ASSA ABLOY Annual Report 2008

FY2008 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
2008

The global leader in
door opening solutions

“Since ASSA ABLOY was formed in 1994 the Group has gone through several
distinct stages of development and has become established as a global leader.
Much has been accomplished, but many important markets and product areas
remain to be consolidated. We have never had a better range of products, greater
market penetration or more innovative new products than we have now. The
continued demand for safety and security, along with continuing population
growth and urbanization, ensure that there is an underlying structural demand
for the Group’s products which will only increase over time. Combined with the
restructuring measures that are now being implemented, this means that, over
time, our prospects for continued growth with good profitability are very good.”

Johan Molin, President and CEO

Report on operations

Financial reports

Cover photograph: The Clarion
Hotel Sign in Stockholm uses the
latest security solutions from
ASSA ABLOY, including doors
equipped to identify the user and
be opened by means of a secure SMS
text message sent to a cellphone.

Corporate governance report and

information for shareholders

Contents

ASSA ABLOY in brief
2008 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
Report of the Board of Directors
Financial risk management
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
Notes
Comments on five years in summary
Five years in summary
Quarterly information
Definitions of key data terms
Proposed distribution of earnings
Audit report
Corporate governance report
Board of Directors
The Executive Team
The ASSA ABLOY share
Information for shareholders
Glossary

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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

A
S
S
A
A
B
L
O
Y

A
n
n
u
a
l

R
e
p
o
r
t
2
0
0
8

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
2008

The global leader in
door opening solutions

Johan Molin, President and CEO

Report on operations

Financial reports

Corporate governance report and

information for shareholders

Contents

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ASSA ABLOY in brief

ASSA ABLOY’s divisions

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 electro-
mechanical 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 32,700 employ-
ees and sales of about SEK 35 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.

Division

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 as the most important market. Some of the divi-
sion’s leading brands are Corbin Russwin, Curries, Emtek,
Medeco, Phillips, SARGENT and La Fonte. The division has
8,600 employees and divisional management is based in New
Haven, Connecticut, USA.

Division

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 11,900 employees and divisional
management is based in London, United Kingdom.

Division

Asia Pacific

The division manufactures and sells locks, cylinders, electro-
mechanical products, security doors and fittings in Asia and
Oceania. Australia and New Zealand account for a large part
of sales, but China and other Asian markets are rapidly gaining
in importance. China is also an important country of produc-
tion. Some of the division’s leading brands are Lockwood,
Guli, Wangli, Baodean, Tianming, Shenfei, Interlock and iRevo.
The division has 7,100 employees and divisional manage-
ment is based in Hong Kong, China.

Americas’ share of Group total

EMEA’s share of Group total

Asia Pacific’s share of Group total

Sales

Operating income (EBIT)

Sales

Operating income (EBIT)

30 %

36 %

39 %

38 %

Sales

9 %

Operating income (EBIT)

6 %

Division

Global Technologies

Division

Entrance Systems

This global division manufactures and sells products for elec-
tronic access control, secure issuance of cards, identification
technology and electronic lock products for hotels. The divi-
sion consists of two business units, HID Global and ASSA
ABLOY Hospitality, which sell their products worldwide. Lead-
ing brands are HID, Fargo, Elsafe and VingCard. The division
has 2,800 employees and divisional management is based in
Stockholm, Sweden.

Entrance Systems is a global division that manufactures and
sells automatic door systems and service. The products are
sold under the Besam brand. 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 divi-
sion has 2,300 employees and divisional management is
based in Landskrona, Sweden.

Global Technologies’ share of Group total

Sales

Operating income (EBIT)

13 %

12 %

Entrance Systems’ share of Group total

Sales

9 %

Operating income (EBIT)

8 %

Production: ASSA ABLOY and Hallvarsson & Halvarsson.
Photographs: Emil Larsson, Ulf Huett, Lars Trangius, Getty Images, Mariusz Sznerch© 2008,
Rithuset, ASSA ABLOY’s own photographic library and others. Translation: Textforum.
English editing: Marcom International. Printing: Elanders AB, Falköping, March 2009.

ASSA ABLOY in brief

ASSA ABLOY’s divisions

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

Division

Americas

Division

EMEA

Division

Asia Pacific

Americas’ share of Group total

EMEA’s share of Group total

Asia Pacific’s share of Group total

Sales

Operating income (EBIT)

Sales

Operating income (EBIT)

30 %

36 %

39 %

38 %

Sales

9 %

Operating income (EBIT)

6 %

Division

Global Technologies

Division

Entrance Systems

Global Technologies’ share of Group total

Sales

Operating income (EBIT)

13 %

12 %

Entrance Systems’ share of Group total

Sales

9 %

Operating income (EBIT)

8 %

ASSA ABLOY
Annual Report
2008

2008 in brief

2008 in brief
1

Significant events

•
•

•
•
•

1 M

Sales increased by 4 percent to SEK 34,918 M (33,550).
Operating income (EBIT) amounted to SEK 5,526
(5,458).
Earnings per share amounted to SEK 9.21
Operating cash flow amounted to SEK 4,769 M (4,808)
The restructuring program initiated in 2006 has been
a great success and will be completed in 2009. The annual
rate of savings is close to the target level of SEK 600 M,
which will be achieved during 2009.

1 (9.02).

•

A new review of production structures was carried out
during the year and the cost of the new program amounts
to SEK 1,180 M with a payback time of 2–3 years.
Significant investments were made in product develop-
ment, which will make a positive contribution to sales.
18 companies were acquired during the year, bringing in
annual sales of SEK 1,800 M.

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

Earnings per share after tax and dilution, SEK/share
Equity per share after dilution, SEK/share
Dividend, SEK/share
Number of shares after full dilution, thousands

2006

31,137
9
3
0
4,771 1
15.3 1
4,100 1
3,528
17.1 1

2006

7.99 1
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
3.60
380,713

2008

34,918
0
4
0
5,526 1
15.8 1
4,756 1
4,769
17.2 1

2008

9.21 1
55.91
3.60 2
380,713

Change

+4%

+1%

+3%
–1%

Change

+2%

Sales and Operating income

Income before tax and
Operating cash flow

Earnings per share 1

Sales,
SEK M

36,000

30,000

24,000

18,000

12,000

6,000

Operating income,
SEK M

6,000

5,000

4,000

3,000

2,000

1,000

Sales, SEK M

Rörelseresultat, MSEK

SEK M

5,000

4,000

3,000

2,000

1,000

SEK

Sales
Operating income1

Income before tax1
Operating cash flow

1 Excluding restructuring costs 2006 and non-recurring costs 2008.
2 Dividend proposed by the Board of Directors.

CEO's statement
2

Statement by the President and CEO
Strong development in a weak market

ASSA ABLOY
Annual Report
2008

I am pleased to report that ASSA ABLOY recorded its highest-ever sales and income in
2008, at the same time as investments in product development and market presence
continued at a high level. The global economy gradually weakened during the year but
the ongoing restructuring programs and other measures achieved valuable savings,
which counteracted the steadily weakening market. Acquisition activity continued at a
high rate, with 18 acquisitions completed.

good contributions to growth in 2009 and beyond. In par-
allel, the successful expansion of the marketing organization
also continued, with increased concentration on specifi-
cation salesmen and architects and greater focus on the
fast-growing area of electromechanical lock solutions. The
effectiveness of marketing efforts is growing in step with the
consolidation of the separate brands under the ASSA ABLOY
master brand.

An industry under consolidation
On the acquisition front, activity was high during the year,
with 18 acquisitions that steadily strengthened ASSA
ABLOY’s positions, especially on the growth markets in Asia
which are important for the future. ASSA ABLOY operates in
an industry under consolidation, where acquisitions are an
important element in the Group’s development. Through
acquisitions ASSA ABLOY complements its product portfo-
lio, brings in new technology and increases the Group’s geo-
graphical market penetration. The companies acquired dur-
ing the year will provide annual sales of about SEK 1,800 M.
All five divisions acquired new units. The major acquisitions
include Rockwood in North America, Gardesa and Valli&Valli
in Italy, Copiax in Sweden, Cheil in South Korea and the Chi-
nese companies Beijing Tianming and Shenfei.

Improved production efficiency
ASSA ABLOY’s restructuring program begun in 2006, which
will be completed early in 2009, has been a great success,
with major savings and substantially improved efficiency in
the Group’s production units. The program, which included
50 individual structural measures, has led to 24 manufactur-
ing units closing while a substantial number of other units
have refocused their operations to concentrate on final
assembly. A consequence of the program is that more and
more standard production has moved to low-cost countries
and is being carried out in both our own and external plants.
Production processes have improved, while a local presence
on the end-user markets ensures rapid delivery and efficient
assembly of customized products. Net savings from the pro-
gram are SEK 600 M a year and more than 2,000 employees
have now left the Group.

During the second half of 2008 a new review of the pro-
duction structure in the high-cost countries was undertaken.
Its aims are to accelerate the restructuring process and
address those units that have not yet converted from full

Johan Molin, President and CEO

Sales in 2008 increased by 4 percent and amounted to SEK
34,918 M (33,550). At the same time operating income
increased by 1 percent excluding restructuring and non-
recurring costs and amounted to SEK 5,526 M (5,458) – once
again the highest-ever income for the Group – representing
an operating margin of 15.8 percent (16.3).

Viewed over a five-year period, total growth exclud-
ing currency effects amounted to a satisfactory 52 percent,
of which 30 percent was organic growth and 22 percent
acquired growth. Cash flow over the whole period has been
very good, with a significantly strengthened balance sheet.

Investments in product development
For ASSA ABLOY, organic growth is the single most impor-
tant driver of profitability and success. Organic growth is
driven chiefly by product development, improved market-
ing and increased market coverage. The year was marked
by continued strong investments in product development,
which will deliver a number of exciting new products and

ASSA ABLOY
Annual Report
2008

CEO's statement
3

production to final assembly. The review resulted in about
40 restructuring projects and the full cost was expensed in
the third and fourth quarters of 2008. Some projects started
before the end of the year. The new program affects a total
of 1,800 employees and the estimated payback time for the
projects is 2–3 years.

It is highly satisfactory to report that at the same time as
production has been undergoing restructuring in the high-
cost countries, ASSA ABLOY has maintained a high tempo
in the expansion of its production base in low-cost coun-
tries. Over the past two years the number of employees in
the low-cost countries has increased by 50 percent to over
12,000 people, more than 40 percent of the Group’s total
workforce.

Development of the divisions
EMEA division
The EMEA division was affected by the gradually deteriorat-
ing economy in Europe during the year and reported nega-
tive organic growth of 2 percent (+7). Operating income
was unchanged, excluding items affecting comparability.
The project to develop the marketing and sales organi-
zations, which includes bringing them together under the
ASSA ABLOY brand, continued to produce good results.
Work with joint product platforms led to the launch of sev-
eral extremely promising electromechanical and electronic
products such as Aperio and various Hi-O solutions.

Most of the projects from the restructuring program
launched in 2006 were concluded in 2008. During the sec-
ond half of 2008 a new program was initiated to convert the
division’s remaining production units in high-cost countries
from full production to assembly.

Several acquisitions were carried out, the most impor-

tant being Gardesa, Copiax and Valli&Valli. Gardesa is a
leading Italian manufacturer of high-security doors. Copiax
is a Swedish security wholesaler. Valli&Valli is a leading
Italian supplier of designer door-handles. The acquisitions
strengthen ASSA ABLOY’S position as a provider of total
door opening solutions on the market.

Americas division
The Americas division reported organic growth of 4 percent
(5) during the year, though trends varied among the different
segments. While demand in the non-residential segment
continued to be robust during the year, demand in the resi-
dential segment fell back strongly. However, this trend had
only a minor effect on the division because of low exposure
to the residential segment. Profitability further improved
during the year and operating income rose by 5 percent.

The initiatives to establish a common segmented sales

organization and to increase specification work so as to
stimulate demand have proved highly successful and led to
increased market shares and advancement of positions.
Work on restructuring and Lean methods continued
successfully through the year. The North American com-
pany Rockwood, which produces door components, was
acquired during the year.

Asia Pacific division
The Asia Pacific division reported 0 percent (10) organic
growth during the year. Market trends in Australia and New
Zealand were negative during the year, but they were posi-
tive on the Chinese market in particular. However, even this
market slowed toward the end of the year. Export sales to
the Group’s units in North America and Western Europe
also fell toward the end of the year due to weak demand and
inventory reductions.

Despite the weak demand, operating income increased
by 11 percent thanks to an efficiency program which contin-
ued at undiminished pace. Two of the four production units
in Australia and New Zealand closed, while the remaining
units are focusing on assembly and customization.

Two large acquisitions were completed: the door manu-
facturer Beijing Tianming, and Shenfei’s door-closer business.
With these acquisitions the Group can now offer a complete
range of door and locking solutions on the Chinese market.

Global Technologies division
Organic growth was 0 percent (11) for the year and operat-
ing income fell by 3 percent. Growth for the HID Global
business unit was weakly negative and for the ASSA ABLOY
Hospitality business unit was weakly positive.

However, within HID Global, Identity and Access Man-

agement showed growth while Identification Solutions
(formerly ITG) reported negative growth due to reduced
demand, the phasing-out of unprofitable customer seg-
ments and delays to many customer projects. HID Global
launched a large number of innovative products during the
year. Great interest surrounded products that combine logi-
cal and physical access, including those built into some Dell
laptop computer models from 2008.

The ASSA ABLOY Hospitality business unit launched a
number of innovative new products on the market. One
important launch was Signature RFID, the first product on the
market to combine RFID technology with NFC, making it pos-
sible to use cellphones to communicate with locking systems.

Entrance Systems division
The Entrance Systems division reported organic growth of
3 percent (6), and operating income was up 5 percent with
unchanged operating margin.

Demand from the retailing sector in Europe and North
America weakened during the year, though this was largely
offset by increased demand from the healthcare sector and
by increasing demand on growth markets. Robust sales
in the service segment also made a positive contribution.
Among the products launched was a new global platform
for automatic door closers.

The move of production from the German plant to the
Czech Republic has now been completed and the new pro-
duction plant in China is running very smoothly. In addition
to several small acquisitions of service businesses in both
mature and new markets, the major acquisition of the South
Korean company Cheil was completed.

CEO's statement
4

ASSA ABLOY
Annual Report
2008

Future development
The Group is well-positioned for long-term sustainable
growth through our position as market leader with a global
presence. Our focus on the non-residential segment, the
high percentage of aftermarket sales and an increasing pro-
portion of fast-growing electromechanical and electronic
products all contribute to stability in growth and earnings.
The sales organizations are now gathered under the ASSA
ABLOY master brand, which is producing good results.

Electromechanical solutions growing rapidly
New products are the most important source of organic
growth. The increased investment in product development
has ranged from 10 to 20 percent annually in recent years.
The number of development engineers is now close to
1,000. Much of the work is concentrated on rapidly growing
electromechanical lock solutions, which are being devel-
oped as global common product platforms with adaptations
for local markets. The product platforms are being devel-
oped in part by the Group’s common development depart-
ment, Shared Technologies, and in part through projects
within and between divisions in which skills are assembled
to take optimum advantage of existing resources. A large
number of new products will be launched in 2009.

The share of sales held by electromechanical products
has risen sharply from 20 to 34 percent during the 2000s
and this trend will continue in the future, since the growth
rate for this segment is two to three times higher than for
traditional mechanical products.

Increased sales on growth markets
The Group is dedicating resources specifically to increasing
its presence in the growth markets in Asia, Eastern Europe,
the Middle East, Africa and South America. The share of sales
on these markets has now passed 16 percent of the Group’s
total sales, compared with 9 percent four years ago.

Positive trend in Earnings per share

Weakening world economy
The global economy weakened gradually during 2008, and
at an accelerating pace towards the end of the year and in
early 2009. This has had a sharply negative effect on con-
struction activity in both mature and new markets that has
resulted in reduced demand for the Group’s products. For
2009 as a whole we expect negative organic growth. We
therefore took measures already in 2008 to adapt the Group
to the market situation, with the result that 10 percent of
employees left the Group during the year. In 2009 we will
continue to work on both the long-term restructuring pro-
gram and other measures to keep costs, profit margins and
cash flow at good levels. Opportunities for financing have
also become extremely limited on the capital market, which
means we must adopt a conservative approach to acquisi-
tions and place even greater emphasis on sustaining cash
flow and streamlining working capital.

Great efforts by the employees
In conclusion I would like to thank all the employees who
contributed to the Group’s successes during the year, and
look forward to our continued efforts together to make
ASSA ABLOY even better despite the difficult market situa-
tion and the challenges we now face.

Since ASSA ABLOY was formed in 1994 the Group has
gone through several distinct stages of development and
has become established as a global leader. Much has been
accomplished, but many important markets and product
areas remain to be consolidated. We have never had a bet-
ter range of products, greater market penetration or more
innovative new products than we have now. The contin-
ued demand for safety and security, along with continuing
population growth and urbanization, ensure that there is
an underlying structural demand for the Group’s prod-
ucts which will only increase over time. Combined with the
restructuring measures that are now being implemented,
this means that, over time, our prospects for continued
growth with good profitability are very good.

SEK
10
9
8
7
6
5
4
3
2
1
0

Stockholm, 13 February 2009

Johan Molin
President and CEO

ASSA ABLOY’s Executive Team
Johan Molin, President and CEO. Standing, left to right: Åke Sund, Director for Market and Business Development.
Ulf Södergren, Chief Technology Officer (CTO). Tomas Eliasson, Chief Financial Officer (CFO). Tim Shea, Head of the ASSA ABLOY Hospitality business unit.
Sitting, left to right: Martin Brandt, Head of Asia Pacific division. Juan Vargues, Head of Entrance Systems division. Thanasis Molokotos, Head of Americas
division. Tzachi Wiesenfeld, Head of EMEA division. Denis Hébert, Head of the HID Global business unit.

Vision, financial targets
and strategy
6

Vision, financial targets and strategy

ASSA ABLOY
Annual Report
2008

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 offer an attractive company to our employees.

•

Financial targets
The financial targets are:
•

10 percent annual growth through a combination of
organic and acquired growth.
an operating margin of 16–17 percent.

•

The financial targets are long-term goals and should be
considered as an average over a business cycle.

Strategy
The Group’s overall focus is to spearhead the trend towards
higher security with a product-driven offering centered on
the customer. The primary product areas are the traditional
segments of mechanical locks and security doors, as well
as the rapidly growing segments of electromechanical and
electronic locks, access control, identification technology
and automatic doors.

ASSA ABLOY’s strong development is based on long-term

structural growth in demand on our key markets in Europe
and North America, an increasing demand on new markets,
and successes in the rapidly growing product segments.

The strategic action plans have been divided into three

focus areas: market presence, product leadership and cost-
efficiency.

Strategy – 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.

Exploiting 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 security
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 residential
market, and ABLOY, which is used for customers who
demand an extra high level of security.

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 an intensified col-
laboration with architects, security consultants and major
end-users. Continued development of the distribution
channels, for example through training and clear market
segmentation, is also a priority. In the fast-growing area of
electronic and automatic door solutions, where the Group
has a market-leading position, continuing investments will
be made to develop channels to market.

Organic and acquired growth

Operating margin (EBIT) 1

Organic, %
Acquired, %

1 Excluding restructuring costs 2006
and non-recurring costs 2008.

ASSA ABLOY
Annual Report
2008

Vision, financial targets
and strategy
7

Sales in 2008 by region

+34

+22

+13

more from lock and door products and the technical level is
continually rising; at the same time, electromechanical lock
solutions are growing at a much faster pace than traditional
mechanical products. Global common product platforms
which are then adapted to the local markets have there-
fore become increasingly important. These platforms are
developed in part through the Group function for product
development, Shared Technologies, and in part through
collaboration within and between divisions.

Share of Group sales 2008, %
Change in sales relative to previous year, %

The changing product mix

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 among the different markets. There is great
potential here for improved market reach. Efforts to develop
channels and products for the residential market continue;
digital door locks in particular are a priority product area.
Exploiting the Group’s strengths in specific technologies
will create interesting new areas for growth. One example is
RFID, which is being adapted to special areas of use such as
contactless hotel-room locks that are opened with cards.

Increased sales on growth markets

2004

2008

Growth markets, 9 %
Mature markets, 91 %

Growth markets, 16 %
Mature markets, 84 %

Strategy – 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 common product platforms with fewer components.
For enhanced customer benefit, products are also being
developed in close collaboration with ASSA ABLOY’s end-
users and distributors. The product development process
has been streamlined by implementing a clearly defined
common development process and by separating the
maintenance and improvement of existing products from
new development. Customers are demanding more and

2000, SEK 14 billion

2008, SEK 35 billion

Mechanical products, 66 %
Electromechanical
products, 20 %
Doors, 14 %

Mechanical products, 47 %
Electromechanical
products, 34 %
Doors, 19 %

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

The value chain in production is under continual review
and the capacity for flexible final assembly close to the cus-
tomer is combined with the transfer of standard production
in large volumes to external and internal production units in
low-cost countries.

Implementation of Lean methods in the Group’s operations

continues. Lean methods lead to more efficient production
flows, better control of material costs, better decision-making
routines, shorter development times and increased coopera-
tion with the marketing and sales teams. Many of the com-
panies in the Group have followed these principles for many
years, enhancing their efficiency.

In purchasing, a far-reaching supply management project
covering both raw materials and components has been initi-
ated, which will become increasingly important as outsourc-
ing of component supply to external suppliers increases. The
percentage of the Group’s total purchases of raw materials,
components and finished products that comes from low-
cost countries has increased from 23 percent to 37 percent
over the past four years.

Support functions such as IT, customer support and
finance are being coordinated. Functions that do not have
direct contact with commercial operations, such as the IT
network, are coordinated regionally and globally. Functions
that are directly business-critical are coordinated within the
divisions and their business units.

Did you know that, every day, 50,000
people in Beijing open their hotel room
doors without touching the lock?

Leading hotels around the
world use the same conve-
nient access solution from
ASSA ABLOY: a contactless
RFID smart card opens the
authorized doors, trans-
mitting a signal at radio
frequency. The same card
can conveniently be used
for other functions too.

The ASSA ABLOY Group company VingCard has supplied the rooms at the Marriott Renais-
sance Beijing Hotel with its Signature RFID contactless electronic lock. ASSA ABLOY is now
the market leader in the high-end hospitality market in Beijing, and is gaining market share
in the total market as well. Before the 2008 Olympic Games, ASSA ABLOY supplied security
products to more than 30,000 hotel rooms in around 90 Beijing hotels. These hotels repre-
sent more than 50 percent of the total high-end market of four-star and five-star hotels.

ASSA ABLOY
Annual Report
2008

The security market
A growing and changing market

The security market
9

ASSA ABLOY is currently the world-leading supplier of total
lock and door solutions. As the Group has grown, its product
portfolio has expanded and evolved to cover the widely
varying needs of airports, schools, hospitals, 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, driving the development of increasingly 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 about EUR 200 billion. The Group has concentrated
its efforts on electronic and mechanical security products
as well as security doors. The segment in which the Group is
active represents about 15 percent of the total market and
ASSA ABLOY has a market share of over 10 percent but with
large variations between different markets.

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 control, some
of which use radio-frequency identification (RFID). As a rule,
electronic products offer high functionality 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 estimated to be two to three times higher than
for mechanical security products. Today electronic prod-
ucts represent about one-third of the Group’s sales, and that
share is increasing every year.

In addition to locks, mechanical security products
mainly include products such as door closers, emergency
exit devices and window hardware. ASSA ABLOY is also a
major manufacturer of security doors and door 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.
The market is growing in tandem with each country’s GDP

(averaged over a business cycle). The market for mechani-
cal 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 countries with different eco-
nomic cycles.

Today only 3–4 percent of all doors are electromechani-

cal, but the percentage is steadily rising. There is great
potential to upgrade traditional mechanical locks to electro-
mechanical lock solutions in order to enhance security and
functionality. ASSA ABLOY is the market leader in electro-
mechanical lock solutions such as electromechanical lock
cases, access control and electric door closers.

Complete security solutions
ASSA ABLOY works with architects, authorities and large
end-customers to offer the best security solutions for differ-
ent types of door opening. The requirements for different
areas vary greatly and the security solution for each door
must 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 requirements such as
fire safety. Customers are also increasingly demanding that
the products should be simple to integrate into new or exist-
ing 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 significantly
larger in the commercial segment than in the residential
segment. If the demands for security and evacuation solu-
tions were equally great in Europe and the United States, the
overall market would roughly double – representing great
potential for ASSA ABLOY.

The total security market

ASSA ABLOY’s sales by product group

ASSA ABLOY’s
product areas, 15%
Security guards & other, 27%
Fire alarms, 2%
Doors & windows, 40%
Intrusion protection, 3%
IT security &
logical access control, 4%
Alarm centers, 9%

Larmcentraler, 9%

IT-säkerhet & logisk behörighetskontroll, 4%

Intrångsskydd, 3%

Dörrar & fönster, 40%

Brandlarm, 2%

Bevakning & övrigt, 27%

ASSA ABLOYs produktområden, 15%

Mechanical locks, lock
systems and accessories, 47%
Electromechanical locks,
access control, automatic
doors and identification
technology , 34%
Security doors and
fittings, 19%

The security market
10

ASSA ABLOY
Annual Report
2008

In global terms the lock market is still fragmented; however,
the market in each country is fairly consolidated, 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 distribu-
tors. In less-developed countries, however, established lock
standards and brands are less common.

Distribution channels
In the security market today, manufacturers of security prod-
ucts such as ASSA ABLOY mainly reach their end-customers
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, leading to a largely local
and fragmented distribution of mechanical and electro-
mechanical 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 distributors and cus-
tomers. Construction and lock wholesalers and locksmiths
have a key role in delivering the products specified for vari-
ous construction projects. ASSA ABLOY has developed a
close collaboration with architects and security consultants
to specify appropriate products and achieve a well-function-
ing security solution. Many door and window manufacturers
install lock cases and fittings in their products before deliv-
ering them to customers.

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

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

channels to offer end-customers the right products, a correct
installation and thereby a well-functioning security solution.
Distributors also have a key role in providing service and
support after installation. This role can vary between different
customer segments. In the commercial segment, distributors
on some markets act as consultants and project managers to
create good security solutions. They understand the custom-
er’s needs and ensure that products meet local regulations.
As technology moves toward more complex security
solutions, distributors need increasing skills levels. On many
markets specialized security distributors may be locksmiths
with expert knowledge of mechanical and electromechani-
cal security products. They buy directly from the manufac-
turer or via wholesalers, providing advice, products, instal-
lation 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 segments
ASSA ABLOY’s main customer segment is the non-residential
segment with institutional and commercial customers who
account for 80 percent of sales, while the residential seg-
ment accounts for 20 percent.

Major customers
This segment consists of institutional and commercial cus-
tomers such as universities, hospitals, offices, airports and
shopping malls, through which a large number of people
pass daily. ASSA ABLOY usually has primary contact with the
customer’s head of security, a person well acquainted with
security needs who actively participates in planning 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.

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, such as locksmiths.
ASSA ABLOY works actively to train distributors and to develop
more standardized solutions for small and medium-sized
companies such as stores and offices.

What drives demand?

ASSA ABLOY’s total sales by region

Aftermarket1, 67%
New construction, 33%

Europe, 46%
North America, 37%
Australia and
New Zealand, 5%
Asia, 8%
Central and
South America, 2%
Africa, 2%

Afrika

Central- och Sydamerika

Asien

Australien och Nya Zeeland

Nordamerika

Europa

1 The aftermarket consists of renova-
tions, rebuilding, extensions,
replacements and upgrades.

ASSA ABLOY
Annual Report
2008

The security market
11

Private customers – the consumer market
The majority of sales are replacements or upgrades of exist-
ing security products. Private consumers have a great need
for advice and installation assistance. ASSA ABLOY has devel-
oped a number of home security concepts to meet consum-
ers’ needs. Depending on the geographical market, ASSA
ABLOY also works with door and window manufacturers or
specialized distribution channels such as home improve-
ment stores and locksmiths.

Heightened demand for electromechanical products
The heightened demand for electromechanical products
is one of the clearest trends in the security market. This is
accompanied by greater technical standardization, making
it easier to integrate different components in the security
solution with each other. ASSA ABLOY’s products aim for
open standards to allow them to be easily connected to the
customers’ other security and administrative systems.

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 basic security requirements.

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; its main com-
petitors are five other major players who are active in parts
of ASSA ABLOY’s segment: Ingersoll-Rand, Stanley Works,
Dorma, Kaba and Black & Decker. 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 interna-
tional market coverage comparable with ASSA ABLOY’s. The
Asian market is still very fragmented; even the largest manu-
facturers have quite modest market shares.

Common sales force
In order to compete effectively in a global market, ASSA
ABLOY’s sales force is working more and more across cor-
porate boundaries. The common sales organizations work
under the master brand, ASSA ABLOY, but at the same time
they work as representatives for the local product brands
with which the customer is familiar. Thus the sales represen-
tatives do not handle just a single brand but several product
brands to solve customers’ security needs.

Distribution channels for
the security market
In the security market today,
manufacturers of security
products such as ASSA
ABLOY mainly 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
different needs.

Specification of security solutions

Security system integrators

Locksmiths and
security installers

Wholesalers – building
and lock suppliers

Retailers – DIY, building
suppliers, hardware stores,
security shops

ASSA ABLOY

LARGE INSTITUTIONAL
AND COMMERCIAL CUSTOMERS
(cid:153)(cid:21)(cid:61)(cid:90)(cid:86)(cid:97)(cid:105)(cid:93)(cid:21)(cid:88)(cid:86)(cid:103)(cid:90)(cid:21)(cid:21)(cid:153)(cid:21)(cid:58)(cid:89)(cid:106)(cid:88)(cid:86)(cid:105)(cid:94)(cid:100)(cid:99)(cid:21)(cid:153)(cid:21)(cid:71)(cid:90)(cid:105)(cid:86)(cid:94)(cid:97)
(cid:153)(cid:21)(cid:61)(cid:100)(cid:104)(cid:101)(cid:94)(cid:105)(cid:86)(cid:97)(cid:94)(cid:105)(cid:110)(cid:21)(cid:153)(cid:21)Offices(cid:21)(cid:153)(cid:21)(cid:62)(cid:99)(cid:89)(cid:106)(cid:104)(cid:105)(cid:103)(cid:94)(cid:86)(cid:97)

SMALL AND MEDIUM-SIZED
CUSTOMERS
(cid:153)(cid:21)Offices(cid:21)(cid:153)(cid:21)(cid:72)(cid:93)(cid:100)(cid:101)(cid:104)

OEMs, door and window
manufacturers

RESIDENTIAL CUSTOMERS
(cid:153)(cid:21)(cid:54)(cid:101)(cid:86)(cid:103)(cid:105)(cid:98)(cid:90)(cid:99)(cid:105)(cid:104)(cid:21)(cid:153)(cid:21)(cid:61)(cid:100)(cid:106)(cid:104)(cid:90)(cid:104)

Increased demand

The security market
12

ASSA ABLOY
Annual Report
2008

Mul-T-Lock and ABLOY in high-security locks and VingCard/
Elsafe in the hospitality and cruise-ship market.

The growing visibility of ASSA ABLOY as the master brand

for complete security solutions demonstrates the great
breadth of the Group’s product range as the world’s largest
provider of security solutions.

The brand strategy has been developed to take advantage of
the Group’s size and product range:
•

ASSA ABLOY as master brand. Sales departments will be
unified under the ASSA ABLOY master brand.
Product brands that benefit from the large installed base
and are adapted to local rules and safety standards.
Complementary global brands, where the products’ lead-
ing position and market positioning in their segment are
unique or overlap that of ASSA ABLOY.

•

ASSA ABLOY’s brand strategy
Through its many acquisitions, ASSA ABLOY owns a broad
variety of well known brands and has the world’s largest
installed base of locks. To take advantage of and manage
these valuable assets while benefiting from the Group’s size,
ASSA ABLOY’s logo is being combined with the individual
product brands. This approach preserves the link to the
installed base while increasing the visibility of ASSA ABLOY
as the master brand, which will continue to be developed.
Under the ASSA ABLOY master brand the Group can offer an
array of complete security solutions that no single product
brand can offer on its own.

The Group complements the master brand with several
global brands that are all leaders in their respective segments
in the market. These brands are HID in RFID and access con-
trol, Yale in the residential market, Besam in automatic doors,

Master brand

Product brands

Global brands

The intelligent door
Complete security solutions
using the entire Group’s product range

A complete security solution from ASSA ABLOY includes
products of many different types. At the main entrance
there may be automatic doors and access control, for exam-
ple, and there may also be access systems on each floor of
offices. Inside the offices there may be security doors, high-
security cylinders, mechanical cylinders, handles and hinges
as well as interior doors. Access cards may also be used to
log on to computers and networks. These are examples of
products from ASSA ABLOY that make up a complete secu-
rity solution.

Magnetic lock

Electronic strikes

Access control

Handles

Electromechanical
cylinders

Automatic
door closer

Electronic
lock-case

Exit device

Electronic hardware

The intelligent door is connected 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 installation
through standardized connections, and remote configuration over the network, which can
also be connected to the Internet.

Products
14

Products and product development
Investment and partnership for increased
competitiveness

ASSA ABLOY
Annual Report
2008

ASSA ABLOY’s vision is to be the most innovative provider of total door opening solutions.
Over the past few years the Group has sharply increased its investments in research and
development. ASSA ABLOY is creating tomorrow’s security solutions by taking advantage
of the skills and expertise of its divisions to develop common techno logy platforms.
Secure, convenient and flexible solutions for the door environment provide the basis for
future growth.

Today’s customer base helps to build tomorrow’s
security solutions
ASSA ABLOY has the largest base of installed locks and lock
systems in the world, well-adapted to local and regional
standards. The Group uses this installed base as a starting
point to develop tomorrow’s solutions, in which electronic
codes supplement or replace mechanical identification.

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
technology and skills enhancement have given ASSA ABLOY
all the tools it needs to meet the challenges of tomorrow.

Security and specification
But security is not just identification – far from it. The mechan-
ical and electromechanical products that prevent intrusion
and permit rapid evacuation are just as important to the
final solution. A well-crafted specification also considers the
design of the products and makes sure that they simplify
usage. The Group’s electromechanical products help to
meet all these security requirements. The electromechani-
cal field is growing quickly and now accounts for more than
one third of Group 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 Inter-
net. This makes it possible to check the status of the door
online, which enhances security and facilitates mainten ance.
In 2008 ASSA ABLOY installed the first Hi-O systems and
integrated Hi-O with over ten of the market’s leading secu-
rity systems. The software is continually being developed to
improve integration and allow remote programming, diag-
nostics and troubleshooting.

RFID enhances security
RFID – radio-frequency identification – and wireless commu-
nication allow the Group to create new security applications
while offering services that assist users.

During the year ASSA ABLOY launched Aperio, a wireless
technology that allows cost-effective connection of several
doors to an existing access control system. Battery- operated
electromechanical cylinders and locks communicate wire-
lessly with the existing network. No expensive installation
costs, no new keycards and no new access system are
required. Aperio received several prizes for innovation
during the year.

Investments in research
and development

The changing product mix

SEK M

1,000

800

600

400

200

2000

2008

Doors

Electromechanics

Mechanical locks

Doors

Electromechanics

Mechanical locks

2000, SEK 14 billion

2008, SEK 35 billion

Mechanical products, 66%
Electromechanical products, 20%
Security doors, 14%

Mechanical products, 47%
Electromechanical products, 34%
Security doors, 19%

Next-generation electric strike
In 2008, Lockwood released its next-generation electric
strike on to the Australian market. The strike offers the latest
in technology with its pre-programming capabilities com-
bined with field-selectable Fail Safe or Fail Secure in a very
small footprint. The product exceeds the highest security
and durability requirements of the Australian Standards
when used with an approved lockset. It was launched for
export in February 2009 and the major export markets
include the UK, Korea, New Zealand, the Netherlands, Singa-
pore, Hong Kong and China.

TimeLox passes a milestone
TimeLox®, the world’s leading supplier of Zigbee wireless
online electronic locking systems for hotels, resorts and
grand casinos, now has more than 20,000 hotel guest-
rooms worldwide using its wireless radio-frequency
online electronic locking system, DC-One ONLINE.
TimeLox passed the 20,000-guestroom milestone with
the 3,186-room installation at the Mandalay Bay Hotel &
Casino in Las Vegas in 2006. It makes DC-One ONLINE the
most widespread hospitality wireless online locking
system.

Aperio wireless door control
Aperio is a new technology
developed to upgrade mechani-
cal doors and connect them
wirelessly to an existing elec-
tronic access control system,
thus providing end-users with a
simple, intelligent way to raise
the security level of their prem-
ises at a lower cost than a tradi-
tional system. Aperio technol-
ogy provides a convenient and
cost-effective way for security
and IT managers to increase the
number of doors that can be

monitored. The technology
bridges the gap between
mechanical and electronic secu-
rity solutions to create intelli-
gent door solutions.

Revolving door for high traffic
Besam’s new revolving door is designed to meet market
demands for automatic revolving-door entrances that can
handle high traffic volumes safely and conveniently. Avail-
able in two sizes, the 3-wing door creates an impressive
entrance that is ‘always open’ and can accommodate large
numbers of pedestrians with or without shopping trolleys.
The door’s patented drive mechanism is located in the
periphery of the drum, reducing stress on the drive itself and
resulting in lower maintenance costs.

Wireless access control solution for campuses
The SARGENT Passport 1000 P.2 lockset features Wi-Fi technology that enables the
lock to connect wirelessly to PERSONA Campus™ software, which allows access and
transaction rights to be changed. The software interfaces with all major housing and
campus transaction applications to avoid duplicating data.

The product utilizes the existing IT infrastructure to communicate with the server.
These features make it a comprehensive, economical and unique access control solu-
tion for campus housing and facilities.

Products
16

ASSA ABLOY
Annual Report
2008

In contrast with Aperio, Smartair is an off-line system. Smar-
tair’s ‘update-on-card’ increases security and convenience
through validation; access is updated on the access card for
a specific period. If the card is not updated in one of the spe-
cial readers or printers that come with the system, the per-
son is not granted access. Lost cards can easily be blocked
and become useless for people without authorization.

No more waiting in line for hotel guests
For hotel guests, VingCard has used RFID and the wireless
technology offered by mobile telephony in combination
with a new communication interface called Near Field Com-
munication (NFC). Guests can use their cellphones to book a
room, gain access to the room and the hotel’s facilities, and
even pay their bills over the Internet. The cellphone serves
as a code carrier and the locks open when the phone is held
up against them. This innovative application won several
awards for best NFC service of the year at the 2008 NFC
Forum in Monaco.

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 requirements.

By combining hundreds of thousands of components 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 renovations alike.

A common process with greater customer
focus and better product planning
ASSA ABLOY is building a Group-wide product development
process, aimed at cutting product development time in
half while increasing the number of new products. A clear
‘gateway’ process with common terminology and interdisci-
plinary collaboration speeds and improves the quality of the
product development process.

In 2008 ASSA ABLOY focused on introducing ‘Voice of the

Customer’, a strategy to strengthen customer relationships
and integrate customers in the development process.

Focus was also placed on improving the product planning
process by providing in-house training for over one hundred
people to spread the process throughout the organization.
As part of the product development and procurement
process, the Group intensified its efforts in value analysis and
value-generating product improvements through a process
known as Value Analysis / Value Engineering (VA/VE).

The goal is to reduce product costs without impairing
functionality. ASSA ABLOY doubled the cost savings in its
existing product range as a result of the initiative.

iCLASS gives secure authentication to PCs
In selected models of Dell’s new Latitude E-Family laptop
computers, HID Global’s contactless iCLASS smart cards are
now read by an embedded purpose-designed card-reader.
A single card can thus be used for both physical access to
buildings and secure authentication to PCs. The development
means that HID Global – which is a key player in the physical
access control and identification technology market – is
expanding its presence into ‘logical security’.

When first turning a laptop on, the user presents an iCLASS
card to the contactless smart card reader located in the com-
puter. A valid card will allow the laptop to boot up and take
the user to the operating system. The cards use secure con-
tactless technology to transmit data between the card and
the reader.

The cards are cost-effective, easy to deploy, and convenient

for the individual users, who can use the same HID card to
access both the PC and the building. For ASSA ABLOY’s cus-
tomers, the seamless integration of the technology into a
mainstream PC platform gives increased security and func-
tionality at modest cost, with a range of options to secure PCs
and their associated data.

Did you know that Besam swing doors
are installed in virtually every hospital
in Sweden?

The intelligent lock tech-
nology in Besam’s SW100
swing door gives increased
security and safety, while
the almost silent motor is
appreciated by staff and
patients alike. The product
will be launched on several
markets around the world
during 2009.

The need for safety and convenience for staff who have their hands full, as well as for patients
with limited mobility, made Swedish hospitals early adopters of Besam’s first automatic
swing doors launched in 1962. Today hospitals around the world rely on Besam’s full range
of swing, sliding and revolving doors, and service support to provide secure entrances,
improve internal logistics and isolate clean-room environments such as operating rooms and
laboratories.

EMEA Division
18

EMEA
Increased focus on market and
production synergies

ASSA ABLOY
Annual Report
2008

During 2008 EMEA continued its aggressive marketing efforts to develop and lead the
European lock market. The division also made substantial investments in innovative new
products, and several Pan-European product platforms will be launched in 2009. In the
later part of the year the European lock market weakened progressively, and powerful
measures were put in place to counter the downturn. The result was an increase in
Operational Excellence activities – a program directed towards Lean methods, purchas-
ing and administration – and significant savings were achieved.

EMEA in brief
The EMEA division manufactures and sells mechanical and
electromechanical locks, cylinders, security doors and
accessories in Europe, the Middle East and Africa. EMEA con-
sists of a number of companies which have good knowledge
of their local, often highly diversified, markets and which sell
products under some of the most respected brands in the
industry.

Report on the year
The division’s sales during the year totaled SEK 13,988 M
(13,477), which was an increase of 4 percent. Operating
income (EBIT) excluding restructuring costs and non-
recurring charges amounted to SEK 2,289 M (2,295), which
represents an operating margin of 16.4 percent (17.0).

The year began with good growth. Towards the end of
2008 the financial crisis led to a slowdown on the housing
market and delays on commercial projects. This applied

Sales by product group

Key figures

Mechanical locks, lock
systems and accessories, 68%
Electromechanical and
electronic locks, 17%
Security doors and fittings, 15%

Säkerhetsdörrar och beslag
Elekromekaniska och elektroniska
Mekaniska lås, låssystem och tillbehör

SEK M

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

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

Market segments

Non-residential, 65%
Residential, 35%

Cash flow
Cash flow

Bostadsmarknaden
Institutionella marknaden

Average number of employees

2007

2008

13,477
8
2,295
17.0

10,055
4,926
21.9

13,988
4
2,289
16.4

12,306
5,766
19.9

2,267

2,421

12,493

11,903

1 Excluding non-recurring costs.

Sales and Operating income 1

Capital employed and Return on capital employed 1

SEK M

14,000

12,000

10,000

8,000

6,000

1 Excluding restructuring costs 2006

and non-recurring costs 2008.

Sales
Operating income

SEK M

2,800

2,400

2,000

1,600

1,200

SEK M

12,000

10,000

8,000

6,000

4,000

Capital employed
Return on capital
employed

ASSA ABLOY
Annual Report
2008

EMEA Division
19

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

particularly to regions such as the UK, Spain and the Baltic
countries and to a lesser extent in France, Italy and Scandi-
navia. The negative impact on earnings caused by reduced
sales was very largely offset by savings resulting from effi-
ciency programs directed at production and the division’s
other efforts towards greater efficiency.

Local differences
The EMEA companies operate in a strongly diversified mar-
ket with significant local differences. Building regulations,
security standards and climates vary greatly between the
countries of northern Europe and southern Europe, and to
some extent the Middle East and Africa. Consequently there
are great differences between the products in demand and
sold on each local market. ASSA ABLOY’s regional companies
have good local knowledge of lock standards and long-term
relationships with their distributors, which keeps demand
stable. In addition, the aftermarket contributes a significant
proportion of sales since the installed lock base consists
of many millions of units that are continually replaced and
upgraded.

Development of the marketing organization
EMEA’s sales organization is structured by vertical segments
in order to serve the market, and the program to develop
this continued during the year. Many sales organizations
have been coordinated under the ASSA ABLOY master
brand. As the specification of total locking solutions has
grown in importance for achieving sales, the number of sales
representatives specializing in specification has been sub-
stantially increased and collaboration with architects and
security consultants further strengthened.

Acquisitions
In 2008 EMEA made three large acquisitions: Gardesa,
Copiax and Valli&Valli. Gardesa is a leading Italian manufac-
turer of high-security steel doors, offering both standard
and customized doors that can be tailored to the customer’s
needs. Copiax is a Swedish wholesaler of security products,
focusing on locksmiths, security installers and builders’
merchants. Valli&Valli is a leading Italian manufacturer of
designer handles and accessories. The acquisitions further
strengthen ASSA ABLOY’s product offering of complete door
opening solutions to the market.

cylinders and lock cases with Aperio technology, and Hi-O
solutions. The Group’s new product-development process
focuses on increased customer value while improving cost-
efficiency and maintaining higher quality. The products have
been well received by customers and have strengthened
ASSA ABLOY’s market-leading position in complete security
solutions.

More effective selling and specification
The program to further strengthen the sales organization
on the highly diversified European market is continuing,
for example through the appointment of specification
salesmen.

Operating under the ASSA ABLOY master brand does not

just mean presenting a common face to the customer, but
also offering a greatly expanded product portfolio based on
the Group’s total range and increasingly on the common
product platforms inside and outside the division.

Efficiency programs
In 2006 ASSA ABLOY launched an efficiency program with
the aim of improving production efficiency and moving
production to low-cost countries. During 2008 the Group
continued to outsource the production of components and
simple products, mainly to preferred suppliers in low-cost
countries. The production of some important components
is now concentrated in specialized production plants, for
example cylinders in the Czech Republic and lock cases in
Romania. In order to maintain high standards of service and
remain close to the customers, Western European produc-
tion facilities will focus on final assembly and customization of
products. Most of the projects in the 2006 efficiency program
will be completed early in 2009, and there have been a num-
ber of plant closures in high-cost countries.

At the end of 2008 a new review of production structures

in high-cost countries was initiated, covering the units not
yet converted from full production to final assembly and
customization. The new program will be implemented from
2009 and aims to be completed by 2011.

An important initiative in EMEA is to coordinate purchas-
ing for the different production units. This has resulted in an
increased percentage of purchases in low-cost countries and
better exploitation of benefits of scale within the division.

Strategic priorities
Product development
Substantially increased investment in research and develop-
ment in recent years has resulted in the launch of many new
electromechanical and electronic products. These include

Common administration
Administrative services are being consolidated on a region-
by-region basis to improve efficiency. Common administra-
tion has already been implemented in Germany, with good
results, and in the coming years all regions will be similarly
organized.

Americas Division
20

Americas
Good performance in a challenging year

ASSA ABLOY
Annual Report
2008

ASSA ABLOY’s growth in Americas continued in 2008 through focused efforts to
increase demand for products primarily in the non-residential segment. The division
increased its sales and its margins through good growth in the non-residential seg-
ment. The residential segment showed negative growth because of the US housing
slowdown. Towards the end of the year, growth decelerated in most segments as a
result of the widespread market downturn.

Americas in brief
The Americas division manufactures and sells mechanical
and electromechanical locks, cylinders and security doors
on the American continents. The largest portion of the divi-
sion’s sales occurs in North America where ASSA ABLOY
has an extensive sales organization and sells its products
through distributors. Sales in South America and Mexico
take place through distributors, wholesalers and DIY stores.
Americas division operates in both the non-residential

and the residential segment. The non-residential segment
accounts for the majority of the division’s sales.

Report on the year
The division’s sales during the year totaled SEK 10,467 M
(10,220), which was an increase of 2 percent. Operating
income (EBIT) excluding restructuring costs rose by 5 per-
cent to SEK 2,101 M (1,995), which represents an operating
margin of 20.1 percent (19.5).

Sales by product group

Key figures

Mechanical locks, lock
systems and accessories, 52%
Electromechanical and
electronic locks, 9%
Security doors and fittings, 39%

Säkerhetsdörrar och beslag
Elekromekaniska och elektroniska
Mekaniska lås, låssystem och tillbehör

SEK M

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

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

Market segments

Non-residential, 90%
Residential, 10%

Cash flow
Cash flow

Bostadsmarknaden
Institutionella marknaden

Average number of employees

2007

2008

10,220
1
1,995
19.5

10,467
2
2,101
20.1

8,595
4,928
22.7

2,211

9,428

9,639
6,236
24.5

2,097

8,573

1 Excluding restructuring costs.

Sales and Operating income 1

Capital employed and Return on capital employed 1

SEK M

12,000

10,000

8,000

6,000

4,000

Sales
Operating income

SEK M

2,400

2,000

1,600

1,200

800

SEK M

10,000

8,000

6,000

4,000

Capital employed
Return on capital
employed

1 Excluding restructuring costs

2006 and 2008.

ASSA ABLOY
Annual Report
2008

Americas Division
21

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

Different products for different market segments
In the North American market there is a clear distinction
between products intended for the residential segment
and products for the non-residential segment. As a result,
very few of the division’s products are suitable for both seg-
ments, and the distribution channels are also totally distinct.
Security doors and door frames are major components of
the solutions offered to non-residential customers.

Good performance in the non-residential segment
The non-residential segment accounts for a large per-
centage of the division’s sales in the USA and Canada and
recorded a good positive trend for the year. Within the non-
residential segment, institutional customers predominate.
Americas is working actively on specification to increase
demand in this segment. Typical security applications are
in public buildings, hospitals, school and college campuses,
airports, transport terminals, sports and shopping centers,
manufacturing plants and commercial offices.

Since security and safety standards for these environ-
ments are often highly complex, they normally require more
lock and door functionality than typical residential applica-
tions. Fire and life-safety codes for buildings change fre-
quently and call for ever-rising levels of product functional-
ity, complexity and durability. It is increasingly essential that
security solutions should consider the door environment
as a whole. A complete solution from ASSA ABLOY is often
a combination of doors, door-frames, locks, door closers or
exit devices, access-control products and high-security key
systems.

A challenging year for the residential segment
The residential segment, which constitutes only a minor part
of the division’s sales, showed a strong negative trend due
to the ongoing downturn in the housing market. Substantial
efforts to cut costs and offer innovative solutions made
positive contributions to managing the worsened market
conditions.

Latin America
The Latin American markets developed very well during the
year. The increasing standard of living in these developing
economies has accelerated the need for higher security lev-
els. Each country requires unique security solutions depend-
ing on local standards. For example, several new products
and strong demand for more stringent security solutions
in high-rise residential construction resulted in good sales
growth for ASSA ABLOY in Brazil.

Acquisitions during the year
In 2008 the division acquired Rockwood Manufacturing
Company, a leading US manufacturer of decorative door
hardware, both standard and customized. Rockwood
complements the division’s product offering to the non-
residential segment.

Strategic priorities
Integration of electronics into traditional mechanical door
and security products is a high priority for Americas division.
There is continuing focus on aesthetic design in the devel-
opment of products and specific end-user solutions. Lean
activities in both manufacturing and administration are an
important part of Americas’ operations and drive continu-
ous improvement across the entire division. Outsourcing
of some components and improved automation processes
complement the division’s cost-efficiency strategy.

Sales and specification
In 2008 Americas division continued to focus on specifica-
tion of security solutions and end-user sales activities. The
sales force furthered its knowledge about the needs of
installers and end-users, and is focused on selling total door
opening solutions rather than individual products.

The division is also working with architects and security

consultants early in the building process. ASSA ABLOY
specification consultants share their expertise to ensure
that security solutions are code-compliant and meet the
functional and security needs of the end-user. Such activi-
ties strengthen relations with architects and increase the
chance of orders once construction is underway.

Innovation
In 2008 the division launched its sales campaign for Hi-O
in North America. Hi-O stands for Highly Intelligent Opera-
tion and is a new concept of intelligent door systems that
simplify installation, service and expansion. Marketplace
reception of the pioneering Hi-O innovation has been very
favorable.

Wireless access-control locks and electronic cylinder

locks were other products launched in 2008.

Operational Excellence
Americas division works in a number of areas of Operational
Excellence to further improve performance. Some of the
areas targeted are Shared Services, production efficiency,
Lean methods and coordinated purchasing for the produc-
tion units.

Shared Services
Americas division continues to coordinate administrative
services for companies in the same market segment. In addi-
tion to financial services and human resources, legal and
IT services have been consolidated, leading to increased
efficiency and quality for the Group. Efforts to coordinate
administration will continue in 2009.

Efficient production
Lean methods are still a major driving force for Americas
division and continually raise efficiency in both production
and administration. Lean methods lead to more efficient
product flows, better control of material costs, improved
decision-making procedures, shorter time-to-market and
increased cooperation with marketing and sales teams.
They have contributed to increasing the operating margin in
2008. Work to advance Lean methods will continue in 2009.

Asia Pacific Division
22

Asia Pacific
Acquisitions support good growth in Asia

ASSA ABLOY
Annual Report
2008

Sales in Asia grew strongly in 2008, and through a combination of organic growth and
strategic acquisitions ASSA ABLOY is now the leading player on the Chinese market. As a
result of its focused acquisition strategy, the Group now offers a complete range of door
opening solutions on the Asian markets. Late in 2008 the strong growth in Asia slowed.
In the more mature markets in Australia and New Zealand growth also slowed in the
second half of the year owing to the downturn in the housing and retail markets.

Asia Pacific in brief
The Asia Pacific division manufactures and sells mechani-
cal and electromechanical locks, high-security doors and
fittings. The division is divided into five geographical sub-
regions: North Asia, China, South Asia, Australia and New
Zealand, plus a common group for high-security doors.
Australia and New Zealand account for about half of the
division’s sales and China and the rest of Asia for the other
half. In Asia the division’s major brands are Yale, Guli, and

Baodean. The markets in Australia and New Zealand are
more mature, with established lock standards and strong
brands such as Lockwood and Interlock. The production
units in China supply significant volumes to ASSA ABLOY’s
other regions.

Report on the year
The division’s sales during the year totaled SEK 3,321 M
(2,780), which was an increase of 19 percent. Operating

Sales by product group

Key figures

Mechanical locks, lock
systems and accessories, 60%
Electromechanical and
electronic locks, 18%
Security doors and fittings, 22%

Säkerhetsdörrar och beslag
Elekromekaniska och elektroniska
Mekaniska lås, låssystem och tillbehör

SEK M

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

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

Market segments

Non-residential, 60%
Residential, 40%

Cash flow
Cash flow

Bostadsmarknaden
Institutionella marknaden

Average number of employees

2007

2008

2,780
20
322
11.6

2,520
1,211
13.8

3,321
19
357
10.8

2,768
1,628
13.2

294

460

5,445

7,065

1 Excluding restructuring costs.

Sales and Operating income 1

Capital employed and Return of capital employed 1

SEK M

3,500

3,000

2,500

2,000

1,500

1,000

500

1 Excluding restructuring costs

2006 and 2008.

SEK M

450

Sales
Operating income

400

350

300

250

200

150

SEK M

3,000

2,500

2,000

1,500

1,000

500

Capital employed
Return of capital
employed

ASSA ABLOY
Annual Report
2008

Asia Pacific Division
23

The division manufactures
and sells mechanical and
electromechanical locks,
security doors and fittings
in Asia, Australia and
New Zealand.

income (EBIT) excluding restructuring costs rose by 11
percent to SEK 357 M (322), which represents an operating
margin of 10.8 percent (11.6).

generally underdeveloped, with low security standards, and
are therefore mostly price-driven when buying locks and
security solutions.

Strong growth in China
The Chinese lock market is growing quickly thanks to rapid
urbanization. Migration from the country to the cities and
the modernization of both residential and commercial
buildings are creating increased demand for security. The
market is fragmented, with many local security companies,
but ASSA ABLOY has a leading position as the largest lock
manufacturer in China.

In China the same types of lock, handle and fittings are
often used in both homes and offices. Sales include prod-
ucts manufactured in the region and also premium products
imported from Europe or North America.

In 2008 ASSA ABLOY established a Door Group compris-

ing Wangli, Beijing Tianming and Pyropanel. These Group
companies are working together to develop new products,
technologies and sales channels and to reduce the costs
of adapting products for different national and security
standards. The investment put into the new Door Group is
expected to lead to high growth because of the increased
focus across the region on higher security requirements for
doors, including fire safety requirements.

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 regulatory
authorities to formulate and improve such standards.

During 2008 the Chinese market showed strong growth,
although this slowed somewhat towards the end of the year.

Acquisitions strengthen ASSA ABLOY
on the Chinese market
ASSA ABLOY made two large acquisitions in China during
2008, Beijing Tianming and Shenfei. Beijing Tianming is one
of the leading manufacturers of fire-rated security doors on
the local market. China is strengthening its enforcement of
fire and life-safety regulations in buildings, and Beijing Tian-
ming is an ideal partner for building developers and specifi-
ers. Shenfei sells door closers both on the local Chinese mar-
ket and for export; the acquisition adds sales network and the
products complement the Group’s product portfolio well.
ASSA ABLOY is now by far the largest lock company in
China with more than 7,000 employees in the local market,
making it the clear leader in door opening solutions with a
full range of products covering many segments under well-
known brands. This has been achieved through a healthy
combination of acquired and organic growth.

Increased presence on other Asian markets
There remains great growth potential in the large, frag-
mented markets elsewhere in Asia. These markets are

In 2008 ASSA ABLOY showed good growth in all major
countries in Asia. Forceful efforts to develop the sales orga-
nization with focused sales teams and concentration on
fewer but powerful brands have further strengthened the
product offer.

In South Korea the Group company iRevo is the market

leader in digital door locks. This type of door lock has had
great success on the residential market in both South Korea
and China. In the first quarter of 2009 iRevo will start to
assemble digital door locks in Shanghai to fulfill the high
demand from China in this segment.

Slowdown in Australia and New Zealand
In Australia and New Zealand ASSA ABLOY is the market
leader on both the residential and the commercial markets
with its established Lockwood and Interlock brands. In 2008
the new sales organization based on market segmentation
and specification work, with key-account managers for large
national customers, showed encouraging development.
Residential and commercial markets then weakened during
the later part of the year, resulting in a slowdown in sales.

Strategic priorities
Product development and product range
Innovation and continued product development are impor-
tant factors enabling the division to maintain an attractive
range of products and increase sales. Electromechanical
security products are becoming more important and there
is considerable growth potential for electronic cylinders
in the commercial segment. Products like Verso CLIQ and
ABLOY Smart Disc have been successfully launched. The Asia
Pacific division is working together with Group companies in
Europe like ASSA and effeff to develop products for the local
market.

Efficiency measures
The division has continued to invest in production facilities
in China, mainly to meet rising demand on the local market
but also to increase intra-Group deliveries to Europe and
North America.

After the closure of two factories (in Wellington, New
Zealand and Brisbane, Australia) the remaining factories
in Auckland in New Zealand and Melbourne in Australia
will focus on customization and final assembly. A large
proportion of parts and commodity products will be made
by the division’s Chinese factories. Productivity in these
factories is being continually improved through implement-
ing Lean methods and investing in semi-automation and
sustainability.

Did you know the most heavily attended
opening at the Walker Art Center receives
little attention?

ASSA ABLOY
Annual Report
2008

There is a lot to see at the Walker Art Center in Minneapolis,
Minnesota – a one-of-a-kind space housing both indoor and
outdoor art exhibitions, performances and educational activ-
ities. When the Center doubled in size in 2005, the planners
wanted visitors to be drawn into an informal, inspiring space.

The minimalist approach applies to the door opening solu-
tions which make judicious use of concealed hardware and
go unnoticed by the majority of museum visitors.

ASSA ABLOY
Annual Report
2008

ASSA ABLOY’s Americas division
supplied ADAMS RITE storefront
hardware and RITE Doors, CECO
doors and frames, McKINNEY
hinges, RIXSON floor closers
and SARGENT hardware.

Global Technologies Division
26

Global Technologies
Strong customer offering on
the global market

ASSA ABLOY
Annual Report
2008

There were varied outcomes for Global Technologies’ two business units, HID Global and
ASSA ABLOY Hospitality, in 2008. Within HID Global, HID Identity and Access Manage-
ment achieved good growth and improved margins, while HID Identification Solutions
(formerly ITG) showed a negative sales trend as the program to phase out unprofitable
segments continued and some customer projects were delayed. The ASSA ABLOY Hospi-
tality business unit achieved stable sales during the year with slightly weakened margins.

Global Technologies in brief
Global Technologies division has a leading position as a
supplier of electronic security solutions worldwide. The
division consists of two business units, HID Global and
ASSA ABLOY Hospitality, whose sales are concentrated on
the non-residential segment. HID Global provides solu-
tions for secure identification and card issuance, primarily
for access management but also for a growing range of
other applications such as logical access to computers and

networks. ASSA ABLOY Hospitality is the market leader
in electronic lock systems and safes for hotels and cruise
ships throughout the world.

Report on the year
The division’s sales during the year totaled SEK 4,884 M
(4,922), which was a reduction of 1 percent. Operating
income (EBIT) excluding restructuring costs fell by 3 percent
to SEK 729 M (754), which represents an operating margin

Sales by product group

Key figures

Access control, 50%
Identification technology, 22%
Hotel locks, 28%

ASSA ABLOY Hospitality
ASSA ABLOY Identification Technologies (ITG)
SEK M
HID Global

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

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

Market segments

Non-residential, 100%
Residential, 0%

Cash flow
Cash flow

Bostadsmarknaden
Institutionella marknaden

Average number of employees

2007

2008

4,922
17
754
15.3

5,181
3,640
14.7

4,884
–1
729
14.9

6,112
4,275
12.7

699

672

2,650

2,811

1 Excluding restructuring costs.

Sales and Operating income 1

Capital employed and Return on capital employed 1

SEK M

5,000

4,000

3,000

2,000

SEK M

1,000

Sales
Operating income

800

600

400

SEK M

6,000

5,000

4,000

3,000

2,000

Capital employed
Return on capital
employed

1 Excluding restructuring costs

2006 and 2008.

ASSA ABLOY
Annual Report
2008

Global Technologies Division
27

The division sells
electronic security
solutions worldwide.

of 14.9 percent (15.3). The operating margin was held back
by continuing initiatives to expand the sales and marketing
organizations in the rapidly growing segments of access
control and secure card issuance.

HID Global
HID Global is the world leader in the areas of electronic
access control, secure issuance of smart cards, and iden-
tification technology using contactless cards and readers
for both physical and logical access control. HID Identity
and Access Management has a product range that includes
various types of card reader, smart cards for access control
and control systems, and secure issuance of smart cards.
The products use several different technologies, including
radio-frequency identification (RFID), magnetic stripe and
biometrics, and are sold under brands such as HID, Indala
and Omnikey. In the field of secure issuance of smart cards,
the Group company Fargo offers a number of printer prod-
ucts designed for the distributed management of different
types of cards.

Under the brand name Sokymat, HID Identification Solu-
tions supplies innovative products in the field of contactless
smart card technology for secure identification, including
electronic passports and identity cards, contactless pay-
ment cards, ID marking of animals and other automatic
identification applications. The main customers are external
system-integrators in the government, financial and indus-
trial sectors. HID Connect is the business unit’s technology
partnership program that provides embedded and virtual
product solutions to a growing network of over 100 appli-

cation and system developers worldwide. The program
enables the business unit’s technology to be used in the
development of a wide variety of smart-card-technology
applications including access control, monitoring of time
and attendance, parking control, biometric verification, digi-
tal security, document printing and manufacturing process
control.

HID Global – Main events in 2008
During 2008 HID Global continued to develop ground-
breaking new products with great success. One of the most
promising is the introduction of built-in card readers in
equipment such as Dell laptop computers to combine physi-
cal and logical access in one system, enabling contactless
smart cards to be used for both buildings and computers.
There were also further launches of EDGE door controllers,
an innovative IP-based product that gives the door a unique
IP address, allowing remote supervision via the Internet. In
the healthcare sector, Smart-ID smart cards and Omnikey
eHealth smart-card readers for fast, secure reading of patient
records were launched. Other interesting and successful
products were the bioCLASS biometric readers which com-
plement existing products in physical access control.

In the field of payment systems, Fargo’s high-definition
printers achieved further great success in the bank sector,
where they are used for immediate secure issuance of pay-
ment cards at the local bank branch. The new products
contributed to the business unit’s good growth. Due to the
continuing phasing-out of unprofitable segments and some
delayed customer projects, HID Identification Solutions

Identification and access management

2. Physical
access control

1. Secure
issuance

3. Logical
identification

Secure
identification

7. Industry and
logistics

4. Contactless
payment

6. Animal ID

5. eGovernment

Identification solutions

HID Global’s product areas
HID Global works with a common technology platform for
secure identification using smart cards, RFID and encryption.
Below are some examples of HID’s product offerings in these
areas of the security market.

Identification and access management
1. Secure issuance

Issuance of secure electronic cards

2. Physical access control

Electronic cards and card readers

3. Logical identification

Identification and encryption of computers

Identification solutions
4. Contactless payment

Electronic payment cards

5. eGovernment

Electronic identity cards and electronic passports

6. Animal ID

Electronic chips for identifying livestock

7. Industry and logistics

Electronic chips for stock control and logistics

Global Technologies Division
28

ASSA ABLOY
Annual Report
2008

(formerly ITG) showed a negative sales trend during the year.
In 2008 the former ITG was reorganized as a more focused
unit, HID Identification Solutions (IDS), which established
competence centers and marketing organizations directed
at identification and access management. This has created a
good platform for strengthening and improving the offering
to existing and prospective customers in some important
business segments.

ASSA ABLOY Hospitality
ASSA ABLOY Hospitality produces electronic lock systems
and safes for hotels and cruise-ships. The business unit
embraces leading global brands such as VingCard, Elsafe
and TimeLox. The world’s most recognized brand name for
hotel locking systems, VingCard, now has products installed
in over 6 million hotel rooms in more than 35,000 hotels
throughout the world.

ASSA ABLOY Hospitality – Main events in 2008
For the year as a whole, ASSA ABLOY Hospitality’s sales to
both new hotel construction projects and the aftermarket
remained stable. Towards the end of the year, however,
it became apparent that customers were delaying major
projects more and more. This had a negative effect on sales
in the fourth quarter. All locks in the hotel segment are elec-
tromechanical, with a life of about ten years, which means
that the aftermarket is important. Hospitality continued
to expand its position on growth markets successfully by
recruiting new distributors. In addition, the important after-
market sales and service business expanded from 30 to 36
percent of total sales revenue.

Innovative new products were important for growth
in 2008. One example is VingCard’s latest electronic lock
solution, Signature RFID, which is the industry’s first contact-
less RFID lock compatible with NFC cellphones. The system
makes it possible for hotel guests to receive reservation con-
firmations, room numbers and an encrypted access code for
the room by SMS before they arrive at the hotel. They can
bypass the line at the hotel front desk and instead proceed
direct to the room and unlock the door with the help of their
cellphone. VingCard’s Signature RFID security solution won
prizes for Best NFC Service at the NFC Forum at the WIMA
exhibition in Monaco in April 2008.

Another example is a project using Zigbee wireless tech-
nology as a cost-effective way to give hotels a higher level
of security via multidirectional communication between
stand-alone electronic locks and the hotel’s booking system.
In the first quarter of 2009 this will be complemented with
a new range of electronic in-room safes that also communi-
cate using Zigbee technology.

Strategic priorities
One important strategic priority for HID Global is the global
launch of ‘HID on the Desktop’, a set of logical-access-
control solutions that extends the reach of existing physical-
access investments. With ‘HID on the Desktop’, the same
card that opens the door of the office or university is also
used to log on to the computer.

Another significant priority for HID Global is to supply
reader technology to an increasing extent to all divisions of
the ASSA ABLOY Group. Reader technology is being inte-
grated into ordinary mechanical door and locking solutions.
It will give both HID Global and the other divisions increased
growth by substantially raising the technology level in these
traditional products so that customers can be offered higher
security and better functionality.

HID Global is also implementing Lean methods in pro-

duction and has appointed Lean project leaders in all its
plants worldwide, which is leading to greater efficiency.
One strategic priority for increased growth in ASSA
ABLOY Hospitality is to offer upgrades for products already
installed. Important components in achieving this are tech-
nologies such as RFID, NFC and Zigbee RF-online solutions.
It is also strategically important for ASSA ABLOY Hospi-
tality to expand the customer base beyond the traditional
hotel and cruising sectors. Efforts are therefore being made
in other segments, such as housing for the elderly and for
students, where the needs for security and ease of access
can be met by the products and technologies that ASSA
ABLOY Hospitality offers.

Major efforts are also being made to increase efficiency
in the business unit. These include the continuing migration
of production to low-cost countries and outsourcing some
component manufacture to high-quality suppliers in low-
cost countries.

ASSA ABLOY
Annual Report
2008

Who makes sure that the 32 million
passengers a year at Mexico City Airport
pass through the right doors?

With 340,000 flights a year,
Mexico City Airport is one of
the largest in the world and
one of many using ASSA
ABLOY’s contactless smart
card technology for access
control.

Latin America’s busiest airport places high demands on secure access control. That’s why
they are using a combination of RFID technology and biometric identification based on
fingerprints.

The airport uses contactless smart cards from the ASSA ABLOY Group company HID
Global. To pass a controlled door, the user must first prove identity with an access control
card and then place a specified finger on the biometric reader.

Entrance Systems Division
30

Entrance Systems
Good development under difficult
market conditions

ASSA ABLOY
Annual Report
2008

ASSA ABLOY Entrance Systems achieved good sales development in 2008, although
demand weakened towards the end of the year. On the European and North American
markets new products and acquisitions contributed to a strong performance, and
growth in Asia was high. Expanded service continued to be an important component
in the market offering.

Entrance Systems in brief
Entrance Systems division is the world-leading provider
of automatic entrance solutions. The product range, sold
under the brand name Besam, includes swing doors, sliding
doors, revolving doors, air curtains and a comprehensive
service and maintenance program. A significant part of sales
goes direct to major end-customers in the healthcare, com-
mercial and transport sectors.

Report on the year
The division’s sales during the year totaled SEK 3,173 M
(2,987), which was an increase of 6 percent. Operating
income (EBIT) excluding restructuring costs rose by 5 per-
cent to SEK 453 M (432), which represents an operating
margin of 14.3 percent (14.4).

On the division’s major markets demand weakened
towards the end of the year, primarily because the impor-
tant retailing sector reduced its investments. However, this

Sales by product group

Automatic doors, 62%
Service, 38%

Market segments

Non-residential, 100%
Residential, 0%

Key figures

service
Auto

SEK M

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

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

Cash flow
Cash flow

Bostadsmarknaden
Institutionella marknaden

Average number of employees

2007

2008

2,987
10
432
14.4

3,149
2,566
13.7

3,173
6
453
14.3

3,425
2,763
13.8

497

399

2,137

2,260

1 Excluding restructuring costs.

Sales and Operating income 1

Capital employed and Return on capital employed 1

SEK M

3,500

3,000

2,500

2,000

1,500

SEK M

490

Sales
Operating income

420

350

280

210

SEK M

3,500

3,000

2,500

2,000

1,500

Capital employed
Return on capital
employed

1 Excluding restructuring costs

2006 and 2008.

ASSA ABLOY
Annual Report
2008

Entrance Systems Division
31

was compensated by growing sales to other sectors like
healthcare and hospitality. Asia was the region that showed
the best growth during the year.

In the second half of the year the margin deteriorated
somewhat because of increased price competition and a
higher proportion of sales in emerging markets where mar-
gins are lower. The division also made major investments in
new products and increased marketing activities.

Asia, Australia and New Zealand
Sales in Asia remained strong during the year, with positive
progress in China and South East Asia. The acquisition of
Cheil in South Korea has significantly strengthened the posi-
tion in the region. The markets in Australia and New Zealand
slowed down but the division improved its market position
both organically and through a number of complementary
acquisitions in Perth, Adelaide and Wellington.

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

During the year Entrance Systems division accelerated the

execution of its efficiency program and continued to adapt
products for local markets in Asia and North America, which
strengthened competitiveness on several key markets.

Automatic entrance solutions for
non-residential customers
Automatic entrance solutions and comprehensive service
offerings are mainly sold in the non-residential segment,
which comprises both private-sector and public-sector end-
users. Typical customers are retail stores, hospitals, homes
for the elderly, hotels, airports, transport terminals, public
buildings, schools and office buildings. To satisfy end-user
needs it is increasingly important to be able to offer auto-
matic entrance solutions in the form of complete packages.
A total solution from Entrance Systems is likely to include a
coordinated combination of automatic sliding, swing and
revolving doors, with safety and convenience sensors and a
preventative service program.

The division’s product range, global resources and local
market knowledge concerning end-customers’ needs make
ASSA ABLOY an ideal partner for creating a wide range of
safe, practical and reliable entrance solutions, backed by a
customized service offering.

EMEA
Growth in EMEA was negative, affected by the deterioration
in market conditions, but despite this the division continued
to increase its market shares. Several factors sustained sales,
including new-product launches, the development of new
service concepts and a number of acquisitions in Portugal,
Turkey and South Africa.

North America
Sales on the North American market were stable during
2008 but were affected negatively by the widespread mar-
ket downturn in the retail segment in particular.

The launch of the new range of swing-door operators
in 2008 was received very positively by the market and will
lead to stronger market positioning. A new regional organi-
zation was implemented with the aims of capturing syner-
gies after the acquisitions completed in recent years and
increasing profitability in the region.

Strategic priorities
Products
Investments in product development continued and the
division initiated several important projects during 2008.
The new Besam SW100 low-energy automatic door was
launched during the year in North America and Europe. The
heavy-duty Besam Swingmaster 900 swing door was also
launched in North America in 2008. These products have sev-
eral competitive advantages, including low operating costs.
In 2009 several further product launches will be carried
out in the important product areas of swing doors, sliding
doors and revolving doors.

Service business upgraded
Entrance Systems is continually working to expand its
customer offering by selling complete automatic door solu-
tions, including a comprehensive range of service offerings.
Regular preventative maintenance is beneficial for custom-
ers, and regular contact with these end-customers also
enhances opportunities for additional sales. Great emphasis
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 becom-
ing more efficient, automating processes even more, and
increasing the number of customer visits.

Higher efficiency
Relocation of parts of production from high-cost to low-
cost countries continued in 2008. The major measures
included closing the production plant in Germany at the
beginning of the year and transferring all its output to the
newly established production facility in the Czech Republic.
After a number of acquisitions in the UK in recent years, the
division decided to integrate its operations there under a
common Besam UK banner. The integration process will be
completed at the beginning of 2009.

Measures to enhance sales and productivity were

implemented in the service organization. A large number of
service engineers in various countries were equipped with
hand-held computers to improve their efficiency in dealing
with customers and orders, with good results.

A new program for standardizing business processes
across the European organizations began during the year
with the aims of improving efficiency and reducing costs.

Sustainable development
32

Sustainable development
Sustainability in all business processes

ASSA ABLOY
Annual Report
2008

The 2008 Sustainability
Report will be published at
the time of the 2009 Annual
General Meeting.

Sustainability Report
2008

The global leader in
door opening solutions

ASSA ABLOY’s work on sustainability means that it is integrated in all business
processes and throughout the value chain. Sustainability initiatives impact both
internal and external stakeholders. They are based on an ongoing risk analysis
throughout the value chain as well as on ASSA ABLOY’s Code of Conduct.

ASSA ABLOY’s Code of Conduct is based on international
guidelines such as the United Nations Declaration of Human
Rights and the core conventions of the International Labor
Organization (ILO). The Code of Conduct applies to areas
such as environment, health and safety, business ethics,
working conditions, human rights and social responsibility.
The ongoing initiatives are carried out in a three-step pro-
cess of analysis, implementation and follow-up. All elements
of business activities are affected: management, purchasing,
production, acquisitions, investment, Research & Develop-
ment, sales and human resources.

Organization
Environmental Sustainability Coordinators at Group and divi-
sional level ensure that necessary policies, programs and tools
regarding environmental issues exist and are implemented,
while the Human Resources departments at Group and divi-
sional level are responsible for social and ethical issues.

Councils for Operations, Human Resources, Sourcing and

Innovation, each with representatives from the Group and
from all divisions, handle issues related to their business
processes/functions and the implementation of Group-
wide tools.

Tools and audits
Internal sustainability development audits are carried out
regularly in ASSA ABLOY’s manufacturing units. The audits
cover the external environment, the working environment,
human rights and business ethics and are followed by
detailed action plans. ASSA ABLOY also applies its internal
audit tools to its suppliers. The work to evaluate ASSA
ABLOY’s suppliers started in 2007 and continued during
2008. ASSA ABLOY sees it as beneficial to all parties to work
close to suppliers and support their development and
improvements.

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 equality.
The Code of Conduct’s whistleblower mechanism is a tool
to be used in the event of suspected violation of the Code.

The 2007–2010 sustainability program
The program adopted in 2007 for work on sustainability
issues is ongoing and runs up to 2010. 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 car-
ried out during the period of this sustainability program:

Use of chemicals
ASSA ABLOY is continuously working to reduce hazardous
substances in the production and to find replacements for
them. Many production facilities have already phased out
chlorinated solvents successfully. Since the program started,
consumption of these solvents has been significantly
reduced; phasing out in just two units now remains.

ISO 14001
Most of the Group’s production plants have implemented
ISO 14001 environmental management systems or the
equivalent. The table on page 33 shows the number of
certificates along with the corresponding number of certifi-
able systems for North American units. Only a small number
of production plants have any significant environmental
impact. The goal of the sustainability program is that all
plants that impact the environment should be certified, and
that newly acquired companies should be certified within
two years after the acquisition.

Energy consumption and greenhouse gases
ASSA ABLOY compiled measurable results for energy
consumption and carbon dioxide emissions in the Group
companies for the first time in 2005. These figures serve
as the baseline for actions taken under the sustainability
program. The goal for all units is to achieve total energy
savings of 15 percent by the end of 2012. ASSA ABLOY will
also analyze the contribution made by transport to energy
consumption and consider opportunities to increase coor-
dination in order to reduce emissions.

Suppliers
ASSA ABLOY has prepared a standard template for global
supplier contracts throughout the Group. Training and
implementation began in 2008. Among other things, the

ASSA ABLOY
Annual Report
2008

Sustainable development
33

Code of Conduct
ASSA ABLOY’s Code of Conduct was introduced in 2004.
It is based on the Group’s values and policies and on inter-
national conventions. A new short version of the Code was
published in 2008 and distributed throughout the Group in
17 languages. The Code of Conduct deals with the following
subjects:
•

Employee rights, human rights, consumers’ interests and
social responsibility
Sustainability
Health and safety
Business ethics

•
•
•

Dialog with stakeholders
ASSA ABLOY strives to have an open dialog with external
stakeholders. The overarching objective is to receive input
from outside interests with respect to strategy choices and
to contribute to a sustainable development that benefits
both the company and its stakeholders. During 2008,
ASSA ABLOY invited ethical analysts to round-table discus-
sions and visits to the Group’s production plants and sub-
suppliers in the Czech Republic and Romania.

More information about sustainable development is avail-

able in ASSA ABLOY’s 2008 Sustainability Report and ASSA
ABLOY’s Code of Conduct. Both documents can be down-
loaded at www.assaabloy.com.

contracts include requirements for suppliers to live up to
the Group’s Code of Conduct. The template is designed
to ensure a uniform approach to quality standards and
sustainability.

Innovation
ASSA ABLOY’s Research & Development process, from
preliminary studies to product launch, includes several
gateways at which the project plan is reviewed and deci-
sions made about continuing the project. Evaluation of
environ mental, health and safety issues is addressed at
these gateways.

Health and safety
ASSA ABLOY’s work on health and safety in production is
based on a zero-tolerance approach to injuries. Goals have
been set for injury rates and for working days lost due to
injuries. Benchmarks are implemented at divisional level
based on reporting from each production unit. Units are
also sharing their experiences of efforts to prevent drug
and alcohol use.

Gender equality and diversity
ASSA ABLOY’s Code of Conduct prevents all forms of dis-
crimination in the workplace. The company also wants to
work proactively to promote gender equality and diversity.
Each division is taking action to facilitate the advancement
of female employees to more senior roles. In general, prefer-
ence is given to the under-represented gender in recruit-
ment, assuming equal qualifications.

Some of the results from the sustainability program

Objective

Result 2006

Result 2007

Result 2008

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 20091.

Health and Safety
Zero-vision and targets for improvement:
• 2007: IR 10; ILDR 220
• 2008: IR 9; ILDR 200
– IR, injury rate = number of injuries per million hours worked
– ILDR, injury lost-day rate = number of days lost due to injuries
per million hours worked

ISO 14001 – Compliance at all factories with significant
environmental impact2.

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

Gender equality – Improve current levels of gender equality at
senior levels.

17.4 MWh/SEK M

16.0 MWh/SEK M

13.8 MWh/SEK M

172 tonnes

93 tonnes

42 tonnes

IR 10.9
ILDR 242

IR 9.5
ILDR 179

IR 8.7
ILDR 166

40 sustainability
audits in China

120 sustainability
audits in China

100 sustainability
audits in China

Level 2: 0%
Level 3: 9%
Level 4: 10%
Level 5: not
measured

Level 2: 0%
Level 3: 14%
Level 4: 19%
Level 5: 22%

Level 2: 0%
Level 3: 11%
Level 4: 17%
Level 5: 23%

1 Plants with completely closed washing processes will be phased out when the machines are taken out of

Deterioration

Unchanged

Improvement

service. Read more about the updated objective in the 2008 Sustainability Report.

2 Number of certificates plus the corresponding number of certifiable systems for North American units.

The change is due in part to the closing of plants in the restructuring program and in part to the addition
of a number of new plants with certificates.

Is one card all that students need at
Quinnipiac University?

The SARGENT ‘Powered by
PERSONA’ lock uses Wi-Fi
technology. Wi-Fi is a wire-
less technology used in
home networks, mobile
phones and video games.

Students at Quinnipiac University in Connecticut, USA have a personal ID card to open doors
to their dormitory and other campus buildings. The same card is also valid in the campus
cafeteria and vending machines, for borrowing books from the library and in washing machines
in the laundry. The University’s 32 buildings and 11 halls of residence use ASSA ABLOY
products exclusively, including SARGENT’s latest approved Powered by PERSONA Wi-Fi lock
which hooks up to the campus’s existing wireless network.

ASSA ABLOY
Annual Report
2008

Employees
ASSA ABLOY – People make it all happen

Employees
35

ASSA ABLOY’s vision is to offer an attractive company and an attractive workplace for its
employees. This involves a conscious effort to develop and retain employees and to be
able to recruit new talent when needed.

Common knowledge-base
A new version of the ASSA ABLOY Orientation Program,
‘Entrance to ASSA ABLOY’, was launched in 2008. This inter-
active web-based program provides employees worldwide
with a common knowledge-base about ASSA ABLOY which
includes the Group’s history, products, strategy and Code of
Conduct. It is mandatory for all employees to do the Program.

from all parts of the Group. In 2008 the twelfth program
was run, with 30 participants.

The ASSA ABLOY Business Leadership Program is held
in collaboration with IMD (the International Institute for
Manage ment Development) in Lausanne, Switzerland. 30
senior executives participated in 2008 and about 150 have
now taken part.

Employee survey follow-up
A global employee survey was carried out for the first time
in 2006. It showed that ASSA ABLOY’s employees are in
general satisfied with their job and workplace. The survey
was followed up during 2007 with activities, to address
areas where the results were less positive. The survey was
repeated in 2008 with about 18,000 participants. The
results were encouraging and showed greater or lesser
improvements in all areas compared to 2006, which con-
firms the effectiveness of the earlier follow-up.

Development of leaders
ASSA ABLOY conducts two Group-wide training programs,
ASSA ABLOY Management Training (MMT) and the ASSA
ABLOY Business Leadership Program.

MMT began in 1996 and over 300 of the Group’s senior

executives have now taken part. The program comprises
four modules held during one year with the main objec-
tives to support integration among Group companies and
to provide opportunities to network, to learn about the
various operations and products and to share experiences

Development through cross-fertilization
The ASSA ABLOY Scholarship Program provides employees
with the opportunity to work at another Group company for
a short period. It gives participants the opportunity to share
their own knowledge and experiences while learning about
other cultures, methods and procedures, which they can
bring back to their workplace.

Talent Management
The goal of ASSA ABLOY’s annual Talent Management Process
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 own
unit. The process involves a structured procedure for succes-
sion planning and for employee development.

Recruitment
A basic principle of ASSA ABLOY’s recruitment policy is to
give priority to internal employees if their qualifications
equal those of external applicants. To encourage and facili-
tate internal mobility, all vacant positions are advertised on
the Group’s global Intranet.

Number of employees by region

Average number of employees

Distribution, men and women

Afrika
Number

35,000

Asien

Central- och Sydamerika

32,000

Australien och Nya Zeeland

Nordamerika

29,000

Europa

26,000

23,000

20,000

Europe, 13,397
North America, 9,331
Australia and New Zealand, 1,290
Central and South America, 679
Asia, 7,452
Africa, 574

Kvinnor

Män

Men, 60%
Women, 40%

Did you know that 100,000 people
in Korea open their apartment doors
by showing a finger to a scanner?

Digital door locking offers
the opportunity to include
additional functionality. The
locks in this project are inte-
grated into the apartments’
security network.

In Korea, highly intelligent locks are very popular for home security, with 45 percent of apart-
ment entrance doors being fitted with digital or biometric locks. The ASSA ABLOY Group
company iRevo created this market and remains the market leader. 3,410 of its fingerprint
scanners are currently being installed in the exclusive Seoul properties shown here. There is
increasing interest in such smart solutions around the world and ASSA ABLOY offers a range
of products under its well known Yale residential and consumer brand.

Report of the Board of Directors,
financial reports and

Contents

Expenses by nature

Share of earnings in associates

38
41
44
45
46
47
48
49
50
51
52
54

Significant accounting and valuation principles
Sales

Report of the Board of Directors
Significant risks and risk management
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
Notes
1
2
3 Auditors’ fees
4 Other operating income and expenses
5
6 Operational leasing agreements
7
8 Depreciation and amortization
9
Exchange-rate differences in the income statement
10
Financial income
11
Financial expenses
12
Tax on income
13
Earnings per share
14
Intangible assets
15
Tangible assets
16
Shares in subsidiaries
Shares in associates
17
18 Deferred tax on income
19 Other long-term financial assets
20
21 Accounts receivable
22
23
24
25 Reserves
26
27 Other provisions
28 Other short-term liabilities
29 Accrued expenses and prepaid income
30 Contingent liabilities
31 Acquisitions
32 Cash flow
33
34 Assets pledged against liabilities to credit institutes
Comments on five years in summary
Five years in summary
Quarterly information
Definitions of key data terms
Proposed distribution of earnings
Audit report
Corporate governance report
Board of Directors
The Executive Team
The ASSA ABLOY share
Information for shareholders
Glossary

56
61
61
61
61
61
61
61
62
62
62
62
62
63
65
66
66
67
67
67
67
67
Financial risk management and financial instruments
Parent company’s equity
72
Share capital, number of shares and dividend per share 72
72
72
75
75
75
75
76
77
78
79
80
81
82
83
84
85
86
90
92
95
98
99

Post-employment employee benefits

Inventories

Employees

Report of
the Board of Directors
38

Report of the Board of Directors

ASSA ABLOY
Annual Report
2008

The Annual Report of ASSA ABLOY AB (publ.), corporate iden-
tity number 556059-3575, contains the consolidated finan-
cial statements for the financial year 1 January – 31 December
2008. ASSA ABLOY is the global leader in door opening solu-
tions, dedicated to satisfying end-user needs for security,
safety and convenience.

Significant events
Sales and earnings
During the year, sales rose by 4 percent to SEK 34,918 M
(33,550), with organic growth of 0 percent and acquired
growth of 4 percent. Operating income (EBIT) excluding
restructuring and non-recurring costs rose by 1 percent to
SEK 5,526 M (5,458), representing an operating margin of
15.8 percent (16.3). Income before tax excluding restructur-
ing and non-recurring costs totaled SEK 4,756 M (4,609).
Restructuring costs of SEK 1,180 M and non-recurring
costs of SEK 77 M relating to supplementary lock protection
in the Swedish operation had a negative impact on operat-
ing income for the year. Including these costs, operating
income (EBIT) amounted to SEK 4,269 M and the corres-
ponding margin was 12.2 percent.

Operating cash flow excluding restructuring payments
was SEK 4,769 M (4,808), a decline of 1 percent. Earnings per
share excluding restructuring and non-recurring costs rose
2 percent to SEK 9.21 (9.02).

Restructuring
The restructuring program initiated in 2006 has been a
great success and will be completed in 2009. The annual
rate of savings is close to the target level of SEK 600 M,
which will be achieved during 2009. More than 2,000
employees have left the Group as a result of the changes in
the production structure.

The restructuring program initiated during the second
half of 2008 was fully underway by year-end. The program
comprises some 40 projects, is expected to cost SEK
1,180 M and affects 1,800 employees. Fifteen production
facilities are closing, while the remaining plants in high-cost
countries are converting to final assembly. In addition,
administrative support functions will be consolidated. Pay-
back time for the full program is 2–3 years and the entire
cost was expensed in the third and fourth quarters of 2008.
Payments related to the restructuring programs totaled

SEK 485 M for the twelve-month period.

In June Asia Pacific division acquired Beijing Tianming’s
security-door operation. The company, which is located out-
side Beijing, employs 400 people and has annual sales of SEK
100 M. The acquisition was EPS-accretive from the acquisi-
tion date. During the fall the division also submitted a public
bid for the remaining 49 percent of shares in the South
Korean company iREVO. ASSA ABLOY now holds more than
90 percent of the total number of outstanding shares and
the Korean stock exchange has approved the company’s
request for delisting. ASSA ABLOY acquired the first 51 per-
cent of iRevo in 2007 and the company has been consoli-
dated in the Group since 1 October 2007.

The Chinese authorities have approved the acquisition of
the door-closer manufacturer Shenfei and the company has
been consolidated since the beginning of 2009. Annual sales
are expected to total SEK 180 M and the acquisition will be
EPS-accretive in 2009.

In February EMEA Division acquired 20 percent of the
shares in Copiax, a Swedish wholesaler of security products
focusing on locksmiths, security installers and builders’ mer-
chants, and at the same time submitted a bid for the remain-
ing shares. The competition authorities approved the acqui-
sition during the fall and it was consolidated during the third
quarter. The company has sales of SEK 400 M and employs
45 people. The division also completed the acquisition of
Valli&Valli, a leading Italian manufacturer of designer door
handles, and Gardesa, one of Italy’s leading manufacturers of
high-security doors. Sales for the two companies total EUR
75 M and they have 370 employees. All these acquisitions
were EPS-accretive during the year.

In July Entrance Systems Division acquired Cheil, a lead-
ing Korean company with a broad range of products in auto-
matic doors and services. The company has 50 employees
and annual sales of about SEK 150 M. The acquisition was
EPS-accretive from the acquisition date.

Including smaller acquisitions, a total of 18 acquisitions
were consolidated during the year. The total purchase price
for these 18 acquisitions was SEK 2,013 M and preliminary
acquisition analyzes indicate that goodwill and other intan-
gible assets with an indefinite useful life amount to about
SEK 1,460 M. The purchase price was adjusted for acquired
net debt and estimated earn outs.

The competition authority in Germany rejected the com-

pany’s application for the acquisition of the German com-
pany SimonsVoss. ASSA ABLOY has lodged a formal appeal
and is currently considering the next step in the process.

Acquisitions
In June Americas Division acquired Rockwood, a leading US
manufacturer of specialty door hardware, which has annual
sales of USD 48 M. The acquisition was EPS-accretive from
the acquisition date.

Research and development
ASSA ABLOY’s expenditure on research and development
during the year amounted to SEK 890 M (776), which is
equivalent to 2.5 percent (2.3) of sales.

ASSA ABLOY
Annual Report
2008

Report of
the Board of Directors
39

ASSA ABLOY has a central function, Shared Technologies,
with responsibility for the standardization of electronics for
the Group’s common platforms. The objective is that this
standardization should result in lower development costs
and a shorter development period for new products.

Sustainable development
Two of ASSA ABLOY’s subsidiaries in Sweden carry on licens-
able activities in accordance with the Swedish Environmen-
tal 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 compa-
nies operate machine shops, foundries and associated sur-
face-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 accor-
dance with ISO 14001. Most units outside Sweden carry on
licensable activities and hold equivalent licenses under local
legislation.

ASSA ABLOY’s units all over the world are working pur-
posefully to reduce the emission of greenhouse gases. This
applies to units on both mature and new markets and to
both existing and newly acquired companies. ASSA ABLOY’s
largest production unit in North America, Sargent Manufac-
turing, has made an investment in a combined-heat-and-
power plant. By using the plant both to generate power and
for heating, efficiency has been raised from 40 percent to 90
percent, which has significantly reduced energy consump-
tion and the emission of greenhouse gases. Furthermore the
investment has a financial payback time of only two years.

The 2008 Sustainability Report, reporting on the Group’s

20-point program and giving other information about sus-
tainable development, will be published at the time of the
Annual General Meeting in April 2009.

Outlook
Long-term outlook
Long term, ASSA ABLOY expects an increase in security-
driven demand. Focus on end-user value and innovation as
well as leverage on ASSA ABLOY’s strong position will accel-
erate growth and increase profitability.

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

Outlook for the year
2009 will be a challenging year since the financial crisis has
had a strongly negative effect on investments in construc-
tion, and negative organic growth for the year is therefore
expected for ASSA ABLOY.

Shareholders and share capital
At year-end, ASSA ABLOY had 22,921 shareholders. ASSA
ABLOY’s principal shareholders are Investment AB Latour
and SäkI AB (9.7 percent of the capital and 29.8 percent of
the votes) and Melker Schörling AB (4.0 percent of the capi-
tal and 11.6 percent of the votes). Foreign shareholders
accounted for 50 percent of the share capital and 34 per-
cent of the votes. The ten largest shareholders accounted for
41 percent of the share capital and 60 percent of the votes.
A shareholders’ agreement that includes preemption
rights for sale of Series A shares by any party exists between
Gustaf Douglas, Melker Schörling and companies closely
related to them. Apart from this, the Board of Directors of
ASSA ABLOY is not aware of any shareholders’ agreements or
other arrangements between shareholders of ASSA ABLOY.

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 company’s assets and
earnings.

Remuneration of senior management in 2009
The Board of ASSA ABLOY proposes that the 2009 Annual
General Meeting adopts the following guidelines for the
remuneration of senior management. The basic principle is
that the remuneration and other employment conditions of
senior management should be in line with market condi-
tions and competitive, in order to ensure that the ASSA
ABLOY Group can attract and retain competent senior man-
agement. The total remuneration of senior management
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 targets 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 fixed salary for the CEO and other members of the
Executive Team. Under the Board’s proposal, the cost of vari-
able 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 remu-
neration is based, and can amount to a total of SEK 35 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 Execu-
tive Team.

ASSA ABLOY has no outstanding remuneration commit-
ments apart from current commitments to senior manage-
ment in accordance with the remuneration principles

Report of
the Board of Directors
40

ASSA ABLOY
Annual Report
2008

described here, including previous commitments regarding
a Long-Term Incentive (LTI) agreement.

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 termination of contract,

the CEO is entitled to a maximum 24 months’ salary and
other employment benefits, while the other members 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 guidelines apply to con-
tracts entered into following the resolution of the Annual
General Meeting, and where amendments are made in
existing contracts after this time. The Board should have the
right to deviate from these guidelines if there are particular
reasons for doing so in an individual case.

2008, the same remuneration guidelines were applied as
the Board’s proposal to the 2009 Annual General Meeting
described above.

Dating from the period before the 2007 Annual General

Meeting, and in one particular case from 2008 where spe-
cial circumstances were considered to apply, ASSA ABLOY
has made Long-Term Incentive (LTI) agreements with some
members of the Executive Team (excluding the CEO), which
allow them to receive variable salary based on improve-
ments 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 10 per-
cent compared with the previous year and organic growth
reaches 6 percent. One-third of such variable salary is paid
the following year, while two-thirds is retained for either
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.

For more information about remuneration to senior

management, see Note 33.

The remuneration of ASSA ABLOY’s senior management
in 2008 was determined in accordance with the guidelines
drawn up and adopted by the Board and subsequently
approved by the 2008 Annual General Meeting. During

Transactions with related parties
No transactions that significantly affected the company’s
position and income have taken place between ASSA ABLOY
and related parties.

ASSA ABLOY
Annual Report
2008

Significant risks and risk management

Significant risks and
risk management
41

Risk management
Uncertainty about future developments and the course of
events is a natural risk for any business. Risk-taking in itself
provides opportunities for continued economic growth, but
naturally the risks may also have a negative effect on busi-
ness operations and the goals set for them. It is therefore
essential to have a systematic and efficient risk assessment
process and an effective risk management program in gen-
eral. The purpose of risk management at ASSA ABLOY is not
to avoid risks, but to take a controlled approach to identify-
ing, handling and minimizing the effects of these risks. This
work is based on an assessment of the probability of the risks
and their potential effect on the Group.

ASSA ABLOY is an international group with a wide geo-
graphical spread, which involves it in exposure to various
forms of strategic, operational and financial risks. Strategic
risks refer to changes in the business environment with
potentially significant effects on ASSA ABLOY’s operations
and business objectives. Operational risks comprise risks
directly attributable to business operations, entailing a
potential effect on the Group’s earnings and financial posi-
tion. Financial risks mainly comprise financing risk, currency
risk, interest rate risk, credit risk and risk associated with the
Group’s pension obligations.

ASSA ABLOY’s Board of Directors has ultimate responsi-
bility for risk management within the Group and determines
the Group’s strategic focus based on recommendations
from the Executive Team. In the decentralized spirit that
characterizes ASSA ABLOY, and to keep risk analysis and risk
management as close as possible to the actual risks, a large
proportion of operational risk management takes place at
division and business-unit level.

Strategic risks
The main risks of this nature that ASSA ABLOY encounters
include various forms of risks from the surrounding world
that may have an impact on the security market in general,
mainly changes in customer behavior, competitors, brand
positioning and environmental risks. In addition, there are
country-specific risks.

ASSA ABLOY has worldwide market penetration, with
sales and production in a large number of countries. The
emphasis is on Western Europe and North America, but the
proportion of sales in Asia and in Central and Eastern Europe
has increased in recent years. For natural reasons, therefore,

the Group is exposed to both general risks from the world at
large and country-specific risks such as political decisions,
comprehensive changes in the regulatory framework, etc.
Changes in customer behavior in general, as well as the
actions of competitors, affect demand for different products
and their profitability.

Customers and suppliers, including the Group’s relation-
ships with them, are subject to continuous local review. For
some time the Group has had a central business intelligence
organization that primarily focuses on industry-specific fac-
tors. In 2008 measures were taken to further strengthen this
organization, for example by spreading pertinent informa-
tion to the Group’s various business units. As regards com-
petitors, risk analyzes are carried out both centrally and
locally.

The Group owns several of the strongest brands in the
industry, including several global brands that form a good
complement to the Group’s master brand ASSA ABLOY. The
local product brands are increasingly being linked to the
master brand. Generally speaking, ASSA ABLOY’s good repu-
tation is one of the Group’s strengths and serves as a founda-
tion for market leadership.

Activities aimed at maintaining and further strengthen-
ing ASSA ABLOY’s good reputation are continually in hand.
One aspect is to ensure compliance with ASSA ABLOY’s Code
of Conduct. The Code of Conduct previously implemented
in the Group was reviewed and updated in 2008. The Code
expresses the Group’s high aspirations relating to social
responsibility, commitment and respect for the environ-
ment. A more detailed description of the Code can be found
in the Sustainable development report on page 32.

Operational risks
Operational risks comprise risks directly attributable to busi-
ness operations and with a potential effect on the Group’s
earnings and financial position. Operational risks include
legal risks, acquisition of new businesses, restructuring mea-
sures, availability and price fluctuations of raw materials,
customer dependence, and more. Risks relating to compli-
ance with laws and regulations and to financial reporting
and internal controls also fall into this category.

The table on page 42 describes in greater detail how

these risks are handled.

Significant risks and
risk management
42

ASSA ABLOY
Annual Report
2008

Operational risks

Risk management

Comments

Legal risks

The Group continuously monitors anticipated
and implemented changes in legislation in the
countries in which it operates.

It was judged at the end of 2008 that there are no
outstanding legal disputes that are expected to
lead to significant costs for the Group.

A Group-wide legal policy specifies the legal
framework within which business operations may
be conducted.

Ongoing and potential disputes and other legal
matters are reported regularly to the Group’s
central legal function.

ASSA ABLOY has implemented guidelines on
compliance with current competition legislation.

Legal risks associated with property and liability
issues are continually evaluated together with
insurance company representatives.

Acquisitions are carried out by a group of people
with considerable experience of acquisitions and
with the support of, for example, legal and finan-
cial consultants.

Acquisitions are carried out according to a uni-
form and predefined Group-wide process. This
consists of four documented phases: strategy,
evaluation, implementation and integration.

The restructuring programs are being run as a
series of projects with set activities and schedules.

The various projects are systematically followed
up on a regular basis.

Acquisition of
new businesses

Restructuring measures

The Group is implementing spe-
cific restructuring programs
which involve some production
units changing focus mainly to
final assembly, while certain
units are closing.

The Group’s 2008 acquisitions are presented in
the Report of the Board of Directors and in Note
31, Acquisitions.

The scope, costs and savings of the restructuring
programs are presented in greater detail in the
Report of the Board of Directors.

Price fluctuations and access
to raw materials

Raw materials are purchased and handled prima-
rily at division and business-unit level.

For more information about procurement of
materials, see Note 7.

Regional committees coordinate these activities
with the help of senior coordinators for selected
material components.

Customer losses

Insurance risks

Accounts receivable are spread among a large
number of customers in many markets.

Credit risks are handled locally at company level
and reviewed at division level.

Receivables for each customer are relatively small
in relation to total accounts receivable. The risk of
significant credit losses for the Group is conside-
red to be limited.

ASSA ABLOY has set up a Group-wide insurance
program mainly relating to property, interruption
of operations, and liability risks. The insurance
program covers all business units.

The Group’s insurance coverage is considered to
be generally adequate, providing a reasonable
balance between assessed risk exposure and
insurance costs.

The Group’s exposure in the risk areas listed
above is regulated by measures such as its own
insurance company.

Risks related to
internal control

The organization is considered to be relatively
transparent, with a clear allocation of responsibi-
lities.

Internal control and other related issues are
reported in greater detail in the Corporate gover-
nance report.

Instructions about the allocation of responsi-
bilities and authority and other internal control
procedures are laid down in an internal control
manual.

Compliance with the manual is evaluated annu-
ally through self assessment.

Risks relating to financial
reporting

A well-established Controller organization at
both division and Group level analyzes and moni-
tors financial reporting quality.

A comprehensive systematic risk assessment of
financial reporting was carried out in 2008.

Also see the section ’Basis of preparation’ in Note 1.

More information about risk management rela-
ting to financial reporting can be found in the
Corporate governance report.

ASSA ABLOY
Annual Report
2008

Significant risks and
risk management
43

Financial risks
Group Treasury at ASSA ABLOY is responsible for the Group’s
short- and long-term financing, financial cash management,
currency risk and other financial risk management. Financial
operations are centralized in a Treasury function that handles
most financial operations as well as financial risks with a
Group-wide focus. Group Treasury moved during the year
from Geneva to headquarters in Stockholm in order to fur-
ther optimize its work on financial risks within the company.
A financial policy that is updated annually and approved

by the Board regulates the distribution of responsibilities
and control of the Group’s financing activities. Group Trea-
sury has the main responsibility for financial risks within the
framework established in the financial policy. In this work a
large number of financial instruments is used. Accounting
principles, risk management and risk exposure are described
in greater detail in Note 1 and Note 22, as well as Note 26 for
pension obligations.

The Group’s financial risks mainly comprise financing
risk, currency risk, interest rate risk, credit risk and risks asso-
ciated with the Group’s pension obligations.

Financing risk refers to the risk that financing the Group’s

capital requirements and refinancing of outstanding loans
becomes more difficult or more expensive. Financing risk can
be reduced by maintaining an even maturity profile for loans
and by maintaining a high credit rating. The risk is further
reduced by substantial unused confirmed credit facilities.

Since ASSA ABLOY sells its products in countries world-
wide and has companies in over 60 countries, the Group is
exposed to the effects of exchange rate fluctuations. Such
changes affect Group earnings both when foreign subsidiar-
ies’ income statements are translated to Swedish kronor
(translation exposure) and when products are exported and
sold in countries outside the country of production (trans-
action exposure). Translation exposure is primarily related
to earnings in USD and EUR. This type of exposure is not
hedged. Currency risk in the form of transaction exposure,
or the relative values of exports and imports of goods, is
fairly limited in the Group, though it is expected to increase
over time due to efficiency measures in production and pur-
chasing. In 2008 the Group handled transaction exposure by
hedging expected cash flows in tradable currencies for the
next financial year. Hedging was done through derivatives,
primarily through a currency basket. For 2009 the Group has
revised its policy and the underlying principle is to allow
currency fluctuations to have an impact on the business as
quickly as possible. As a result of this strategy, only limited
portions of current currency flows are usually hedged.

Exchange rate changes also affect the Group’s liabilities and
equity. The difference between the assets and liabilities of
foreign subsidiaries in the respective foreign currency is
affected by exchange rate changes and causes a translation
difference that affects the Group’s equity. A general weaken-
ing of the Swedish krona leads to an increase in net debt, but
at the same time increases Group equity. At year-end the
largest foreign net assets were denominated in USD and EUR.
With respect to interest rate risks, interest rate fluctua-

tions have a direct impact on ASSA ABLOY’s net interest
expense. The net interest expense is also impacted by the
size of the Group’s net debt and its currency composition.
Net debt was SEK 14,013 M (12,953) at the end of 2008 and
was mainly denominated in SEK, USD and EUR. Group Trea-
sury analyzes the Group’s interest rate exposure and calcu-
lates the impact on income of defined interest rate shifts on
a rolling 12-month basis. In addition to raising fixed-rate and
floating-rate loans, various interest rate derivatives are used
to adjust interest rate sensitivity. At year-end, the average
interest rate duration, excluding pension obligations, was
about 23 (25) months.

Credit risk arises both within ordinary business operations
and through the financial transactions carried out by Treasury.
Accounts receivable are spread across a large number of cus-
tomers from different territories, which reduces the credit
risk. Credit risks related to operational business activities are
handled locally at company level and reviewed at division
level.

Financial risk management exposes ASSA ABLOY to cer-
tain counterparty risks. Such exposure may arise, for exam-
ple, from the placement of surplus cash, from borrowing and
from derivative financial instruments. Counterparty limits
are set for each financial counterparty and continually
reviewed.

At the end of 2008 ASSA ABLOY had obligations for pen-
sions and other post-employment benefits of SEK 3,963 M
(4,384). The Group manages pension assets valued at SEK
2,604 M (3,177). Pension provisions in the balance sheet
amount to SEK 1,182 M (1,156). Changes in the value of
assets and liabilities from year to year are due in part to
trends on the debt capital markets and equity markets and
in part to the actuarial assumptions made. Such assump-
tions involve factors such as discount rates, as well as anti-
cipated inflation and salary increases.

Financial reports
44

Sales and earnings

ASSA ABLOY
Annual Report
2008

Operating income
Operating income (EBIT) excluding restructuring costs and
non-recurring costs amounted to SEK 5,526 M (5,458) after
positive exchange-rate effects of SEK 5 M. The correspond-
ing operating margin was 15.8 percent (16.3).

Operating income before depreciation and amortization

(EBITDA) excluding restructuring costs and non-recurring
costs amounted to SEK 6,447 M (6,366). The corresponding
margin was 18.5 percent (19.0).

Restructuring costs of SEK 1,180 M and non-recurring
costs of SEK 77 M relating to the provision of supplementary
lock protection in the Swedish operation had a negative
impact on operating income for the year. Including these
items, operating income (EBIT) amounted to SEK 4,269 M
and the corresponding margin was 12.2 percent.

Restructuring costs
Total restructuring costs were SEK 1,180 M (–) including
write-down of assets, mainly machinery and equipment, of
SEK 141 M. The remaining portion mainly pertains to pay-
ments in connection with staff redundancies.

Income before tax
Income before tax excluding restructuring costs and non-
recurring costs totaled SEK 4,756 M (4,609), an increase
of 3 percent compared with the previous year. Negative
exchange-rate effects amounted to SEK 14 M. Net financial
items amounted to SEK –770 M (–849). This reduction was
mainly attributable to non-recurring costs of SEK 75 M in
the last quarter of 2007. Profit margin – defined as income
before tax in relation to sales – was 13.6 percent (13.7)
ex cluding restructuring costs and non-recurring costs.
The Parent company’s income before tax was SEK

1,589 M (2,351).

Tax
The Group’s tax expense totaled SEK 1,061 M (1,240), corres-
ponding to an effective tax rate of 30 percent (27). The
increase in the effective tax rate was due to the fact that
deferred tax was not factored into certain restructuring costs.

Earnings per share
Earnings per share excluding restructuring costs and non-
recurring costs amounted to SEK 9.21 (9.02), corresponding
to an increase of 2 percent.

•

Organic growth for comparable units was 0 percent (7),
while acquired growth was 4 percent (5).
Operating income (EBIT) excluding restructuring costs
and non-recurring costs rose by 1 percent to SEK 5,526 M
(5,458), equivalent to an operating margin of 15.8 per-
cent (16.3).
Earnings per share excluding restructuring costs and
non-recurring costs rose by 2 percent to SEK 9.21 (9.02).

Sales
The Group’s sales increased to SEK 34,918 M (33,550).
Exchange-rate effects had a positive impact of SEK 16 M on
sales, compared with 2007.

Change in sales

Organic growth
Acquired growth
Exchange-rate effects

Total

2007

2008

7
5
–4

0
4
0

Sales rose by 4 percent (12) in local currency, of which
organic growth for comparable units accounted for 0 per-
cent (7) and acquired units made a positive contribution of
4 percent (5).

Sales by product group

Mechanical locks,
lock systems and accessories

Electromechanical and electronic locks

Security doors and fittings

2007

2008

Mechanical locks, lock systems and accessories accounted
for 47 percent (48) of sales. Sales of electromechanical and
electronic locks rose to 34 percent (33), while security
doors and fittings accounted for 19 percent (19) of sales.

Cost structure
Total wage costs, including social security expenses and
pension expenses, amounted to SEK 10,016 M (10,066),
corresponding to 29 percent (30) of sales. The average num-
ber of employees was 32,723 (32,267). The average number
of employees in the Parent company was 101 (98).
The Group’s material costs totaled SEK 11,329 M
(10,721), corresponding to 32 percent (32) of sales. This
increase was mainly due to the increased costs of raw mat-
erials and outsourcing.

Other purchasing costs totaled SEK 7,172 M (6,424), cor-

responding to 20 percent (19) of sales.

Depreciation and amortization of fixed assets amounted
to SEK 921 M (910), corresponding to 3 percent (3) of sales.

ASSA ABLOY
Annual Report
2008

Income statement – Group

Financial reports
45

SEK M

Sales
Cost of goods sold

Gross income

Selling expenses
Administrative expenses
Research and 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 interest

Earnings per share

before dilution, SEK
after dilution, SEK
after dilution excl. items affecting comparability, SEK

Note

4
5

6–9

10
9, 11

13
13
13

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
9.02

2008

34,918
–21,532

13,386

–6,129
–2,067
–890
–43
12

4,269

47
–817

3,499

–1,061

2,438

2,413
25

6.60
6.55
9.21

Financial reports
46

Comments by division

ASSA ABLOY
Annual Report
2008

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, Australia
and New Zealand) manufacture and sell mechanical and
electromechanical locks, security doors and fittings in their
respective geographical markets. Global Technologies divi-
sion operates worldwide in the product areas of access con-
trol systems, secure issuance of cards, identification technol-
ogy and hotel locks. Entrance Systems division is a world-
wide supplier of automatic doors and service. Group-wide
functions are shown in the column headed ‘Other’ in the
table on page 47.

EMEA
Sales totaled SEK 13,988 M (13,477), with organic growth of
–2 percent (7). Acquired units contributed 4 percent. Oper-
ating income excluding restructuring and non-recurring
costs amounted to SEK 2,289 M (2,295), with an operating
margin (EBIT) of 16.4 percent (17.0). Return on capital
employed excluding restructuring and non-recurring costs
was 19.9 percent (21.9). Operating cash flow before inter-
est paid amounted to SEK 2,421 M (2,267).

Many markets noted declining sales towards the end of
the year as a result of the economic downturn in the housing
market and delayed commercial projects. Savings from effi-
ciency programs in production, together with the division's
other Operating Excellence initiatives, have been largely
responsible for sustaining the margin during the year.

Americas
Sales totaled SEK 10,467 M (10,220), with organic growth of
4 percent (5). Acquired units contributed 2 percent to sales.
Operating income excluding restructuring costs amounted
to SEK 2,101 M (1,995), with an operating margin (EBIT) of
20.1 percent (19.5). Return on capital employed excluding
restructuring costs was 24.5 percent (22.7). Operating cash
flow before interest paid amounted to SEK 2,097 M (2,211).
The division increased sales and margins mainly due to
robust growth in the commercial segment. The residential
segment demonstrated negative growth due to the down-
turn in the US housing market.

Asia Pacific
Sales totaled SEK 3,321 M (2,780), with organic growth of
0 percent (10). Acquired units contributed 20 percent to
sales. Operating income excluding restructuring costs
amounted to SEK 357 M (322), with an operating margin
(EBIT) of 10.8 percent (11.6). Return on capital employed
excluding restructuring costs was 13.2 percent (13.8).
Operating cash flow before interest paid amounted to SEK

460 M (294).
Market trends in Australia and New Zealand were negative
during the year, but they were positive on the Chinese mar-
ket in particular. However, even this market slowed down
towards the end of the year. Export sales to the Group's
units in North America and Western Europe also fell
towards the end of the year due to inventory reductions
on those markets.

Global Technologies
Sales totaled SEK 4,884 M (4,922), with organic growth of
0 percent (11). Units acquired and sold reduced sales by
1 percent net. Operating income excluding restructuring
costs amounted to SEK 729 M (754), with an operating
margin (EBIT) of 14.9 percent (15.3). Return on capital
employed excluding restructuring costs totaled was 12.7
percent (14.7). Operating cash flow before interest paid
amounted to SEK 672 M (699).

Growth for the HID Global business unit was weakly neg-
ative and for the ASSA ABLOY Hospitality business unit was
weakly positive. However, within HID Global, Identity and to
Access Management reported growth, while Identification
Solutions (formerly ITG) reported negative growth due to
the phasing-out of unprofitable customer segments and
to customer delays.

Entrance Systems
Sales totaled SEK 3,173 M (2,987), with organic growth of
3 percent (6). Acquired units contributed 3 percent to sales.
Operating income excluding restructuring costs amounted
to SEK 453 M (432), with an operating margin (EBIT) of 14.3
percent (14.4). Return on capital employed excluding
restructuring costs was 13.8 percent (13.7). Operating cash
flow before interest paid amounted to SEK 399 M (497).

Demand from the retailing sector in Europe and North

America weakened during the year, though increased
demand from healthcare and from growth markets largely
compensated for this trend. Robust sales in the service seg-
ment made a positive contribution.

Other
The costs of Group-wide functions, such as Group manage-
ment, accounting and finance, supply management and
Shared Technologies, amounted to SEK 404 M (340).

ASSA ABLOY
Annual Report
2008

Results by division

Financial reports
47

SEK M

Sales, external
Sales, internal

Sales
Organic growth
Share of earnings in associates

Operating income (EBIT) excl.
items affecting comparability
Operating margin (EBIT)
Items affecting comparability 6

Operating income (EBIT)
Net financial items
Tax on income

Net income

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

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
2007

2008

Americas2

2007

2008

Asia Pacific3
2008

2007

Global
Technologies4
2008

2007

Entrance
Systems
2007

2008

13,073
405

13,477
7%
3

13,578 10,166
54

410

13,988 10,220
5%
6

–2%
3

10,426
41

10,467
4%
9

2,558
222

2,780
10%
–

3,031
290

3,321
0%
–

4,805
117

4,922
11%
–

4,748
136

4,884
0%
–

2,949
38

2,987
6%
–

2,295
17.0%
–

2,289
16.4%
–863

1,995
19.5%
–

2,101
20.1%
–77

322
11.6%
–

357
10.8%
–65

754
15.3%
–

729
14.9%
–149

432
14.4%
–

3,135
39

3,173
3%
–

453
14.3%
–103

2,295

1,426

1,995

2,024

322

293

754

580

432

350

–340

–404

Other

Total

2007

2008

2007

2008

–
–836

–836

–

– 33,550

34,918

–915

–915 33,550
7%
9

–

34,918
0%
12

–340

–404

–

5,458
16.3%
–

5,458
–849
–1,240

5,526
15.8%
–1,257

4,269
–770
–1,061

3,368

2,438

10,055
4,926

12,306
5,766

8,595
4,928

9,639
6,236

2,520
1,211

2,768
1,628

5,181
3,640

6,112
4,275

3,149
2,566

3,425
2,763

–879
–

–1,400 28,621
– 17,270

32,850
20,669

21.9%

19.9%

22.7%

24.5%

13.8%

13.2%

14.7%

12.7%

13.7%

13.8%

18.4%

17.2%

11,137
2
1,500

3,269
5
763

3,950
5
1,183

6,602
–
1,174

7,293
–
1,181

3,771
–
721

4,631
–

317
–
1,206 14,217

1,311 37,732
39
16,722 22,064

–

44,960
38
26,122

13,933
32
3,953

16,637
31
4,330

2,295
–
433
–524
173
–111

1,426
786
455
–403
75
82

9,839
2
1,235

1,995
–
218
–187
45
140

2,024
77
205
–235
20
5

2,267

2,421

2,211

2,097

322
–
69
–84
27
–40

294

293
65
80
–107
9
120

460

754
–
138
–197
33
–29

699

580
149
136
–152
23
–64

672

432
–
38
–36
22
41

497

–340
–
12
–22
–
–27

350
103
37
–37
5
–60

399

–404
–
8

5,458
–
909
–29 –1,050
299
–25

–
–88

4,269
1,180
921
–962
133
–5

5,591

5,536

–49
–734

–49
–718

–49
–734

–49
–718

4,808

4,769

Investments in subsidiaries
Average number of employees

–275
12,493

–762
11,903

–319
9,428

–420
8,573

–357
5,445

–331
7,065

–304
2,650

–114
2,811

–102
2,137

–204
2,260

–
113

–

–1,358
111 32,267

–1,831
32,723

1 Europe, Middle East and Africa.
2 North and South America
3 Asia, Australia and New Zealand.
4 ASSA ABLOY Hospitality and HID Global.
5 Excluding restructuring payments.
6 Items affecting comparability consist of restructuring costs and non-recurring costs. Non-recurring costs relate to EMEA and totaled SEK 77M.

Financial reports
48

Financial position

ASSA ABLOY
Annual Report
2008

•
•
•

Capital employed amounted to SEK 32,850 M (28,621).
Net debt totaled SEK 14,013 M (12,953).
The net debt / equity ratio was 0.74 (0.83).

SEK M

Capital employed
– of which goodwill
Net debt
Equity
– of which minority interests

2007

28,621
17,270
12,953
15,668
201

2008

32,850
20,669
14,013
18,838
163

Capital employed
Capital employed – defined as total assets less interest-
bearing assets and non-interest-bearing liabilities including
deferred tax liabilities – amounted to SEK 32,850 M (28,621).
The return on capital employed excluding items affecting
comparability was 17.2 percent (18.4).

Intangible assets amounted to SEK 22,662 M (18,708).
The change can be attributed to exchange-rate effects and to
acqusitions made. During the year, goodwill and other intan-
gible assets with an indefinite useful life have arisen to a value
of approximately SEK 1,460 M. 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 impairment was recognized this year.

Tangible assets amounted to SEK 5,952 M (5,345). Capital

expenditure on tangible and intangible assets, less sales of
tangible and intangible assets, totaled SEK 829 M (751).
Depreciation according to plan amounted to SEK 921 M
(909).

Accounts receivable totaled SEK 6,372 M (5,537) and
inventories totaled SEK 5,383 M (4,399). The average col-
lection period for accounts receivable was 52 days (54).
Material throughput time was 105 days (104). The Group
is making systematic efforts to increase capital efficiency.

Net debt
Net debt amounted to SEK 14,013 M (12,953), of which
pension commitments accounted for SEK 1,182 M (1,156).
Net debt was increased by acquisitions, exchange-rate
effects and the dividend to shareholders and reduced by the
strong operating cash flow.

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 138 M (238) and a three-
year bank financing totaling SEK 1,000 M (0).

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) respectively.
At year-end, SEK 3,215 M (4,166) of the Commercial Paper
Programs had been utilized. In addition, substantial credit
facilities are available, mainly in the form of a Multi-Cur-
rency Revolving Credit (MCRC) agreement for a maximum
of EUR 1,100 M (1,100), 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 5.7 (7.4). Fixed
interest terms were largely unchanged during the year, with
average terms of 23 months (25) at year-end.

Cash and cash equivalents amounted to SEK 1,931 M
(1,338) and are invested in banks with high credit ratings.

Some of the Group’s main financing agreements contain

a customary Change of Control clause. The effect of the
clause is that lenders have the right in certain circumstances
to demand the renegotiation of conditions or to terminate
the agreement should control of the company change.

Equity
The Group’s equity totaled SEK 18,838 M (15,668) at year-
end. The return on shareholders’ equity amounted to 12.8
percent (21.0). The equity ratio was 41.9 percent (41.5). The
net debt / equity ratio, defined as net debt divided by share-
holders’ equity, was 0.74 (0.83).

ASSA ABLOY
Annual Report
2008

Balance sheet – Group

Financial reports
49

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
Convertible debenture 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

2007

2008

14
15
17
19
18

20
21

22
22
22

22
22
18
26
27

22
22
22

27
28
29

18,708
5,345
39
170
881

25,143

4,399
5,537
404
449
368
94
–
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

22,662
5,952
38
317
757

29,726

5,383
6,372
249
479
485
277
58
1,931

15,234

44,960

366
8,887
1,572
7,850

18,675
163

18,838

6,248
1,518
56
1,182
1,453
151

10,221

10,608

5,258
–
26
2,503
249
566
624
2,617

11,843

37,732

6,400
1,096
92
2,909
377
787
729
3,124

15,514

44,960

Financial reports
50

Cash flow

ASSA ABLOY
Annual Report
2008

•
•

Operating cash flow amounted to SEK 4,769 M (4,808).
Net capital expenditure amounted to SEK 829 M (751).

Relationship between cash flow from operating
activities and operating cash flow

SEK M

Cash flow from operating activities
Restructuring payments
Net capital expenditure
Tax paid

Operating cash flow

2007

3,871
424
–751
1,264

4,808

2008

4,369
485
–829
742

4,769

Acquisitions of subsidiaries
The total purchase price for acquisitions of subsidiaries
amounted to SEK 2,030 M (1,675). Acquired cash totaled
SEK 58 M (100).

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

SEK M

Net debt at 1 January
Operating cash flow
Restructuring payments
Tax paid
Acquisitions
Dividend
Exchange-rate differences

Net debt at 31 December

2007

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

12,953

2008

12,953
–4,769
485
742
1,819
1,317
1,466

14,013

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

1 Excluding restructuring payments.
2 Excluding restructuring costs.

2007

5,458
–
909
–751
–25
–734
–49

4,808

2008

4,269
1,180
921
–829
–5
–718
–49

4,769

1.04

1.02 2

The Group’s operating cash flow amounted to SEK 4,769 M
(4,808), equivalent to 102 percent (104) of income before
tax excluding restructuring costs. The Parent company’s cash
flow amounted to SEK 1 M (–1).

Net capital expenditure
Direct net capital expenditure on tangible and intangible
assets totaled SEK 829 M (751), equivalent to 90 percent
(83) of depreciation of tangible and intangible assets. The
low net capital expenditure is mainly due to the Group’s
long-term efforts to optimize investments, and to stream-
line the production structure.

Change in working capital

SEK M

Inventories
Accounts receivable
Accounts payable
Other working capital

Change in working capital

2007

–148
–256
219
160

–25

2008

–144
38
–59
160

–5

The material throughput time was 105 days (104) at year-
end. Capital tied up in inventories has increased somewhat
during the year, which had an impact of SEK –144 M (–148)
on cash flow. The decreased capital tied up in accounts
receivable is attributable in part to weaker sales toward the
end of the year.

ASSA ABLOY
Annual Report
2008

Cash flow statement – Group

Financial reports
51

Note

14, 15, 32
14, 15, 32
32
32

SEK M

OPERATING ACTIVITIES
Operating income
Depreciation
Reversal of restructuring costs
Restructuring payments
Non-cash items

Cash flow before interest and tax

Interest paid
Interest received
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
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 exchange-rate differences

Cash and cash equivalents at 31 December

2007

5,458
909
–
–424
–49

5,894

-764
30
–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

2008

4,269
921
1,180
–485
–49

5,836

–732
14
–742

4,376

–5

4,369

–962
133
–1,831
12

–2,648

–1,317
1,000
–
–994

–1,311

410

1,338
410
183

1,931

Financial reports
52

Changes in equity – Group

ASSA ABLOY
Annual Report
2008

SEK M

Opening balances 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

Opening balances 1 January 2008

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 2007
Acquisitions

Closing balance 31 December 2008

Note

Parent company’s shareholders

Other
contribu-
ted capital

Reserves

Retained
earnings

Minority
interests

Share
capital

366

8,887

–253

4,585

–287
0

–287

3,358

–1,189

366

8,887

–540

6,754

8,887

–540

6,754

2,112
0

2,112

2,413

–1,317

366

8,887

1,572

7,850

–4

135

201

–82

163

Total

13,645

–291
0

–291

3,368

3,077

–1,189
135

15,668

2,131
0

2,131

2,438

4,569

–1,317
–82

18,838

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

Financial reports
54

Parent company financial statements

ASSA ABLOY
Annual Report
2008

Income statement
Parent company

SEK M

Administrative expenses
Research and development costs
Other operating income and expenses

Balance sheet
Parent company

Operating income

Financial income
Financial expenses

Income before tax

Tax on income

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

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
Convertible debenture 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

Assets pledged
Contingent liabilities

Note

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

9, 33

10
9, 11

2007

–660
–221
1,641

760

2,294
–703

2,351

–197

2,154

2008

–554
–229
1,775

992

1,443
–846

1,589

–435

1,154

Note

2007

2008

14
15
16

22
22

34
30

692
6
13,266
2,374
101

16,439

14,837
13
31
0

14,881

31,320

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

None
9,939

506
4
16,061
2,624
79

19,274

15,268
36
24
1

15,329

34,603

366
8,905
408

2,943
1,154

13,776

1,000
1,517
2, 624
4

5,145

2,224
1,096
18
12,123
31
16
116

15,624

34,603

None
8,501

ASSA ABLOY
Annual Report
2008

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
Investment in tangible and intangible assets
Sales of tangible and intangible assets
Investments 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

Changes in equity
Parent company

SEK M

Note

Opening balance 1 January 2007
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 2006

Closing balance 31 December 2007

Opening balance 1 January 2008
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 2007

Closing balance 31 December 2008

Note

Financial reports
55

2007

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

2008

992
188

1,180

160
555
20

1,915

–819

1,096

0
0
–1,560
0

–1,560

–1,317
1,782

465

0
1

Restricted shareholders' equity

Unrestricted
shareholders' equity

Share
capital

366

8,905

Statutory
reserve

Fair value
reserve

Retained
earnings

43
99

142

142
266

266

408

4,927

–766
214
2,154

1,602

–1,189

5,340

–1,500
420
1,154

–1,317

4,097

Total

14,241
99
–766
214
2,154

1,701

–1,189

14,753

14,753
266
–1,500
420
1,154

340

–1,317

13,776

366

8,905

366

8,905

Financial reports
56

Notes

Note 1 Significant accounting and valuation principles

The Group
ASSA ABLOY applies International Financial Reporting Stan-
dards (IFRS) as endorsed by the European Union (EU), the
Swedish Annual Accounts Act and standard RFR 1.1, of the
Swedish Financial Reporting Board. The accounting prin-
ciples are based on IFRS as endorsed by 31 December 2008
and have been applied to all years presented, unless stated
otherwise. This Note describes the most significant account-
ing principles that have been applied in the preparation
of the financial reports, which comprise the information
appearing on pages 38–84.

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 (includ-
ing 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 assump-
tions 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 assump-
tions may lead to changes in the financial statements.

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 reason-
able 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 14.

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.
IAS 23 Borrowing costs (amendment), effective from
1 January 2009.
IAS 27 Consolidated and Separate Financial State-
ments (amendment), effective from 1 July 2009, not yet
endorsed by EU.
IFRS 2 Share based payments (amendment), effective
from 1 January 2009.
IFRS 3 Business Combinations (amendment), effective

•

ASSA ABLOY
Annual Report
2008

•
•

•

from 1 July 2009, not yet endorsed by EU.
IFRS 8 Operating Segments, effective from 1 January 2009.
IAS 32 Financial instruments presentation (amendment),
effective from 1 January 2009.
IAS 39 Financial instruments , recognition and measure-
ment (amendment), effective from 1 July 2009, not yet
endorsed by EU.
IFRIC 13 Customer loyalty programmes, effective from
1 July 2008.
IFRIC 15, Agreements for construction of real estate,
effective from 1 January 2009, not yet endorsed by EU.
IFRIS 16, Hedges of net investment in a foreign operation,
effective from 1 October 2008, nor yet endorsed by EU.
IFRIC 17, Distribution of Non Cash Assets to owners,
effective from 1 July 2009, not yet endorsed by EU.
IFRIC 18, Transfers of Assets from Customers, effective
from 1 July 2009, not yet endorsed by EU.

Management analyzes 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 rel-
evant 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 effective dates.
The amendments to IAS 1 mainly affect the formats and
terms used in the financial reports. The amendments to
IAS 27 will have an impact on the accounting for minority
interest in future transactions. IFRS 3 will affect the account-
ing of future business combinations regarding transaction
costs, contingent consideration and business combinations
achieved in stages. IFRS 8 will not change the segments,
only the presentation of the segments. 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 Parent
company held, directly or indirectly, more than 50 percent 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 control 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 goodwill.
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
2008

Note 1 cont.

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

Associates
Associates are defined as companies which are not sub-
sidiaries 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 accor-
dance 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 acquisi-
tion. 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, Americas
and Asia Pacific. Global Technologies’ and Entrance Systems’
products are sold worldwide. The divisions reflect a parti-
tion 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 aris-
ing from the settlement of such transactions are normally
reported in the income statement, as are those arising from
translation of monetary balances in foreign currencies 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.

Financial reports
57

Country

Currency

2007

2008

2007

2008

Average rate

Closing-day rate

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

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

2.08
5.55
3.62
6.20
6.11
0.012
0.94
0.38
1.29
0.62
9.65
12.11
0.85
0.039
1.83
0.095
0.0060
2.80
0.59
1.98
1.17
4.66
2.74
0.26
4.65
0.039
0.31
0.20
6.59
0.81

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

2.25
5.38
3.26
6.30
7.37
0.012
1.14
0.41
1.47
0.70
10.96
11.27
1.00
0.041
2.02
0.099
0.0062
3.17
0.57
2.22
1.11
4.53
2.64
0.26
5.39
0.038
0.36
0.22
7.78
0.82

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 nor-
mally upon delivery. If the product requires installation at the
customer’s premises, revenue is recognized when installation
is completed. Revenue from service contracts is recognized
through distribution over the contract period. In the case of
installations over a longer period of time, the percentage of
completion method is used.

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 eco-
nomic benefits for the Group and provided such benefits

Financial reports
58

Note 1 cont.

ASSA ABLOY
Annual Report
2008

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 develop-
ment of existing products are expensed as they are incurred.

accumulated amortization and impairment losses. Amor-
tization is on a straight-line basis over estimated useful life.
Acquisition-related intangible assets with indefinite useful
life are tested for impairment every year in the same way as
goodwill, as described above.

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

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 accordance
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 them-
selves 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
carry ing amounts of assets and liabilities and their respec-
tive 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 subsidiaries are not reported in the consoli-
dated financial statements since the Parent company can
control the time at which the temporary differences are can-
celled 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.

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.

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 impair-
ment losses. Goodwill is allocated to Cash Generating Units
(CGU) and each year is systematically tested for impairment
using a valuation model based on discounted future cash
flows. Deferred tax receivables based on local tax rates are
reported in terms of tax-deductible goodwill (with corres-
ponding reduction of the goodwill value). Such deferred tax
receivables are expensed as the tax deduction is utilized.
Other acquisition-related intangible assets consist chiefly
of various types of intangible rights such as brands, technol-
ogy and customer relationships. Identifiable acquisition-
related intangible assets are initially recognized at fair value
at the date of acquisition and subsequently at cost less

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 rec-
ognized at cost and is amortized over its estimated 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 depre-
ciation and impairment losses. Cost includes expenditure
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
industrial buildings, 25 years
machinery and other technical plant, 7–10 years
equipment and tools, 3–6 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.

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.

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 carried 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 recoverable
amount is the higher of the asset’s fair value less costs to sell,
and its value in use.

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 arising
from deliveries between Group companies. Work in prog-
ress and finished goods include both direct costs incurred
and a fair allocation of indirect manufacturing costs.

ASSA ABLOY
Annual Report
2008

Note 1 cont.

Financial reports
59

Accounts receivable
Accounts receivable are recognised initially at fair value and
subsequently measured at amortised cost using the effec-
tive interest method. A provision is recognized when there is
objective evidence that the Group will not be able to collect
recorded amounts. The year’s change in such a provision is
reported in the income statement.

Financial instruments
Financial instruments are initially recorded at fair value. Sub-
sequent measurement of financial instruments depends on
the classification at initial recognition, which in turn depends
on the original purpose of acquiring the instrument. Clas-
sification is determined when the instrument is recorded
for the first time. Financial instruments are divided into the
following categories:

‘Financial instrument 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 quali-
fying 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 state-
ment in the period in which they arise. For the accounting of
hedging instruments qualifying for hedge accounting, see
the section ‘Hedge accounting’.

‘Loans and other receivables’ are non-derivative financial
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 sup-
plies a customer with goods or services without intention of
trading the receivable. Loans and other receivables are car-
ried at amortized cost using the effective interest method.
The category covers non-current receivables, accounts
receivable, other current receivables, short-term invest-
ments and cash and cash equivalents.

‘Available-for-sale financial assets’ includes non-deriv-
ative 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 holds no positions falling into
this category.

‘Financial liabilities at amortized cost’ are financial liabili-

ties 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 cat-
egory covers non-current and current loan liabilities which
are not hedged items, other non-current and current liabili-
ties, and accounts payable.

Acquisitions and disposals of financial instruments are
recognized on trade-date, i.e. when the Group is committed
to the purchase or sale. Transaction costs are included ini-
tially 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 instru-
ments in a non-active market and for unlisted securities, fair
value is determined by using an appropriate method of valua-
tion, for example using available information on comparable
arm’s length transactions, comparison with similar instru-
ments, 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. Conversely, 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
liability 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. When a transaction is entered into, the
Group documents the relationship between the hedging
instrument and the hedged item, as well as the Group objec-
tives of the risk management and the hedging strategy.

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. In calculating fair value, only general changes in mar-
ket interest rates, and not changes in the credit spread of the
individual company, are taken into account.

Changes in the fair value of both the hedged item and the

hedging instrument are reported in the income statement
(financial items) in the period in which they arise. Informa-
tion about the fair values of the various derivative financial
instruments used for hedge accounting can be found in
Note 22.

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. The ineffective portion of
the gain or loss is reported in the income statement in the
period in which it arises.

Provisions
A provision is recognized when the Group has a legal or
constructive obligation resulting from a past event 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
re presenting 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
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-

ASSA ABLOY
Annual Report
2008

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 corridor (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 pension plans are reported as cost in
the period to which they refer, based on the services per-
formed 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 pension cost determined in accordance with
local regulations.

Pension obligations
Pension obligations for the Parent company are accounted
for in accordance with FAR SRS Red 4. The pension obliga-
tions are covered by taking out insurance with an insurance
company.

Dividend
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.

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

Dividend
Dividend is reported as a liability once the Annual General
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 accor-
dance with the Swedish Annual Accounts Act (1995:1554)
and standard RFR 2.1 of the Swedish Financial Reporting
Board . RFR 2.1 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 pos-
sible within the framework of the Annual Accounts Act and
with regard to the relationship between accounting and
taxation. RFR 2.1states 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 similar
to those of other Group companies concerned with exter-
nal business.

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 con-
tracts in the Parent company consist of operational 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 instruments
are reported in the income statement with the exception of
exchange rate differences related to a monetary 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 (the Swedish Financial Reporting Board). 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 deduction for
their actual tax effects. Group contributions comparable 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.

Financial reports
60

Note 1 cont.

ASSA ABLOY
Annual Report
2008

Financial reports
61

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

Note 5 Share of earnings in associates

SEK M

Låsgruppen Wilhelm Nielsen AS
Cerraduras de Colombia Cerracol S.A

Total

Group

2007

2008

3
6

3
9

Note 6 Operational leasing agreements

SEK M

2007

2008

2007

2008

Group

Parent
company

Leasing fees paid during
the year
Total
Nominal value of agreed
future leasing fees
Due for payment in
(2008) 2009
Due for payment in
(2009) 2010
Due for payment in
(2010) 2011
Due for payment in
(2011) 2012
Due for payment in
(2012) 2013
Due for payment in
(2013) 2014 or later

Total

273
273

279
279

254

199

155

113

145

942

253

200

156

111

112

922

11
11

13
13

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 and development costs amount to
SEK 30,618 M (28,121). Below, these same costs are broken
down by nature:

SEK M

Remuneration to employees (Note 33)
Direct material costs
Depreciation (Note 8, 14, 15)
Other purchase expenses
Restructuring costs
Total

Group

2007

10,066
10,721
910
6,424
–
28,121

2008

10,016
11,329
921
7,172
1,180
30,618

Note 8 Depreciation and amortization

Group

Parent
company

SEK M

2007

2008

2007

2008

Intangible rights
Machinery
Equipment
Buildings
Land improvements
Total

107
436
239
126
1
909

124
424
240
134

1
921

210
–
2
–
–
212

186
–
2
–
–
188

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).

Sales to customers, by country

SEK M

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

Note 3 Auditors’ fees

Group

2007

10,681
2,501
2,179
1,649
1,547
1,583
1,180
827
1,350
1,144
867
798
773
586
493
679
468
382
408
410
231
302
324
325
290
182
215
174
138
127
154
74
56
66
54
333
33,550

2008

11,005
2,597
1,965
1,731
1,541
1,539
1,267
1,195
1,193
1,149
887
834
810
680
671
634
576
444
441
440
439
332
303
290
276
258
211
192
170
169
139
80
74
61
58
267
34,918

Group

Parent
company

SEK M

2007

2008

2007

2008

Audit
PricewaterhouseCoopers
Other
Assignments other
than audit
PricewaterhouseCoopers
Other

Total

22
6

12
5

26
6

2
–

2
2

3
–

2
1

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

2007

2008

14
52
4
–42
–9
19

14
56
10
–38
–85
–43

Financial reports
62

ASSA ABLOY
Annual Report
2008

Note 9 Exchange-rate differences

in the income statement

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

SEK M

2007

2008

2007

2008

Percent

2007

2008

2007

2008

Group

Parent
company

Group

Parent
company

Exchange-rate differences
reported in operating
income
Exchange-rate differences
reported in financial
expenses (Note 11)
Total

–20

–24
–44

4
10

–2

77
75

–3
1

Note 10 Financial income

SEK M

2007

2008

2007

2008

Group

Parent
company

Earnings from participa-
tions in subsidiaries
- of which dividends from

subsidiaries

- of which impairment of
shares in subsidiaries
Intra-group interest
income
External interest income
and similar items
Total

–

27
27

–

1,489

–

803

486

555

–69

956

47
47

2
2,294

1
1,443

Note 11 Financial expenses

SEK M

2007

2008

2007

2008

Group

Parent
company

Intra-group interest
expenses
Interest expenses, con-
vertible debenture loans
Interest expenses, other
liabilities
Interest expenses,
interest 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

–

-484

–578

–76

–110

–76

–110

–625

–665

–88

–125

–53

–31

–12

–17

148

–

–3

–

–28

–11

–30

–22

–18

–148

–

–75
–10
–876

–
–7
–817

–75
–28
–703

–
–8
–846

Note 12 Tax on income

SEK M

Current tax paid
Tax attributable to prior
years
Deferred tax
Total

Group

2007

2008

–1,090

–1,047

–14
–136

14
–28
–1,240 –1,061

Parent
company

2007

–209

12
–
–197

2008

–419

–16
–
–435

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

–3
–1
–1
1
–

–3
–1
–1
–
3

–

–20
–
–
–
–

–

–1
–
–
–
–

Note 13 Earnings per share

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)
Asssumed conversion of convertible
debentures (thousands)
Weighted average number of shares
for calculations (thousands)
Earnings per share after dilution
(SEK per share)

Earnings per share after dilution and
items affecting comparability

Earnings assigned to the Parent
company's shareholders
Interest expenses for convertible
debenture loans, after tax
Items affecting comparability,
before tax 1
Net profit for calculating earnings
per share after dilution
Weighted average number of shares
issued (thousands)
Asssumed conversion of convertible
debentures (thousands)
Weighted average number of shares
for calculations (thousands)
Earnings per share after dilution
(SEK per share)

Group

2007

2008

3,358

2,413

365,918

9.18

6.60

Group

2007

2008

3,358

2,413

3,413

2,494

365,918

12,615

14,795

378,533

380,713

9.02

6.55

Group

2007

2008

3,358

2,413

–

3,413

1,014

3,508

365,918

12,615

14,795

378,533

380,713

9.02

9.21

1 Items affecting comparability consist of restructuring costs and non-recurring
costs. Non-recurring costs totaled SEK 77 M.

ASSA ABLOY
Annual Report
2008

Note 14 Intangible assets

2008, SEK M

Opening accumulated acquisition value
Purchases
Acquisitions of subsidiaries
Adjustments for prior year acquisitions
Divestments/disposals
Reclassifications
Exchange-rate differences
Closing accumulated acquisition value

Opening accumulated amortization/impairment
Divestments/disposals
Reclassifications
Impairment
Amortization for the year
Exchange-rate differences
Closing accumulated amortization/impairment
Carrying amount

2007, SEK M

Financial reports
63

Parent company

Intangible
rights

938
–
–
–
–
–
–
938

–246
–
–
–
–186
–
–432
506

Parent company

Intangible
rights

443
495
–
–
–
–
–
938

–36
–
–
–
–210
–
–246
692

Total

19,137
114
1,459
–13
–11
78
2,570
23,334

–429
10
–34
0
–124
–95
–672
22,662

Total

18,157
103
1,370
–22
–2
–
–469
19,137

–332
2
–
–
–107
8
-429
18,708

Group

Intangible
rights

Goodwill

17,271
–
1,208
–13
–4
–
2,207
20,669

–
–
–
–
–
–
–
20,669

1,866
114
251
–
–7
78
363
2,665

–429
7
–34
–
–124
–92
–672
1,993

Group

Intangible
rights

Goodwill

16,683
–
1,029
–22
–
–
–419
17,271

–
–
–
–
–
–
–
17,271

1,474
103
341
–
–2
–
–50
1,866

–332
2
–
–
–107
8
–429
1,437

Intangible rights consist mainly of licenses and brands. The carrying value of intangible rights with indefinite useful life
amounts to SEK 1,138 M (763).

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 are mainly 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). For each
Cash Generating Unit, the Group assesses each year whether any write-down of goodwill is needed, in accordance with the
accounting principles described in Note 1. Recoverable amounts for Cash Generating Units have been established by calcu-
lation of value in use. These calculations are based on estimated future cash flows, which in turn are based on financial bud-
gets 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 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 discount
rate in local currency after tax is used for the Group.

Financial reports
64

ASSA ABLOY
Annual Report
2008

2008
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 summa-

rized in the following table:

SEK M

Goodwill
Intangible rights with
indefinite useful life

Total

EMEA

5,766

233

5,999

Americas

Asia Pacific

Global
Technologies

Entrance
Systems

6,236

256

6,492

1,628

247

1,875

4,275

377

4,652

2,763

2,788

Total

20,669

1,138

21,807

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 summa-

rized 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

Sensitivity analysis
A sensitivity analysis has been carried out for each Cash Generating Unit. The result of the analyzis can be summarized as fol-
lows.

2008
If the estimated operating margin after the end of the budget period had been one percentage point lower than the man-
agement’s figure, total recoverable amount would be 6 percent lower (EMEA 6 percent, Americas 5 percent, Asia Pacific 8
percent, Global Technologies 6 percent and Entrance Systems 6 percent).

If the estimated growth rate to extrapolate cash flows beyond the budget period had been one percentage point lower
than the basic assumption of 3 percent, total recoverable amount would be 13 percent lower (EMEA 13 percent, Americas
13 percent, Asia Pacific 11 percent, Global Technologies 11 percent and Entrance Systems 13 percent).

If the estimated weighted average cost of capital used for the Group’s discounted cash flow had been one percentage point

higher than the basic assumption of 9.0 to 10.0 percent, total recoverable amount would be 14 percent lower (EMEA 14 per-
cent, Americas 14 percent, Asia Pacific 13 percent, Global Technologies 13 percent and Entrance Systems 14 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 interpreted with caution.

None of the hypothetical cases above would lead to impairment of goodwill in a particular Cash Generating Unit.

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 percent, Americas 10 percent, Asia Pacific 9 percent,
Global Technologies 9 percent and Entrance Systems 10 percent).

If the estimated growth rate to extrapolate cash flows beyond the budget period had been 10 percent lower than the
basic assumption of 3 percent, total recoverable amount would be 4 percent lower (EMEA 4 percent, Americas 4 percent,
Asia Pacific 4 percent, Global Technologies 4 percent and Entrance Systems 4 percent).

If the estimated weighted average cost of capital used for the Group’s discounted cash flow had been 10 percent higher than

the basic assumption of 9 to 10 percent, total recoverable amount would be 13 percent lower (EMEA 13 percent, Americas
13 percent, Asia Pacific 13 percent, Global Technologies 13 percent and Entrance Systems 13 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 sensi-
tivity analysis should therefore be interpreted with caution.

None of the hypothetical cases above would lead to impairment of goodwill in a particular Cash Generating Unit.

ASSA ABLOY
Annual Report
2008

Note 15 Tangible assets

2008, SEK M

Opening accumulated acquisition value
Purchases
Acquisitions of subsidiaries
Sales/disposals
Reclassifications
Exchange-rate differences
Closing accumulated acquisition value

Opening accumulated depreciation/
impairment
Sales/disposals
Impairment
Depreciation for the year
Reclassifications
Exchange-rate differences
Closing accumulated depreciation/
impairment

Construction in progress
Carrying amount

Group

Land and
land im-
provements

Buildings

Machinery

Equipment

3,133
144
87
–57
35
507
3,849

–1,352
42
–18
–134
–
–278

–1,740

736
8
2
–1
1
88
834

–25
1
–
–1
–
–7

–32

5,959
318
96
–489
39
1,141
7,064

–4,125
456
–62
–424
–
–968

1,966
194
17
–170
–17
376
2,366

–1,354
147
–
–239
34
–316

–5,123

–1,728

–8,623

2,109

802

1,941

638

The tax value of the Group’s Swedish buildings was SEK 128 M (120).
The tax value of the Group’s Swedish land was SEK 5 M (14).

2007, SEK M

Opening accumulated acquisition value
Purchases
Acquisitions of subsidiaries
Sales/disposals
Reclassifications
Exchange-rate differences
Closing accumulated acquisition value

Opening accumulated depreciation/
impairment
Sales/disposals
Impairment
Depreciation for the year
Reclassifications
Exchange-rate differences
Closing accumulated depreciation/
impairment

Construction in progress
Carrying amount

Group

Land and
land im-
provements

Buildings

Machinery

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
–
–436
18
–18

1,764
214
35
–122
66
9
1,966

–1,189
103
–1
–239
–18
–10

–4,125

–1,354

–6,857

1,781

711

1,834

612

408
5,345

Financial reports
65

Parent
company

Equipment

16
0
–
–1
–
–
15

–10
1
–
–2
–
–

–11

Parent
company

Equipment

17
3
–
–4
–
–
16

–10
2
–
–2
–
–

–10

Total

11,794
664
202
–717
58
2,112
14,113

–6,857
646
–80
–798
34
–1,568

462
5,952

Total

11,021
695
263
–435
153
97
11,794

–6,284
274
–1
–802
0
–43

Financial reports
66

ASSA ABLOY
Annual Report
2008

Note 16 Shares in subsidiaries

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
HID Global 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
ASSA ABLOY North America AB
WHAIG Limited
ASSA ABLOY Asia Pacific Ltd
Total

Note 17 Shares in associates

2008
Company name

Talleres Agui S.A
Låsgruppen Wilhelm Nielsen AS
Panpan Security Industries Co. Ltd.
Cerraduras de Colombia Cerracol S.A
Renato Fattorini SRL
Total

2007
Company name

Talleres Agui S.A
Låsgruppen Wilhelm Nielsen AS
Panpan Security Industries Co. Ltd.
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, Geertruidenberg
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
039347-83, Oregon
147126, Ontario
1148165260, St Laurent, Quebec
002098175, Ontario
ACN 095354582, Oakleigh, Victoria
199804395K, Singapore
GIP980312169, Mexico
556192-3201, Stockholm
556180-7156, Göteborg
556671-9851, Stockholm
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
15,184,271
211,000
2,500
1
1,330,000
1
501,000
13,787,856
100,220
100
25,846,600
1
1
48,190,000
3,400,000
27,036,635
2,500
1,000
1,000
100,100
1,000,000

Country of
registration

Spain
Norway
China
Colombia
Italy

Country of
registration

Spain
Norway
China
Colombia
Italy

Number
of shares

4,800
305
123,323
182,682
1

Number
of shares

4,800
305
123,323
182,682
1

Group

% of share
capital

40
50
3
29
25

Group

% of share
capital

40
50
3
29
25

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
100

197
22
81
528
220
0
189
0
1,595
538
376
1,064
87
928
9
1,964
0
47
15
3,002
1
323
901
184
2,259
0
13
78
242
43
765
1
14
0
303
72
16,061

Book value

16
11
5
2
4
38

Book value

14
12
5
2
5
1
39

ASSA ABLOY
Annual Report
2008

Note 18 Deferred tax on income

Accounts receivable per currency

Financial reports
67

2007

1,947
1,621
362
269
111
202
1,025
5,537

2008

2,343
2,023
269
250
241
202
1,044
6,372

2007

2008

278
8
–71
–23
89
13
294

294
0
–78
–39
184
43
404

EUR
USD
GBP
AUD
CNY
SEK
Other currencies
Total

Current year's change in
provision for bad debts

Opening balance
Acquisitions (+) / disposals (-)
Receivables written off
Reversal of unused amounts
Provision for bad debt
Exchange-rate differences
Closing balance

Note 22 Financial risk management

and financial instruments

Financial risk management
ASSA ABLOY is exposed to a variety of financial risks through
its international business operations. ASSA ABLOY’s units
have carried out financial risk management in accordance
with the ASSA ABLOY Group’s Treasury Policy. The Group’s
financial risk management principles are described below.

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 and the majority of financial transactions are entered
through the subsidiary ASSA ABLOY Financial Services AB,
which is the Group’s internal bank. External financial trans-
actions are conducted by Treasury which also handles
transactions involving foreign currencies and interest rates.
Treasury achieves many economies of scale when borrowing
funds, fixing interest rates and exchanging currency flows.

Capital structure
The Group’s objectives regarding capital structure are to
safeguard the Group’s ability to continue as a going concern
in order to provide returns for its shareholders and benefits
for other stakeholders. Maintaining an optimal capital struc-
ture enables the Group to keep the cost of capital as low as
possible. 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 based on factors such as the ratio between net debt
and equity.

Net debt is defined as interest bearing liabilities, includ-

ing negative market values on derivatives, plus pension
provisions, less cash and cash equivalents, other interest-
bearing investments and positive market values for deriva-
tives. The table Net debt and Equity on page 68 shows the
position at 31 December.

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

Group

2007

2008

439
187
255
881
119
762

983
–84
–136
–1
762

430
106
221
757
56
701

762
-46
-28
13
701

The group has additional tax losses carried forward of some
SEK 900 M (900) for which deferred tax receivables have not
been recognized.

Note 19 Other long-term financial assets

SEK M

2007

2008

2007

2008

Group

Parent
company

Other shares and
participations
Interest-bearing long-
term receivables
Other long-term
receivables
Total

105

256

28
170

24
317

–
101

–
79

Other shares and participations are valued at cost. Interest-
bearing long-term receivables and other long-term receivables
are valued at amortized cost.

Note 20 Inventories

SEK M

Materials and supplies
Work in progress
Finished goods
Paid in advance
Total

Group

2007

1,157
1,361
1,782
99
4,399

2008

1,458
1,630
2,213
82
5,383

Write-downs of inventory amounted to SEK 188 M (103).

Note 21 Accounts receivable

SEK M

Accounts receivable
Provision for bad debts
Total

Ageing 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

Group

2007

5,831
–294
5,537

2008

6,776
–404
6,372

3,866

4,408

1,292
156
17
1,465

216
144
140
500

–294
5,537

1,448
224
62
1,734

288
179
167
634

–404
6,372

Financial reports
68

Note 22 cont’d.

Net debt and equity

SEK M

Long-term interest-bearing receivables
Short-term interest-bearing investments
incl. derivatives
Cash and bank balances
Pension provisions
Long-term interest-bearing liabilities
Short-term interest-bearing liabilities
incl. derivatives
Total
Equity
Net debt/equity

Group

2007

–105

–220
–1,212
1,156
8,050

5,284
12,953
15,668
0,83

2008

–256

–688
–1,579
1,182
7,766

7,589
14,013
18,838
0,74

ASSA ABLOY
Annual Report
2008

Another important variable in the assessment of the Group’s
capital structure is the credit rating that the credit ratings
agencies assign to the Group’s liabilities. In order to have
access to both long-term and short-term financing from the
capital markets when needed, it is essential to maintain a
good credit rating. ASSA ABLOY maintains both long-term
and short-term credit ratings from Standard & Poor’s and a
short-term rating from Moody’s.

Maturity profile – financial instruments

SEK M

Long-term bank loans
Long-term capital market loans
Convertible loans
Other long-term liabilities
Short-term bank loans
Commercial papers and short-
term capital-market loans
Derivatives
Total by period

Cash and cash equivalents incl.
interest-bearing receivables
Accounts receivable
Accounts payable
Net total
Confirmed credit facilities
Adjusted maturity profile

< 1 year

–51
–239
–110
–
–5,088

–3,060
45
–8,503

1,338
5,537
–2,503
–4,131
10,360
6,229

External financing / net debt

Credit lines /facilities

US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
Multi-Currency RCF
Bank loan
Incentive Program
Incentive Program
Other long-term loans
Total long-term loans

Global MTN Program
Global CP Program
Swedish CP Program
Incentive Program
Bank loan
Other bank loans
Overdraft facility
Total short-term loans
Total credit lines/facilities

Cash and bank balances
Short-term interest-bearing investments
Long-term interest-bearing investments
Market-value derivatives
Pensions
Net debt

1 Loans subject to hedge accounting.

31 December 2007

31 December 2008

> 5 years

< 1 year

> 1 < 2
years

–51
–1,813
–1,029
–25
–

–
3
–2,915

> 2 < 5
years

–640
–997
–1,444
–103
–

–
–8
–3,192

–412
–3,601
–
–
–

–
1
–4,012

–2,915

–3,192

–10,360
–14,372

> 1 < 2
years

–36
–252
–50
–27
–

–
42
–323

> 2 < 5
years

–1,036
–2,148
–1,577
–148
–

–
72
–4,837

> 5 years

–
–4,317
–
–74
–

–
22
–4,369

–323

–4,837

–12,055
–16,424

–43
–252
–1,164
–
–1,728

–4,820
94
–7,913

1,989
6,372
–2,909
–2,461
12,055
9,594

Amount,

Carrying
amount,

SEK M Maturity

SEK M Currency

Amount
2007

Amount
2008

Of which
Parent com-
pany, SEK M

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

50
80
53
80
76
50
50
122
70
1,100
0
100
38

50
80
53
80
76
50
50
122
70
1,100
1,000
100
38

SEK
EUR
EUR/SEK
EUR
EUR

1,500
205
25/2,000
100
66

1,500
56
0/2,637
100
66

Dec 2011
388
674 May 2012
408
Dec 2013
721 May 2015
Dec 2016
586
Apr 2017
388
388 May 2017
947
Dec 2018
544 May 2020
Jun 2014
Oct 2011
Jun 2012
Jun 2011

12,055
1,000
1,096
421
205
19,821

Nov 2009

Jun 2009
Feb 2009

16,439
7,779
5,000
1,096
724
546
1,174
32,757
52,577

388
6741
408
7211
586
388
388
947
544
0
1,000
1,096
421
205
7,766

1,500
607
2,608
1,096
724
546
415
7,495
15,261

–1,579
–410
–256
–185
1,182
14,013

1,000
1,096
421

2,517

1,500

1,096
724

3,320
5,837

–1

–51

5,785

ASSA ABLOY
Annual Report
2008

Note 22 cont’d.

Rating

Agency

Short-
term

Standard & Poor’s
Moody’s

A2
P2

Outlook

Stable
Stable

Long-
term

A –
n/a

Outlook

Negative

Ratings from both agencies remain unchanged from last year.
The outlook for the long-term rating from Standard & Poor’s
was changed from stable to negative during January 2009.

Financing risk and maturity profile
Financing risk is defined as the risk 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. Group
Treasury 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.
According to the Treasury Policy, the available facilities
should include a reserve (facilities confirmed but not used)
equivalent to 10 percent of the Group’s annual total sales.

Maturity profile
The table Maturity profile on page 68 shows that maturi-
ties of the debt are not concentrated in the short term,
especially considering the credit facility of EUR 1,100 M
that matures in 2014, which was completely unutilized
at year-end. Moreover, the financial assets should also be
considered when evaluating the maturity structure. The
table shows undiscounted future cash flows related to
the Group’s financial instruments, and to derivatives that
existed at the balance sheet date, which is why the amounts
are not found in the balance sheet.

Interest-bearing liabilities
The Group’s long-term loan financing mainly consists of
Private Placement Programs in the US totaling USD 630 M
(630), Incentive Programs of EUR 138 M (238) and a bilat-
eral bank loan of SEK 1,000 M (0). The Group’s short-term
loan financing mainly consists of two Commercial Paper
Programs for a maximum of USD 1,000 M (1,000) and SEK
5,000 M (5,000) respectively. At year-end, SEK 3,215 M
(4,166) of the Commercial Paper programs had been uti-
lized. In addition, substantial credit facilities are available,
mainly in the form of a Multi-Currency Revolving Credit
Facility for EUR 1,100 M (1,100), which was not utilized at
all at year-end. According to the Group’s policy, the average
remaining time to maturity for interest-bearing liabilities
should not be less than 18 months. At year-end, the average
time to maturity, excluding the pension provision, was 41
(43) months. Some of the Group’s main financing agree-
ments contain a customary Change of Control clause. The
effect of the clause is that lenders have the right in certain
circumstances to demand the renegotiation of conditions

Net debt by currency

Financial reports
69

or to terminate the agreement should control of the com-
pany change.

During the year the Parent Company raised only one new

loan, a bilateral bank loan of SEK 1,000 M.

Convertible debenture loans
Incentive 2004 has a variable interest rate equivalent to 0.9*
EURIBOR + 47 basis points. Any conversion of Incentive2004
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 dilu-
tion 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 Incentive
2006 will take place in a 180-day period between December
2010 and June 2011. Full conversion at a conversion 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 conversion 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, EUR 20.50 for Bond 2, EUR 23.00 for Bond 3 and EUR
25.40 for Bond 4, will add 4,679,610 shares.The dilution
effects with full conversion will amount to 1.2 percent of
share capital and 0.8 percent of the total number of votes.
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.

Currency composition
The currency composition of ASSA ABLOY’s borrowing
depends on the currency composition of the Group’s
assets. ASSA ABLOY uses currency swaps to achieve the
desired currency composition. See the table ‘Net debt by
currency’ below.

Cash and cash equivalents and other
interest-bearing receivables
Short-term interest-bearing investments amounted to
SEK 410 M (126) at year-end. In addition, ASSA ABLOY has
long-term interest-bearing receivables of SEK 256 M (105)
and financial derivatives with a positive market value of SEK
277 M (94) which, in addition to cash and cash equivalents,
are included in the definition of net financial debt. Cash and
cash equivalents are mainly invested in interest-bearing

SEK M

USD
EUR
SEK
GBP
AUD
KRW
DKK
Other
Total

31 Dec 2007

31 Dec 2008

Net debt excl.
currency swaps

Net debt incl.
currency swaps

Net debt excl.
currency swaps

Net debt incl.
currency swaps

3,166
6,258
3,745
114
–47
286
1
–569
12,953

4,645
4,824
1,174
1,051
543
286
286
143
12,953

4,713
4,621
4,920
18
–94
487
0
–651
14,013

5,662
4,021
2,048
936
576
487
283
0
14,013

Financial reports
70

Note 22 cont’d.

ASSA ABLOY
Annual Report
2008

instruments with high liquidity from issuers with a credit
rating of at least A-, according to Standard & Poor’s or similar
agency. The average term for cash and cash equivalents was
2.2 days (4.3) at the end of 2008.

The Parent Company’s cash and cash equivalents are held

in a sub-account to the Group cash pool.

SEK M

2007

2008

2007

2008

Group

Parent company

Cash and bank
balances
Short-term invest-
ments with duration
less than 3 months
Cash and cash
equivalents
Short-term invest-
ments with duration
more than 3 months
Long-term interest-
bearing receivables
Positive market
value derivatives
Total

1,212

1,579

126

352

1,338

1,931

–

105

256

94
1,537

277
2,522

–

–
73

–

–
52

Interest rate risk in cash and cash equivalents
Treasury manages interest rate risks in these investments.
Derivative instruments such as interest rate swaps and FRAs
(Forward Rate Agreements) may be used to manage interest
risk. The investments are primarily short-term. The duration
for most of the investments is three months or less. The
interest rate duration for these short-term investments was
2.2 days (4.3) at the end of 2008. A downward change of
one percentage point in the yield curve would reduce the
Group’s interest income by about SEK 20 M (13) and the
Group’s equity by SEK 15 M (10).

Interest rate risk on borrowing
Changes in interest rates have a direct effect on ASSA
ABLOY’s net interest. Treasury is responsible for identifying
and managing the Group’s interest rate exposure. It analyzes
the Group’s interest rate exposure and calculates the impact
on net income by shifts in the interest rates 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. The Treasury Policy stipulates that the
average interest rate duration should usually be 24 months.
At year-end, the average interest rate duration, excluding
pension obligations, was about 23 (25) months. An upward
change of one percentage point in the yield curve would
increase the Group’s financial expense by about SEK 91 M
(87) and reduce the Group’s equity by SEK 67 M (64).

Currency risk
Currency risk affects ASSA ABLOY mainly through translation
of capital employed and net debt, through translation of
income in foreign subsidiaries, and through the effects on
income of flows of goods between countries with different
currencies.

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. In 2008, the Group managed transaction
exposure by hedging anticipated cash flows in all tradable
currencies for the 12 months following the balance date.
Hedging was carried out through derivatives, primarily
a currency basket that facilitated contract management
and reduced administrative costs. For 2009 the Group has
revised its policy and the underlying principle is to allow

currency fluctuations to have an impact on the business as
quickly as possible. As a result of this strategy only limited
portions of current currency flows are usually hedged.

Transaction flows relating to major currencies
(import + and export –)

Currency exposure, SEK M

Currency

AUD
CAD
CHF
EUR
GBP
NOK
SEK
USD

2007

283
232
–242
443
184
–220
–925
146

2008

357
413
–218
385
286
–220
–678
–329

Translation exposure of income
The table below shows the impact on the Group’s income
before tax of a 10 percent weakening of the Swedish krona
in relation to the major currencies, while all other variables
remain constant.

Impact on income before tax of a 10 percent
weakening of the SEK

Currency, SEK M

AUD
CAD
CHF
EUR
GBP
NOK
USD

2007

22
12
9
139
24
31
229

2008

21
13
7
145
13
25
238

Translation exposure in the balance sheet
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 of movements in individual currencies. Treasury uses
currency derivatives to supply the appropriate funding and to
eliminate undesirable currency exposure.

The table ‘Net debt by currency’ on page 69 shows the
use of currency forward contracts in association with fund-
ing, for the major currencies. The forward contracts are used
to neutralize the exposure arising between net debt and
internal needs.

Financial credit risk
Financial risk management exposes ASSA ABLOY to certain
counterparty risks. Such exposure may arise from the place-
ment of surplus cash as well as from the use of debt securi-
ties and derivative financial instruments.

ASSA ABLOY’s policy is to minimize the potential credit

risk from cash surplus by using cash from subsidiaries to
amortize the Group’s debt. This objective is achieved pri-
marily by cash pools put in place by Treasury. About 78 (75)
percent of the Group’s sales were settled through cash pools
in 2008. The Group may nevertheless deposit surplus funds
on a short-term basis with banks in order to match debt
maturities and cash flow.

Derivative financial instruments are allocated to banks
according to risk limits set in the Treasury policy in order to
limit counterparty risk. Treasury enters into derivative con-

ASSA ABLOY
Annual Report
2008

Note 22 cont’d.

Financial reports
71

tracts exclusively with banks that have a good rating.
ISDA agreements (full netting of transactions in case of
default by a counterparty) has been set up in the case of
interest rate and currency derivatives.

Commercial credit risk
The Group’s accounts receivable are distributed over a large
number of customers who are spread internationally. The
concentration of credit risk associated with accounts receiv-
able is therefore limited. The fair value of accounts receiv-
able corresponds with the carrying amount. Credit risk from
operating activities is monitored by local management at
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 in production.
The Group’s policy is to not enter into financial commodity
hedge contracts.

Fair value of 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 exposure
to financial risks.

The positive and negative fair value in the table ‘Out-
standing derivative financial instruments’ below show the
fair values of instruments outstanding at year-end, based on
available fair 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 table below pro-
vides an overview of financial assets and liabilities, measure-
ment categories and carrying value and fair value per item.
When calculating fair value only general changes in
market interest rates are considered and not credit spread
movements for the company itself.

Outstanding derivative financial instruments
at 31 December

Instrument, SEK M

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

31 December 2007

31 December 2008

Positive fair
value

Negative
fair value

Nominal

value

Positive fair
value

Negative
fair value

Nominal
value

61
2
6
26
94

–19
–2
–
–5
–26

6,058
31
–

2,089
9,092

124
–
–
153
277

–72
–
–
–20
–92

4,312
–
–
2,411
6,723

Financial Instruments: carrying amounts and
fair values by measurement categories

SEK M

Financial assets
Other long-term financial assets
Accounts receivable
Other short-term receivables
Derivative instruments – hedge accounting
Derivative instrument – held for trading
Derivative instruments, total
Short-term investments
Treasury notes/bills
Other cash and cash equivalents
Cash and cash equivalents total

Financial liabilities
Long-term loans – hedge accounting
Long-term loans – not hedge accounting
Long-term loans
Convertible debenture loans
Other long-term liabilities
Short-term loans – not hedge accounting
Derivative instruments – hedge accounting
Derivatives instrument – held for trading
Derivative instruments total
Accounts payable
Other current 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.
5 = Derivative hedge accounting.

2007

2008

IAS 39
category*

Carrying
amount

Fair value

Carrying
amount

Fair value

1
1
1
5
2

1
3
1
1

2
4

4
4
4

4
4

170
5,537
449
26
68
94
–
51
1,287
1,338

1,024
4,781
5,805
2,245
122
5,258
–
26
26
2,503
624

170

5,537
449
26
68
94
–
51
1,287
1,338

1,073
4,920
5,993
2,245
122
5,258
–
26
26
2,503
624

317
6,372
479
153
124
277
58
–
1,931
1,931

1,245
5,003
6,248
2,614
151
6,400
–
92
92
2,909
729

317
6,372
479
153
124
277
58
–
1,931
1,931

1,433
5,433
6,866
2,614
151
6,400
–
92
92
2,909
729

Financial reports
72

ASSA ABLOY
Annual Report
2008

Note 23 Parent company’s equity

Note 25 Reserves

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.
Re stricted 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 24 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 2007
Closing balance at
31 December 2007

Number of votes,
thousands

Opening balance at
1 January 2008
Closing balance at
31 December 2008

Number of votes,
thousands

All shares have a par value of SEK 1.00 and provide the hold-
ers 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 380,713 thou-
sand (378,533).

Dividend per share
The dividend paid out during the financial year amounted
to a total sum of SEK 1,317 M (1,189), corresponding to
SEK 3.60 (3.25) per share. At the Annual General Meeting on
23 April 2009, a dividend of SEK 3.60 per share for the year
2008 – a total sum of SEK 1,317 M – will be proposed.

Group, SEK M

Opening balance at
1 January 2007
Translation differences
Financial instruments, fair value
Closing balance at
31 December 2007

Opening balance at
1 January 2008
Translation differences
Financial instruments, fair value
Closing balance at
31 December 2008

Trans-
lation
reserve

Hedging
reserve

–253
–287
–

–540

–540
2,112
–

1,572

0
–
0

Total

–253
–287
0

–540

–540
2,112
0

1,572

The translation reserve consists of all currency translation
differences that arise in the translation of foreign subsidiar-
ies. If a subsidiary is sold, translation differences are trans-
ferred to the income statement.

Note 26 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. Pension
provisions 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 obliga-
tions related to post-retirement medical benefits in the USA.

Amounts recognized in the income statement

Pension costs, SEK M

2007

2008

Defined benefit pension charges (A)
Defined contribution pension charges
Post-employment medical
benefit charges (A)
Total

29
326

29
384

56
328

29
413

Amounts recognized in the balance sheet

Pension provisions, SEK M

2007

2008

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

701

383

72
1,156
–20
1,136

638

485

59
1,182
–23
1,159

ASSA ABLOY
Annual Report
2008

Note 26 cont.

Financial reports
73

A) Specification of amounts recognized in the income statement

Post-employment
medical benefits

Defined benefit
pension plans

Total

Pension cost, SEK M

2007

2008

Current service cost
Interest on obligations
Expected return on plan assets
Net actuarial losses (gains), net
Past service cost
Losses (gains) on curtailments/settlements
Total
–of which included in:
Operating income
Net financial items
Total

7
22
–
–
–
–
29

7
22
29

6
23
–
0
0
–
29

6
23
29

2007

58
206
–214
0
0
–21
29

58
–29
29

2008

50
219
–216
1
2
0
56

53
3
56

2007

65
228
–214
0
0
–21
58

65
–7
58

2008

56
242
–216
1
2
0
85

59
26
85

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 is recognized as income/expense over the expected average remaining ser-
vice period, starting in the year after the actuarial gain or loss arose. Amortization of actuarial gains/losses that arose in 2008 will
start in 2009.

The actual return on plan assets regarding defined benefit plans was SEK –594 M (239) in 2008.
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

Post-employment
medical benefits

Defined benefit
pension plans

Total

Specification of pension provisions, SEK M

2007

2008

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)
Unrecognized past service cost

Provisions for defined contribution pension plans
Total

C) Movement in pension obligations

SEK M

Opening obligation, present value
Current service cost
Interest on obligations
Actuarial losses (gains)
Curtailments / settlements
Payments
Exchange-rate differences
Closing obligation, present value

–
–
–
391
–4
–4
383

–
–
–
361
122
2
485

2007

3,733
–3,177
556
260
–114
–1
701

2008

2,867
–2,604
263
736
–356
–5
638

2007

3,733
–3,177
556
651
–118
–5
1,084
72
1,156

Post-employment
medical benefits

Defined benefit
pension plans

Total

2007

406
7
22
6
2
–28
–24
391

2008

391
6
23
–106
6
–25
66
361

2007

4,081
58
206
13
–40
–175
–150
3,993

2008

3,993
50
219
–574
–1
–184
99
3,602

2007

4,487
65
228
19
–38
–203
–174
4,384

2008

2,867
–2,604
263
1,097
–234
–3
1,123
59
1,182

2008

4,384
56
242
–680
5
–209
165
3,963

Financial reports
74

Note 26 cont.

D) Movement in fair value of plan assets

ASSA ABLOY
Annual Report
2008

Defined benefit
pension plans

SEK M

Opening fair value of plan assets
Expected return on plan assets
Actuarial gains (losses)
Net payments
Exchange-rate differences
Closing fair value of plan assets (E)

E) Plan assets allocation

Plan assets

Shares
Interest-bearing investments
Other assets
Total

F) Sensitivity analysis on medical benefits

The effect of a 1 percent change in the assumed medical
benefit trend rate, SEK M

Effect on the aggregate of the current service cost and interest cost
Effect on the defined benefit obligation

Key actuarial assumptions (weighted average), %

Discount rate
Expected return on plan assets 1
Future salary increases
Future pension increases
Future medical benefit increases
Expected inflation

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
4 487
–3 133
1 354

2007

3,133
214
25
–16
–179
3,177

2007

2,030
959
188
3,177

+1%

3
25

2007

5.6
7.1
2.4
2.7
11.0
2.9

2007
4,384
–3,177
1,207

2008

3,177
216
–811
–43
65
2,604

2008

1,413
907
284
2,604

–1%

–2
–22

2008

6.9
6.7
2.2
2.7
9.5
2.8

2008
3,963
–2,604
1,359

1 The expected return on plan assets is determined by considering the expected returns avaiable on 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 2008 financial
year the company has not had access to information making it possible to report this plan as a defined benefit plan. Pension
plans in accordance with ITP that are guaranteed through insurance with Alecta are therefore reported as defined contribu-
tion plans. The year’s contributions that are contracted to Alecta amount to SEK 7 M (9), of which SEK 3 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 2008
Alecta’s surplus expressed as collective consolidation level amounted to 112.0 (152.0) 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.

ASSA ABLOY
Annual Report
2008

Note 27 Other provisions

Group

Note 28 Other short-term liabilities

Financial reports
75

Group

2007

2008

217
74
66
26
241
624

244
72
93
38
282
729

SEK M

VAT and excise duty
Employee withholding tax
Advances received
Social security contributions
Other short-term liabilities
Total

Note 29 Accrued expenses and prepaid income

SEK M

2007

2008

2007

2008

Group

Parent
company

Personnel-related
expenses
Customer-related
expenses
Prepaid income
Accrued interest
expenses
Other
Total

1,346

1,441

438
121

87
625
2,617

444
79

125
1,035
3,124

–
–

39
14
104

–
–

55
4
116

Note 30 Contingent liabilities

Group

Parent
company

SEK M

2007

2008

2007

2008

Guarantees
Guarantees on behalf of
subsidiaries
Total

–
29

–
36

–

9,339
9,339

8,501
8,501

In addition to the guarantees shown in the table above the
Group has a large number of small performance guarantees
issued by banks in the ordinary course of business. No mat-
erial obligations are expected as a result of these guarantees.

SEK M

Opening balance at
1 January 2007
Reclassifications
Reversal of unused amounts
Provisions for the year
Acquisitions of subsidiaries
Utilized during the year
Exchange-rate differences
Closing balance at
31 December 2007

Opening balance at
1 January 2008
Reclassifications
Reversal of unused amounts
Provisions for the year
Acquisitions of subsidiaries
Utilized during the year
Exchange-rate differences
Closing balance at
31 December 2008

Balance sheet allocation:

Other long-term provisions
Other short-term provisions
Total

Restruc-
turing
reserve

Other

Total

1,257
–3
–74
54
–
–424
18

828

828
–
–
1,038
–
–485
137

186
164
–
17
293
–94
–54

512

512
–
0
11
267
–114
46

1,443
161
–74
71
293
–518
–36

1,340

1,340
–
0
1,049
267
–599
183

1,518

722

2,240

Group

2007

774
566
1,340

2008

1,453
787
2,240

The restructuring reserve is concerned chiefly with the
ongoing restructuring programs initiated in 2006 and
2008. The closing balance of the provision is expected to be
utilized during the coming three-year period and is mainly
related to severance payments. The long-term part of the
restructuring provision amounts to SEK 870 M. For detailed
information about the restructuring programs see the
Report of the Board of Directors. ‘Other provisions’ relates
to estimates of deferred considerations for acquisitions and
to legal obligations including future environmental-related
interventions.

Parent company
‘Other provisions’ in the Parent company relate to estimates
of deferred considerations for acquisitions.

Financial reports
76

ASSA ABLOY
Annual Report
2008

Note 31 Acquisitions

2008, 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
Fair value adjustments, intangible assets
Fair value adjustments, deferred taxes etc
Acquired net assets at book value

Purchase prices settled in cash
Cash and cash equivalents in acquired subsidiaries
Change in Group cash and cash equivalents resul-
ting from acquisitions

Net sales from times of acquisition
EBIT from times of acquisition
Net income from times of acquisition

Total

1,710
320
2,030
–822
1,208

251
202
339
223
58
–40
–275
64
822
–233
165
754

1,710
–58

1,652

691
82
9

Total net sales in 2008 of acquired entities amounted to SEK
1,732 M and net income amounted to SEK 29 M. No individu-
ally material acquisition was performed in 2008. In November
2008 the holding in iRevo was increased and amounts to more
than 90 percent of the share capital. Rockwood, Valli & Valli,
Gardesa and Shenfei were the largest acquisitions during 2008.

Rockwood
On 24 June 2008 the Group acquired 100 percent of the
share capital of Rockwood Manufacturing Company, a lead-
ing US producer of standard and decorative specialty door
hardware. The acquisition brings into ASSA ABLOY a well
recognized producer of door components. With the acqui-
sition of Rockwood ASSA ABLOY takes another step in its
strategy to provide total door solutions on the non-residen-
tial market in the USA. The company has its headquarters
and manufacturing facility in Rockwood, Pennsylvania. The
brand has been separately recognized and remaining good-
will is chiefly related to synergies and other intangible assets
not qualifying for separate recognition.

Valli&Valli
On 3 July 2008 the Group acquired 100 percent of the share
capital of Valli&Valli, a leading Italian manufacturer of design
handles. The acquisition brings into ASSA ABLOY an exciting
product range and a well known brand used by designers
and architects worldwide. The acquisition will strengthen
ASSA ABLOY’s leading position on the Italian market and it
will also reinforce the Group’s specification efforts in many
other countries. The company is based near Milan in Italy.
The brand has been separately recognized and remaining
goodwill is chiefly related to synergies and other intangible
assets not qualifying for separate recognition.

Gardesa
On 9 July 2008 the Group acquired 100 percent of the
share capital of Gardesa, a leading Italian manufacturer of
high-security steel doors. Gardesa is a valuable addition to

ASSA ABLOY, bringing a leading brand, a very exciting prod-
uct range, advanced technology and very attractive Italian
design. The majority of the products are sold through the
company’s distribution network in Italy while 25 percent are
sold through distributors to other markets in Europe, Africa
and Asia. Gardesa is located near Piacenza in Italy. The brand
has been separately recognized and remaining goodwill is
chiefly related to synergies and other intangible assets not
qualifying for separate recognition.

Shenfei
On 19 December 2008 the Group acquired 100 percent of
the share capital of Shenfei, a leading Chinese manufacturer
of door closers. The acquisition is an important step in the
growth strategy on emerging markets and adds market
presence as well as complementing ASSA ABLOY’s product
portfolio. Shenfei complements the Group’s port folio of
locks and door opening solutions and adds a valuable dis-
tribution network in China. Shenfei is located in Wen Zou,
south of Shanghai. The purchase price allocation is prelimi-
nary. Goodwill is chiefly related to synergies and other intan-
gible assets not qualifying for separate recognition.

2007, SEK M

Cash paid, including direct acquisition costs
Unpaid parts of purchase prices
Total purchase price
Fair value of acquired net assets
Goodwill

Fair value adjustments, intangible assets
Fair value adjustments, deferred taxes etc
Acquired net assets at book value

Purchase prices settled in cash
Cash and cash equivalents in acquired subsidiaries
Change in Group cash and cash equivalents resul-
ting from acquisitions

Net sales from times of acquisition
EBIT from times of acquisition
Net income from times of acquisition

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

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 acquisi-
tions during 2007.

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 acquisi-
tion 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

ASSA ABLOY
Annual Report
2008

Note 32 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

Change in working capital
Inventory increase/decrease (–/+)
Accounts receivable increase/decrease (–/+)
Accounts payable increase/decrease (+/–)
Other working capital increase/decrease (–/+)
Change in working capital

Capital expenditure
Purchase of tangible and intangible assets
Sales of tangible and intangible assets
Net capital expenditure

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

Financial reports
77

Group

2007

2008

–58
20
–11
–49

–148
–256
219
160
–25

–1,050
299
–751

–1,370
–273
–253
–206
–65
143
117
154
74
4
–1,675

–31
–3
–15
–49

–144
38
–59
160
–5

–962
133
–829

–1,459
–202
–339
–203
–20
–64
70
135
70
–18
–2,030

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

100
251

58
320

–34
–1,358

–179
–1,831

Other investments
Investments in / sales of other shares
Investments in / sales of other financial assets
Other investments

–13
–5
–18

1
11
12

recognized and remaining goodwill is chiefly related to syn-
ergies 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 sup-
pliers of RFID inlays for electronic passports. The acquisition
expanded the customer base, provided ASSA ABLOY with yet
another secure site for the Group’s 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. Intan gible assets in the form of customer relationships
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
Baodean, a leading Chinese lock company. Baodean manu-
factures 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 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.

iRevo
On 12 October 2007 the Group acquired more than 50
percent of the share capital of iRevo, a Seoul-listed company
and market leader in digital door locks. The acquisition
brings benefits to the ASSA ABLOY Group including a market-
leading position in Korea, access to efficient distribution
channels in the residential sector and ability to leverage on
ASSA ABLOY’s global distribution network. Based on a pre-
liminary purchase-price allocation, the brand has been sepa-
rately recognized and remaining goodwill is chiefly related
to synergies and other intangible assets not qualifying for
separate recognition.

Financial reports
78

Note 33 Employees

Salaries, wages and other remuneration

ASSA ABLOY
Annual Report
2008

2007

2008

Group

Salaries, wages and
other remuneration

of which, performance-
related salary paid to
managing directors

Salaries, wages and
other remuneration

of which, performance-
related salary paid to
managing directors

587
329
276
185
625
67
227
635
554
212
120
280
90
48
87
69
205
2,666
195
69
155
391
80
59
136
8,347

8
0
1
1
3
0
2
4
4
1
1
2
0
–
–
–
1
8
1
0
0
0
–
0
0
36

590
339
311
230
503
45
245
430
568
230
154
288
133
48
118
67
194
2,733
151
76
166
303
85
39
278
8,324

5
0
1
0
3
0
2
4
2
1
0
2
–
–
0
–
2
11
0
0
0
0
0
0
2
35

2007

2008

Parent company

Salaries, wages and
other remuneration

of which, performance-
related salary paid to
managing directors

Salaries, wages and
other remuneration

of which, performance-
related salary paid to
managing directors

96
12
108

6
–
6

102
0
102

Group

Parent company

2007

1,719
384
1,719

2008

1,692
413
1,692

2007

55
21
55

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
Korea
Other
Total

SEK M

Sweden
Other
Total

Social security costs

SEK M

Social security costs
–of which pensions
Total

Fees to board members in 2008 (including committee work), SEK thousands

Name and post

Gustaf Douglas, Chairman
Jorma Halonen, member
Carl Douglas, member
Birgitta Klasén, member
Eva Lindqvist, member
Johan Molin, president and CEO
Sven-Christer Nilsson, member
Lars Renström, member
Ulrik Svensson, member
Employee representatives (2)
Total

Remun-
eration
Committee

Audit
Committee

Social secu-
rity costs

100
–
–
–
–
–
50
–
–
–
150

–
–
–
100
–
–
–
100
200
–
400

102
–
141
173
141
–
157
173
204
–
1,092

Board

900
450
450
450
450
–
450
450
450
–
4,050

Remuneration and other benefits of the Executive Team in 2008, SEK thousands

Johan Molin
Other members of the Executive Team (9)
Total remuneration and benefits
Total costs1

Fixed salary Variable salary Other benefits

Pension costs

12,831
29,460
42,291
51,426

2,625
8,933
11,558
14,055

100
1,548
1,648
1,813

3,500
8,092
11,592
13,910

1 Total costs include social security contributions on salaries and benefits, special pension tax and additional costs for other benefits. Salaries and other remunera-

tion paid to the Executive Team during 2007 totaled SEK 63 M and social security costs totaled SEK 26 M, of which SEK 13 M were pension costs.

3
–
3

2008

55
20
55

Total

1,102
450
591
723
591
–
657
723
854
–
5,692

ASSA ABLOY
Annual Report
2008

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
31 M (34). Social security costs for the Board of Directors
and the Parent company’s Executive Team amounted to SEK
19 M (19), of which SEK 10 M (8) are pension costs.

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.

Absence for illness, %

Total absence for illness
– long-term 1
– men
– women
– aged 29 or younger
– aged 30-49
– aged 50 or older 1

Financial reports
79

Parent company

2007

2008

2.4
–
2.7
1.8
0.9
1.5
–

1.8
–
2.0
1.2
0.6
1.0
–

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

Average number of employees per country, with breakdown into women and men

Group

Sweden
Other
Total

Total

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
85
1,048
301
818
32,267

2007

Women

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
22
318
99
302
12,691

Men

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
63
730
202
516
19,576

Total

1,433
1,073
667
414
1,315
224
620
2,124
1,242
407
604
760
1,085
484
460
534
581
6,961
1,721
659
527
5,962
266
954
336
1,310
32,723

2008

Women

536
420
245
141
525
83
91
907
485
159
202
224
578
234
131
206
107
2,246
1,042
172
369
2,939
50
283
116
583
13,074

Parent company

2007

Total

Women

90
8
98

29
2
31

Men

61
6
67

Total

101
–
101

2008

Women

32
–
32

Men

897
653
422
273
790
141
529
1,217
757
248
402
536
507
250
329
328
474
4,715
679
487
158
3,023
216
671
220
727
19,649

Men

69
–
69

Gender-split in senior management

SEK M
Board of Directors2
Executive Team
– of which Parent company's

Executive Team

Total

2 Excluding employee representatives.

2007

2008

Total

Women

Men

Total

Women

Men

8
10

4
18

1
–

–
1

7
10

4
17

9
10

4
19

2
–

–
2

7
10

4
17

Note 34 Assets pledged against liabilities to credit institutes

SEK M

Real-estate mortgages
Other mortgages
Total

Group

Parent company

2007

2008

41
32
73

41
30
71

2007

None
None
None

2008

None
None
None

Financial reports
80

Comments on five years in summary

ASSA ABLOY
Annual Report
2008

2004
Some recovery in demand on major markets contributed to
a notable improvement in organic growth. Acquisitions con-
tributed to business performance in the EMEA and Global
Technologies divisions. Negative exchange-rate effects con-
tinued 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 purchasing struc-
ture. 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 perfor-
mance 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 electro-
mechanical locks, access control, automatic doors and iden-
tification 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 implemented in 2009.

Sales volume growth, acquisitions and the restructuring
measures implemented contributed to the strong increase
in operating income.

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 Amer-
ica, increasing demand in new markets, and successes in
fast-growing segments such as electromechanical locks,
access control, secure smart-card issuance, automatic doors
and identification technology. The acquisition rate remained
high during the year and major acquisitions included Bao-
dean (China), iRevo (Korea), Aontec (Irish Republic), Power-
shield (Northern Ireland), Pemko (North America) and Pyro-
panel (Australia).

The successful implementation of the three-year

restructuring program for the Group’s manufacturing units
continued during the year. All 50 projects are proceeding
according 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.

2008
2008 was a record year for ASSA ABLOY with increased sales
and profit due to focused efforts to increase demand mainly
on the commercial and institutional markets. The Group
increased its investments in product development and
more products than ever were introduced on the market.
The economic situation weakened toward the end of the
year as the financial crisis had a negative impact on invest-
ments in new construction.

ASSA ABLOY
Annual Report
2008

Five years in summary

Financial reports
81

(Amounts in SEK M unless stated otherwise)

2004

2005

2006

2007

2008

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
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. items affecting comparability, %
Return on shareholders’ equity, %
Equity ratio, %
Net debt / Equity ratio, times
Interest coverage ratio, times
Interest on convertible debenture loans after tax
Number of shares, thousands
Number of shares after dilution, thousands
Average number of employees

1 Excluding restructuring costs in 2006 and items affecting comparability in 2008
2 For 2008, as proposed by the Board.

25,526
5
5
4,606
923
3,683
3,199
2,356

3,018
–1,505
–1,413
100
3,439

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

27,802
5
1
4,960
882
4,078
3,556
2,613

3,153
–1,052
–2,027
73
3,702

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
5,6691
898
4,7711
2,626
1,756

2,968
–3,871
1,203
300
3,528

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

4.77
7.991
39.13
3.25
149.00

18.21
15.3 1
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

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

34,918
0
4
6,4471
–921
5,5261
3,499
2,438

4,369
–2,648
–1,311
410
4,769

32,850
20,669
14,013
163
18,674

6.60
9.211
55.91
3.60 2
88.50

18.51
15.81
10.0
13.3
17.2
12.8
41.9
0.74
5.7
81.0
365,918
380,713
32,723

Financial reports
82

Quarterly information

ASSA ABLOY
Annual Report
2008

THE GROUP IN SUMMARY
(Amounts in SEK M
unless stated otherwise)

Sales
Organic growth
Gross income excl. items affecting
comparability
Gross income / Sales
Operating income before depre-
ciation (EBITDA) excl. items affec-
ting comparability
Gross margin (EBITDA)
Depreciation
Operating income (EBIT) excl.
items affecting comparability
Operating margin (EBIT)
Items affecting comparability 4
Operating income (EBIT)
Net financial items
Income before tax (EBT)
Profit margin (EBT)
Tax

Net income

Allocation of net income:

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%

Q4
2007

Full year
2007

8,721
6%

33,550
7%

Q1
2008

8,203
0%

Q2
2008

8,526
5%

Q3
2008

8,722
1%

Q4
2008

Full year
2008

9,468
-4%

34,918
0%

3,405
41.2%

3,587
41.1%

13,799
41.1%

3,383
41.2%

3,547
41.6%

3,590
41.2%

3,898
41.2%

14,418
41.3%

1,625
19.6%
–221

1,404
17.0%
–
1,404
–193
1,211
14.6%
–327

884

1,670
19.1%
–230

1,440
16.5%
–
1,440
–271
1,168
13.4%
–309

6,366
19.0%
–909

5,458
16.3%
–
5,458
–849
4,609
13.7%
–1 240

859

3,368

1,476
18.0%
–232

1,244
15.2%
–
1,244
–189
1,055
12.9%
–283

772

1,599
18.8%
–222

1,378
16.2%
–
1,378
–190
1,188
13.9%
–323

865

1,669
19.1%
–234

1,435
16.5%
–247
1,188
–207
980
11.2%
–271

709

1,703
18.0%
–233

1,469
15.5%
–1,010
460
–184
276
2.9%
–184

6,447
18.5%
–921

5,526
15.8%
–1,257
4,269
–770
3,499
10.0%
–1,061

2,438

Shareholders in ASSA ABLOY AB
Minority interests

803
1

820
2

882
2

854
5

3 358
10

772
0

857
8

700
8

84
9

2,413
25

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 tax

Q1
2007

1,289
–
229
–101
–469
–124
–19

805

Q2
2007

1,325
–
229
–218
–159
–216
–4

Q3
2007

1,404
–
221
–220
53
–149
–3

Q4
2007

Full year
2007

1,440
–
230
–212
550
–245
–23

5,458
–
909
–751
–25
–734
–49

Q1
2008

1,244
–
232
–164
–581
–162
14

Q2
2008

1,378
–
222
–173
–113
–206
–26

Q3
2008

1,188
247
234
–199
–111
–134
–36

Q4
2008

Full year
2008

460
933
233
–293
801
–217
–1

4,269
1,180
921
–829
–5
–718
–49

957

1,306

1,740

4,808

583

1,081

1,189

1,916

4,769

0.73

0.85

1.08

1.49

1.04

0.55

0.91

0.972

1.492

1.022

CHANGE IN NET DEBT

Net debt at start of period
Operating cash flow
Restructuring payments
Tax paid
Acquisitions
Dividend
Exchange-rate differences

Net debt at end of period
Net debt / Equity ratio

NET DEBT

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

Q1
2007

13,560
–805
44
173
509
–
318

13,799
0.94

Q2
2007

13,799
–957
81
433
92
1,189
–103

14,534
1.02

Q3
2007

Q4
2007

Full year
2007

Q1
2008

Q2
2008

Q3
2008

Q4
2008

Full year
2008

14,534
–1,306
90
258
341
–
–461

13,456
0.91

13,456
–1,740
209
400
434
–
194

12,953
0.83

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

12,953
0.83

12,953
–583
111
127
126
–
–320

12,414
0.79

12,414
–1,081
97
251
473
1,317
78

13,549
0.87

13,549
–1,189
126
81
717
–
726

14,010
0.80

14,010
–1,916
152
283
503
–
981

14,013
0.74

12,953
–4,769
485
742
1,819
1,317
1,466

14,013
0.74

Q1
2007

Q2
2007

Q3
2007

Q4
2007

Q1
2008

Q2
2008

Q3
2008

Q4
2008

–139

–161

–197

–105

–102

–83

–89

–256

–79
–998
1,337

–119
–1,549
1,239

–261
–979
1,213

–220
–1,212
1,156

–332
–953
1,151

–191
–1,221
1,150

–133
–1,534
1,131

–688
–1,579
1,182

7,392

8,218

8,002

8,050

7,707

7,683

7,539

7,766

6,285

6,906

5,678

5,284

4,943

6,212

7,096

7,589

Total

13,799

14,534

13,456

12,953

12,414

13,549

14,010

14,013

ASSA ABLOY
Annual Report
2008

Financial reports
83

CAPITAL EMPLOYED AND
FINANCING

Capital employed
– of which, goodwill
Net debt
Minority interests
Shareholders’ equity
(excl. minority interests)

Q1
2007

28,535
17,375
13,799
59

Q2
2007

28,822
17,237
14,534
56

Q3
2007

Q4
2007

28,198
17,077
13,456
56

28,621
17,270
12,953
201

Q1
2008

Q2
2008

Q3
2008

Q4
2008

28,116
16,508
12,414
181

29,045
17,068
13,549
188

31,538
18,851
14,010
211

32,850
20,669
14,013
163

14,677

14,232

14,686

15,467

15,521

15,308

17,317

18,674

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. items affecting
comparability
Shareholders’ equity per share
after dilution

NUMBER OF SHARES

Number of shares before dilution,
thousands
Number of shares after dilution,
thousands3

Q1
2007

Q2
2007

Q3
2007

Q4
2007

Full year
2007

Q1
2008

Q2
2008

Q3
2008

Q4
2008

Full year
2008

2.19

2.24

2.41

2.34

9.18

2.11

2.34

1.91

0.23

6.60

2.16

2.20

2.36

2.30

9.02

2.08

2.30

1.89

0.29

6.55

2.16

2.20

2.36

2.30

9.02

2.08

2.30

2.38

2.45

9.21

42.46

43.68

44.68

46.76

46.64

46.13

51.61

55.91

Q1
2007

Q2
2007

Q3
2007

Q4
2007

Full year
2007

Q1
2008

Q2
2008

Q3
2008

Q4
2008

Full year
2008

365,918 365,918 365,918 365,918 365,918 365,918 365,918 365,918 365,918 365,918

376,033 376,599 380,713 380,713 378,533 380,713 380,713 380,713 380,713 380,713

1 Excluding restructuring payments.
2 Income before tax excluding items affecting comparability.
3 Weighted average.
4 Items affecting comparability consist of restructuring costs and non-recurring costs. Non-recurring costs total SEK 77 M in the fouth quarter and for the full year.

Definitions of key data terms Organic growth:

Change in sales for comparable units after adjustments for
acquisitions and exchange-rate effects.

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 50 for the items included in operating
cash flow.

Net capital expenditure:
Investments in fixed assets less disposals of fixed assets.

Equity ratio:
Shareholders’ equity as a percentage of total 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 per-
centage of average shareholders’ equity (excluding minor-
ity interests) after dilution.

Return on capital employed:
Income before tax plus net interest as a percentage of aver-
age 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 deben-
ture loan, divided by number of shares after dilution.

Financial reports
84

Proposed disposition of earnings

ASSA ABLOY
Annual Report
2008

The following retained earnings are available for disposition by the shareholders at the Annual General Meeting:

Net income for the year: SEK 1,154 M
Retained earnings brought forward: SEK 2,943 M
TOTAL: SEK 4,097 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 2,780 M,
be carried forward to the new financial year.

Tuesday 28 April 2009 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 4 May 2009.

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.

Gustaf Douglas
Chairman

Birgitta Klasén
Board member

Stockholm, 13 February 2009

Carl Douglas
Board member

Eva Lindqvist
Board member

Jorma Halonen
Board member

Johan Molin
President and CEO

Sven-Christer Nilsson
Board member

Lars Renström
Board member

Ulrik Svensson
Board member

Seppo Liimatainen
Employee representative

Mats Persson
Employee representative

Our audit report was issued on 13 February 2009

PricewaterhouseCoopers AB

Peter Nyllinge
Authorized Public Accountant
Auditor in Charge

Bo Karlsson
Authorized Public Accountant

ASSA ABLOY
Annual Report
2008

Audit report

Audit report
85

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 2008. (The company’s annual accounts are
presented on pages 38-84 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 opin-
ion 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 disclo-
sures 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 information
in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we exam-
ined 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 Associa-
tion. 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 Swe-
den. 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 consoli-
dated 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 pro-
posal 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 2009

PricewaterhouseCoopers AB

Peter Nyllinge
Authorized Public Accountant
Auditor in Charge

Bo Karlsson
Authorized Public Accountant

Corporate governance report
86

Corporate governance report

ASSA ABLOY
Annual Report
2008

ASSA ABLOY is a Swedish public limited liability company
with registered office in Stockholm, Sweden.

The Group’s corporate governance is based on, among
other things, its articles of association, the Swedish Compa-
nies Act and the rules and regulations of the NASDAQ OMX
Stockholm (Stockholm Stock Exchange). ASSA ABLOY
applies the Swedish Code of Corporate Governance and is
considered, at the end of 2008, to be in compliance with all
of its provisions.

The Corporate Governance Report describes how the
work of corporate governance has been conducted at ASSA
ABLOY during the 2008 financial year. This report has not
been examined by the company’s auditors.

ASSA ABLOY’s objective is that its activities should gen-
erate 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 interact-
ing components, which are described below.

should be equivalent to 33–50 percent of ASSA ABLOY’s
earnings after standard tax, 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 registered 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 nor-
mally passed by simple majority. However, on certain mat-
ters the Swedish Companies Act prescribes that a proposal
should be supported by a higher majority. Individual share-
holders who wish to have an issue raised at the Annual Gen-
eral Meeting can apply to ASSA ABLOY’s Board of Directors
at a special address published on the company’s website
well before the Meeting.

Share-
holders
Annual
General Meeting
Nomination Committee

Board of Directors
Audit Committee
Remuneration Committee

orting
Financial rep

CEO and Executive Team
Management philosophy
Guidelines and policies
Internal control and risk management

Decentralized organization

End

Shareholders
At year-end, ASSA ABLOY had 22,921 shareholders. ASSA
ABLOY’s principal shareholders are Investment AB Latour
and SäkI AB (9.7 percent of the capital and 29.8 percent of
the votes) and Melker Schörling AB (4.0 percent of the capi-
tal and 11.6 percent of the votes). Foreign shareholders
accounted for 50 percent of the share capital and 34 per-
cent of the votes. The ten largest shareholders accounted
for 41 percent of the share capital and 60 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 company’s assets and
earnings.

Share and dividend policy
ASSA ABLOY’s Series B share is quoted on the Large Cap list
of the Stockholm Stock Exchange. ASSA ABLOY’s market
capitalization at year-end amounted to SEK 32,383 M. The
aim of the Board is that, in the long term, the dividend

The Annual General Meeting should be held within six
months of the end of the company’s financial year. Matters
considered at the Annual General Meeting include: a divi-
dend; adoption of the income statement and balance sheet;
discharge of the Board of Directors and the CEO from liabil-
ity; election of board members and Chairman of the Board;
appointment of the Nomination Committee and auditors;
determination of remuneration guidelines for senior man-
agement and fees for the Board of Directors and auditors.
Styrelse
An Extraordinary General Meeting may be held if the Board
Revisionsutskott
of Directors considers this necessary or if ASSA ABLOY’s
Ersättningsutskott
auditors or shareholders holding at least 10 percent of the
shares so request.

Finansiell rap

Aktieägare
Bolagsstämma
Valberedning

ortering

VD och koncernledning
(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)
Intern kontroll och riskhantering

Decentraliserad organisation

Annual General Meeting 2008
The Annual General Meeting in April 2008 was attended by
shareholders representing 49 percent of the company’s
capital and 66 percent of the votes.

ortering

Aktieägare
Bolagsstämma
Valberedning

Finansiell rap

At the Meeting, Gustaf Douglas, Carl Douglas, Sven-
Christer Nilsson and Johan Molin were re-elected as mem-
bers of the Board. Moreover, Birgitta Klasén, Eva Lindqvist,
Jorma Halonen, Lars Renström and Ulrik Svensson were
elected as members of the Board. Gustaf Douglas was re-
elected as Chairman of the Board.
It was noted that the 2006 Annual General Meeting had
Styrelse
Revisionsutskott
Ersättningsutskott

appointed PricewaterhouseCoopers as auditors, with
authorized public accountant Peter Nyllinge as Auditor in
VD och koncernledning
Charge, for the four-year period up to the 2010 Annual Gen-
(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)
eral Meeting.
Intern kontroll och riskhantering
The Meeting approved a dividend of SEK 3.60 per share,
in accordance with the proposal of the Board and the CEO.
In addition, the Meeting passed a resolution on remunera-
tion guidelines for senior management and fees payable to
the Board and the auditors and appointed the members of
the Nomination Committee up to the 2009 Annual General
Meeting.

Nomination Committee
The Nomination Committee prior to the 2009 Annual Gen-
eral Meeting comprises Mikael Ekdahl (Melker Schörling
AB), Gustaf Douglas (Investment AB Latour and SäkI),

ASSA ABLOY
Annual Report
2008

Corporate governance report
87

Staffan Grefbäck (Alecta), Mats Tunér (SEB Fonder) and Mar-
ianne Nilsson (Swedbank Robur). Mikael Ekdahl is Chairman
of the Nomination Committee. 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 shareholders 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 2009 Annual General Meeting for any other reason. Dur-
ing the year the Nomination Committee appointed Mats
Tunér (SEB Fonder) to replace Björn Lind (SEB Fonder). The
Nomination Committee has the task of preparing, on behalf
of the shareholders, decisions on the election of the Chair-
man, Vice Chairmen and other members of the Board of
Directors, the appointment of the auditor, the election of
the Chairman of the Annual General Meeting, and fees and
associated matters. Prior to the 2009 Annual General Meet-
ing, the Nomination 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 annual evalua-
tion of the Board was part of the basis for this assessment.
The search for suitable board members continues through-
out 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 Nom-
ination Committee can do so by e-mailing nominationcom-
mittee@assaabloy.com. The Nomination Committee’s pro-
posals 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 2009.

Board of Directors
In accordance with the Swedish Companies Act, the Board
of Directors is responsible for the organization and adminis-
tration of the Group and for ensuring satisfactory control of
bookkeeping, asset management and other financial cir-
cumstances. 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, recommends a dividend and
guidelines 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 infor-
mation 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 com-
pany’s conduct are established

The Board’s rules of procedure and instructions for the divi-
sion of duties between the Board and the CEO are updated
and approved at least once a year. The Board has also issued
written instructions specifying how financial reporting to
the Board should be carried out. In addition to leading the
work of the Board, the Chairman should continuously moni-
tor the Group’s operations and development through con-
tact with the CEO.

The Chairman should consult the CEO on strategic issues
and represent the company in matters concerning the own-
ership structure. The Chairman should also, when necessary,
take part in particularly important external discussions 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 pub-
lication 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 relating 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 prepare mat-
ters 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 procedures.

The Board’s work during 2008
During the year the Board held nine meetings, including
two by telephone. At two meetings one board member was
absent and at one meeting two board members were
absent. Otherwise all members were present at all meet-
ings. At the scheduled board meetings, the President and
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. The Board takes decisions on all acquisitions and dis-
posals with a value (on a debt-free basis) exceeding SEK 100
M. This amount presumes that the matter involves acquisi-
tions or disposals that fall within the framework of the strat-
egy as agreed by the Board.

More important matters dealt with by the Board during

the year included the acquisitions of Rockwood, Gardesa,
Shenfei and Valli&Valli, as well as the restructuring program
announced during 2008. During the year the Board also

Corporate governance report
88

ASSA ABLOY
Annual Report
2008

conducted in-depth reviews of the Group’s activities in the
Americas and HID Global and visited several of the Group’s
sales and production units in China and the Czech Republic.

Remuneration Committee
During 2008, 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 senior management,
which the Board proposes to the Annual General Meeting
for resolution. The Board’s proposal for guidelines prior to
the 2009 Annual General Meeting can be seen on page 39.
The Remuneration Committee also addresses matters per-
taining to sal aries, bonus, pension, severance pay and incen-
tive programs for the CEO and other senior management.
The committee held one meeting during the year at

which all members were present. 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.

The Audit Committee
During 2008 the Audit Committee comprised Ulrik Svens-
son (Chairman), Birgitta Klasén and Lars Renström.

The duties of the Audit Committee include the continu-
ous quality assurance of ASSA ABLOY’s financial reporting.
Regular communication is maintained with the Company’s
auditor on matters including the focus and scope of the
audit. The Audit Committee is also responsible for evaluat-
ing the audit assignment and informing the Board of Direc-
tors and the Nomination Committee of the results, as well
as continuously monitoring the current risk status of legal
risks in the operation.

The Audit Committee held four meetings during the
year at which all members, the company’s auditor and rep-
resentatives from corporate management were present.
The meetings of the Audit Committee are minuted; the
minutes are sent out with material for the Board and a ver-
bal report is given at board meetings.

More important matters dealt with by the Audit
Committee during the year included monitoring account-
ing aspects of the restructuring program, the adoption of

new guidelines for appointing external auditors locally, and
the procurement of services other than auditing from the
company’s auditors. In addition to this, the Audit Commit-
tee was kept updated on the move of Treasury operations
from Geneva to Stockholm, and also monitored the Group’s
financing situation, given the turbulence in the credit mar-
kets during the year. The Audit Committee also initiated an
overview of the Group’s policies and guidelines for manage-
ment of funds allocated to meet the Group’s pension
liability.

ASSA ABLOY’s Board of Directors
The Board consists of 11 members. Nine members are
elected by the Annual General Meeting for a period of one
year and two of the members are appointed by the
employee organizations in accordance with Swedish law.
The employee organizations also appoint two deputies.
With the exception of the CEO, none of the board members
are members of the Executive Team. The CEO has no signifi-
cant shareholdings or partnerships in companies with sig-
nificant business relationships with ASSA ABLOY.

Remuneration of the Board
The Annual General Meeting passes a resolution on the
remuneration to be paid to board members. The 2008
Annual General Meeting decided that fees paid to the Board
should comprise a total sum of SEK 4,050,000 (excluding
remuneration for committee work), to be allocated
between the members as follows: SEK 900,000 to the Chair-
man and SEK 450,000 to each of the other members not
employed by the company. As remuneration for committee
work, the Chairman of the Audit Committee should receive
SEK 200,000, the Chairman of the Remuneration Commit-
tee SEK 100,000, members of the Audit Committee SEK
100,000 and members of the Remuneration Committee
SEK 50,000.

The Chairman and other board members have no pen-
sion benefits or severance payment agreements. The CEO
and employee representatives do not receive any remuner-
ation. For more information about remuneration to Board
members for 2008, please see Note 33.

ASSA ABLOY
Annual Report
2008

Corporate governance report
89

Independence of the Board

The Board of Directors of
ASSA ABLOY meets the
requirements for indepen-
dence according to the
rules and regulations of
NASDAQ OMX Stockholm
and the Swedish Code of
Corporate Governance.

Name

Gustaf Douglas
Carl Douglas
Jorma Halonen
Birgitta Klasén
Eva Lindqvist
Johan Molin

Sven-Christer Nilsson
Lars Renström
Ulrik Svensson

Position

Independent of the company
and its management

Independent of the company’s
major shareholders

Chairman
Board member
Board member
Board member
Board member
Board member,
President and CEO
Board member
Board member
Board member

Yes
Yes
Yes
Yes
Yes
No

Yes
Yes
Yes

No
No
Yes
Yes
Yes
–

Yes
Yes
No

The Board’s composition and shareholdings

Name

Position

Gustaf Douglas
Carl Douglas
Jorma Halonen
Birgitta Klasén
Eva Lindqvist
Johan Molin

Chairman
Board member
Board member
Board member
Board member
Board member, President
and CEO

Sven-Christer Nilsson Board member
Board member
Lars Renström
Board member
Ulrik Svensson
Board member,
Seppo Liimatainen
employee representative
Board member,
employee representative
Deputy, employee
representative
Deputy, employee
representative

Per Edvin Nyström

Mats Persson

Rune Hjälm

1 Including family and through companies.

Appoin-
ted

1994
2004
2008
2008
2008

2006
2001
2008
2008
2003

Born

1938
1965
1948
1949
1958

1959
1944
1951
1961
1950

1994

1955

2005

1964

1994

1955

Remu-
neration
Committee

Chairman
–
–
–
–

Audit
Committee

Series A
shares1

Series B
shares1

–
–
–
Member
–

13,865,243
–
–
–
–

21,750,000
–
1,000
4,000
–

Incentive
program
Series B
shares

–
–
–
–
–

–
Member
–
–
–

–
–
Member
Chairman
–

–

–
–
–
–
–

–

500,000
2,500
10,000
3,000
2,600

440,000
–
–
–
–

–

7,727

7,800

Corporate governance report
90

Board of Directors

ASSA ABLOY
Annual Report
2008

Board members elected at the 2008 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 SäkI AB. Board member of 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.

Carl Douglas
Board member of ASSA ABLOY AB since 2004.
Born 1965.
Bachelor of Arts. Self-employed.
Other appointments: Vice Chairman of Securitas AB. Board member of Investment AB Latour, Niscayah Group AB, Swegon
AB and Säkl AB.
Shareholdings (including family and through companies): —

Jorma Halonen
Board member of ASSA ABLOY AB since 2008.
Born 1948.
Bachelor of Science in Economics.
Executive Vice President of AB Volvo and Deputy CEO of the Volvo Group 2004–2008. President and CEO of Volvo Truck
Corporation 2001–2004. Prior to that, a number of senior posts at Scania, such as President of Saab-Scania in Finland
1990–1996, Vice President 1996–1998 and President 1998–2001 of Scania Latin America. Prior to that, senior posts in
the telecommunication and computer industry 1972–1990.
Other appointments: Chairman of the Board of Niscayah Group AB and CPS Color. Board member of SEMCON AB and NICDP
(Advisory Board to the Saudi Arabian Government).
Shareholdings (including family and through companies): 1,000 Series B shares.

Birgitta Klasén
Board member of ASSA ABLOY AB since 2008.
Born 1949.
Master of Science in Engineering.
Independent IT consultant (Senior IT Advisor). Chief Information Officer (CIO) and Head of Information Management
at EADS (European Aeronautics Defence and Space Company) 2004–2005. CIO and Senior Vice President of Pharmacia
1996–2001 and prior to that, CIO at Telia. Held various posts at IBM 1976–1994.
Other appointments: Board member of Acando AB and BISNODE AB.
Shareholdings (including family and through companies): 4,000 Series B shares.

Eva Lindqvist
Board member of ASSA ABLOY AB since 2008.
Born 1958.
Master of Science in Engineering and Bachelor of Science in Economics.
Senior Vice President of Mobile Business at TeliaSonera AB 2006-2007. Prior to that several senior posts at TeliaSonera AB,
such as President and Head of Business Operation International Carrier, and various posts in the Ericsson Group 1981–1999.
Other appointments: Chairman of the Board Xelerated AB and Admeta AB, as well as Board Member of companies including
Schibstedt, Niscayah Group AB, Transmode AB and Nordia Innovation AB. Member of the Royal Swedish Academy of
Engineering Sciences (IVA).
Shareholdings (including family and through companies): —

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 as well as Incentive 2006 and Incentive
2007 corresponding, on full conversion, to 440,000 Series B shares.

Gustaf Douglas

Carl Douglas

Jorma Halonen

Birgitta Klasén

Eva Lindqvist

Johan Molin

ASSA ABLOY
Annual Report
2008

Sven-Christer Nilsson

Lars Renström

Ulrik Svensson

Corporate governance report
91

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 Sprint Nextel Corporation,
CEVA, Inc. and Tilgin AB.
Shareholdings (including family and through companies): 2,500 Series B shares.

Lars Renström
Board member of ASSA ABLOY AB since 2008.
Born 1951.
Master of Science in Engineering and Bachelor of Science in Economics.
President and CEO of Alfa Laval AB since 2004. President and CEO of Seco Tools AB 2000–2004. President and Head of
Division of Atlas Copco Rock Drilling Tools 1997-2000. Prior to that a number of senior posts at ABB and Ericsson.
Other appointments: Board member of Alfa Laval AB.
Shareholdings (including family and through companies): 10,000 Series B shares.

Ulrik Svensson
Board member of ASSA ABLOY AB since 2008.
Born 1961.
Bachelor of Science in Economics.
President of Melker Schörling AB. CFO of Swiss International Airlines Ltd. 2003–2006. CFO of Esselte AB 2000–2003 and CFO
of the Stenbeck Group’s foreign telecom ventures 1992–2000.
Other appointments: Board member of AAK AB, Loomis AB, Niscayah Group AB, Hexpol AB and Flughafen Zürich.
Shareholdings (including family and through companies): 3,000 Series B shares.

Board members appointed by
employee organizations

Deputy board members appointed by
employee organizations

Seppo Liimatainen

Mats Persson

Rune Hjälm

Per Edvin Nyström

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: —

Rune Hjälm
Deputy board member at
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
Deputy board member at
ASSA ABLOY AB since 1994.
Born 1955.
Employee representative,
Swedish Metal Workers
Union.
Shareholdings: 7,727 Series
B shares and Incentive 2004
corresponding, on full con-
version, to 7,800 Series
B shares.

Corporate governance report
92

The Executive Team

ASSA ABLOY
Annual Report
2008

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

Johan Molin
Born 1959
Bachelor of Science in
Economics
President and CEO and
Head of Global
Technologies division
Employed since 2005
Shareholdings: 500,000
Series B shares. Incentive
2006 and Incentive 2007
corresponding, on full
conversion, to 440,000
Series B shares.

Martin Brandt
Born 1960
M.Sc. Engineering, MBA
Executive Vice President
Head of Asia Pacific division
Employed since 1996
Shareholdings: Incentive
2006 corresponding, on full
conversion, to 60,700
Series B shares.

Denis Hébert
Born 1956
Bachelor of Commerce,
MBA
Executive Vice President
Head of Global
Technologies
business unit HID Global
Employed since 2002
Shareholdings: Incentive
2006 and Incentive 2007
corresponding, on full
conversion, to 62,200
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
corresponding, on full
conversion, to 108,600
Series B shares.

Thanasis Molokotos
Born 1958
M.Sc. Engineering
Executive Vice President
Head of Americas division
Employed since 1996
Shareholdings: 25,000
Series B shares. Incentive
2004, Incentive 2006 and
Incentive 2007 corre-
sponding, on full conver-
sion, to 105,400 Series B
shares.

Tim Shea
Born 1959
Degree in Mechanical
Engineering, MBA
Executive Vice President
Head of Global
Technologies
business unit ASSA
ABLOY Hospitality
Employed since 2004
Shareholdings: Incentive
2006 and Incentive 2007
corresponding, on full
conversion, to 21,500
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 corre-
sponding, on full conver-
sion, to 223,900 Series B
shares.

Ulf Södergren
Born 1953
Master of Science in
Engineering, Bachelor of
Science in Economics
Executive Vice President
Chief Technology Officer
(CTO)
Employed since 2000
Shareholdings: Incentive
2004, Incentive 2006 and
Incentive 2007 corre-
sponding, on full conver-
sion, to 217,600 Series B
shares.

Juan Vargues
Born 1959
Degree in Mechanical
Engineering, MBA
Executive Vice President
Head of Entrance Systems
division
Employed since 2002
Shareholdings: Incentive
2004, Incentive 2006 and
Incentive 2007 corre-
sponding, on full conver-
sion, to 229,600 Series B
shares.

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

ASSA ABLOY
Annual Report
2008

Corporate governance report
93

The Executive Team and organization
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 Develop-
ment and the Director for Market and Business Develop-
ment. ASSA ABLOY’s operating activities are divided into five
divisions, where the fundamental principle is that these divi-
sions should be responsible, as far as is possible, for business
operations, while various functions at headquarters are
responsible for coordination, monitoring, policies and
guidelines at a comprehensive level. The composition of
this group gives a geographical and strategic spread of
responsibility designed to ensure short decision-making
paths. The Group’s management philosophy is based on
trust, as well as respect for local cultures and conditions.

Guidelines and policies
The Group’s most important guidelines and policies define
the product areas in which the Group should operate 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 has been provided to
all employees in the Group. 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
monitoring. ASSA ABLOY’s communication policy aims to
provide essential information at the right time and in com-
pliance with stock market rules and regulations, as well as to
ensure compliance with other legal requirements. Guide-
lines 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 condi-
tions, human rights and business ethics. Application of the
Code of Conduct in the Group’s different units is monitored
regularly with the purpose of ensuring compliance and
relevance.

Decentralized organization
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 benefits
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.

ASSA ABLOY’s operating structure is designed to create
the greatest possible transparency, to facilitate financial and
operational monitoring and to promote the flow of infor-
mation and communication across the Group. The Group
consists of five divisions, which are divided into about 30
business units. These consist in turn of a considerable num-
ber of sales and production units, depending on the struc-

ture of the business unit concerned. Apart from monitoring
by unit, monitoring of products and markets is also carried
out.

Internal control and financial reporting
ASSA ABLOY’s process for internal control and financial
reporting is designed to provide reasonable assurance of reli-
able financial reporting and that the information is prepared
in compliance with generally accepted accounting principles,
applicable laws and regulations and other requirements for
listed companies. The process is based on the framework for
internal control issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The pro-
cess can be divided into several sub-components, such as
those defined in the framework referred to above and
described in greater detail below.

Control environment
The Board of Directors is responsible for effective internal
control and to this end has established fundamental docu-
ments of significance for financial reporting. These docu-
ments include the Board of Directors’ rules of procedure
and instructions to the Chief Executive Officer, as well as the
Group’s code of conduct, financial policy etc. Regular meet-
ings are held with the Audit Committee, which also adopts
the internal audit plan annually. The Group has an estab-
lished internal audit function, with the primary goal of pro-
viding reliable financial reporting.

ASSA ABLOY’s effective decentralized organizational
structure makes a substantial contribution to a good con-
trol environment. All units in the Group apply uniform
accounting and reporting instructions. A handbook was
published in 2008 that established minimum levels for
internal control of financial reporting. The Code of Conduct
was also reviewed and updated during the year.

Risk assessment
Risk assessment includes identifying and evaluating the risk
of material error in the financial reporting and accounting
systems at Group, division and local levels. A number of pre-
viously established documents govern the procedures to be
used for accounting, finalizing accounts, reporting and
monitoring. The entire Group uses a financial reporting sys-
tem with predefined report templates.

A systematic comprehensive risk assessment of financial

reporting was carried out during 2008, which will be regu-
larly updated over the next few years.

Control activities
The Group’s controller and accounting organization at both
central and division level plays a significant role in ensuring
reliable financial information. It is responsible for complete,
accurate and timely financial reporting. Internal financial
audits were carried out during the year in certain parts of
the Group, where experienced financial personnel conduct
audits in units other than the ones where they work. In 2009
the Group will review the structure and format of the inter-
nal audit. Group-wide guidelines for internal control were

Corporate governance report
94

ASSA ABLOY
Annual Report
2008

adopted in 2008 and affect various processes such as orders
and purchasing (including payments), procedures for final-
izing accounts and facilities, as well as compliance with vari-
ous relevant policies.

Information and communication
The Group’s intranet provides all involved employees with
information about reporting and accounting manuals as
well as other guidelines for financial reporting. A regular
review and analysis of financial outcomes is carried out at
both business unit and division level and as part of the
Board’s established operating structure. The Group also has
established procedures for external communication of
financial information in accordance with regulations for
listed companies.

Follow-up
The Board of Directors and the Audit Committee evaluate
and review the Annual Report and Interim Reports prior to
publication. The Audit Committee follows up on the finan-
cial reporting as well as other related issues and regularly
discusses these issues with the external auditors.

All business units report their financial results monthly
in accordance with the Group’s accounting principles. This
reporting serves as 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 con-
trollers at different levels. Financial reviews take place quar-
terly at divisional board meetings and monthly in the form
of performance reviews and through more informal analy-
sis. Particular attention is paid to the sales trend, and moni-
toring takes the form of daily sales reporting by all the units
in the Group. Other important Group-wide components of

internal control are the annual business planning and bud-
geting process and quarterly detailed forecasts of all the
financial parameters for the current calendar year. Internal
control guidelines implemented during the year are also
monitored in the large business units through self-assess-
ments and a second opinion from external auditors. Self-
assessments are usually followed up at division and Group
level to further improve the reliability of the financial
reporting.

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 the following companies besides ASSA ABLOY:
Securitas, SäkI, Bonnier and Skandinaviska Enskilda Banken.
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 administration by the
Board of Directors and the CEO.

The company’s auditor attends all Audit Committee
meetings as well as the February board meeting, at which he
reports his observations and recommendations concerning
the Group audit for the year.

The external audit is carried out in accordance with good

auditing practice in Sweden. The audit of annual accounts
for legal units outside Sweden takes place according to
statutory requirements and other applicable rules in each
country. For information about the fees paid to auditors
and other assignments carried out in the Group during the
last three financial years, please see Note 3 of this Report
and Note 3 on page 72 of the Annual Report for 2007.

ASSA ABLOY
Annual Report
2008

The ASSA ABLOY share

The ASSA ABLOY share
95

Share price trend in 2008
The closing price of ASSA ABLOY’s Series B share at the end
of 2008 was SEK 88.50 (129.75), equivalent to a market cap-
italization of SEK 32,383 M (47,203). The ASSA ABLOY share
fell 32 percent compared with its closing price at the end of
2007. During the same period, the OMXSPI index on
NASDAQ OMX Stockholm decreased by 42 percent. The
highest closing price of the share was SEK 126.00, recorded
on 2 January, and the lowest was SEK 69.75, recorded on 21
November.

Ownership structure
The number of shareholders at year-end was 22,921
(23,961). Investors outside Sweden accounted for 50 per-
cent (49) of the share capital and 34 percent (33) of the
votes. The ten largest shareholders accounted for 41 per-
cent (40) of the share capital and 60 percent (59) 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 per-
cent of the votes.

Listing and trading
ASSA ABLOY’s Series B share is listed on NASDAQ OMX
Stockholm, Large Cap. The share has been listed since
8 November 1994.

During the year, a total of 788 million shares (675) were
traded, which is an average of 3.1 million shares (2.7) a day
and is equivalent to about 227 percent (195) of the listed
shares.

Share capital and voting rights
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
ten votes and each Series B share one vote.

Cont. on page 97

Share price trend and trading 1999–2008

Dividend per share
1999–2008

200

180

160

140

120

100

120,000

100,000

80,000

60,000

40,000

20,000

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

OMX AB

Series B share

OMX Stockholm

No. of shares traded, thousands (incl. after hours)

SEK

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

2008 proposed dividend

Data per share

SEK/share 1

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

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

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

7.992
3.25
2.2
64.0
149.00
151.00
109.00
39.13

9.02
3.60
2.8
40.5
129.75
164.00
124.50
46.76

9.212
3.604
4.1
52.3
88.50
126.00
69.75
55.91

324,200

356,712

361,730

370,935

378,718

376,033

380,713 380,713

1 Adjustments made for new issues.
2 Excluding items affecting comparability.
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 1999–2003 have not been adjusted for IFRS.

The ASSA ABLOY share
96

ASSA ABLOY
Annual Report
2008

ASSA ABLOY’s 10 largest shareholders

Based on the register of shareholders at 31 December 2008.

Shareholders

Investment AB Latour
SäkI
Melker Schörling AB
Alecta
Capital Group Funds
Swedbank Robur Funds
Oppenheimer Funds (USA)
SEB Funds
Harbor Funds Inc
Wärtsilä Corporation
Other shareholders

Total number

Source: SIS Ägarservice AB and Euroclear Sweden AB (VPC AB).

A shares

6,746,425
7,118,818
5,310,080

B shares

Share capital, %

Votes, %

19,450,000
2,300,000
9,162,136
23,800,000
18,631,900
15,175,959
13,942,956
11,555,968
10,578,608
7,270,350
214,874,834

7.2
2.6
4.0
6.5
5.1
4.1
3.8
3.2
2.9
2.0
58.7

16.1
13.6
11.6
4.4
3.5
2.8
2.6
2.1
2.0
1.4
39.9

19,175,323

346,742,711

100.0

Ownership structure (capital)

Ownership structure (votes)

Latour, 7.2%
Alecta, 6.5%
Capital Group Funds, 5.1%
Swedbank Robur Funds, 4.1%
Melker Schörling AB, 4.0%
Oppenheimer Funds, 3.8%
Other foreign
shareholders, 41.1%
Other Swedish
shareholders, 23.1%
Other Swedish private
individuals, 5.1%

Övr sve priv

Övr sve äg

Övr.urlä

Oppenheim

Melker

Swedbank

Capital

Alecta

Latour

Latour, 16.1%
Säkl, 13.6%
Melker Schörling AB, 11.6%
Alecta, 4.4%
Capital Group Funds, 3.5%
Swedbank Robur Funds, 2.8%
Other foreign shareholders, 30.5%
Other Swedish shareholders, 14.0%
Other Swedish private
individuals, 3.5%

Övr sve priv

Övr sve äg

Övr.urlä

swebank

capital

Alecta

Melker

säkl

Latour

Share capital
ASSA ABLOY’s share capital on 31 December 2008 was 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 ten votes and each Series B share one vote.

Year

1989
1994
1994
1994
1996
1996
1997
1998
1999
1999
1999
1999
1999
2000
2000
2000
2001
2002
2002

Transaction

Split 100:1
Bonus issue
Non-cash issue
New share issue
Conversion of C shares into A shares
New share issue
Converted debentures
Converted debentures before split
Bonus issue
Split 4:1
New share issue
Converted debentures after split and new issues
Converted debentures
New share issue
Non-cash issue
Converted debentures
New share issue
Converted debentures
Number of shares fully diluted

A shares

C shares

20,000

1,428,550
1,714,260

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

B shares

2,000,000

50,417,555
60,501,066
60,501,066
66,541,706
66,885,571
67,179,562

268,718,248
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

Share
capital, SEK

2,000,000
2,000,000

53,592,110
64,310,532
64,310,532
70,732,118
71,075,983
71,369,974

285,479,896
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

ASSA ABLOY
Annual Report
2008

The ASSA ABLOY share
97

Dividend and dividend policy
The Board of Directors and the President propose that a divi-
dend of SEK 3.60 per share (3.60), a maximum total amount
of SEK 1,317 M, be paid to shareholders for the 2008 financial
year, equivalent to a direct return on Series B shares of 4.1
percent (2.8). The aim is that, in the long term, the dividend
should be equivalent to 33-50 percent of ASSA ABLOY’s earn-
ings after standard tax, but always taking into account ASSA
ABLOY’s long-term financing requirements.

Incentive programs
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 deben-
ture 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
loan 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. At 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 will take place in a 90-day period
between March and June 2009.

In 2006, it was decided to launch an incentive program
for senior managers, Incentive 2006. This program amounts
to a total of EUR 38.4 M and is based on four series of con-
vertible 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. At 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. At full conversion, at a conversion 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.

About 2,500 employees in about 15 countries are partic-

ipating in the incentive programs.

Analysts who follow ASSA ABLOY

Company

Name

ABG Sundal Collier
Carnegie
Cheuvreux
Credit Suisse
Deutsche Bank
Dresdner Kleinwort
Enskilda Securities
Goldman Sachs
Handelsbanken Capital Markets
HQ Bank
HSBC
ICAP Securities Ltd
JP Morgan
Merrill Lynch
Nordea
Nordea
Erik Penser Bankaktiebolag
Société Générale
Swedbank Markets
The Royal Bank of Scotland
UBS

Christer Fredriksson
Oscar Stjerngren
Patrik Sjöblom
Andre Kukhnin
Johan Wettergren
Colin Grant
Julian Beer
Sam Edmunds
Peder Frölén
Patric Lindqvist
Colin Gibson
Nick Wilson
Nico Dil
Ben Maslen
Ann-Sofie Nordh
Johan Trocmé
Kenneth Toll Johansson
Roderick Bridge
Niclas Höglund
Klas Bergelind
Fredric Stahl

Telephone

+46 8 566 286 26
+46 8 676 87 69
+46 8 723 51 15
+44 20 7888 0350
+46 8 463 55 18
+44 20 7475 9161
+46 8 522 296 52
+44 20 7552 1289
+46 8 701 12 51
+46 8 696 20 84
+44 20 7991 6592
+44 20 7532 4683
+44 20 7325 4292
+44 20 7996 4783
+46 8 5349 14 52
+46 8 5349 13 99
+46 8 463 84 37
+44 20 7762 5086
+46 8 5859 1800
+44 20 7678 6001
+44 20 7568 9016

E-mail

christer.fredriksson@abgsc.se
oscar.stjerngren@carnegie.se
psjoblom@cheuvreux.com
andre.kukhnin@credit-suisse.com
johan.wettergren@db.com
colin.grant@dkib.com
julian.beer@enskilda.se
samson.edmunds@gs.com
pefr15@handelsbanken.se
patric.lindqvist@hq.se
colin.gibson@hsbcib.com
nicholas.wilson@icap.com
nico.dil@jpmorgan.com
ben_maslen@ml.com
ann-sofie.nordh@nordea.com
johan.trocme@nordea.com
kenneth.tolljohansson@penser.se
roderick.bridge@sgcib.com
niclas.hoglund@swedbank.se
klas.bergelind@rbs.com
fredric.stahl@ubs.com

Information for shareholders
98

Information for shareholders

ASSA ABLOY
Annual Report
2008

Annual General Meeting
The Annual General Meeting of ASSA ABLOY will be held at
Moderna Museet (Museum of Modern Art), Skeppsholmen,
Stockholm at 15.00 on Thursday 23 April 2009. Sharehold-
ers wishing to attend the Annual General Meeting should:
Be registered in the share register kept by Euroclear
•
Sweden AB (formerly VPC AB) by Friday 17 April 2009.
Notify ASSA ABLOY AB of their intention to attend by
16.00 on Friday 17 April 2009.

•

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 regis-
ter kept by Euroclear Sweden AB by Friday 17 April 2009, in
order to have the right to attend the Annual General Meet-
ing. Shareholders must notify the nominee of this well before
that date.

Nomination Committee
The Nomination Committee has the task of preparing deci-
sions on the election of the Chairman 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. The Nomination Com-
mittee prior to the 2009 Annual General Meeting com-
prises Mikael Ekdahl (Melker Schörling AB), Gustaf Douglas
(Investment AB Latour and SäkI), Staffan Grefbäck (Alecta),
Mats Tunér (SEB Fonder) and Marianne Nilsson (Swedbank
Robur). Mikael Ekdahl is Chairman of the Nomination
Committee.

Dividend
Tuesday 28 April 2009 is proposed as the record date for
dividends. If the Annual General Meeting approves the pro-
posal of the Board of Directors, dividends are expected to
be distributed by Euroclear Sweden AB on Monday 4 May
2009.

Notification of intention to attend
Shareholders must notify ASSA ABLOY of their intention to
attend the Annual General Meeting by 16.00 on Friday 17
April 2009 by:
•
•

Website www.assaabloy.com
Post

ASSA ABLOY AB “årsstämman”,
Box 7842, SE-103 98 Stockholm

•
•

Telephone +46 (0) 8 506 485 14
Fax

+46 (0) 8 506 485 18 (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 doc-
ument) 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 17 April 2009.

Additional information
Niklas Ribbing, Director, Investor Relations
Telephone +46 (0) 8 506 485 79
niklas.ribbing@assaabloy.com

Reports can be ordered from ASSA ABLOY AB
•
•
•
•

Website
www.assaabloy.com
Telephone +46 (0) 8 506 485 00
+46 (0) 8 506 485 85
Fax
ASSA ABLOY AB
Post
Box 70340
SE-107 23
Stockholm
Sweden

Financial reporting
First quarter: 22 April 2009
Second quarter: 29 July 2009
Third quarter: 28 October 2009
Fourth quarter and Year-end Report: February 2010
2009 Annual Report: March 2010

ASSA ABLOY
Annual Report
2008

Glossary

Glossary
99

Aperio
Aperio is a new technology that enables mechanical locks to
be wirelessly linked to an existing access control system.
Aperio locks can be installed in a new or existing access con-
trol system and users can use the same credentials 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 connectors that
can be used with all electrical ASSA ABLOY products and can
be installed inside doors as desired. The solution means that
installers themselves do not need to solder and connect
individual wires.

Gateway process
The ASSA ABLOY Product Innovation Process is based on a
structured Gateway approach, meaning that all projects
have to pass six gates on their way from idea to installed
products.

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. Usu-
ally the OEM company does not sell the product directly to
the public but goes through dealers. The product may con-
sist of proprietary components or a combination of pur-
chased and proprietary.

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

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 keycards.

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

Zigbee
Zigbee is a standard for wireless control of equipment in
homes, commercial properties, industry and other places
where there is a need for it. The technique consumes little
energy and the wireless platform makes it easy to install
retrospectively.

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

ASSA ABLOY in brief

ASSA ABLOY’s divisions

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

Division

Americas

Division

EMEA

Division

Asia Pacific

Americas’ share of Group total

EMEA’s share of Group total

Asia Pacific’s share of Group total

Sales

Operating income (EBIT)

Sales

Operating income (EBIT)

30 %

36 %

39 %

38 %

Sales

9 %

Operating income (EBIT)

6 %

Division

Global Technologies

Division

Entrance Systems

Global Technologies’ share of Group total

Sales

Operating income (EBIT)

13 %

12 %

Entrance Systems’ share of Group total

Sales

9 %

Operating income (EBIT)

8 %

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
8

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
2008

The global leader in
door opening solutions

Johan Molin, President and CEO

Report on operations

Financial reports

Corporate governance report and

information for shareholders

Contents

1
2
6
9
14
18
20
22
26
30
32
35
38
41
44
45
46
47
48
49
50
51
52
54
56
80
81
82
83
84
85
86
90
92
95
98
99