ASSA ABLOY Annual Report 2012

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FY2012 Annual Report · ASSA ABLOY

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Annual Report
2012

The global leader in
door opening solutions

Annual Report
2012

The global leader in
door opening solutions

Report on operations

Divisions

Cover image

ASSA ABLOY’s door closers help
create a total door opening solution
and can be used in homes as well
as public buildings, elderly homes,
offices, factories and pre-schools.

Contents

The ASSA ABLOY Group
Statement by the President and CEO
Vision, financial targets and strategy
Market presence
Product leadership
Cost-efficiency
Growth and profitability

ASSA ABLOY’s divisions
EMEA division
Americas division
Asia Pacific division
Global Technologies division
Entrance Systems division

CSR

Sustainable development

Report of the
Board of Directors

Financial statements

Report of the Board of Directors

Significant risks and risk management
Corporate governance
Board of Directors
The Executive Team
Remuneration guidelines
for senior management

Sales and income
Consolidated income statement and
Statement of comprehensive income
Comments by division
Results by division
Financial position
Consolidated balance sheet
Cash flow
Consolidated cash flow statement
Changes in consolidated equity
Parent company financial statements
Notes
Comments on five years in summary
Five years in summary
Quarterly information
Definitions of key data
Proposed distribution of earnings
Audit report

Shareholder information

The ASSA ABLOY share
Information for shareholders

2
8
10
22
30
36

40
42
44
46
48
52

63
65
68
72
74
77

78
79

80
81
82
83
84
85
86
88
90
116
117
118
119
120
121

122
125

Lock and lock systems

Mobile keys

Access control

Door closers

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 on both mature and emerging markets worldwide,
with leading positions in much of Europe, North America,
Asia, Australia and New Zealand.

SHARE OF GROUP SALES
BY REGION 2012

NORTH AMERICA

29 %

EUROPE

47 %

SOUTH AMERICA

2 %

1 %

AFRICA

ASIA

16 %

AUSTRALIA

NEW
ZEALAND

5 %

Schools and offices

Museums

Homes

Hospitals

Door closers

Electromechanical locks

Entrance automation

Industrial doors

Digital locks

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

and convenience.

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.

Since its formation in 1994, ASSA ABLOY has grown from a
regional company into an international group with
around 43,000 employees and sales of around
SEK 47 billion.

47SEK 47 billion

in sales

In the fast-growing electromechanical security segment, the Group
has a leading position in areas such as access control,
identification technology, entrance automation and
hotel security.

Hospitals

Industry

Arenas

Railway Stations and Airports

Hotels

Strategies for growth, profitability
and value creation

ASSA ABLOY is the global leader in door opening solutions. Its products account
for more than one in ten of all lock and security installations worldwide. The
Group’s strategies are based on three cornerstones:

Market presence

A global leading market presence is achieved by exploiting the strength of the brand portfolio,
increasing growth in the core business and expanding into new markets and segments. ASSA
ABLOY has many of the industry’s strongest brands. The sales teams on the local markets are
united under the ASSA ABLOY master brand to better meet the rising demand for more
complete security solutions.

Product leadership

The Group’s product leadership is achieved through the continuous development of products
offering enhanced customer value and lower product costs. A key activity for achieving this is
the use of common product platforms with fewer components. New products are also being
developed in close collaboration with ASSA ABLOY’s end-users to enhance customer value.

Cost-efficiency

Efforts to increase cost-efficiency continue in all areas, including common product platforms
with fewer components and common product development. Production combines flexible
final assembly close to the customer with the transfer of high-volume standard production to
external and internal production units in low-cost countries.

Increased growth and profitability

SALES ANd OPERATING INCOME (EBIT)

INCREASE IN SALES

 Sales Operating income (EBIT)

+1,200 %

EBIT, SEK M

7,500

6,000

4,500

3,000

INCREASE IN OPERATING INCOME

0
961 971 981 991 001 011 021 031 04 05 062 07 082, 3 092, 3 10 112 12
96
04
12

¹ 1996–2003 have not been adjusted for IFRS.

² Excluding items affecting comparability.

³ Reclassification has been made.

1,500

+4,700 %

ASSA ABLOY’s strategic
focus on market presence,
product leadership and
cost-efficiency has been
very successful. The
Group’s earnings trend has
created major value for
customers, shareholders
and em ploy ees.

Sales, SEK M

50,000

40,000

30,000

20,000

10,000

ASSA ABLOY AnnuAL RepORt 2012

Statement by the President and CEO

Winning strategy on
a challenging market

Once again we can look back on a very good year for ASSA ABLOY, despite tough market conditions in a
global recession. Sales rose 12 percent to SEK 46,619 M and organic growth was 2 percent. Operating
income increased 13 percent to SEK 7,501 M and the margin strengthened further to 16.1 percent. Our
performance in 2012 confirms once again the long-term strength of the Group’s strategies and action
programs. during five years of financial crisis, ASSA ABLOY has increased sales by 34 percent and opera-
ting income by 36 percent, with a continued strong cash flow and good financial stability. Excellent per-
formance in recent years has consolidated ASSA ABLOY’s position as the largest global supplier of door
opening solutions, providing a sound basis for continued profitable growth and value creation.

Following five years of serious financial disruption,
macro economic turbulence and considerable uncer-
tainty in the global economy, there is reason to comment
on the Group’s performance in a longer perspective and
ask the question: How has ASSA ABLOY weathered the
financial crisis?

But let us begin with a slightly more detailed review

of the past year for our divisions.

Divisions
EMEA division The European market remained divided
into two, with overall weak demand. We saw stable
growth, which weakened at the end of the year, in
northern and eastern Europe, while sales fell in southern
Europe in the wake of the financial crisis, austerity poli-
cies and a deep recession. EMEA division (Europe, the
Middle East and Africa) reported stable organic growth
of 1 percent, outperforming the total market. Operating

Important events during the year

•

Sales increased by 12 percent to SEK 46,619 M (41,786).

Operating income amounted to SEK 7,501 M (6,624¹).

Earnings per share after full dilution amounted to SEK 13.84 (12.30¹).

Operating cash flow amounted to SEK 7,044 M (6,080²).

Investments in product development continued at an
accelerated level and a number of new products were launched.

¹ Excluding items affecting comparability.
2 Excluding restructuring payments.

StAtement BY the pReSiDent AnD CeO

ASSA ABLOY AnnuAL RepORt 2012

income and operating margin remained satisfactory,
due to several years of tough cost-efficiency programs
and successful marketing of new products and services.
Americas division On the American markets we saw

a cautious market upturn in North America, mainly in
the residential segment. Renovations and upgrades in
the commercial and institutional segments also showed
positive growth. The Latin American markets contin-
ued to show stable growth. Americas division reported
4 percent organic growth and further strengthened its
good operating income and very good operating mar-
gin. Several years of considerable investments in market
presence and new products resulted in a strengthened
market position.

Asia Pacific division In the Asia Pacific region, sales
growth remained strong in China and Southeast Asia.
In South Korea, the market was weak, while the consid-
erable export trade in digital door locks grew strongly.
Negative growth in Australia continued but improved
at the end of the year. Asia is an im port ant growth driver
for the Group and has been the focus of several years of
intensive marketing initiatives and acquisitions. ASSA
ABLOY continued to be the clear market leader and gain
market shares on the fast-growing Chinese market. Asia
Pacific division reported 3 percent organic growth with
somewhat lower operating income and maintained
good operating margin.

Global Technologies division Demand for digital iden-

tification systems continued to grow strongly, as did
demand for access control, logical access and secure
smart card issuance. Government ID and project orders

experienced negative growth in the wake of austerity
measures. ASSA ABLOY strengthened its position on
these fast-growing future markets, as a result of market-
ing and innovation initiatives in recent years. Growth
was also strong on the hotel market, particularly in
the renovation segment. Global Technologies division
reported 6 percent organic growth and substantially
improved its operating income and margin.

Entrance Systems division The global market for
entrance automation, doors and entrance solutions,
mainly in the commercial and institutional segments,
weakened in Europe during the year in the wake of
the recession. Demand was stable in North and South
America, while it grew in Asia, particularly in the indus-
trial segment. The market has good underlying growth
potential in the long term, and ASSA ABLOY has rapidly
built a global leading position. Entrance Systems division
reported acquired growth of 37 percent for the year,
while organic growth was –2 percent. Operating income
increased substantially, while the operating margin
declined somewhat.

Group-wide programs are delivering
Our Group-wide initiatives continued successfully dur-
ing the year. The number of specification sales represen-
tatives increased on most markets, which means that
we are increasingly relevant to the customer as a spe-
cialist and adviser in total door opening solutions. The
expansion rate on emerging markets was again high,
with 5 percent organic growth. The innovation flow was
strong and the share of products launched in the past

Key data

Sales, SEK M
of which: Organic growth, %

Acquired growth, %
Exchange rate effects, %

Operating income (EBIT), SEK M
Operating margin (EBIT), %
Income before tax (EBT), SEK M
Operating cash flow, SEK M3
Return on capital employed, %

Data per share

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

1 Excluding items affecting comparability.
2 As proposed by the Board of directors.
3 Excluding restructuring payments.

2010

36,823
3
8
–6
6,046
16.4
5,366
6,285
18.5

2010

10.89
58.64
4.00
372,736

2011

41,786
4
17
–8
6,6241
15.91
5,9791
6,080
17.41

2011
12.301
65.54
4.50
371,213

2012

46, 619
2
9
1
7,501
16.1
6,731
7,044
18.2

2012

13.84
71.82
5.102
369,592

Change

12%

13%

13%
16%

Change

13%

ASSA ABLOY AnnuAL RepORt 2012

StAtement BY the pReSiDent AnD CeO 3

Important events during the year

Sales increased by 12 percent to SEK 46,619 M (41,786).

Operating income amounted to SEK 7,501 M (6,624¹).

Earnings per share after full dilution amounted to SEK 13.84 (12.30¹).

Operating cash flow amounted to SEK 7,044 M (6,080²).

Investments in product development continued at an

accelerated level and a number of new products were launched.

•

¹ Excluding items affecting comparability.

2 Excluding restructuring payments.

Statement by the President and CEO

three years rose to 25 percent. A total of 13 acquisitions
improved our market positions, and complemented our
product offering and technologies.

The review shows that the Group is well on track to
meet the operating margin target of 16 to 17 percent.
The outcome was 16.1 percent. Operating income
increased by 13 percent to SEK 7,501 M. This indicates
considerable strength in the Group’s earning capacity,
even under the difficult conditions that confronted us
during this year’s downturn and the five-year financial
crisis.

increased strength during the financial crisis
Global crises are often critical strength tests for busi-
nesses and watersheds for development trends. The
financial crisis and double-dip recession since 2008 can
therefore be an appropriate starting point for an account
of ASSA ABLOY’s strategies, processes and activities for
value creation in a longer perspective.

What have we achieved during this challenging

period?

Since 2008 the Group has increased sales by 34
percent to SEK 46,619 M, and operating income by

ASSA ABLOY’s Executive Team from left
to right: Ulf Södergren, Chief Technology
Officer (CTO); Tzachi Wiesenfeld, Head
of EMEA division; Denis Hébert, Head of
HID Global business unit; Juan Vargues,
Head of Entrance Systems division; Johan
Molin, President and CEO and Head of
Global Technologies division; Thanasis
Molokotos, Head of Americas division;
Carolina Dybeck Happe, Chief Financial
Officer (CFO); Jonas Persson, Head of Asia
Pacific division; and Tim Shea, Head of
ASSA ABLOY Hospitality business unit.

peRFORmAnCe 2008–2012

SALES ANd OPERATING INCOME

INCOME BEFORE TAX ANd OPERATING CASH FLOW

Sales
SEK M

50,000

40,000

30,000

20,000

10,000

Operating income
SEK M

7,500

6,000

4,500

3,000

1,500

 Sales1
Operating
income2

¹ Reclassification has been
made for 2008 and 2009.
² Excluding items affecting

comparability, 2008,
2009 and 2011.

11 12

SEK M

7,000

6,000

5,000

4,000

3,000

2,000

1,000

11 12

 Income before tax1
 Operating cash flow2

¹ Excluding items affecting

comparability, 2008,
2009 and 2011.

² Excluding restructuring

payments.

StAtement BY the pReSiDent AnD CeO

ASSA ABLOY AnnuAL RepORt 2012

36 percent to SEK 7,501 M, with a stable, high operat-
ing margin. Cash flow has increased markedly, as has the
equity ratio, with reduced net indebtedness. Sharehold-
ers have seen the share price triple. A good indicator of
value creation is that equity per share has increased by
around 30 percent.

At least as important is the operational shift, which
highlights our strengths for the future. ASSA ABLOY has
tripled its sales on emerging markets to a growing share
of 25 percent. We have accelerated product develop-
ment, and the share of products launched in the past

DEVELOPMENT OF EARNINGS PER SHARE

SEK

Earnings per share has
increased by 1,372
percent since 1996.

three years have reached the target of 25 percent of
sales. We are the market leader overall and in the indus-
try’s digital revolution. Our sales have 46 percent elec-
tronic content, a doubling in five years. We have shifted
from 25 percent low-cost content to more than 50 per-
cent, and replaced over 50 old plants with considerably
fewer upgraded and new plants.

Sustainability efforts have been integrated into the

Group’s strategies and business processes. Over the
past seven years, sustainability methods have been
integrated into sales, logistics, manufacturing, product
development and supply management. Our commit-
ment and efforts meet market demand: a more sustain-
able product is more competitive, more cost-efficient
and creates added value for customers and other stake-
holders. Last year ASSA ABLOY updated its sustainabil-
ity program on the basis of the Group’s risk assessment
process, with targets up to 2015. The 2012 results show
that the Group is well on the way to achieving its more
stringent targets.

All in all, ASSA ABLOY has emerged considerably
strengthened from the crisis. Going forward, we have a
more competitive product offering, improved market
positions and a better cost situation than before the
crisis.

What is the basis of this transformation?
I often say that locks and door opening solutions is a
good business to be in. We have three fundamental and
mutually reinforcing global drivers supporting us:
• Security and convenience are human needs, which
are high on the agenda as prosperity increases.
• We have a strong growth trend, with urbanization

in countries with a predominant share of the global
population.

• We have new digital technologies, which drive the

replacement, upgrade and renovation of door open-
ing solutions.

On the basis of these drivers, the ASSA ABLOY Group
is developing its three strategic action areas, which
provide us with the necessary foundation for organic
growth.

Increased market presence
An essential task since the mid-2000s has been the
development of an offensive brand structure that cre-
ates synergies for our global and local market leader-
ship. Today 75 percent of products are sold under the
ASSA ABLOY brand or co-branded with a strong local
brand. The other 25 percent of products are sold under
global brands, such as Yale, HID, ABLOY and Mul-T-Lock,
as well as non-ASSA ABLOY associated brands, such
as Entrematic, Flexiforce and Helton. Attitude surveys
clearly show that we are well on the way to loading our

ASSA ABLOY AnnuAL RepORt 2012

StAtement BY the pReSIdent And CeO 5

Statement by the President and CEO

brands with our vision of being the global leader in total
door opening solutions, with strong local competence
and presence.

Brand consolidation has gone hand in hand with the
rationalization and development of products and solu-
tions, in which segmentation and lower costs have been
a guiding principle. By segmenting market and custom er
development, and focusing on specification sales to
direct and indirect customers, such as installers and
architects, we gain a superior knowledge of customer
needs, can act as a partner in better total door opening
solutions, and generate increased demand. The share
of customer-facing or ‘demand-generating’ staff has
increased considerably in recent years.

Emerging markets have been a key priority. Their
share of sales has tripled to a total share of over 25 per-
cent in seven years, and I venture to have confidence
in the potential for up to a 50 percent share. We have
become China’s largest lock and door company, with a
small but fast-growing market share. However, we also
see substantial future demand in other Asian, South
American and eastern European countries in pace with
increasing prosperity and urbanization.

Complementary acquisitions have built new market
positions and contributed key products and technology.
The 100 acquisitions in the past seven years are proof of
this and have generated additional sales of nearly SEK 20
billion. Our largest ever structural transaction was the
acquisition of Crawford two years ago. This transformed
our Entrance Systems division into a global leader in
entrance automation, creating considerable revenue
and cost synergies with the rest of the Group. Following
its rapid expansion in recent years, Entrance Systems is
now entering a new phase, with a new organization and
good growth and profit conditions.

product leadership
A continuous flow of innovative products, with en-
hanced customer value and lower costs, creates prod-
uct leadership, the foundation for long-term successful
organic growth. The Group has implemented a signif-
icant reorientation from a relatively fragile base over
the past seven years. R&D investments have increased
by 129 percent since 2005, and the number of develop-
ment engineers has risen by over 30 percent to around
1,350. Our ambition is to be the industry’s most innova-
tive supplier, and products launched in the past three
years have reached the target of 25 percent.

Product leadership is focused on customer needs
for security, reliability, functionality, design, life cycle
costs and so on. A strong driver is the demand for elec-

tromechanical locks and entrance automation, which
today account for 46 percent of our sales, double the
share in the mid-2000s. A large part of our substantially
increased investments have focused on these new tech-
nologies and developed today’s product and market
leadership. This provides competitiveness for continued
rapid growth, in which sales value per electromechanical
door is increasing, as well as the recurring revenue from
service and upgrades.

The focus on product development has resulted in a

renewal of the Group’s working methods, with a com-
mon structured innovation process. In the Group func-
tion Shared Technologies and in collaborations in and
between divisions, we have developed common product
platforms, which have considerably reduced the num-
ber of components, increased the development rate and
reduced costs. Ideas and competence are spread more
rapidly through the development of R&D competence
centers. Customers are involved earlier and deeper in
the product development process.

Cost-efficiency
In the mid-2000s, ASSA ABLOY had an over-dimensioned
production structure, with a large number of small local
and regional plants. Rationalization of production has
substantially improved cost-efficiency. The policy is to
locate flexible final assembly close to customers and
standard production in low-cost countries. Since 2006,
53 plants have been closed and nearly 15 more plants
are in the process of being closed. A total of 56 plants
have been converted to assembly. Nearly 30 offices have
also been closed. Today around 55 percent of products
are manufactured in low-cost countries, compared with
26 percent in 2005.

Meanwhile the Group has increased the share of
purchases from high-quality suppliers with a good cost
profile. As a result of purchasing competence programs,
specific category managers, better agreements and price
management, the number of suppliers has fallen 25 per-
cent in seven years, while the value of directly purchased
materials has increased by nearly 130 percent.

An important change since the mid-2000s is the
implementation of a number of processes to increase
efficiency in various dimensions of the operations. Value
Analysis and Value Engineering (VA/VE) have enabled us
to reduce the cost of existing products by between 25
and 40 percent through measures in the development,
design and production of existing products. To date,
savings exceed SEK 500 M. Lean processes have led to
more efficient production flows, better materials cost
control, improved administration and decision-making

StAtement BY the pReSiDent AnD CeO

ASSA ABLOY AnnuAL RepORt 2012

procedures, shorter development times, and increased
cooperation between various parts of the Group. Seam-
less Flow is automating administrative processes across
the whole value chain, resulting in major savings. By
2017 the number of different business systems is to be
reduced from 120 to 6, while the number of data cen-
ters is to be reduced from 55 to 5, and 80 different data
networks are to be consolidated into 1 in the Group’s
Shared Service Center.

Outlook
In these circumstances I should like to thank all our
employees for their excellent efforts during a very
demanding period for the Group. We can be pleased
with the strength we have developed over the past years
and the very good outcome for 2012.

We now face exciting challenges. Many indicators
suggest that the world economy will remain weak for
the foreseeable future, due primarily to the budget cut-
backs that many countries are making. It is therefore of
the utmost importance that ASSA ABLOY continues its

expansion on the new markets, which are expected to go
on growing well, while at the same time maintaining its
investments in new products and market presence.
Going forward, I see excellent opportunities for
ASSA ABLOY. As I have already said: Locks and door
opening solutions is a good business to be in. Increased
prosperity and urbanization are driving ever-increasing
security and safety needs. If we venture to have confi-
dence in a return to the same growth figures as we had
before the financial crisis, ASSA ABLOY is today better
prepared than ever before to further increase its rate
of value creation.

Stockholm, 7 February 2013

Johan Molin
President and CEO

ASSA ABLOY AnnuAL RepORt 2012

StAtement BY the pReSiDent AnD CeO 7

Vision

Financial targets

•

To be the world-leading, most successful
and innovative supplier of total door
opening solutions,

to lead in innovation and offer well-
designed, convenient, safe and secure
solutions that create added value for
our customers, and

•

to be an attractive company to work for.

•

10 percent annual growth through a com-
bination of organic and acquired growth.

•

An operating margin of 16 to 17 percent .

The financial targets are long-term and should
be regarded as an average over an economic
cycle.

Strategy

The Group’s overall focus is to spearhead the trend towards increased 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 fast-growing segments of electromechanical
and electronic locks, access control, identification technology and entrance automation.

ASSA ABLOY’s strong development is based on long-term structural growth in demand on mature
markets in Europe, North America, Australia and New Zealand, increasing demand on emerging
markets in Asia, eastern Europe, Africa and South America, and successes in fast-growing product
segments.

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

Strategy

Product
leadership

pages 22–29

Goal

Growth and
profitability

pages 36–39

Cost-
efficiency

pages 30–35

Market
presence

pages 10–21

Market presence

+ Global leader in door opening solutions

+ 25 percent of sales are on emerging markets,

a triple increase in seven years

+ The industry’s leading brands

+ Electromechanical solutions account

for 46 percent of sales

Market presence

Market expansion
for profitable growth

ASSA ABLOY’s world-leading market presence is based on three strategies:
• Exploiting the strength of the brand portfolio,
• Increasing growth in the core business and
• Expanding into new markets and segments.
These market strategies have been successful through a combination of organic
and acquired growth focused on profitable, expanding markets and segments.

Drivers
The need for security in workplaces and homes is growing in pace with increased welfare and technological
development . Demand is driven by:

Increased prosperity and
urbanization, particularly in
emerging markets, lead to
new construction and
increased demand for doors,
locks and access control
systems.

The need for increased secu-
rity drives more advanced
solutions and upgrades of
existing security systems.

Technological development
meets the demand for solu-
tions offering increased
convenience and user-friend-
liness in addition to high
security.

ASSA ABLOY is focusing its operations on electromechanical and mechanical security products as well as
entrance automation and security doors for the global market. The Group has a global market share of over
10 percent but with large variations between different markets.

CUSTOMERS

DID YOU
KNOW THAT?

The institutional and
commercial market
accounts for 75% of sales.

Private customers and
the residential market
account for 25% of sales.

ASSA ABLOY has a large number
of end-customers with very varied
requirements. Products and solutions
are distributed to the customer
in cooperation with a number of
different players and through a
variety of distribution channels
(see illustration on pages 14–15).

Institutional and commercial market
– complex, demanding projects
The most demanding and dynamic customer segment is
institutional and commercial customers, which account
for around 75 percent of sales. This segment includes
universities, hospitals, offices, airports and shopping
malls used by a large number of people daily. The driver
for electromechanical and advanced solutions is strong.
The procurement of these projects is often complex
and involves many stakeholders on the customer side,
such as property and security managers. ASSA ABLOY’s
common sales force has developed expertise in under-
standing the multifaceted needs of end-customers and
has contact with many stakeholders in the value chain
to develop optimal solutions for the customer. Distribu-
tion and installation are largely handled by installers and
locksmiths.

MaRkET pRESEnCE

aSSa aBLOY annUaL REpORT 2012

Share of Group sales by region 2012

NOrTh AMEriCA
AND CENTrAL AMEriCA

WESTErN
AND EASTErN EurOPE

ASiA AND
MiDDLE EAST

29 %
+12%

47%
+11%

16 %
+9 %

Share of Group sales
in local currency
2012, %

Change relative to
the previous year, %

SOuTh AMEriCA

AFriCA

2 %
+9 %

SALES ON EMErGiNG MArKETS1

1%
+16 %

AuSTrALiA
AND NEW ZEALAND

5 %
+1 %

SEK M
12,000

10,000

8,000

6,000

4,000

2,000

2005

2006

2007

2008

2009

2010

2011

2012

1 Emerging markets comprise Africa, Asia, the Middle East,

South America and eastern Europe.

Small and medium-sized customers
– professional advice and installation assistance
This segment consists of institutional, commercial and
residential customers, who generally need professional
advice and installation, which is primarily met by spe-
cialized distributors and installers, such as locksmiths.
ASSA ABLOY is working actively to train distributors and
to develop more standardized solutions for small and
medium-sized companies, such as stores and offices.

Consumer market – replacement and upgrade
with advice and installation
The majority of sales are replacements or upgrades of
existing security products. However, an increasing num-
ber of private individuals want electronic locks, providing
major growth potential for ASSA ABLOY. Private custom-
ers have a considerable need for advice and installation
assistance. The Group has therefore developed a number
of home security concepts to meet consumer needs. In
some geographical markets, ASSA ABLOY also works with
door and window manufacturers or specialized distribu-
tion channels such as DIY stores and locksmiths.

aSSa aBLOY annUaL REpORT 2012

MaRkET pRESEnCE 13

Market presence

DISTRIBUTIOn

ASSA ABLOY reaches its end-cus-
tomers through a variety of distri-
bution channels at various stages
in the supply chain depending on
customer needs, the product and
solution, and national and local
requirements and standards. The
Group has a competitive edge due
to its well-developed cooperation
with all distribution players, and
seeks to offer its competence as
early as possible in the planning
and specification of door opening
solutions.

Distributors – a close partner
ASSA ABLOY works closely with its distribution chan-
nels to offer end-customers the right products, correct
installation, and consequently a well-functioning secu-
rity solution. Distributors also have a key role in provid-
ing service and support after installation. This role may
vary between different customer segments.

In the commercial segment, distributors in some
markets act as consultants and project managers to cre-
ate good security solutions. They have a good knowl-
edge of the customer’s needs and ensure that the prod-
ucts comply with local regulations.

Electromechanical security products mainly reach
the end-user via security installers and specialized dis-
tributors. These products are also sold through security
systems integrators who offer a total solution for the
installation of perimeter protection, access control and
increasingly also computer security.

ASSA ABLOY collaborates with
architects and installers.

Distribution channels for the security market
Electronic security products mainly reach the end-user via security installers and specialized distributors.
These products are also sold through integrators who often offer a total solution for the installation of
perimeter protection, access control and increasingly also computer security.

SpECIFICaTIOn ASSA ABLOY specifies a security solution for major com-
mercial projects jointly with end-customers and other stakeholders.

ASSA ABLOY
representative

Distributor

ASSA ABLOY

SpECIFICaTIOn

DISTRIBUTORS

DISTRIBUTIOn CHannELS Security systems integrators, locksmiths and
security installers, building and lock wholesalers, retailers, DIY, hardware
and security stores, OEMs, door and window manufacturers.

Building and lock wholesalers, security consultants and lock-
smiths have a key role in delivering the products specified for
various construction projects.

MaRkET pRESEnCE

aSSa aBLOY annUaL REpORT 2012

STakEHOLDERS

CODES anD SECURITY STanDaRDS

Specification of door opening solutions
– competence increasingly important
In order to market innovative new solutions, ASSA
ABLOY collaborates with architects, security consultants
and major end-users to specify appropriate products
and achieve a well-functioning security solution. Build-
ing and lock wholesalers, security consultants and lock-
smiths have a key role in supplying the products speci-
fied for various construction projects. Many door and
window manufacturers install lockcases and hardware
in their products before delivering them to customers.
The trend towards more complex security solutions
is increasing the competence required by distributors.
To support the customer in choosing a security solu-
tion, ASSA ABLOY has special specification teams that
can offer total security solutions under the ASSA ABLOY

brand to major end-customers. These specification
teams also collaborate with other key groups early on in
the order chain, such as building consultants, architects
and building standards authorities to create demand for
innovative competence. The service offering includes
telephone support, technical drawings, product configu-
ration and e-commerce.

ASSA ABLOY develops the competence of locksmiths,

a key distributor of mechanical and electromechani-
cal security products on many markets. They buy direct
from ASSA ABLOY or via wholesalers and provide advice,
delivery, installation and service. Some locksmiths have
an increased focus on electronics, while IT integrators
are increasingly offering physical security solutions.

ASSA ABLOY
representative

Installer

SpECIFICaTIOn ASSA ABLOY specifies a security solution for major
commercial projects jointly with end-customers and other stakeholders.

ASSA ABLOY
representative

End-
customer

InSTaLLERS

SpECIFICaTIOn

EnD-CUSTOMERS

ASSA ABLOY
representative

Stakeholders

STakEHOLDERS

CODES anD SECURITY STanDaRDS

EnD-CUSTOMERS
Large institutional and
commercial customers
• Healthcare • Education • Retail
• Hospitality • Offices • Industry

Small and medium-sized customers
• Offices • Stores

Residential market
• Apartments • Houses

STakEHOLDERS
Such as architects, security consult-
ants, public authorities responsible
for security standards and other
stakeholders.

ASSA ABLOY has developed close collaboration with architects and security consultants to specify appropriate
products and achieve a well-functioning security solution. Many door and window manufacturers install lock-
cases and hardware in their products before delivering them to customers.

aSSa aBLOY annUaL REpORT 2012

MaRkET pRESEnCE 15

Fragmented competition
– continued consolidation
The global door opening solutions market remains frag-
mented, despite consolidation over the past 10 years.
However, the market in each country is relatively con-
solidated. Companies in the industrialized world are
generally still family-owned and leaders on their home
markets. They are often well established and have strong
ties with local distributors. In less developed countries,
however, established lock standards and brands are less
common.

ASSA ABLOY is the global market leader and has five
main competitors, which partly operate in its segment:
Ingersoll-Rand (USA), Stanley Black & Decker (USA),
Dorma (Germany), Kaba (Switzerland) and Hörmann
(Germany). After the market leader ASSA ABLOY, these
five are strong local players on their home markets and
also have an international presence. The Asian market
is still very fragmented; even the largest manufacturers
have modest market shares.

Asia, the Middle East, eastern Europe, South America and Africa are
emerging markets with considerably higher growth.

Market presence

MaRkETS

DID YOU
KNOW THAT?

North 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 North
Americans.

The majority of Group sales
are for use in existing build-
ings and therefore less sensi-
tive to cyclical fluctuations.

The global market for door opening
solutions is disparate and fragmented.
ASSA ABLOY is the industry’s most
global player, with sales in more than
70 countries. The mature markets of
North America and Europe account
for three quarters of Group sales, and
demand is growing slightly faster than
national GDP. Asia, the Middle East,
russia, South America and Africa are
emerging markets with considerably
higher growth.

Major differences
– advantage for global aSSa aBLOY
The difference in demand between continents and
countries is significant due to different regulations,
standards and requirements. As the most globally
established player, this gives ASSA ABLOY competitive
advantages. There is also a trend among multinationals
towards a more consistent security approach in some
customer segments.

North Americans spend more than twice as much
on emergency exit devices as Europeans, while north-
ern Europeans spend three to four times as much on
high-security locks for their homes as North Americans.
Entrance automation is also considerably more wide-
spread in Europe than in the USA. The same size market
for security and emergency exit solutions in Europe and
the USA would roughly double the total market.

Electromechanical solutions are considerably more
widespread in the commercial segment than in the resi-
dential segment. However, an increasing number of pri-
vate individuals want electronic locks for their homes,
providing a major growth opportunity for ASSA ABLOY.

SALES BY PrODuCT GrOuP

 Mechanical locks, lock

systems and fittings, 36%
 Entrance automation, 24%
 Electromechanical and
electronic locks, 22%
 Security doors and
hardware, 18%

MaRkET pRESEnCE

aSSa aBLOY annUaL REpORT 2012

renovations, refurbishments, extensions,
replacements and upgrades account for
67 percent of ASSA ABLOY’s sales.

New construction accounts for
33 percent of ASSA ABLOY’s sales.

67%
33 %

Stability and profitability
Due to its unique global market penetration and the
world’s largest installed base of door opening solu-
tions, two-thirds of ASSA ABLOY’s sales are to the
aftermarket, which consists of renovations, refur-
bishments, extensions, replacements and upgrades.
Demand in the aftermarket is more stable than in
new construction, and the Group is therefore less
sensitive to cyclical fluctuations.

The Group’s strategies also prioritize commercial

and institutional customers with a higher demand
for electronic products and complex solutions, and
therefore higher profitability.

STABiLiTY iN ThE AFTErMArKET

ASSA ABLOY
supplies total
solution to Cisco

 Aftermarket1, 67%
 New construction, 33%

¹ The aftermarket consists
of renovations, refur-
bishments, extensions,
replacements and
upgrades.

Customer:

BrEAKDOWN BY CuSTOMEr SEGMENT

Solution:

 Commercial and

institutional customers, 75%

 Private customers –

residential market, 25%

Cisco is the world’s largest supplier of network equipment
and systems. ASSA ABLOY Australia and ASSA ABLOY Singapore
have supplied all the locks, hardware and fittings for over 300
doors in Cisco’s new Singapore office, a project completed in
November 2012.

The ability to deliver a total solution was a contributory factor in
ASSA ABLOY’s appointment as supplier of all the hardware for over
300 doors, of which 55 are connected to an access control system .
The products used included electric mortice locks for doors
connected to the access control system and Synergy mechani-
cal mortice locks for doors not connected to this system, as well
as master key cylinders and Besam swing door operators . ASSA
ABLOY has now implemented 16 successful projects for Cisco in
Asia and the Pacific region.

aSSa aBLOY annUaL REpORT 2012

MaRkET pRESEnCE 17

Market presence

MaRkET
STRaTEGIES

DID YOU
KNOW THAT?

A large aftermarket, combi-
ned with global sales across
countries with different eco-
nomic cycles, contributes to
stable sales and profitability.

DID YOU KNOW
THAT?

A large percentage of
ASSA ABLOY’s products are
sold in small volumes to a
large number of end-cus-
tomers with very different
needs.

The common sales organiza-
tion operates under the
ASSA ABLOY master brand,
while acting as representat-
ives of the local product
brands already recognized
by the customer.

ASSA ABLOY’s world-leading market
presence is a strategic cornerstone in
the Group’s ambition for profitable
growth. Market strategy is based on
long-term structural demand growth
on mature markets in Europe and
North America, and fast-growing
demand on emerging markets. in
order to increase its market pres-
ence, ASSA ABLOY is exploiting the
strength of the brand portfolio,
increasing growth in the core busi-
ness, and expanding into new mar-
kets and segments.

Increasing growth in the
core business by segmentation
Over the past seven years ASSA ABLOY has made a
significant strategic shift to an increasingly market-
oriented organization in close collaboration with
architects, security consultants, major end-users
and distributors. The main growth potential is found
in existing market channels and an increased share
of distributors’ sales.

One important initiative is the focus on increased
customer relevance through market segmentation.
Sales teams are focusing on different customer seg-
ments to gain the industry’s best understanding of
customer needs, build relationships and generate
demand, thereby becoming the end-user’s door
opening solution expert. Segmentation aims at total
door opening solutions customized to the doors’
applications, security and convenience aspects, spe-
cial requirements for compliance with standards
and regulations, and the need for integration with
new or existing security systems and IT networks.
This focus includes investments in employees
with a clear, direct demand-generating responsibil-
ity. In the Americas division, for example, the share
of customer-facing staff rose from 35 percent in
2004 to 56 percent in 2012. In the EMEA division,
the share of customer-facing staff has risen from
42 percent to 48 percent in three years. This trend
is ongoing.

The spectacular
opening of
Friends Arena

Sweden’s new national arena, Friends Arena,
opened in autumn 2012 and can accommodate
65,000 concertgoers. Apart from concerts, the
arena will host various sports events such as foot-
ball and speedway. ASSA ABLOY has supplied cylin-
ders, lockcases, handles, door closers, emergency
exit devices, access control, card readers and indus-
trial doors for the arena.

MaRkET pRESEnCE

aSSa aBLOY annUaL REpORT 2012

75 %

Around 75 percent of prod-
ucts are co-branded with
the local brand and the
ASSA ABLOY master brand.

ASSA ABLOY’s brand strategy

The aSSa aBLOY
master brand

product brands, (examples)

Well-known product brands
benefit from the large
installed base and are
adapted to comply with local
regulations and safety stan-
dards. The product brands
are combined with the
ASSA ABLOY master brand.

Global brands
with a unique
market position

products brands,
non endorsed by
aSSa aBLOY, (examples)

Exploiting the strength of the
brand portfolio and the sales force
ASSA ABLOY has grown as a result of its many acquisi-
tions and today the brand portfolio consists of leading
brands. In order to exploit this valuable brand asset while
benefiting from the Group’s size, ASSA ABLOY’s logo-
type is combined with the individual product brands.
The latter are well known and rooted in local regulations
and security standards. The Group thus capitalizes on
its large global installed base, while increasing the vis-
ibility of the ASSA ABLOY master brand, which unites the
Group’s sales departments and represents competence
in total door opening solutions. Around 75 percent of
Group sales are co-branded with the master brand and
local brands.

The ASSA ABLOY master brand is complemented by
four global brands, which are all leaders in their respec-
tive market segments: HID in access control, secure card
issuance and identification technology, Yale in the resi-
dential market, Mul-T-Lock for locksmiths, and ABLOY
in high-security locks. The Group also has non endorsed
product brands that are not directly associated with
ASSA ABLOY, such as Entrematic, Flexiforce and Helton.
These brands have a leading position and a unique mar-
ket positioning, which is therefore important to exploit.
In order to compete effectively on a global market,
the sales force operates as an integrated organization
and representatives of the ASSA ABLOY master brand.
They create solutions for the customer using various
products manufactured under established local brands.
Consequently, customers can be offered total door
opening solutions, while recognizing the local brands.

aSSa aBLOY annUaL REpORT 2012

MaRkET pRESEnCE 19

Market presence

The Group sees good expansion opportunities
in new markets and segments

Geographical expansion

OEM market

Geographical expansion is mainly achieved
through acquisitions of leading local companies
with well-known brands, in order to build a
strong platform on emerging markets in Asia,
eastern Europe, the Middle East, Africa and South
America. These markets have increased their
share of Group sales from 12 percent seven years
ago to 25 percent in 2012.

The OEM market for door and window manu-
facturers has considerable potential. The aim is
to build a global presence through acquisitions
and organic growth. Since 2000, Group sales of
security doors have increased from SEK 2 billion
to over SEK 8 billion, and accounted for 18 per-
cent of total Group sales in 2012.

Residential market

Efforts to develop channels and products for the
global residential market under the Yale brand are
ongoing. The Group’s leading competence and
market presence in digital door locks in China and
South Korea are also creating a significant basis for
global expansion in this future technology.

Increased demand for electromechanical products

The increased demand for electromechanical
products is a clear trend. increased technical
standardization is driving integration of various
components in the security solution. ASSA ABLOY’s
products aim at open standards to facilitate
integration with the customer’s other security and
administrative systems. The Group’s strength in
specific technologies is creating interesting new
growth areas. One example is rFiD, which enables
hotel locks to be opened by a card or cell phone.

MaRkET pRESEnCE

aSSa aBLOY annUaL REpORT 2012

Well-functioning
doors at
Copenhagen
airport

Customer:

Challenge:

Solution:

Copenhagen’s international airport, Kastrup, has 60 airlines in operation and over 62,000 passengers per day. In 2011,
22.7 million people passed through the airport, making Kastrup the largest Nordic airport. The airport has a maximum
capacity of 83 take-offs and landings per hour and can accommodate 108 planes. Kastrup employs 2,060 people and a
total of 22,000 people work at and around the airport. 500 companies operate in the area, including logistics compa-
nies, restaurants and cafes.

The 22.7 million people that pass through the airport each year want to make their way easily to get to their departures
on time or to meet arriving friends and relatives.

It must be easy for airlines to move planes in and out of the hangars, and the planes must be kept secure even when

they are not in the air. The airport’s emergency services must be able to rely on the doors opening rapidly and at the
right time. All the airport’s operators must be able to move goods and staff in and out through the buildings efficiently
in terms of time and energy.

ASSA ABLOY Entrance Systems has in total over 1,200 pedestrian entrance solutions, over 500 door and docking solu-
tions as well as many hangar doors and high-speed doors installed at Kastrup. These doors are branded Besam, Craw-
ford, Albany and Megadoor.
ASSA ABLOY Entrance Systems and Kastrup Airport have now signed as a service frame agreement on all pedestrian
doors/automatic entrance doors. Together with the service performed by ASSA ABLOY Entrance Systems already on a
majority of the industrial, high-speed and hangar doors, ASSA ABLOY Entrance Systems makes life easier for the compa-
nies and passengers at Copenhagen Airport Kastrup.

Entrance automation

Entrance automation is a fast-growing market in which
ASSA ABLOY has gained global market leadership
through acquisitions, innovation and organic growth.
The total market is estimated at Eur 20 billion with a
growth rate above GDP and is still very fragmented.
The largest potential is in retail, transport, logistics and
manufacturing in the wake of increased globalization.
ASSA ABLOY has a unique offering of total automatic
door opening solutions and a comprehensive service
concept.

aSSa aBLOY annUaL REpORT 2012

MaRkET pRESEnCE 21

Product
leadership

+ The most innovative supplier
of total door opening solutions

+ Products launched in the past three years

exceeded 25 percent of total sales

+ Electromechanical products and entrance

automation have increased from 20 percent
to 46 percent of sales in 10 years

+ Clear leadership in secure

identity solutions and entrance automation

Product leadership

Successful product development
provides basis for organic growth

A constant flow of innovative new products to the market is the single
most important driver of organic growth. Successful product development
is therefore vital for the Group’s future. In 2012 sales of products launched
in the past three years exceeded 25 percent, which means that a first
milestone has been reached.

PRODUCT
LEADERSHIP

DID YOU
KNOW THAT?

Group sales of electromechani-
cal products including entrance
automation have increased
from 20 percent to 46 percent
of sales in 10 years.

ASSA ABLOY’s vision is to be the
most innovative supplier of total
door opening solutions, and R&D
investments have increased substan-
tially in recent years. ASSA ABLOY
aims to double the innovation rate
by means of a Group-wide structu-
red innovation process.

Successful product development and leadership is
the single most important driver for maintaining
the target of 5 percent organic growth per year over
an economic cycle. The focus on product leader-
ship has been very consistent and is reflected in the
number of product development engineers, which
has risen by more then 30 percent to over 1,350

Docking solution from
Entrance Systems.

PRODUCT LEADERSHIP

people in seven years. Sales of products launched in the
past three years have reached the Group’s target of 25
percent, a sharp increase in just a few years. This 25 per-
cent target is a well-considered level in view of the 10 to
15-year product life cycle.

Today’s customer base helps develop
tomorrow’s security solutions
ASSA ABLOY has the world’s largest base of installed
locks and lock systems, and its products are well adapted
to comply with local and regional standards. The Group
builds on this installed lock base to develop tomorrow’s
solutions, in which electronic codes supplement or
replace mechanical identification, such as metal keys.
Electromechanical products including entrance automa-
tion have increased from 20 to 46 percent of Group sales
in ten years.

This does not mean that sales of mechanical prod-
ucts are falling, but that electromechanical products are
growing three to four times faster. An increased share of
electromechanical products also means an increase in
the sales value per door, as well as in the recurring rev-
enue from service and upgrades. The number of installed
doors in the market fitted with some form of electro-
mechanical solution is estimated at 3 to 5 percent. This
share may very well rise to 20 percent or more in the
future, representing a very large potential for upgrades
as well as new sales of these door opening solutions.

The implementation of Lean-Innovation has shown

that development time can be halved, while results
are improved. With this new approach, the Group has
also seen the benefit of continuous parallel technology
development.

The growing need for sustainable solutions is embed-

ded in the Group’s development processes. Product
specifications and customer solutions may be based on
life cycle costs, a reduction in energy consumption in
buildings and other climate impact, as well as concrete
savings in materials consumption.

ASSA ABLOY ANNUAL REPORT 2012

TECHNICAL
DEVELOPMENT

MECHANICAL PRODUCTS
the basic technical solution is simple: a lock-
case in a wall or a door contains a bolt, which is
advanced or retracted by a key. the pin-tumbler
lock was invented by Linus Yale in the middle of
the 1800’s. It consists of an outer casing and a
plug with drilled channels in which spring-
loaded pins are lifted to the right height with
the correct key that opens the lock. the wafer-
tumbler lock contains circular wafers with holes
for the key. the correct key turns the wafers to
the right position and the lock can be opened or
closed in combined action with a side bar. Lever
tumbler locks have a number of locking levers
built into the lockcase. the correct key lifts the
levers and frees the bolt to open or close.

ChAnGE In PRODuCt mIx

2000
SEK 14 billion

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

ELECTROMECHANICAL PRODUCTS
the first electromechanical locks were developed in the
early 20th century, when the bolt was operated by an
electric motor and/or electromagnet instead of muscu-
lar effort. Electromechanical technology has developed
substantially over the past 20 years with various code
systems. the lock itself is still based on mechanical prin-
ciples, while the key element utilizes electronic codes
and readers with a control unit that evaluates the read
code. Electronic codes can be stored on cards, on
mechanical keys with a chip or be transmitted wire-
lessly from a cell phone. the reader provides a signal to
an electrically operated opening or closing mechanism.

ENTRANCE AUTOMATION
this is a fast-growing and global leading business within
ASSA ABLOY. the technology is usually described as
automatic as it is based on sensors, electronics and elec-
tric motors that open and close doors without direct
user involvement. typical application areas are large

entrances to institutions, organizations and companies,
which are used by many people daily. the technology
has developed into central control and monitoring sys-
tems for whole building complexes for enhanced secu-
rity, convenience and a better environment.

2012
SEK 47 billion

mechanical products, 36%
Entrance automation, 24%
Electromechanical products, 22%
Security doors, 18%

ASSA ABLOY ANNUAL REPORT 2012

PRODUCT LEADERSHIP 25

Product leadership

Product
development process

the innovation strategy aims to
create cost and quality benefits
for the customer through con-
stant small steps. the Group-wide
product development process is
based on ASSA ABLOY’s global
presence and strengthens local
operations. the ambition is to
halve development time and in-
crease the number of new prod-
ucts. All new projects are driven
by customer needs.

A common process with increased customer
focus and better product planning
ASSA ABLOY continues to develop the Group-wide product
development process with the goal of halving development
time and increasing the number of new products. A clear gate-
way model with common terminology and interdisciplinary
collaboration ensures the quality of the product development

PRODUCT
SPECIFICATION

Project proposal/
pilot study

Requirements
specification

Master
specification

PRODUCT BOARD

CUSTOMER NEEDS AND REQUIREMENTS

PRODUCT
LEADERSHIP

Brighthandle designed door
handles communicate with
colored light.

PRODUCT LEADERSHIP

Product leadership is achieved and
maintained through the continuous
development of products offering
enhanced customer value and lower
product costs, often in close collabo-
ration with ASSA ABLOY’s end-users
and distributors.

Customers are increasingly demanding more
advanced lock and door products, and the techni-
cal level is constantly rising, with electromechani-
cal door opening solutions growing considerably
faster than traditional mechanical products. Global
common product platforms adapted to the local
markets have therefore become increasingly impor-
tant. These platforms are developed by the Group
product development function, Shared Technolo-
gies, and through collaboration within and between
divisions.

Customer needs are integrated into the Group’s
product development and innovation processes as
a result of systematic collaboration at many levels
and in many dimensions. The Group conducts ongo-
ing studies of various customer segments, giving
rise to new product concepts. Future Lab is an inter-
net forum in which ASSA ABLOY can ask customers
questions about requirements, trends and product
initiatives.

ASSA ABLOY strengthens its customer relevance

through continuous multidimensional develop-
ment. Customer needs are constantly developing

with regard to functional integration, design, compli-
ance with regulations and standards in other countries,
openness to other systems, and simplicity in installation,
operation and maintenance.

Substantial strengthening of
entrance automation offering
ASSA ABLOY is a global leader in automatic doors
through its Entrance Systems division. The division’s
annual sales have risen from SEK 3 billion to nearly
SEK 11 billion in five years. As a result, the Group has
gained clear product and market leadership in entrance
automation.

Automatic doors have sensors and electronics that
ensure a convenient and energy-saving door environ-
ment in, for example, stores, hotels and hospitals. It
is increasingly important to be able to offer a total
entrance automation solution comprising both auto-
matic door opening solutions and industrial doors. The

InvEStmEntS In RESEARCh AnD DEvELOPmEnt¹

SEK M

1,400

1,200

1,000

800

600

400

200

11 12

for 2008 and 2009.

¹ Reclassification has been made

ASSA ABLOY ANNUAL REPORT 2012

process. Product management is a very important factor, and the number of product
managers increased sharply during the year.

Customer requirements and views are a natural part of the Group’s process for
strengthening customer relationships and integrating customers into the Group’s
product development process, thereby increasing the fitness for purpose of the
product offering.

A number of in-depth studies conducted jointly with customers have resulted in

the development of many new concepts and products.

CUSTOMERS

Product and
process design

Industrialization
and marketing

Launch

PRODUCT BOARD

CUSTOMER NEEDS AND REQUIREMENTS

service offering can therefore be expanded to include
automatic entrances for pedestrian traffic at the front
of a commercial building and for goods deliveries at the
rear of the building. A number of acquisitions in recent
years have strengthened the product range with solu-
tions for all entrances and doors in which central con-
trol systems can minimize drafts and energy losses in
buildings.

RFID enhances security and is more user-friendly
Since the acquisition of HID Global ten years ago,
ASSA ABLOY has had clear market and product leader-
ship in secure identity solutions. Products and services
include keys, keycards and other identity carriers that
are encoded, giving access to doors and computers. The
codes and the electronic keys are managed securely and
distributed encrypted.

In North America, HID Global products are esti-
mated to account for 70 percent of the installed base in
secure identity solutions. The position is also strong on
other markets. Acquisitions during the year have further
strengthened ASSA ABLOY’s position in this area.

Radio frequency identification (RFID) and wireless
communication allow the Group to create new secu-
rity applications, while offering services that are user-
friendly. RFID technology is also the basis for the rapid
expansion of logical access control, in which computers
are provided with ASSA ABLOY’s software that prevents
start-up if the user fails to present the right access card.
This technology has allowed HID Global to become

the global leader in ePassport programs and national
programs for various types of ID cards and driving
licenses, including the very advanced US Green Card

(a permit allowing a foreign national to live and work
permanently in the USA). Deliveries also include a range
of very high capacity ID printers, Fargo. The year 2012
saw the launch of a new model, which is particularly suit-
able for major ID card programs in the public sector, uni-
versities and large companies.

Wireless Aperio technology allows cost-effective con-
nection of several doors in an existing access control sys-
tem. Battery-operated electromechanical cylinders and
locks communicate wirelessly with the existing network,
avoiding expensive installation costs, new keycards and
new access systems. Today many leading manufacturers
of access control systems have integrated Aperio tech-
nology into their systems.

Cell phone replaces key
VingCard uses RFID and the wireless technology offered
by mobile telephony in combination with near field
communication (NFC). The hotel guest can use their cell
phone to book and pay online. The cell phone serves as
a code carrier, and guests can also use their cell phone
to unlock the door of their hotel room by holding the
phone close to the lock. More than half a million hotel
rooms out of ASSA ABLOY Hospitality’s installed base of
over 7 million rooms have been recently fitted with or
upgraded to RFID solutions, and interest in the technol-
ogy continues to grow.

The year 2012 saw the launch of Seos, the world’s first

commercial ecosystem for issuing and managing digi-
tal keys on cell phones with NFC technology. Seos pro-
vides the customer with a complete system in which cell
phones replace ordinary keys and keycards for opening
doors in homes, workplaces, hotels, offices, hospitals,

The year 2012 saw the launch of
Seos, the world’s first commer-
cial ecosystem for issuing and
managing digital keys on cell
phones with NFC technology.

ASSA ABLOY ANNUAL REPORT 2012

PRODUCT LEADERSHIP 27

Product leadership

universities, and industrial and other commercial build-
ings. Access control can be centrally managed and secu-
rity staff can, for example, send temporary digital keys
to visitors and service staff. Seos digital keys can be pro-
tected by PIN codes.

safety requirements. By combining hundreds of thou-
sands of different components to meet the needs of
consumers, architects and installers, the Group creates
products with the right quality, design and price, which
are ideal for both new buildings and renovations.

Total door opening solutions
are ASSA ABLOY’s strength
ASSA ABLOY’s sales are not only based on new innova-
tions. The Group’ strength is the variety of traditional
and new products that can be combined to create a
large number of different door environments. ASSA
ABLOY has products for different climates, different
types of buildings, and plants with varied security and

In recent years a number of products have been
launched with the aim of reducing energy consump-
tion in buildings. By using doors with improved insula-
tion together with new sealing products, loss of heat to
a cooler environment can be reduced, while in hot cli-
mates air conditioning costs can be cut. In addition, the
use of recycled materials in doors is increasingly possible
and desirable.

total door opening solution

magnetic lock

Automatic
door closer

Electronic strike plate

Electronic lockcase

Access control

Handle

Electromechanical
cylinders

Emergency
exit device

Electronic hardware

PRODUCT LEADERSHIP

ASSA ABLOY ANNUAL REPORT 2012

the Essence hotel lock is the ultimate minimalist lock
solution. All the lock’s electronic components are
housed in the door and are RFID and nFC controlled.

Albany insulated door for cold stores from ASSA ABLOY
Entrance Systems, designed for increased security,
improved productivity and lower maintenance costs.
the system is remotely controlled and validated in
accordance with the customer’s own rules.

New innovations
drive growth
ASSA ABLOY is leading
development in fast-
growing electrome-
chanical and entrance
automation technolo-
gies. New products and
solutions that create
cost and quality benefits
for the customer drive
growth.

Double-leaf door from ASSA ABLOY’s Group company
Pan Pan in China. An extra lock in the middle of the
door enhances security.

ASSA ABLOY’s Aperio wireless cupboard lock makes it
simple and cost-efficient to link access control to cup-
boards and pedestals requiring control and verification.

CLIQ Remote allows access to be controlled and man-
aged from remote locations. the keys are programmed
remotely via the administration system and validated
in accordance with the customer’s own rules.

FARGO Industrial Series is a new advanced printer for
card personalization and issuance suitable for customers
requiring high card volumes and extra durability, such as
government ID cards, universities and large companies.

ASSA ABLOY ANNUAL REPORT 2012

PRODUCT LEADERSHIP 29

Cost-
efficiency

+ Constant major cost reductions

a strategic priority

+ Production restructuring program

providing significant results

+ Number of suppliers reduced

by 17 percent in five years

+ Price management for price leadership

Cost-efficiency

Successful
restructuring programs

ASSA ABLOY is endeavoring to radically reduce the breakeven point
through cost-efficiency and improved processes, to achieve the opera-
ting margin target of 16-17 percent. Restructuring programs are continu-
ously improving the production structure and product costs. Flexible
final assembly close to the customer is combined with the transfer of
standard production to low-cost countries. Lean programs, outsourcing
and automated flows are further increasing cost-efficiency, which is a
condition for ASSA ABLOY being a price leader and contributing to
sustainable development.

PRODUCTION
STRUCTURE

ASSA ABLOY is moving from manufac-
turing everything itself to concentra-
ting efficient assembly plants in high-
cost countries, transferring production
to low-cost countries, and sourcing
more non-critical components.

The restructuring programs have been very success-
ful, resulting in considerable savings and increased
efficiency in the production units. Four programs
launched between 2006 and 2009 have led to the
closure of 53 production units. The majority of
the remaining production units in high-cost coun-
tries have switched from full production to mainly
final assembly and customization. As a result of this
re structuring, 6,765 employees have left the Group.
Ongoing restructuring activities include closures
or switching another 34 plants in high-cost countries
from full production to assembly and customization,
affecting 770 employees.

Standard production has been increasingly trans-

ferred to internal and external production units in
low-cost countries. Today 55 percent of products are
manufactured in low-cost countries, compared with
43 percent five years ago. This is also reflected in the
distribution of the Group’s staff, with 48 percent of
total employees now located in low-cost countries,
compared with 38 percent five years ago. The produc-
tion process has been improved, while local presence
on end-customer markets in both high- and low-cost

countries has been strengthened for fast delivery and
efficient assembly of customized products.

Automated production in ASSA ABLOY’s Americas division.

ChAnGE In PRODuCtIOn StRuCtuRE

100

high-cost countries,
Full production
high-cost countries,
Assembly
Low-cost countries,
Production
Acquired production
units

An increasing volume of standard production has been transferred to
internal and external units in low-cost countries. the production process
has been improved, while local presence on end-customer markets
ensures fast delivery and efficient assembly of customized products.

COST-EFFICIENCY

ASSA ABLOY ANNUAL REPORT 2012

PROFESSIONAL SOURCINg

A sharp increase in sourcing is an important element in a more cost-efficient
structure in which assembly is concentrated in high-cost countries. the ambition
is to have a limited number of high-quality suppliers as strategic partners based
on delivery contracts, category management, and development, quality and
sustainability guidelines.

Extensive work is in progress to develop competence,
create category responsibility, and coordinate and
streamline purchases of raw materials and components.
This is driven by the outsourcing of component supply
to external suppliers in low-cost countries and the ambi-
tion to exploit economies of scale.

Increased outsourcing has resulted in material costs

rising from 28 to 36 percent of sales in five years, or an
increase of 85 percent in absolute terms. This makes
totally new demands on the purchasing organization,

which has moved from simple call off to professional
sourcing. Today the divisions have specialized purchas-
ing managers for each component category. Central
purchasing centers in the Group efficiently manage
different component categories. These activities have
resulted in a 17 percent reduction in the number of
suppliers over the past five years, despite a 34 percent
increase in sales over the same period as a result of
organic and acquired growth.

numBER OF SuPPLIERS

ShARE OF tOtAL PuRChASES In LOW-COSt COuntRIES

Number

10,000

9,000

8,000

7,000

6,000

5,000

4,000

Reducing the number of suppliers helps to cut costs and improve
quality . By active efforts, ASSA ABLOY has reduced the total number
of suppliers by 17 percent over the past years.

the share of the Group’s total purchases of raw materials, components
and finished goods from low-cost countries has increased from 38 per-
cent to 55 percent over the past five years.

Cost-efficiency increases with a larger share of purchases from a smaller number of high-quality suppliers, based on delivery contracts and
development, quality and sustainability guidelines.

ASSA ABLOY ANNUAL REPORT 2012

COST-EFFICIENCY 33

Cost-efficiency

PROCESS
DEVELOPMENT

ASSA ABLOY applies a number of tested
methods to increase cost-efficiency.
Lean methods include all processes and
result in increased customer value
using less resources at all stages. value
Analysis and value Engineering (vA/vE)
involve in-depth analyses of products
and production processes to avoid
materials waste. Seamless Flow
optimizes the Group’s flows through
It standardization and integration of
information dissemination.

Today all ASSA ABLOY’s major workplaces have well-
functioning Lean programs and organization for both
production and administration. Implementation is
ongoing. The results show more efficient production
flows, better materials cost control, improved decision-
making procedures, shorter development times, and
increased collaboration with the marketing and sales
organization. In 2012 the Group implemented more
Lean projects than in any previous year.

Value Analysis focuses on eliminating materials
waste, improving products and increasing customer
value in existing products through a structured pro-
cess. The same applies to Value Engineering, which
is part of the product development process. ASSA
ABLOY can point to results involving product cost
savings of between 25 and 40 percent. A total of over
124 studies were conducted during the year involving
1,200 employees. Since the methodology was intro-
duced in 2007, the Group has made savings of more
than SEK 570 M as a result of VA/VE.

ASSA ABLOY aims to maximize resources for inno-
vation, product development, production and sales.

Other operations, i.e. administrative support functions,
account for 30 percent of all staff and more than 40 per-
cent of the total personnel cost. This is equivalent to
around 25 percent of sales. The most important activity
for streamlining these functions across the business is
automated flows, known as Seamless Flow. The goal is to
reduce or totally eliminate manual work in all processes
so that more resources can be transferred to production
and sales. Seamless Flow is a process project in which a
coordinated and optimized IT structure is fundamental.
On the customer side, this includes e-ordering, while

on the supplier side, e-purchasing projects are in pro-
gress. Manufacturing, product development, logistics
and other internal processes are now included in Seam-
less Flow.

The most important activities in IT optimization
include a reduction in the number of ERP systems from
more than 120 to six. The number of data centers is to be
reduced from 55 to five worldwide, while today’s more
than 80 networks are to be consolidated into just one.
The implementation of Seamless Flow and the coordina-
tion and optimization of the IT structure will also enable
the more efficient coordination of support functions.

Price management
As a market leader, ASSA ABLOY also has the role of a
price leader. A high innovation and product develop-
ment rate and constant streamlining of all areas of the
business provide the basis for the best value at the best
price for customers. ASSA ABLOY operates an active
price management program, with a shift from cost-
based to value-based pricing, systematic and fact-based
monitoring of price trends and discounting, a detailed
calculation of shipping costs, and a price strategy that
manages the significant differences between new sales
and the aftermarket.

Lean methods are used
to increase efficiency in
all major workplaces and
administrative processes.

COST-EFFICIENCY

ASSA ABLOY ANNUAL REPORT 2012

mobile access control
prized at netflix

netflix, founded 1997, is the leading online subscription service streaming
tv episodes and movies over the internet. As netflix has a mobile, global
work force, the company recently began exploring various ways of using
cell phones for physical and logical access control. A pilot project for
mobile access control was implemented in collaboration with hID Global.

Challenge:

Solution:

Unlike many other companies, Netflix’s over 1,000 employees at headquarters do not need to use photo ID badges. Instead
they have been using pocket-size ProxKey key fobs from HID Global, which offer contactless technology smoothly and con-
veniently. Netflix has a totally paperless employee induction system, which is entirely online.

HID Global’s solution of sending digital keys direct to new employees’ cell phones was intended to help further streamline this
process. multiCLASS SE readers were configured to read both contactless keycards and NFC-enabled smartphones with Seos
digital keys. Participants in the pilot project emphasized the increased security as one of the many advantages of using smart-
phones for opening doors. In addition, 90 per cent of participants found the solution user-friendly, while 88 percent stated
that they would like to use a smartphone to open all locked doors at Netflix. According to 81 percent of the respondents, the
fact that Netflix is testing and implementing mobile access solutions makes the company a more fun and exciting workplace.

ASSA ABLOY ANNUAL REPORT 2012

Growth and
profitability

+ Sales growth from SEK 3 billion to

SEK 47 billion in 18 years

+ Total average sales growth
of 16 percent since 1994

+ Operating income (EBIt), excluding items
affecting comparability, has increased
from SEK 156 M to SEK 7,501 M, by
more than 4,700 percent, since 1994

+ Earnings per share has increased

by 1,300 percent to SEK 13.84 since 1994

Growth and profitability

Strategy to deliver stable,
long-term value

value-creating strategies for all the Group’s stakeholders have enabled
ASSA ABLOY to become by far the largest global supplier of door opening
solutions since its formation in 1994. Organic growth and acquisitions,
market-leading technological development and cost-efficiency have
transformed the company from a traditional, regional lock company into a
modern, multinational security company in intelligent door opening solutions.

growth from SEK 3 billion to
SEK 47 billion in 18 years
Since ASSA ABLOY’s formation in 1994, Group sales have
risen from SEK 3 billion to SEK 47 billion. Today the Group
has around 43,000 employees, compared with 4,700
employees in 1994. Operating income (EBIT) excluding
items affecting comparability has increased from SEK
156 M in 1994 to SEK 7,501 M in 2012, an increase of
over 4,700 percent.

ASSA ABLOY was founded when Securitas (Sweden )

and Metra (Finland) merged their lock businesses.
The company had operations in Sweden, Finland, Nor-
way, Denmark and Germany at that time. The strategy
of increasing market presence through organic and
acquired growth has been successful. Global market
leadership involves Group operations in 70 countries
and sales worldwide. Since 2007, the Group has focused
on enhancing its presence on emerging markets in
Asia, eastern Europe, the Middle East, Africa and South
America. Sales on these markets are growing rapidly
and account for 25 percent of total Group sales, while
China accounts for 9 percent. Sales on emerging markets

totaled SEK 115 M or 3 percent of total Group sales 18
years ago.

Today more than one in ten lock purchasers worldwide

chooses a lock from ASSA ABLOY, which has the world’s
largest installed base of locks and lock systems. Demand
for safety and security is constantly increasing world-
wide, and the Group has never had a wider product range,
higher market penetration and so many innovative new
products.

At the start, the product range largely consisted of
mechanical security products such as traditional locks
and handles for entrance doors, with market penetra-
tion mainly in northern and central Europe. ASSA ABLOY
has become the industry’s global technology leader as a
result of its product leadership strategy combined with
acquisitions. The product offering has gradually widened
from traditional lock products to include security doors,
entrance automation and secure identity solutions.

New technology areas
New technology areas and innovative products are the
most important sources of organic growth. The Group

SALES AnD OPERAtInG InCOmE (EBIt)

 Sales Operating income (EBIT)

EBIT, SEK M

7,500

6,000

4,500

3,000

1,500

¹ 1996–2003 have not been adjusted for IFRS.
² Excluding items affecting comparability.
³ Reclassification has been made.

0
96
04
12
961 971 981 991 001 011 021 031 04 05 062 07 082, 3 092, 3 10 112 12

4,700 %

Operating income
(EBIT) has increased
by over 4,700 percent
in 18 years.

Sales, SEK M

50,000

40,000

30,000

20,000

10,000

gROWTH AND PROFITABILITY

ASSA ABLOY ANNUAL REPORT 2012

Strategy

market
presence

Product
leadership

Cost-
efficiency

Increasing growth in the core
business.

Exploiting the strength of the
brand portfolio and the sales
force.

Expanding into new markets
and segments.

Developing products with
enhanced customer value in
close collaboration with end-
users and distributors.

Innovation and product
development to increase
cost-efficiency.

Quality product development –
for quality products.

Continuous streamlining of the
production structure, with flex-
ible assembly and final assembly
in high-cost countries close to
the customer and the transfer of
standard production to low-cost
countries.

Cost benefits from a substantial
increase in outsourcing.

Increased cost-efficiency
through methods and processes
such as Lean, VA/VE and Seam-
less Flow.

Efficient price management for
price leadership.

targets

Growth and profitability

10 percent annual growth through a combination of organic and acquired growth.

An operating margin of 16 to 17 percent.

The financial targets are long-term and should be regarded as an average over an economic cycle.

therefore invests heavily in R&D. Investments in prod-
uct development have increased by between 10 and 20
percent per year in recent years, and products launched
in the past three years account for a quarter of sales.
The Group employs over 1,350 development engineers.
Electromechanical products now account for 46 per-
cent of Group sales, and the growth rate remains high.

Value creation is driven by clear cost-efficiency strate-
gies. Group-wide programs to streamline products and
the production structure, and cost savings in produc-
tion processes, sourcing and administration are pre-
requisites for good profits, high profitability and stable
finances. As a result, ASSA ABLOY contributes to long-
term sustainable business, which creates value for cus-
tomers, employees and shareholders, and to social sus-
tainable development.

ASSA ABLOY’S DEvELOPmEnt AnD ACQuISItIOnS 2008-2012

2008 – Wireless
technology launched
the new Aperio wireless
technology is launched, making
it easy for customers to upgrade
their access control systems.
Other acquisitions: Beijing
tianming and Shenfei (China),
Gardesa and valli & valli (Italy),
Copiax (Sweden), Cheil (South
Korea) and Rockwood (uSA).

2009 – Strong results
despite weak market
Acquisition of the Ditec
Group, a leading company in
automatic doors, industrial
doors, high-performance
doors and gate automation.
Other acquisitions: Portsystem
2000 (Sweden), maiman (uSA)
and Cerracol (Colombia).

2010 – Acquisitions strengthen
customer offering in Asia
Acquisition of Pan Pan, China’s
largest manufacturer of high-
security steel doors, King Door
Closers, South Korea’s leading
manufacturer of door closers,
Paddock, the uK’s leading
manufacturer of multi-point
locks, ActivIdentity, a leader
in secure identity solutions
(uSA), Security metal Products
(uSA) and LaserCard (uSA).
Other acquisitions: Interest in
Agta Record (Switzerland).

2011 – global leader in
entrance automation
Acquisition of Crawford Entrance
Solutions and FlexiForce, which
strengthen the customer offering
in industrial doors, docking
solutions and garage doors.
Other acquisitions: Swesafe
(Sweden), Portafeu (France),
metalind (Croatia), Electronic
Security Devices (uSA), and
Angel metal (South Korea).

2012 – Acquisitions strengthen
Entrance Systems range
the acquisition of Albany Door
Systems, a global leader in
high-performance doors, is
completed. ASSA ABLOY also
acquires 4Front (uSA), a leader
in docking systems, Securistyle
Group holdings Limited
and traka (uK), Frameworks
manufacturing (uSA), and helton
(Canada), which manufactures
overhead door hardware. In
China, the Group acquires
the hardware manufacturer
Shandong Guoqiang.
Other acquisitions: Dynaco
(Belgium) and Shantou Longhu
Sanhe metal holdings (China).

In addition to the acquisitions listed above, ASSA ABLOY has acquired a number of smaller companies.

ASSA ABLOY ANNUAL REPORT 2012

gROWTH AND PROFITABILITY 39

SALES AnD OPERAtInG InCOmE (EBIt)

ASSA ABLOY’s
divisions

ASSA ABLOY is divided into three regional and two global divisions.

Regional divisions

The regional divisions manufacture
and sell mechanical and electrome-
chanical locks, digital door locks,
cylinders and security doors adapted
to the local market’s standards and
security requirements.

Americas

Share of sales

Share of operating income

21%

25 %

Read about the division’s operations and performance
on pages 44–45

The global divisions manufacture and
sell electronic access control, identifica-
tion products and entrance automation
on the global market.

Global Technologies

Share of sales

Share of operating income

13 %

14 %

Read about the division’s operations and performance
on pages 48–50

EMEA

Asia Pacific

Share of sales

Share of operating income

Share of sales

Share of operating income

14 %

12 %

Read about the division’s operations and
performance on pages 46–47

28 %

29 %

Read about the division’s operations and performance
on pages 42–43

Entrance Systems

Share of sales

Share of operating income

24 %

20 %

Read about the division’s operations and
performance on pages 52–53

EMEA

Growth and continued good
profitability in a year of
challenging market conditions

2012 was a challenging year with continuing weak economic
activity and austerity measures seen across many European
countries. Emerging markets in Eastern Europe, the Middle
East, Turkey and Africa experienced strong demand growth.
The division’s investments in new products and market lead-
ership contributed to increased sales. Operating income and
margin remained at a good level due to intensive efforts on
market presence, cost-efficiency and price management.

Report on the year
• Sales: SEK 13,382 M (13,030) with 1 percent organic

growth.

• Operating income (EBIT) excluding restructuring

costs: SEK 2,279 M (2,203).

• Operating margin: 17.0 percent (16.9).

Market development
The mature markets were marked by subdued demand
for most of the year, affected by the fiscal problems and
tough austerity measures in southern Europe and a
deepening economic slowdown in western Europe. The
Nordic and German-speaking countries showed strong
growth in the first half of the year, which weakened in
the second half. France and the UK showed weak growth.
Sales fell relatively sharply in southern Europe. The
emerging markets in Eastern Europe, the Middle East,
Turkey and Africa continued to grow rapidly, resulting in
strong sales growth for the division.

Market presence
EMEA’s markets are very diverse, with a major difference
in product demand due to local differences in building
and security standards and climate. ASSA ABLOY’s local

The Cliq Remote key manage-
ment system is controlled by
cell phone.

FACTS ON EMEA

companies have a good knowledge of local lock stand-
ards and long-term relationships with their distribu-
tors, stabilizing demand. In addition, the aftermarket is
important, with a large installed lock base.

The sales organizations are coordinated under the
ASSA ABLOY master brand. Market presence was strength-
ened through the continued consolidation of brands
and products. A more complete product program now
reaches more customers. Trade fair participation under
the ASSA ABLOY brand was more intensive than ever. Mar-
keting was further developed through unique online and
offline campaigns for Yale, including TV advertising that
attract much attention.

Successful specification sales of total door opening
solutions continued. The division has 240 dedicated speci-
fication sales representatives, a sharp increase. Contacts
with key partners, such as architects and security experts,
were continuously strengthened. During the year more
than 12,000 projects were specified, involving more than
1,400,000 doors. A large proportion of these projects were
in the commercial sector, such as universities, hospitals and
major commercial buildings.

Demand in Eastern Europe, Turkey the Middle East
and Africa, which jointly account for around 17 percent
of sales, is growing substantially. Sales in these emerging
markets rose more than 13 percent during the year and
were particularly strong in Russia. This is the result of a
deliberate investment in a larger distribution network
for ABLOY products. Electromechanical locks and solu-
tions for the commercial sector account for a substantial
fast-growing share of sales. Several large deliveries are
being made to the sports facilities in Sochi, Russia for the
2014 Winter Olympics.

In Africa sales rose by 11 percent. The African conti-
nent is expected to have major potential due to its rapid
urbanization rate and increased standard of living. EMEA

Offering: Mechanical and electromechanical locks, digital
door locks, security doors and fittings.

diverse markets. Products are sold primarily through a number
of distribution channels and also directly to end users.

Markets: EMEA is the leader in its product areas in Europe, the
Middle East and Africa. The commercial segment accounts for
around 60 percent of sales and the residential segment for 40
percent. EMEA comprises a large number of Group companies
with a good knowledge of their local and in many respects

Brands: ABLOY, ASSA, IKON, Mul-T-Lock, TESA, UNION, Vachette
and Yale.

Acquisitions: Traka and Securistyle (UK).

4242

EMEA DIVISION

ASSA ABLOY ANNuAL REpORT 2012

is positioning itself on the markets, which are expected to account for
90 percent of Africa’s GDP by 2015.

Two acquisitions of British companies complemented the product

portfolio. Securistyle strengthens the division’s position in window
hardware on mature markets. The company has sales of around SEK 225
M. Traka is a leader in electronic key management and secure storage
solutions, with high innovation competence and growth. Sales total
around SEK 140 M.

product leadership
Efficient product development is the most important activity for creat-
ing organic growth. The Group’s new development process focuses on
enhanced customer value, while the products are more cost-efficient
and maintain a higher quality. Group-wide product platforms with
fewer components contribute to enhanced customer value and lower
costs. Substantially increased investment in R&D in recent years has
increased the share of products launched in the past three years to over
25 percent, a doubling in three years.

The division’s High Impact products were a major success during the
year. There are currently six such products, which have been developed
in the past two years. Particular importance has been placed on a high
technical standard and modern design. Marketing is coordinated across
the whole division with special competence teams that cooperate
closely with the local sales teams.

The new door closer range under the ASSA ABLOY brand – a High
Impact product – has been a major success. Launched in 2011, sales have
now reached over EUR 15 M or around 1 percent of the division’s sales.
Demand for the other five High Impact products is increasing sharply:
Aperio, an electromechanical lock that can be wirelessly connected to
networks; Cliq Remote, another innovative mobile electromechanical
cylinder system; Smartair, an access control system; DDL, digital door
locks, and Code Handle, a digital door and window handle. Additional
products launches and further product development are in progress.

Cost-efficiency
Cost-efficiency efforts have focused on the division’s production struc-
ture. The relocation of component production to low-cost countries con-
tinued during the year. The remaining plants in western Europe are being
rapidly transformed into fewer, more efficient plants for final assembly
and product customization in close contact with demand growth.

The number of production plants has almost halved since 2005.
The Group’s broad, deep programs for Lean production methods, Seam-
less Flow in various administrative processes, as well as outsourcing and
more efficient supply management run parallel to the rationalization
of the production structure. The program to reduce the number of ERP
systems and harmonize IT use is progressing country by country and is
estimated to be completed with a common ERP system by 2016. Several
important steps were taken in supply management during the year. The
share of purchases in low-cost countries continued to increase and is
beginning to approach the short-term target of 40 percent. The share of
external suppliers is in the process of being halved, compared with 2005.
The division coordinates purchases in major categories and is changing
the procurement process from tendering to target cost contracts.

Implementation of VA/VE methods continued to yield positive
results. Product development aims for major cost savings through a
sustainable approach to materials consumption, logistics and packag-
ing. Sustainability efforts were intensified through several program
activities across the whole division, especially the introduction of bet-
ter measuring methods. Investments are being made to reduce energy
consumption and CO2 emissions in production plants, while new meth-
ods were introduced for process water purification.

The number of specification sales representatives has increased sharply.

KEY FIGURES

SEK M

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

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

Cash flow
Cash flow2
Average number of employees

2011

2012

13,030
0
2,203
16.9

8,950
5,564
22.0

13,382
1
2,279
17.0

9,217
5,846
22.6

2,142
10,071

2,241
10,260

1 Excluding items affecting comparability of SEK 587 M in 2011.
2 Excluding restructuring payments.

SALES AND OPERATING INCOME

SEK M

14,000

12,000

10,000

8,000

6,000

SEK M

2,800

2,400

2,000

1,600

1,200

 Sales1

Operating income2

1 Reclassification has been
made for 2008 and 2009.
2 Excluding items affecting

comparability in 2008, 2009
and 2011.

SALES BY PRODUCT GROUP

Mechanical locks, lock
systems and fittings, 62 %
Electromechanical and
electronic locks, 24%
Security doors and
hardware , 14 %

ASSA ABLOY ANNuAL REpORT 2012

EMEA DIVISION 4343

Americas

Increased market presence and inno-
vation strengthen sales and earnings

Sales rose mainly due to growth in high-security and electro-
mechanical products, as well as a recovery in the North
American residential market. Apart from Brazil, demand con-
tinued to grow in Latin America. Several years of considerable
investments in market presence and product development
resulted in a strengthened market position. Continued cost-
efficiency measures and increased customer activities con-
tributed to an increased operating margin.

Report on the year
• Sales: SEK 9,671 M (8,906) with 4 percent organic

growth.

• Operating income (EBIT) excluding restructuring

costs: SEK 2,007 M (1,812).

• Operating margin: 20.8 percent (20.3).

Market development
This year was the second year of growth following the
deep recession of 2009–2010. Sales growth was strong
overall in Central and South America, and additionaly for
high-security and electromechanical products in the insti-
tutional and commercial segments. Demand for mechani-
cal lock products and security doors was stable. The divi-
sion was able to meet increased demand and strengthen
its market presence with a number of new products and
solutions in both North and Latin America.

The residential market in North America showed
strong growth. Renovations and upgrades have shown
relatively stable growth in recent years, which strength-
ened in 2012.

The Latin American markets showed stable growth

with increased demand driven by urbanization and
growing prosperity. The exception was Brazil, where new
construction fell due to high interest rates.

Security Metal Products
steel security door with
frosted glass with Sargent
Harmony Wiegand lock
from Americas division.

FACTS ON AMERICAS

Market presence
In the North American market there is a clear distinction
between products for the residential segment and those
for the commercial segment. The distribution channels
are also separate. Safety and security requirements are
higher in the commercial segment, particularly regard-
ing fire and evacuation safety. The division has therefore
had a segmented marketing and sales organization for a
number of years to meet each customer group’s specific
demands, combined with experts in a number of areas
such as electronic access control.

Considerable investments have been made in recent

years to strengthen the division’s market presence. In
the USA, direct sales people account for 60 percent of
marketing and sales staff, compared with 30 percent in
2004. The number of specification sales representatives
and specialist teams has increased sharply. These target
leading architectural firms with training and the introduc-
tion of new products and solutions in their role as the end-
customer’s door solution expert. A large training program
has been devoted to the latest electromechanical products
and solutions. These have experienced strong demand
growth on the replacement market in recent years.

ASSA ABLOY has the industry’s leading brands in
North America. The main emphasis in brand manage-
ment is on the overall message that ASSA ABLOY is the
leading player in total door opening solutions. During
the year the division took part in over 50 trade fairs. Fixed
and mobile exhibitions continued to attract an increased
number of visitors in over 300 cities in North America.
The acquisition of Frameworks Manufacturing and
Alarm Controls Corporation strengthen the division’s
offering of total door opening solutions for commercial
and institutional customers in the USA and Canada.

product leadership
The division has doubled its R&D investments since
2009. The main focus is on the fast-growing electro-
mechanical area and products that support the devel-

Offering: Mechanical and electromechanical locks, cylinders,
door fittings, security doors and door frames.

Markets: US, Canada, Mexico, Central America and South Ame-
rica. 88 percent of sales are in the USA and Canada where ASSA
ABLOY has an extensive sales organization and sells its products
through distributors.

Institutional and commercial customers are the largest end-

customer segments and account for 90 per cent of sales. The
private residential segment is accounts for 10 percent of sales.
Sales in South America and Mexico take place mainly through

distributors, wholesalers and DIY stores. Sales in these markets
are more evenly distributed between the commercial and resi-
dential segments.

Brands: Some of the leading brands are Ceco, Corbin Russwin,
Curries, Emtek, Medeco, Phillips, SARGENT and La Fonte.

Acquisitions: Frameworks Manufacturing Inc. and Alarm
Controls Corporation (USA).

4444

AMERICAS DIVISION

ASSA ABLOY ANNuAL REpORT 2012

Mobile Innovation Showrooms bring door opening solutions to architects, end-users, integrators and other customers.

opment of building standards. Nearly 300 significant products and
solutions have been launched in the past three years. Design and cli-
mate-smart solutions are increasing in importance. The share of overall
sales from new products exceeded 20 percent during the year, contrib-
uting substantially to a stronger market position.

The year saw the launch of new wireless-controlled digital locks for
the residential segment. Consequently, the division has strengthened
its product offering for the fast-growing home automation market
(systems to control and monitor a number of different functions in the
home via electronic networks).

Increased commitment to sustainable construction practices is a
significant trend. Buildings account for 40 percent of all energy con-
sumption in the USA, with 5 percent leakage through doors. ASSA
ABLOY has the widest offering of certified doorway products designed
to meet sustainable construction regulations and guidelines, including
energy efficiency, materials and resources, and indoor environmental
quality. This offering experienced considerable demand during the year.

Cost-efficiency
Americas division’s production structure has been undergoing major
rationalization since 2005. The number of production plants has been
reduced by 40 percent, including 14 acquisitions during the period.
A total of 16 factories have been consolidated and a number of cent-
ers of excellence for development and manufacturing have been cre-
ated. Implementation of Lean projects continued at an undiminished
rate not only in production but also in administration, where more
than one-third of the projects are being implemented. A large number
of products have been reviewed and processes simplified using VA/VE
methods in product development. The number of parts in a SARGENT
electromechanical lock has, for example, been reduced from 48 to 20,
with improvements in the performance.

More efficient supply management and increased outsourcing to

low-cost countries have helped to nearly double cost savings since
2008. The number of suppliers has fallen by 30 percent, while the share
of materials and components sourced from low-cost countries has
increased substantially.

The implementation of Seamless Flow activities continued to give posi-

tive results. Production is moving towards the ‘paperless plant’. A large
number of workstations have been modernized, with robots and semi- or
fully automated machinery. Order management has been streamlined,
not least due to the introduction of fully automated e-commerce mainly
for sales of standardized products to wholesalers, where the share of
e-commerce has risen to over 50 percent in just a few years.

KEY FIGURES

SEK M

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

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

Cash flow
Cash flow2
Average number of employees

2011

2012

8,906
2
1,812
20.3

8,468
6,041
22.8

1,731
6,658

9,671
4
2,007
20.8

8,301
5,913
23.6

1,797
6,620

1 Excluding items affecting comparability of SEK 150 M in 2011.
2 Excluding restructuring payments.

SALES AND OPERATING INCOME

SEK M

12,000

10,000

8,000

6,000

4,000

SEK M

2,400

2,000

1,600

1,200

800

 Sales1

Operating income2

1 Reclassification has been
made for 2008 and 2009.
2 Excluding items affecting
comparability in 2008, 2009
and 2011.

SALES BY PRODUCT GROUP

Mechanical locks, lock
systems and fittings, 49 %
Electromechanical and
electronic locks, 39 %
Security doors and
hardware , 12 %

ASSA ABLOY ANNuAL REpORT 2012

AMERICAS DIVISION 4545

Asia Pacific

Continued expansion in Asia and rapid
growth in digital lock solutions

The division’s sales increased on the important Chinese
market, where demand slowed during the year. Growth
was strong on the Southeast Asian emerging markets, while
it was negative in Australia, which resulted in a somewhat
lower operating margin but improved operating income.
Demand for digital lock solutions increased rapidly in Asia
where the Group is the clear market leader.

Report on the year
• Sales: SEK 7,224 M (6,633) with 3 percent organic

growth.

• Operating income (EBIT) excluding restructuring

costs: SEK 978 M (933).

• Operating margin: 13.5 percent (14.1).

Market development
The high growth rate in China slowed during the year.
The underlying growth factors in the country – the
urbanization trend, industrialization, new construction
and increased prosperity – continue to be important
growth drivers. The credit restrictions imposed by the
Chinese government in late 2011 to avoid overheating
in the economy resulted in a lower investment tempo
in the domestic economy, while the export sector con-
tinued to grow strongly. All ASSA ABLOY’s product areas
experienced strong growth. The Group has a strong and
clearly leading position on the advanced South Korean
market, with a wide product range of total door opening
solutions. The domestic market was weak, while the con-
siderable export sales of the Group companies iRevo and
King continued to grow at a high rate. Demand for digi-
tal door locks is considerable in South Korea and iRevo is
the market leader. The company collaborates with other

Door designed by ASSA
ABLOY’s Group company
Pan Pan in China.

Facts on asia PaciFic

Group companies to adapt and export digital door locks
to the residential markets in China, Southeast Asia, India,
Australia, Singapore, and the EMEA and Americas divi-
sions, a successful expansion that is ongoing.

Growth in India and several other countries in South-

east Asia continued to increase at a high rate. The divi-
sion’s sales in India increased by 18 percent following
significant investments in market presence and the mar-
keting of new products. Sales also increased rapidly in
Vietnam and Indonesia from low levels.

The Australian market position is very strong.

Demand, which has been weak since 2011 due to a low
level of new construction and fewer government stimu-
lus measures, improved towards the end of the year.

Market presence
ASSA ABLOY has a very strong position on the major
emerging market of China. The need for security is
increasing strongly in pace with urbanization, prosper-
ity and new housing construction. Demand for security
doors is increasing rapidly and the division sold over two
million units in 2012. There is tough competition from
a very large number of small local firms, whose main
weapon is low prices, but business failure has accel-
erated in the wake of lower growth and higher costs.
ASSA ABLOY’s market share remains small, but expan-
sion potential is strengthened by the increased need for
consolidation.

The division continued to make major investments in
the specification of door opening solutions and training.
The number of specification sales representatives dou-
bled during the year.

Market presence in China strengthened as a result of
the acquisition of Sanhe Metal, with sales of SEK 130 M.
This gives the division a comprehensive position in the
fire door segment in the fast-growing coastal regions.
The acquisition of Guoqiang, with sales of around SEK

offering: Mechanical and electromechanical locks, digital
door locks, high-security doors and hardware.

mature markets with established lock standards. Renovations
and upgrades account for the majority of sales.

Markets: China accounts for 50 percent of sales, South Korea
and the rest of Asia for 20 percent, Australia and New Zealand
for 20 percent, and exports to the rest of the world for
10 percent. The Asian countries are emerging markets without
established security standards. New construction accounts
for around three-quarters of sales. In China, the same types of
lock, handle and hardware are often used in both homes and
workplaces. The production units in China also supply
ASSA ABLOY’s other divisions. Australia and New Zealand are

Brands: In China Baodean, Guli, Pan Pan, Liyi (Shenfei), Doormax,
Beijing Tianming, Golking, Sahne and Longdian. In South
Korea Gateman, Angel and King and the global Yale brand. In
Australia and New Zealand, the largest brands are Lockwood
and Interlock.

acquisitions: Sanhe Metal and Guoqiang (China). Sale agree-
ment: Wangli (China).

4646

asia PaciFic Division

assa aBLoY annuaL RePoRt 2012

Airports are an important customer segment for ASSA ABLOY.

600 M, opens up a new, growing segment for the division in window
hardware in China. Guoqiang is one of China’s leading manufacturers
of window hardware with a strong patent portfolio. In 2012, an agree-
ment was reached to sell the co-owned Chinese company Wangli, with
annual sales of SEK 600 M.

Following substantial sales growth, the division established its
own sales companies in the highly populated countries of Vietnam
and Indonesia, which have a population of 85 million and 220 million
respectively. Urbanization, industrialization and rapidly rising prosper-
ity provide significant growth potential on these markets.

Product leadership
The Group’s product leadership is an important factor for market
penetration in Asia. Demand for digitalization and access control is
increasing rapidly and sales more than doubled in the region. In China,
the number of digital door lock distributors rose from 50 to 100, with
major successes on the residential market.

The investment in India was strengthened by the development of

several unique products for this major market, contributing to the
division’s high share of products launched in the past three years of
31 percent.

cost-efficiency
The division’s Chinese production units account for a large share of the
Group’s production and employees. The division had about 14,600
employees in China. More than 90 percent of the Chinese production
is sold on the domestic market and less than 10 percent is exported to
other regions.

The number of employees fell by around 1,300 people, excluding
acquisitions, compared with 2011, as a result of intensified implemen-
tation of Lean processes, an increased share of purchases and outsourc-
ing, and the automation of production processes. These efficiency
measures are necessary to meet increased cost pressure particularly
from wage increases in China, but also to reduce the division’s sensitiv-
ity to cyclical fluctuations, thereby improving margin growth. System-
atic efforts to increase the share of coordinated purchases are increas-
ing rapidly and give positive results. The efforts will continue in 2013.

KEY FIGURES

seK M

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

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

cash flow
Cash flow2
Average number of employees

2011

2012

6,633
9
933
14.1

4,278
3,410
23.6

7,224
3
978
13.5

5,168
4,326
20.7

912
15,784

1 348
15,284

1 Excluding items affecting comparability of SEK 48 M in 2011.
2 Excluding restructuring payments.

SALES AND OPERATING INCOME

SEK M

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

SEK M

1,000

 Sales1

Operating income2

1 Reclassification has been
made for 2008 and 2009.
2 Excluding items affecting

comparability in 2008, 2009
and 2011.

900

800

700

600

500

400

300

SALES BY PRODUCT GROUP

Mechanical locks, lock
systems and fittings, 54 %
Electromechanical and
electronic locks, 8 %
Security doors and
hardware , 38 %

assa aBLoY annuaL RePoRt 2012

asia PaciFic Division 4747

Global Technologies

Continued good growth
with new products and services

Demand was strong in the markets for upgrading and
supplementing existing systems. Sales increased, driven
by launches of new products and services and successful
expansion in emerging markets. Continued streamlining
and cost-efficiency programs contributed to a significant
profit increase and a strong margin improvement.

HID Global’s iCLASS SE techno-
logy contributes to increased
security, mobility and flexibility.

Report on the year
• Sales: SEK 6,262 M (5,756) with 6 percent organic

growth.

• Operating income (EBIT) excluding restructuring
costs: SEK 1,073 M (897), a 20 percent increase.

• Operating margin: (EBIT): 17.1 percent (15.6)

Global Technologies division consists of two business
units: HID Global and ASSA ABLOY Hospitality.

HID GLOBAL

Market development
Demand remained strong in all markets for upgrading
and supplementing existing systems. The traditional
product areas in identity and access management
showed strong, stable demand. Sales rose as a result of
a successful focus on emerging markets, such as China,
Indonesia, Russia and Brazil, and marketing of new prod-
ucts and services in recent years. The division made a
strong contribution to the Group’s core operations in
electronic door opening solutions, with high growth in
physical access control, accounting for 40 percent of the
Group’s sales in 2012.

Demand for secure identity solutions is increasing
in all markets. HID Global improved its market-leading
position through the launch of innovations in mobile
access and identity solutions, more efficient card print-
ers, and new technology in converged access solutions

combining physical with logical access control and other
integrated solutions.

Market presence
HID Global is making a long-term investment in its global
leading market presence, with considerable success in
the institutional and commercial markets. Increased
emphasis on unique selling points, a scalable ecosys-
tem of security solutions, and a global partner program
further strengthened the brand position. Brand consoli-
dation has been very successful, resulting in the con-
solidation of 17 brands into a single HID Global brand
in just five years. All product lines have gained wider
distribution worldwide, strengthening brand loyalty
while a complete product portfolio can be offered to
all customers. The focus on market segmentation con-
tinued and resulted in deeper customer dialogue and
a stronger customer offering across all product lines.
The development of specification expertise continues
with investments in special teams for global advice and
development in cooperation with end-customers. For
example, the focused sales initiative in Government ID
Solutions has resulted in a leading position in four key
segments: e-documents, ID readers, personalization and
issuance solutions, and professional support solutions.
HID Global’s solutions are in many important national
programs for various types of ID cards, passports, driving
licenses and vehicle registration, including 27 ePassport
programs and 49 national ID/eID programs. HID Global
reader technology is used by the world’s five largest doc-
ument reader suppliers.

The American company EasyLobby, a specialist in visi-

tor management solutions, was acquired at the end of
2011. The Group company was successfully integrated
in 2012.

product leadership
The global product strategy is to offer a complete eco-
system for secure identity management with solutions
for all parts of the value chain. In 2012 the main focus

FACTS ON GLOBAL
TECHNOLOGIES

Offering: HID Global is a global leader in secure identity solu-
tions, primarily in identity and access management, and in con-
tactless identification technology solutions.
ASSA ABLOY Hospitality is a global leader in electronic lock
systems and safes for hotels and cruise ships.

Markets: Customers are mainly in the institutional and commer-
cial sectors worldwide.

Brands: HID Global and VingCard.

Acquisitions: Codebench, USA.

4848

GLOBAL TECHNOLOGIES DIVISION

ASSA ABLOY ANNuAL REpORT 2012

KEY FIGURES

SEK M

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

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

Cash flow
Cash flow2
Average number of employees

2011

2012

5,756
11
897
15.6

6,449
4,846
14.3

933
2,819

6,262
6
1,073
17.1

5,717
4,524
17.3

1 140
3,029

1 Excluding items affecting comparability of SEK 87 M in 2011.
2 Excluding restructuring payments.

SALES AND OPERATING INCOME

SEK M

7,000

6,000

5,000

4,000

3,000

SEK M

1,200

1,000

800

600

400

 Sales1

Operating income2

1 Reclassification has been made
for 2008 and 2009.
2 Excluding items affecting compa-
rability in 2008, 2009 and 2011.

SALES BY PRODUCT GROUP

Access control, 52 %
Identification technology, 26 %
Hotel locks, 22%

was on improving convenience in use and installation, product and sys-
tem security, and systems integration. Quality assurance work showed
positive results. Customer satisfaction with delivered quality was very
high.

ASSA ABLOY has a world-class product development process. HID
Global has broadened the innovation process to include systems inte-
gration and an overall approach comprising development platforms,
as well as collaborations with external partners, customers and other
parts of the Group.

Several new products and solutions were launched during the year.

FARGO HDP8500 is an industrial class ID printer, which is particularly
suitable for large government ID card programs and other demanding
environments. It allows considerable reductions in materials costs and
initial investments in printer hardware.

pivCLASS is an extensive range of security solutions, which make it
easier for the US Federal Government, its subcontractors and others to
comply with high security requirements and use personal ID cards for
physical access control. The new EDGE EVO and VertX EVO IP-enabled
platforms, forms a unique portfolio of advanced, networked solutions.
The year also saw the launch of Seos, the worlds first commercial eco-
system for digital keys in NFC cell phones, which was met with consid-
erable interest. Seos enables doors to be opened by holding the cell
phone in front of the lock. Private individuals and security staff can send
temporary digital keys to visitors via their cell phone.

Cost-efficiency
Efforts to reduce inventories and optimize working capital across all
product areas and geographical regions continued with positive results
in 2012. HID Global began consolidation of distribution and produc-
tion plants in the USA, with the announced closure of four units and
the construction of a new plant in Austin, Texas, that is due for comple-
tion in 2014. A new production plant is under construction in Malaysia
for deliveries to the fast-growing Asian markets. This consolidation will
contribute significant cost savings in future years.

A major global project has begun to consolidate the number of stra-
tegic suppliers. Work will continue in 2013, resulting in greater flexibil-
ity, an increased rate of development and launch of new products in the
market, better quality and reduced costs.

The new plants in the USA and Malaysia are being built to the high-
est sustainability and high energy efficiency standards to comply with
the requirements of ISO 14001. Continuous sustainability audits of
important suppliers now cover 98 percent of the annual materials flow.
Sustainability is a criterion in the development of new products and
solutions. Examples include low-energy access control readers, ENERGY
STAR compliant card printers, and biodegradable cards.

HID GLOBAL
HID Global supplies solutions for secure identity creation and management to commercial companies, healthcare, educational
and financial institutions as well as government and state institutions. HID Global’s open technology platforms provide significant benefits.

pRODuCT AND SERVICE OFFERING
physical access control: cards, card readers and networked access
control units.
Secure issuance: card printers and software.
Identity assurance: smart cards, readers and credential management
and other software.

Government ID: cards, card printers, readers, software and professional services
for government-issued credentials.
Managed Services: customized smart cards and secure identity issuance, such
as mobile keys.
Mobile access control: digital keys and reader technology for NFC cell phones.
Contactless identification: RFID tags, readers and embedded solutions for
identification.

ASSA ABLOY ANNuAL REpORT 2012

GLOBAL TECHNOLOGIES DIVISION 4949

Global Technologies

VingCard’s RFID (radio fre-
quency identification) lock
system offers functions such
as contactless access control
using encoded communica-
tion and secure, copy protected
software.

ASSA ABLOY HOSpITALITY

Report on the year
ASSA ABLOY Hospitality experienced strong growth,
despite an economic slowdown that affected demand
for hotel rooms in mature markets. Sales growth was
driven by increased global demand for renovation and
upgrade projects. Active market development in recent
years led to several major contracts for deliveries to
global hotel chains.

The market for new hotel construction remained
weak. Demand from the cruise ship market declined due
to a more subdued global economy. The aftermarket’s
good margins further strengthened operating profit and
operating margin.

ASSA ABLOY Hospitality’s customers are a clear
example of the rapid market trend towards increasingly
advanced electromechanical technology and entrance
automation. In recent years marketing efforts have
focused on promoting the replacement or upgrade of
installed lock systems that use magnetic strip cards.

The latest contactless RFID (radio frequency identi-
fication) technology provides hotels and hotel guests
with considerably more secure, flexible and user-friendly
locks, which also create opportunities for major energy
savings.

ASSA ABLOY Hospitality has established itself as a
market leader with a clear hi-tech image. Today nearly
three-quarters of sales are RFID-based systems and
more than 750,000 VingCard RFID locks have now been
installed globally. The new VISIONLINE system is also
attracting considerable interest. It is integrated with
the hotel’s other operating systems to add efficient new
housekeeping, security, front desk and maintenance
functions. This allows the front desk to cancel keys and
authorize room changes, extension of stay and access to
conference rooms without the guest needing to hand in
or exchange their key.

VingCard Elsafe has also established itself as an impor-

tant supplier of energy management systems for the
hotel market through its Orion range launched in 2010.
Sensors that can detect guest presence in the room and
information from the door lock when the guest enters
and leaves the room allow Orion to efficiently manage
energy consumption. The technology can contribute to
energy cost savings of up to 20-30 percent.

Market presence
Global market presence has gradually strengthened in
recent years, with deliveries to 166 countries. Sales have
increased rapidly on new emerging markets due to tar-
geted marketing initiatives. Market presence in China,
for example, strengthened during the year and sales rose
sharply, due to a high level of investment in the country
and modernization in the hotel sector.

product leadership
Product development continued at a high rate during
the year. One important launch was Seos, the world’s
first commercial ecosystem for digital keys in NFC (Near
Field Communication) cell phones. The hotel guest can
check in and receive their electronic key using their cell
phone. On arrival the guest can enter their hotel room
using their cell phone. RFID technology was further
developed with a new common electronic platform. This
is suitable for both old and new locks and provides better
performance. The newly developed concept of loyalty
cards was launched by several major global hotel chains
during the year. The Hotel’s guest’s loyalty card acts as a
room key, the booking confirmation and room number
are sent by SMS or Email, the guest skips the front desk
and uses their loyalty card to open the assigned door.
Booking confirmation and room number are sent to the
guest by SMS or email. VingCard Elsafe launched a new
electronic concept, Essence by VingCard. All lock com-
ponents are housed in the door, a new stage in the devel-
opment of door design.

Cost-efficiency
ASSA ABLOY Hospitality continued its successful relo-
cation of component production to high-quality sup-
pliers in low-cost countries, mainly China. The program
to streamline production and product development
in the new Shanghai production plant yielded positive
results. It included major efforts to reduce environmen-
tal impact. VA/VE methods have contributed to consid-
erable materials savings in production, as well as a life
cycle perspective. Implementation of the global ERP sys-
tem also continued, which will strengthen Hospitality’s
Seamless Flow program to automate an increasing num-
ber of process flows. This system will be taken into use in
the beginning of 2013.

FACTS

ASSA ABLOY HOSpITALITY
ASSA ABLOY Hospitality manufactures and sells electronic lock
systems, safes, energy management systems and minibars for
hotels and cruise ships under the VingCard Elsafe brand. It is the

world’s best-known brand for hotel lock systems and in-room
safes, with products installed in over seven million hotel rooms
in more than 42,000 hotels worldwide.

5050

GLOBAL TECHNOLOGIES DIVISION

ASSA ABLOY ANNuAL REpORT 2012

VingCard Elsafe security
solution for Park Inn
Trysil Mountain Resort

On 19 December 2011 the Rezidor Hotel Group, SkiStar and Peab opened Park
Inn Trysil Mountain Resort in the Norwegian ski resort of Trysil. The hotel has 369
rooms and is part of the Park Inn by Radisson chain, Rezidor’s young and dynamic
mid-priced brand. Guests are offered a carefree stay, a relaxed and personal
atmosphere, and comfortable modern rooms.

Challenge:

Solution:

The 33,000 square meter Park Inn Trysil Mountain Resort has four apartment wings, which are connected to the main build-
ing with its conference facilities, lobby, restaurant and spa via a 30 meter long glazed bridge. The hotel complex is located
around 800 meters above sea level, and it is a challenge to service and maintain all these buildings in low temperatures. Ving-
Card Elsafe was commissioned to develop an access control solution, which makes it easier for technicians and reception staff,
while providing guests with increased security and flexibility.

VingCard Elsafe supplied 471 electromechanical locks and 32 wall-mounted RFID (radio frequency identification) readers,
which are all wirelessly connected to an access control system. The company’s R&D department developed new software,
which enables guests to use their SKIDATA lift pass to open the door of their hotel room at Park Inn Trysil Mountain Resort and
other participating facilities. The Rezidor Hotel Group, SkiStar and Peab are extremely satisfied with this solution and VingCard
Elsafe’s continuous control of the facility.

ASSA ABLOY ANNuAL REpORT 2012

Entrance Systems

More growth platforms for
continued global expansion

Demand was weak in Europe but continued at a stable level
in North America, while growing strongly on emerging
markets. The division has successfully integrated the many
acquisitions made in recent years and continued to acquire
companies to strengthen its global leading position in
entrance automation. Operating income increased, while
the operating margin weakened somewhat.

Report on the year
• Sales: SEK 10,979 M (8,278) with -2 percent organic

growth.

• Operating income (EBIT) excluding restructuring

costs: SEK 1,546 M (1,197).

• Operating margin: 14.1 percent (14.5).

Market development
Growth declined in western Europe, which accounts for
the majority of sales, but the picture was diverse. Sales in
Germany, Austria, Switzerland and the Nordic countries
grew in the first half of the year, but weakened gradually
during the year. Sales fell sharply in the crisis-hit coun-
tries in southern Europe. Demand remained at a stable
level in North and South America, with all the division’s
companies reporting positive growth. Asia also showed
positive growth particularly in the industrial segment.

The strongest segment during the year was industrial

customers, with strong demand on the whole for Craw-
ford, Albany and the newly acquired Dynaco. The health-
care and transport sectors were negatively impacted by
fiscal restrictions and fewer investments in major public
projects, which affected Besam. The residential segment
also experienced weakening demand, while demand in
the retail trade was stable.

Besam revolving door in
a hospital environment.

FACTS ON
ENTRANCE SYSTEMS

Nearly 40 percent of the division’s sales are generated
by the comprehensive service offering, with its high and
regular sales. This has helped to counterbalance equip-
ment sales, which are more cyclical.

The division has grown very strongly in recent years
mainly through acquisitions. Sales have nearly tripled
since 2010, and ASSA ABLOY has consequently achieved
a global leading position. The year was marked by inten-
sive integration activities. The division now has a number
of geographically and technologically well-positioned
platforms for continued rapid global growth. It has also
invested in the development of new products, solutions
and service, which provided strength in the weakened
business climate in 2012.

Market presence
A significant trend is that the entrance automation market
is developing from a large number of regional markets to
a more global market. The division is driving this develop-
ment through acquisitions and global growth platforms.
The year saw the start of major organization development
to further strengthen market presence. The division’s
companies are organized into three groups focusing on
direct sales, indirect sales via distributors and component
sales. Within these groups, sales activities for both prod-
ucts and service will be segmented even more effectively,
with specialist teams for large end-customer segments,
providing customers with their own problem solvers.

The Key Account Management concept for selected
customers continued its successful development. This
is an answer to the globalization of major industrial,
transport and retail companies, which are aiming for har-
monized total door opening systems for their facilities
worldwide. The service concept continued to be devel-
oped with solutions for regular preventive service.

The acquisition of Albany Door Systems was com-
pleted during the year, as was the acquisition of Dynaco,
a leading manufacturer of automatic high-performance

Offering: Entrance automation products, components and ser-
vice. The product range includes automatic swing, sliding and
revolving doors, air curtains, gate automation, garage doors,
high-performance doors, industrial doors, docking solutions
and hangar doors.

Markets: Entrance Systems is a global leader with sales world-
wide. It has sales companies in 30 countries and distributors in
60 countries. Service operations account for nearly 40 percent
of sales.

The products are sold through two channels. In the direct chan-
nel, new equipment and comprehensive service are sold direct
to the end-customer, while in the indirect channel, products and
components are sold to end-customers through distributors.

Brands: Besam, Crawford, Megadoor, Albany, FlexiForce,
Normstahl , Ditec and EM.

Acquisitions: Albany and 4Front (USA), Dynaco (Belgium) and
Helton (Canada).

5252

ENTRANCE SYSTEMS DIVISION

ASSA ABLOY ANNuAL REpORT 2012

doors specializing in sales to a global distributor network. The acquisi-
tion of Helton fits well with the acquisition of FlexiForce in 2011. Helton
manufactures overhead door components for private and industrial
customers on the North American market. The American company
4Front, a leader in docking systems, was acquired at the end of the year.
The company offers a complete product range of docking systems and a
large range of fittings for increased safety in the loading bay area.

product leadership
Investments in new product development continued to increase.
Strengthening product development competence and increasing the
rate of new product launches are an important part of the integration
of acquired companies. The new product development organization
established in recent years has considerably streamlined the develop-
ment of new products and shortened the lead times to market. Product
development and production are achieving significant economies of
scale in resource and component utilization, due to an increasing num-
ber of common product platforms and modular solutions for more and
more products.

Environmental considerations and energy efficiency are strong sales
arguments. VA/VE methods in the product development phase reduce
energy and raw material consumption in the production process,
reducing product cost and increasing customer value. The division has
also begun the development of new service concepts, increasing focus
on preventive and improvement service. The aim is to offer customers
total modernization solutions for the division’s door opening solutions
and those of its competitors. This involves extensive upgrades of old
installations with a series of new products and components. This type
of major renovation and modernization requirement is expected to
increase in the coming years.

Cost-efficiency
An important task during the year, in the wake of the many acquisi-
tions, was simplifying the complexity and streamlining the structure
of production and administration. The extensive program to rational-
ize the production structure of the newly acquired units accelerated. A
number of production plants are being closed, with production trans-
ferred between existing plants in both high- and low-cost countries.
Meanwhile investments are being made in five final assembly plants in
strategic locations in Europe. Complementary programs are coordi-
nating supply management to reduce the number of suppliers. Many
administrative functions can likewise be coordinated and concentrated
to increase efficiency. A large number of IT-based systems are set to be
replaced by fewer systems.

Dynaco high speed doors.

KEY FIGURES

SEK M

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

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

Cash flow
Cash flow2
Average number of employees

2011

2012

8,278
5
1,197
14.5

10,837
7,153
12.2

1,317
5,605

10,979
–2
1,546
14.1

13,189
8,323
12.3

1,648
7,429

1 Excluding items affecting comparability of SEK 423 M in 2011.
2 Excluding restructuring payments.

SALES AND OPERATING INCOME

SEK M

12,000

10,000

8,000

6,000

4,000

2,000

SEK M

1,800

1,500

1,200

900

600

300

 Sales1

Operating income2

1 Reclassification has been made
for 2008 and 2009.
2 Excluding items affecting compa-
rability in 2008, 2009 and 2011.

SALES BY PRODUCT GROUP

Products, 63%
Service, 37%

Megadoor hangar door.

ASSA ABLOY ANNuAL REpORT 2012

ENTRANCE SYSTEMS DIVISION 5353

Sustainable development

Corporate responsibility
drives a more profitable ASSA ABLOY

ASSA ABLOY’s sustainability initiatives are based on the operations impact of the
environment, increasing demand for sustainable products, and the intention to
be a responsible and attractive company. Work on relevant sustainability issues
is integrated across the value chain – from product development to recycling.

Sustainability Report
2012

The global leader in
door opening solutions

Further information about
ASSA ABLOY’s sustainability
initiatives is to be found in the
2012 Sustainability Report,
which will be published in con-
nection with the 2013 Annual
General Meeting.

¹ for comparable units. total

energy consumption amounted
to 692 gWh including units
acquired during the year and
increased reporting.

² for comparable units. total

consumption amounted to 20
tonnes including units aquired
during the year and increased
reporting.

3 for comparable units. the total
injury rate (ir) was 9.1 including
units acquired during the year
and increased reporting.

4 for comparable units. the total
injury lost day rate (iLDr) was
171 including units acquired
during the year and increased
reporting.

5 for comparable units. number
of certificates and correspond-
ing certifiable systems for north
American units amounted to
100. the change is due to the
closure of plants under the
restructuring program and to
the addition of a number of new
plants with certificates. Sales
companies with iSO 14001 cer-
tification are included in the
reports from 2012.

ASSA ABLOY has a Group-wide Code of Conduct that
provides the basis for everyone’s behavior. The Group
identifies continuing risks and opportunities to be man-
aged in dialogue with internal and external stakeholders.
It helps customers reduce their energy consumption and
environmental impact through continuing improve-
ments to production processes, and the development
of new products and solutions. Sustainable products
account for an ever-increasing share of Group sales.
The drivers for ASSA ABLOY’s sustainability initia-
tives are risk management and reduction, streamlining
production and administration, and the management
of opportunities. This approach enables ASSA ABLOY to
meet customer expectations, expand market share and
create value.

Control of sustainability initiatives
The Code of Conduct is Group-wide and establishes the
principles that ASSA ABLOY has defined for the Group’s

employees, suppliers and other stakeholders. The Code
is based on international standards and is available in 22
languages. ASSA ABLOY monitors compliance with the
Code of Conduct. Action is taken in case of non-compli-
ance with the Code.

The Code is available to all employees. It forms
part of the induction of new employees, and it is every
employee’s responsibility to read and comply with the
Code and related policies. Whistle-blowing procedures
are in place to enable all employees to report suspected
infringements. Reported cases are investigated by a spe-
cial committee headed by ASSA ABLOY’s HR director.

Suppliers are informed of ASSA ABLOY’s Code of Con-
duct and undertake in writing to comply with it in their
collaboration with the Group. Since 2011, the Code of
Conduct has been supplemented with a separate anti-
corruption policy, which is now being implemented
across the Group.

SOme Of the reSuLtS Of the SuStAinABiLitY prOgrAm

Deterioration

unchanged

improvement

Targets

Results
2008

Results
2009

Results
2010

Results
2011

Results
2012

Trend

Energy consumption – 15 percent reduced
consumption 2015 compared with 2010,
based on normalized values.

Organic solvents – Phase out all use of
perchloroethylene and trichloroethylene.

Health and safety
Zero vision and targets for improvement:
– 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 impact.

Suppliers – Sustainability appraisals –
Code of Conduct requirement for all suppliers.
Sustainability audits of suppliers in risk category.

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

482 GWh

491 GWh

605 GWh

632 GWh¹

633 GWh

42 tonnes

44 tonnes

32 tonnes

22 tonnes

17 tonnes ²

IR: 8.7
ILDR: 166

IR: 8.4
ILDR: 150

IR: 7.8
ILDR: 141

IR: 8.9
ILDR: 161

IR: 9.03
ILDR: 1734

915

100
sustain-
ability
audits
in China

178
sustain-
ability
audits
in China

376
sustain-
ability
audits
in China

493
sustain-
ability
audits
in Asia

795
sustain-
ability
audits
in Asia

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

Level 2: 0 %
Level 3: 15 %
Level 4: 18 %
Level 5: 20 %

Level 2: 0 %
Level 3: 16 %
Level 4: 18 %
Level 5: 24 %

Level 2: 0 %
Level 3: 15 %
Level 4: 19 %
Level 5: 26 %

Level 2: 18 %
Level 3: 16 %
Level 4: 18 %
Level 5: 23 %

5454

SuSTaInablE dEvElOpmEnT

aSSa ablOY annual REpORT 2012

aSSa ablOY’s way of working
The Board of Directors has the overall responsibility,
while the Executive Team is responsible for operational
management of relevant sustainability issues and the
Group’s strategies.

Appointed coordinators at divisional and company
level are responsible for the availability and implemen-
tation of environmental guidelines, programs and tools.
HR functions at Group and divisional level are responsi-
ble for the same in the management of social and busi-
ness ethical issues. The divisions and Group companies
are responsible for compliance with the Group’s Code
of Conduct.

ASSA ABLOY provides information, guidelines and

tools to support the Group companies in their work
on relevant sustainability issues. There is a Group-wide
database for reporting and monitoring of the sustain-
ability program. This database is a knowledge bank that
employees working with sustainability can access.

A target-based activity
ASSA ABLOY has been working in accordance with a sus-
tainability program since 2007. The program has been
revised regularly; the last time was in 2010. In 2012, the
Group continued working to achieve the targets and
to integrate newly acquired companies into the Group
reporting. In 2012, 293 companies were included in the
Group reporting, an increase of 15 percent on 2011.
ASSA ABLOY has gradually increased the accuracy and
the level of detail of internal reporting to increase con-
trol and ensure continuous progress with the Group’s
sustainability initiatives.

The targets now governing the work apply until 2015
and have been formulated for all the Group’s divisions.
These targets include ASSA ABLOY’s most important sus-
tainability issues: water consumption, chemicals man-
agement, energy efficiency, health and safety, employee
issues, supplier relations, and the overall control of sus-
tainability initiatives. The program has been part of cre-
ating a structure for sustainability initiatives.

repOrting unitS

300

250

200

150

100

the number of reporting units
in the group has increased to
293 (256).

SuStAinABiLitY initiAtiVeS Are integrAteD ACrOSS the VALue ChAin

INNOVATION
New products are evaluated from a life cycle perspective. Many recently
developed products save energy as a result of improved insulation and
intelligent control of various door opening solutions.

SOURCING
The Group’s suppliers in risk areas are evaluated from a sustainability per-
spective. Suppliers failing to comply with the Group’s requirements are
requested to make improvements or will otherwise be phased out.

MANUFACTURING
The manufacture of the Group’s products should be carried out safely and
with minimal environmental impact. Hazardous processes are gradually
being phased out and replaced by eco-friendly alternatives.

MARKET PRESENCE
ASSA ABLOY respects the laws and regulations governing business ethics
in the countries in which it operates, and requires all partners to act in the
same way.

CUSTOMERS
ASSA ABLOY’s ambition is to supply high-quality products that fulfill
custom er needs, have a long service life and are manufactured with minimal
resource consumption and environmental impact over their life cycle.

e rs

u st o

atio

employees

Code of Conduct and
Corporate governance

g
cin
r
u
o
S

manufacturing

aSSa ablOY annual REpORT 2012

SuSTaInablE dEvElOpmEnT 5555

Sustainable development

aSSa ablOY’s customer offering
Sales of products and solutions with a sustainable profile
are increasing.

The product innovation process has three important
stages:
• Product management – refers to the strategic aspects

Development of energy-efficient products is a cen-
tral part of ASSA ABLOY’s product development. Energy-
efficient products account for an ever-increasing share
of Group sales. Understanding and satisfying customer
needs is crucial for retaining a strong market position.
Demand for sustainable products is increasing, and
it is important for the Group to develop products that
meet customer expectations, and get them certified and
included in the databases used by architects for building
specification. The increased use of various certifications
for sustainable and green construction means that the
characteristics of ASSA ABLOY’s products are increasing
in importance and make them more attractive to the
market.

ASSA ABLOY has a number of climate-smart prod-
ucts, which combined with increased security help the
customer to reduce energy consumption and create a
better quality indoor environment.

progress towards more sustainable products
ASSA ABLOY’s ambition is to have world-class product
development. This requires a good knowledge of cus-
tomer needs today and tomorrow, as well as knowledge
of the product’s value chain. Group companies use the
Group’s product innovation process and environmental
checklist for all new product development.

•

of the process.
Involving customers in product development. Voice
of the Customer ensures ASSA ABLOY develops prod-
ucts that customers want.

• The Gateway process – ensures that development

projects are structured and efficient.

The Group has carried out product life cycle analyses
to evaluate where the largest environmental impact
occurs. The amount of materials used accounts for a
significant part of a product’s environmental impact,
and this is something ASSA ABLOY has successfully
addressed in Value Analysis/Value Engineering (VA/VE) in
product development. In the case of electromechanical
products, standby power consumption has a relatively
large environmental impact. ASSA ABLOY has there-
fore launched a number of products with considerably
reduced energy consumption in standby mode.

ASSA ABLOY can reduce its environmental impact
and costs through a reduced and efficient use of chemi-
cals, energy and materials in the production process. The
Group’s environmental checklist provides a structured
review of materials selection, design and manufacturing
processes to reduce the amount of hazardous materials
and ensure sustainable and efficient processes. Redu-
cing the amount of packaging materials for different cus-
tomer groups and forms of delivery is an important issue
in working towards more resource-efficient operations.

SuStAinABLe DeVeLOpment prOgrAm in Brief

2004–2008
Code of Conduct with updates

Whistle-blowing

Internal audits

Due diligence directive

Tools for supplier control

Employee survey

Sustainability strategy for prod-
uct development including
checklists

Marketing and sales training

Training in supplier control

2009
Sales companies and offices
are included in reported
figures

Increased monitoring of
energy consumption and CO2

Launch of joint recruitment
and selection guide

2010
Increased audit of suppliers
in low-cost countries

Targets for 2015 are defined
for all monitored areas

2011
Increased reporting of environ-
mental data

25 percent more Group compa-
nies included in reporting

Improved analysis and bench-
marking opportunities between
Group companies

Updated Code of Conduct

Implementation of an anti-bribery
policy across the Group

Target of 30 percent women in
management positions within
ASSA ABLOY

2012
Increased reporting of
environmental data on
water usage and green-
house gases¹

15 percent more Group
companies included in
reporting

Internal semi-annual
reporting for increased
internal control

More than 6,000 employees
participated in anti-bribery
training

¹ the increased reporting is
presented in ASSA ABLOY’s
Sustainability report 2012.

5656

SuSTaInablE dEvElOpmEnT

aSSa ablOY annual REpORT 2012

energy-efficient
door system from
entrance Systems

Challenge:

Solution:

Result:

The ICA Group has set a target to reduce its carbon emissions by 30 percent between 2006 and 2020. ICA has
made a strategic investment in a pilot project, the ICA store at Sannegården in Gothenburg, using energy reducing
technology.

Part of the solution is that ASSA ABLOY Entrance Systems has supplied two energy-efficient Besam RD3L revolv-
ing doors to ICA. This is a high-capacity door opening solution, which is 20 percent more energy-efficient than any
other current automatic door system, due to enhanced insulation and the use of low-energy bulbs. The door design
ensures separation between internal and external environments.

In this pilot project, ICA has managed to reduce energy consumption by around 35 percent, compared to a five-
year-old ICA store. Besam’s revolving doors are responsible for about a third of this energy reduction. The reduction
is equivalent to the annual energy consumption of two medium-sized Swedish households. In addition, the indoor
environment has improved, due to a more even indoor climate and a reduction in noise and exhaust fumes from the
exterior.

The pilot project was successful and ICA estimates that it could reduce its carbon emissions by 30 percent.

ICA intends to apply these energy-reducing principles in the construction of new ICA stores.

Security Intersects with Sustainability

Challenge:

Solution:

Facilities are faced with the challenge of increasing security within the
restraints of their existing budget with minimal disruption to the build-
ing. Together with the growing trend of sustainable building design, many
facilities seek to leverage existing infrastructure while maximizing energy
efficiency and achieving sustainability goals.

To meet this end-user security challenge, Group brands Corbin Russwin
and SARGENT have developed IP-enabled Power over Ethernet (PoE) and
WiFi locking solutions that utilize existing infrastructure to expand access
control. These high performing electronic access control solutions, par-
ticularly PoE locks, help achieve numerous sustainability goals. The Cor-
bin Russwin Access 800 IP1 PoE lock easily brings online access control to
more doors and provides substantial advantages, including minimized
components – access control functions (e.g. door position monitoring and
request to exit sensor) are incorporated in one lock body rather than sepa-
rately purchased and installed components. This PoE lock uses 50% less
power per activation than traditional access control solutions using PoE,
and significantly less standby power than traditional access control. Facili-
ties also re-use existing building infrastructure adding to the overall ROI
savings.

Result:

The Access 800 IP1 exemplifies a new generation of energy-efficient, sus-
tainable access control products. When the total Life Cycle Assessment of
a PoE system is considered, the result is less energy and material used dur-
ing manufacturing, shipping, installation and use.

aSSa ablOY annual REpORT 2012

SuSTaInablE dEvElOpmEnT 5757

Sustainable development

development of supplier relations
Evaluation and improvement of the supplier base is
a continuous process. Supplier selection is based on
standardized criteria for both quality and work on rel-
evant sustainability issues. Good supplier control and
working in accordance with jointly agreed action plans
result in increased product quality and more sustainable
processes.

ASSA ABLOY’s suppliers are required to comply with
its Code of Conduct. Quality and sustainability audits are
carried out before new suppliers are approved. Suppliers
deemed to be in a risk category are prioritized for audit.
The system used to monitor suppliers’ compliance

with the Code of Conduct includes factors such as
wages, overtime, noise levels, protective equipment,
chemicals management, accident reporting, environ-
mental management systems, and health and safety
training.

Any supplier failing to comply with these require-
ments is requested to implement necessary improve-
ments in accordance with an action plan. The contract is
terminated if action is not taken.

Supplier selection process
The process has three stages:
• Supplier self-assessment – the supplier assesses its
ability to meet ASSA ABLOY’s requirements, using a
form from ASSA ABLOY.

• On-site audit – a sustainability audit assesses how
well a potential supplier meets ASSA ABLOY’s
requirements.

• Extended sustainability audit – this complements the

standard audit.

Following the audit, the supplier is graded green, yellow
or red. Green means the supplier is approved; yellow
means the supplier needs to improve within a specific
time frame; and red means the supplier is not approved.

A red or yellow grade can be upgraded through an
improvement plan. If no action is taken, the supplier
is immediately classed as red. All purchases from the
supplier are then stopped until a green grade has been
achieved.

Audits conducted
In 2012 ASSA ABLOY conducted 795 (493) sustainability
audits. At year-end, 806 (461) active suppliers had sat-
isfied the minimum standards for quality and relevant
sustainability issues, and were therefore considered reli-
able. 10 (19) suppliers were blacklisted. Sustainability
audits have been gradually extended to cover a larger
geographical area. In 2012 suppliers in all low-cost
countries were included.

All new suppliers in low-cost countries carry out a
self-assessment of their sustainability, in accordance
with a standardized process, before they can be consid-
ered as potential suppliers to ASSA ABLOY. This is fol-
lowed by an on-site audit. ASSA ABLOY annually moni-
tors previously approved suppliers.

ASSA ABLOY’s supplier database
The Group’s suppliers are listed, graded and monitored
in a supplier database. Audit reports on both quality and
relevant sustainability issues are regularly entered into
the database. Suppliers are listed with a standardized
name, geographical location, type of products and other
information, in order that green suppliers can be used by
many group companies with similar needs.

The database also lists non-approved and blacklisted
suppliers to ensure that they are not used again. Sustain-
ability audit results override quality audit results regard-
ing non-compliance. This means that a supplier rejected
for poor management of relevant sustainability issues is
either stopped immediately or must wait until the defi-
ciencies have been addressed for approval.

SuStAinABiLitY AuDitS Of SuppLierS in ASiA

ShAre Of tOtAL purChASeS in LOW-COSt COuntrieS

Number

800

700

600

500

400

300

200

100

in 2012 ASSA ABLOY conducted 795 (493) sustainability audits.

the share of the group’s total purchases of raw materials, components
and finished goods that comes from low-cost countries has risen from
38 percent to 55 percent in the past five years.

5858

SuSTaInablE dEvElOpmEnT

aSSa ablOY annual REpORT 2012

more efficient production
Energy
ASSA ABLOY’s ambition is to reduce energy consump-
tion and emissions of harmful greenhouse gases.
The Group is therefore implementing a three-stage
approach to reduce energy consumption.

The first stage is to concentrate manufacture in as
few plants as possible, in order to maintain full capacity,
efficient working practices and high quality.

The second stage is to introduce smart solutions that

reduce energy and water consumption in both offices
and plants.

The third stage is to evaluate alternative energy
sources, which combined with innovative product
design, can make manufacturing processes even more
energy-efficient.

Water consumption
Efforts to improve water use efficiency have focused on
plants with surface treatment processes, which account
for the bulk of consumption. Technical improvements
in the purification and reuse of water in the production
process have reduced water consumption.

Waste management
The Reduce, Reuse, Recycle principle is applied across
the organization. This principle means that ASSA ABLOY
works systematically to reduce the amount of materi-
als in products, develop products that can be upgraded
rather than replaced, and enable recycling of both pro-
duction waste and the finished products at the end of
their life cycle. The Group has refined its monitoring of
waste in various types of materials with the aim of better
monitoring and reducing the amount of waste.

Hazardous chemicals
ASSA ABLOY works continuously to reduce the use of
hazardous substances in the production process and
find substitutes for them. Most production plants have
phased out chlorinated organic solvents successfully.

Health and safety
ASSA ABLOY should offer a safe working environment
and has a zero vision for accidents at work. The goal is to
create a culture where each individual contributes to a
safe workplace and good health.

ASSA ABLOY has defined a number of targets

intended to lead to ongoing improvements. These tar-
gets are based on the zero vision.

Health and safety audits are included in the internal
audits, and risk assessment is carried out routinely. Inci-
dent reporting and analysis are used to identify preven-
tive measures.

uSe Of ChLOrinAteD OrgAniC SOLVentS (per AnD tri)

Tons

2012 represents development
for comparable units from
2011.

inJurieS per miLLiOn hOurS WOrKeD

energY uSe

2012 represents development
for comparable units from
2011.

GWh

700

600

500

400

300

200

100

2012 represents development
for comparable units from
2011.

aSSa ablOY annual REpORT 2012

SuSTaInablE dEvElOpmEnT 5959

Sustainable development

Manufacture of industrial
doors at the Entrance Systems
plant at Torslanda, Sweden.

Employees generate success
ASSA ABLOY’s vision and ambition is to be an attractive
company to work for. Each individual has responsibility
for his/her professional development. It is important
that all employees feel that they contribute. Competi-
tion for talent is intensifying and ASSA ABLOY is invest-
ing globally and locally to offer stimulating assignments
with clear responsibility, good development opportuni-
ties, and a positive, engaging work situation.

ASSA ABLOY Employee Survey
The ASSA ABLOY Employee Survey is an efficient means
of finding out what the employees think about their
work situation, how they perceive ASSA ABLOY as an
employer, how they perceive health and safety in their
workplace and if everyone is given equal opportunities.
The survey is carried out every 18–24 months. The most
recent survey took place in March 2012, and received
responses from nearly 28,000 employees. The results in
2012 show a slight improvement in all areas compared
to the previous survey (2010).

The results have been broken down into 275 units,
making them more relevant to all employees and ena-
bling appropriate actions to be taken at the local level
to achieve further improvements.

Common knowledge base
A good knowledge of the company in which you work
and an understanding of how your own efforts relate
and contribute to the overall goals are crucial for moti-
vation and commitment. One way to achieve this is that
all employees have a common understanding of what
ASSA ABLOY’s business is and how the goals are to be
achieved. To create this basic knowledge all employees
complete the interactive induction program ‘Entrance
to ASSA ABLOY’. This program is available in 15 lan-
guages and covers the Group’s history, organization,
products, strategy and Code of Conduct.

Gender equality
ASSA ABLOY’s ambition is to achieve a better gender bal-
ance at all levels in the organization. In 2011, the Group
set a target of 30 percent women in management posi-
tions at levels 2 to 5 by 2020. A gender equality policy is
already in place to direct these efforts.

The trend in the share of women at management
level is monitored in connection with the Talent Man-
agement Process. Other measures include prioritizing
the underrepresented gender in the recruitment pro-
cess provided they have equal qualifications, and aiming
for at least one person from the underrepresented gen-
der among the final candidates.

Growing with care
ASSA ABLOY is an acquisition-intensive Group, and it is
important to monitor how monitor how new units are
operating in relation to ASSA ABLOY’s Code of Conduct
and policies. Third party social audits in accordance
with internationally accepted methods have been con-
ducted for several years for this purpose. These audits
cover areas such as working conditions, human rights,
the work environment, workplace culture and skills
development. During the year audits were conducted at
one production plant in China and one in Romania. The
audits are followed by measures to implement improve-
ments where needed.

NUMBER OF EMPLOYEES BY REGION

Europe, 15,904
North America, 7,631
Central and South
America, 850
Africa, 520
Asia, 16,802
Australia and
New Zealand, 1,055

AVERAGE NUMBER OF EMPLOYEES

WOMEN AT DIFFERENT LEVELS OF THE ORGANIZATION

Men
Women

Number

50,000

40,000

30,000

20,000

10,000

11 12

Share of women,%

Level

2008

2009

2010

2011

2012

2 – reports to CEO
3 – reports to level 2
4 – reports to level 3
5 – reports to level 4

Levels 2 – 5

Average number of
employees

0
11
17
23

–

0
15
18
20

–

0
16
18
24

–

0
15
19
26

18
16
18
23

In 2012, the definition has been revised to include only managerial and
specialist positions. This has had a negative impact on levels 4 and 5.

6060

SuStAinABLE dEvELOpmEnt

ASSA ABLOY AnnuAL REpORt 2012

management training
Every year ASSA ABLOY offers a number of senior man-
agers the opportunity to take part in one of the Group’s
two senior management development programs: ASSA
ABLOY Management Training (MMT) and ASSA ABLOY
‘Boosting Market Leadership Program’

MMT is intended to provide participants with an
increased knowledge of all areas of ASSA ABLOY’s opera-
tions, develop their internal contact network, and con-
tribute to sharing best practices and identifying new
business opportunities. This is of particular importance
for ASSA ABLOY in view of its continuing acquisition of
companies.

The ASSA ABLOY ‘Boosting Market Leadership Pro-
gram’ was launched in 2011. This is a tailor-made pro-
gram developed in collaboration with IMD in Lausanne,
Switzerland. The program’s main aim is to support the
implementation of ASSA ABLOY’s strategy.

Scholarship program
ASSA ABLOY’s Scholarship Program offers employees the
opportunity to work for a short period at another Group
company, in order to share knowledge and experience
and learn about other cultures and working practices.
This program is open to all employees.

Employee development
ASSA ABLOY has a well-established global employee
development process at all levels, the Talent Manage-
ment Process. The aim is to support career develop-
ment in a structured way, optimize the utilization of
the Group’s total resources, and ensure that the skills
needed to meet future requirements are available.

Recruitment and future supply of competence
ASSA ABLOY has great confidence in its employees, and
it is up to each individual to take responsibility for their
career. A basic principle of ASSA ABLOY’s recruitment
policy is to give priority to internal candidates provided
they have equal qualifications to external applicants.
All job vacancies are advertised on the Group’s global
intranet to encourage and facilitate internal mobility.
Recruitment takes place locally in the majority of cases.

dialogue with external stakeholders
ASSA ABLOY’s stakeholders in sustainability issues are
shareholders, investors, analysts, customers, suppliers,
employees, local communities, NGOs and the media.
The Group’s policy of openness means that we listen to
these stakeholders and take on board their views.

During the year ASSA ABLOY held a round-table dis-
cussion with investors on ASSA ABLOY’s management
of sustainability issues. Round-table discussions have
been held annually for a number of years. Requests from
investors have generally concerned more externally
available information on suppliers in low-cost coun-
tries, procedures for establishing new operations and
the acquisition process. Investors have also requested
increased transparency with regard to the targets for
each monitored area. These meetings have proved valu-
able and given the Group important feedback.

Learning and networking

A new IMD program is bringing ASSA ABLOY’s senior managers
together for an intensive and informative week with lots of learning
and networking.
More than 250 of ASSA ABLOY’s senior managers from 32 countries
have taken part in IMD programs since 2005, when ASSA ABLOY began
collaboration with the world-leading Swiss business school, IMD. A
new program, Boosting Market Leadership, was launched in 2011.

This program is held once or twice a year and focusses on key stra-

tegic issues, such as market leadership, innovation and growth. The
aim is to give ASSA ABLOY’s senior managers an inspirational and
informative experience.
Allen Wong, Vice President of Operations and Technology, ASSA
ABLOY Asia Pacific, has taken part in two IMD programs.

“It was a fantastic experience,” said
Allen. “I learned a lot and it was quite
intensive but very enjoyable. I learned
just as much from my course col-
leagues as from the program itself.”
Allen has already applied two
models he learned on the course; one
concerns motivation and the other
concerns values. “The program is very
relevant to our job and our leadership
development,” he said. Allen consid-
ers that in particular he learned to think on new lines, introduce new
models and develop a more effective leadership style.

Allen Wong, Vice President of
Operations and Technology,
ASSA ABLOY Asia Pacific.

aSSa ablOY annual REpORT 2012

SuSTaInablE dEvElOpmEnT 6161

Report of the Board of Directors
and Financial statements
Contents

Report of the Board of Directors

Significant risks and risk management
Corporate governance
Board of Directors
The Executive Team
Remuneration guidelines for
senior management

63
65
68
72
74

77
78

79
80
81
82
83
84
85
86
88

notes

1 Significant accounting and valuation principles
2 Sales
3 Auditors’ fees
4 Other operating income and expenses
5 Share of earnings in associates
6 Operating leases
7 Expenses by nature
8 Depreciation and amortization
9 Exchange 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
17 Investments in associates
18 Deferred tax
19 Other financial assets
20 Inventories
21 Trade receivables
22 Parent company’s equity
23 Share capital, number of shares and

dividend per share

24 Post-employment employee benefits
25 Other provisions
26 Other current liabilities
27 Accrued expenses and deferred income
28 Contingent liabilities
29 Assets pledged against liabilities to

credit institutions
30 Business combinations
31 Assets of disposal group classified as held
for sale and discontinued operations

32 Cash flow
33 Employees
34 Financial risk management and

financial instruments

Comments on five years in summary
Five years in summary
Quarterly information
Definitions of key data
proposed distribution of earnings
Auditor’s report

90
95
96
96
96
96
96
96
96
97
97
97
97
98
100
101
101
102
102
102
102
102

102
103
105
105
105
105

105
105

107
107
108

110

116
117
118
119
120
121

ASSA ABLOY AnnuAL RepORt 2012

Report of the Board of Directors

The Annual Report of ASSA ABLOY AB (publ.), corporate identity number 556059-3575,
contains the consolidated financial statements for the financial year 1 January to 31
December 2012. ASSA ABLOY is the global leader in door opening solutions, dedicated
to satisfying end-user needs for security, safety and convenience.

Significant events
Sales and income
Sales for the year totaled SEK 46,619 M (41,786), with
organic growth of 2 percent (4) and acquired growth of 9
percent (17). Operating income (EBIT) excluding restructur-
ing costs rose 13 percent to SEK 7,501 M (6,624), equivalent
to an operating margin of 16.1 percent (15.9). Income
before tax excluding restructuring costs totaled SEK 6,731 M
(5,979).

Operating cash flow excluding restructuring payments

remained strong and amounted to SEK 7,044 M (6,080).
Earnings per share after full dilution excluding restructuring
costs were SEK 13.84 (12.30), an increase of 13 percent.

Restructuring
The restructuring programs launched during the period
2006–2007 have been completed. The activity level in the
remaining restructuring programs remained high during the
year and is expected to continue in the same way during the
years 2013–2014.

At year-end 2012, 6,765 employees had left the Group as
a result of the changes in the production structure since the
programs began, of which 896 employees left during the
year. A total of 53 production plants closures have been
implemented and a large number of plants in high-cost
countries have switched from production to final assembly.
A total of 28 offices have also closed during the equivalent
period. The Group’s production is increasingly concentrated
to its own plants in China, central and eastern Europe and to
external suppliers in low-cost countries.

Payments related to the restructuring programs totaled

SEK 498 M (373) for the full year. At year-end 2012, the
remaining provisions for restructuring measures amounted
to SEK 1,068 M (1,665).

Acquisitions and divestments
On 11 January 2012, 100 percent of the share capital was
acquired in Albany Door Systems (USA), a global leader in
automatic high-performance doors. The company has
global market penetration in industrial automatic high-per-
formance doors. The products are used for industrial appli-
cations and in logistics centers, where there is a major need
for customized automatic high-performance doors with
high security and access control. Albany also offers service
and maintenance on the company’s principal markets. The
company is headquartered in Georgia, USA.

On 1 March 2012, 100 percent of the share capital was
acquired in Dynaco (Belgium). Dynaco is a leading manufac-
turer of automatic high-performance doors specializing in

sales to a global distributor network. The acquisition of
Dynaco further strengthens ASSA ABLOY’s position in the
fast-growing market segment of high-performance doors.
Dynaco adds manufacturing expertise, with many leading
patented products and a global distribution channel. The
company is headquartered in Moorsel, Belgium.

On 29 May 2012, 100 percent of the share capital was
acquired in Guoqiang, a Chinese manufacturer of window
hardware. Guoqiang offers a complete range of window
hardware mainly for the Chinese market. The company has a
good market presence in China through an extensive net-
work of sales offices. Guoqiang provides a good fit with the
existing offering in total door opening solutions in China
and gives access to the Chinese window hardware market.
The company is headquartered in Leling, Shandong Prov-
ince, China.

On 24 December 2012, 100 percent of the share capital
was acquired in 4Front, a leading American player in docking
systems. The company offers a complete product range of
docking systems and a large range of fittings. The acquisition
increases the strategic foothold on the important North
American entrance automation market, and provides an
excellent fit with the Group’s growing product portfolio in
docking systems.

A total of 13 acquisitions, including minor acquisitions,
were consolidated during the year. The total purchase price
of these acquisitions was SEK 4,799 M, and preliminary
acquisition analyses show that goodwill and other intangible
assets with an indefinite useful life amount to SEK 3,768 M.
During the year an agreement was signed to sell the
Group’s 70-percent interest in Wangli Security Products Ltd
in China. The business was not considered to be a good fit
with ASSA ABLOY’s operations in the long-term. The divest-
ment is dependent on the approval of the authorities and is
expected to be completed in 2013. The business has been
shown as an asset in a disposal group held for sale. Sales and
operating income have not been reported on a current
basis. No significant capital gain/loss is expected to arise on
the sale.

Research and development
ASSA ABLOY’s expenditure on research and development
during the year amounted to SEK 1,344 M (1,202), equiva-
lent to 2.9 percent (2.9) of sales.

ASSA ABLOY has a central function, Shared Technologies,

with responsibility for the standardization of electronics in
the Group’s common platforms. The objective is that stan-
dardization should result in lower development costs and a
shorter development time for new products.

ASSA ABLOY AnnuAL RepORt 2012

RepORt OF the BOARD OF DiReCtORS 63

Report of the Board of Directors

Sustainable development
Four 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 through the
subsidiaries ASSA AB and ASSA OEM AB. These companies
operate engineering workshops and associated surface-
coating plants, which have an impact on the external envi-
ronment through emissions to water and air as well as solid
waste. The subsidiaries ASSA AB and ASSA OEM AB are
actively addressing environmental issues and are certified in
accordance with ISO 14001. Crawford Entrance Solutions
also carries on licensable and notifiable activities in Gothen-
burg and Strömstad.

Most units outside Sweden carry on licensable activities

and hold equivalent licenses under local legislation.

ASSA ABLOY’s units worldwide are working purposefully
to reduce greenhouse gas emissions. This applies to units on
both mature and emerging markets, and to both existing
and newly acquired companies.

The 2012 Sustainability Report, reporting on the Group’s

prioritized environmental activities and providing other
information on sustainable development, will be published
at the time of the Annual General Meeting in April 2013.

transactions with related parties
No transactions occurred between ASSA ABLOY and related
parties that significantly affected the company’s financial
position and results.

Significant events after the financial year-end
No significant events occurred after the financial year-end
and up to the date of adoption of the Annual Report of ASSA
ABLOY AB.

Outlook
Long-term outlook
ASSA ABLOY anticipates an increase in demand for security
solutions in the long term. A focus on customer value and
innovations as well as leverage on the Group’s strong posi-
tion will accelerate growth and increase profitability.

Organic sales growth is expected to be strong. The ope-
rating margin (EBIT) and operating cash flow are expected to
develop favorably.

RepORt OF the BOARD OF DiReCtORS

ASSA ABLOY AnnuAL RepORt 2012

Report of the Board of Directors
Significant risks and risk management

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 impact on busi-
ness operations and company goals. It is therefore essential
to have a systematic and efficient risk assessment process
and an effective risk management program in general. The
purpose of risk management at ASSA ABLOY is not to avoid
risks, but to take a controlled approach to identifying, man-
aging and minimizing the effects of these risks. This work is
based on an assessment of the probability of the risks and
their potential impact on the Group.

ASSA ABLOY is an international group with a wide geo-

graphical spread, involving exposure to various forms of
strategic, operational and financial risks. Strategic risks refer
to changes in the business environment with potentially sig-
nificant effects on ASSA ABLOY’s operations and business
objectives. Operational risks comprise risks directly attribu-
table to business operations, entailing a potential impact on
the Group’s financial position and performance. Financial
risks mainly comprise financing risk, currency risk, interest
rate risk, credit risk, and risks associated with the Group’s
pension obligations.

ASSA ABLOY’s Board of Directors has overall responsibil-
ity for risk management within the Group and determines
the Group’s strategic focus based on recommendations
from the Executive Team. In view of the decentralized struc-
ture of the Group, and to keep risk analysis and risk manage-
ment as close as possible to the actual risks, a large propor-
tion of operational risk management takes place at division
and business unit level.

Strategic risks
The risks of this nature encountered by ASSA ABLOY include
various forms of business environment risks with an impact
on the security market in general, mainly changes in cus-
tomer behavior, competitors and brand positioning. In addi-
tion, there are country-specific risks.

ASSA ABLOY has global market penetration, with sales
and production in a large number of countries. The empha-
sis is on western Europe and North America, but the propor-
tion of sales in Asia and in central and eastern Europe has
increased in recent years. The Group is therefore naturally
exposed to both general business environment risks and

country-specific risks, including political decisions and com-
prehensive changes in the regulatory framework etc.
Changes in customer behavior in general and 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. As
regards competitors, risk analyses are carried out both cen-
trally and locally.

The Group owns a number of the strongest brands in the

industry, including several global brands that complement
the ASSA ABLOY master brand. Local product brands are
gradually being linked increasingly to the master brand.
Generally speaking, ASSA ABLOY’s good reputation is one of
the Group’s strengths and serves as a foundation for market
leadership.

Activities to maintain and further strengthen ASSA
ABLOY’s good reputation are constantly ongoing. These
include ensuring compliance with ASSA ABLOY’s Code of
Conduct. The Code is an expression of the Group’s high
ambitions with regard to social responsibility, commitment
and environmental considerations.

Operational risks
Operational risks comprise risks directly attributable to busi-
ness operations and with a potential impact on the Group’s
financial position and performance. They include legal and
environmental risks, acquisition of new businesses, restruc-
turing measures, availability and price fluctuations of raw
materials, customer dependence etc. Risks relating to com-
pliance with laws and regulations and to financial reporting
and internal control are also included in this category.

The table on page 66 describes in more detail the man-

agement of these risks.

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, which
manages most financial transactions as well as financial risks
with a group-wide focus.

A financial policy, which is approved by the Board, regu-

lates the allocation of responsibilities and control of the
Group’s financing activities. Group Treasury has the main

StRAtegiC RiSkS

OpeRAtiOnAL RiSkS

FinAnCiAL RiSkS

Changes in the business environment
with potentially significant effects on
operations and business objectives.

Risks directly attributable to business
operations with a potential impact on
financial position and performance.

Financial risks with a potential impact
on financial position and performance.

• Customer behavior
• Competitors
• Brand positioning
• Country-specific risks etc.

• Legal and environmental risks
• Acquisition of new businesses
• Restructuring measures
• Availability and price fluctuations

of raw materials

• Customer dependence etc.

• Financing risks
• Currency risks
• Interest rate risks
• Financial credit risks
• Risks associated with pension

obligations

ASSA ABLOY AnnuAL RepORt 2012

RepORt OF the BOARD OF DiReCtORS 65

Report of the Board of Directors
Significant risks and risk management

Operational risks

Risk management

Comments

Legal risks

The Group continuously monitors anticipated and
implemented changes in legislation in the coun-
tries in which it operates.

At year-end 2012 there are considered to be no
outstanding legal disputes that may lead to signif-
icant costs for the Group.

A group-wide legal policy has been implemented,
specifying the legal framework in which business
operations may be conducted.

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

Guidelines on compliance with applicable com-
petition, export control and anti-bribery legisla-
tion have been implemented.

Legal risks associated with property and liability
issues are continually evaluated.

environmental risks

Ongoing and potential environmental risks are
regularly monitored in the operations. External
expertise is brought in for environmental assess-
ments when necessary.

Prioritized environmental activities and other
information on sustainable development are
reported in the Group’s Sustainability Report.

Acquisition of new businesses

Acquisitions are carried out by a number of peo-
ple with considerable acquisition experience and
with the support of, for example, legal and finan-
cial consultants.

The Group’s acquisitions in 2012 are reported in
the Report of the Board of Directors and in Note
30, Business combinations.

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.

Restructuring measures

The Group is implementing
specific restructuring programs,
which entail some production
units changing direction mainly
to final assembly while certain
units are closed.

The restructuring programs are carried on as a
series of projects with stipulated activities and
schedules.

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

The various projects are systematically monitored
on a regular basis.

price fluctuations and
availability of raw materials

Raw materials are purchased and handled primar-
ily at division and business unit level.

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

Credit losses

insurance risks

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

Trade receivables are spread across a large num-
ber of customers in many markets.

Commercial credit risks are managed locally at
company level and monitored at division level.

A group-wide insurance program is in place, mainly
relating to property, business interruption and lia-
bility risks. This program covers all business units.

The Group’s exposure to the risk areas listed above
is regulated by means of its own captive insurance
company.

Receivables from each customer are relatively
small in relation to total trade receivables. The risk
of significant credit losses for the Group is consid-
ered to be limited.

The Group’s insurance cover is considered to be
generally adequate, providing a reasonable bal-
ance between assessed risk exposure and insur-
ance costs.

Risks relating to internal
control of financial reporting

The organization is considered to be relatively trans-
parent, with a clear allocation of responsibilities.

Internal control and other related issues are
reported in more detail in the Report of the Board
of Directors, section on Corporate governance.

Instructions about the allocation of responsibilities,
authorization and other internal control proce-
dures are laid down in an internal control manual.

Compliance with internal control is evaluated
annually for all operating companies.

Risks relating to financial
reporting

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

A comprehensive systematic risk assessment of
financial reporting has been implemented.

See also the section ‘Basis of preparation’ in Note 1.

Further information on risk management relating
to financial reporting can be found in the Report
of the Board of Directors, section on Corporate
govern ance.

RepORt OF the BOARD OF DiReCtORS

ASSA ABLOY AnnuAL RepORt 2012

responsibility for financial risks within the framework estab-
lished in the financial policy. A large number of financial
instruments are used in this work. Accounting principles,
risk management and risk exposure are described in more
detail in Notes 1 and 34, as well as Note 24 regarding post-
employment employee benefits.

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
Financing risk refers to the risk that financing the Group’s
capital requirements and refinancing outstanding loans
become more difficult or more expensive. It can be reduced
by maintaining an even maturity profile for loans and a high
credit rating. The risk is further reduced by substantial unutil-
ized confirmed credit facilities.

Currency risk
Since ASSA ABLOY sells its products in countries worldwide
and has companies in a large number of countries, the
Group is exposed to the effects of exchange rate fluctua-
tions. These fluctuations affect Group earnings when the
income statements of foreign subsidiaries are translated to
Swedish kronor (translation exposure), and when products
are exported and sold in countries outside the country of
production (transaction 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 transac-
tion exposure, i.e. the relative values of exports and imports
of goods, is relatively limited in the Group, even though it is
expected to increase over time due to rationalization of pro-
duction and purchasing. In accordance with financial policy,
the Group only hedged a very limited part of current cur-
rency flows in 2012. As a result, exchange rate fluctuations
had a direct impact on business operations

Exchange rate fluctuations also affect the Group’s debt-
equity ratio and equity. The difference between the assets
and liabilities of foreign subsidiaries in the respective foreign
currency is affected by exchange rate fluctuations and
causes a translation difference, which affects the Group’s
comprehensive income. A general weakening of the Swed-
ish krona leads to an increase in net debt, but at the same
time increases the Group’s equity. At year-end, the largest
foreign net assets were denominated in USD and EUR.

Interest rate risk
With respect to interest rate risks, interest rate changes 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
14,732 M (14,207) at year-end 2012. Debt was mainly
denominated in SEK, USD and EUR. Group Treasury analyzes
the Group’s interest rate exposure and calculates the impact
on income of interest rate changes on a rolling 12-month
basis. In addition to raising variable-rate and fixed-rate
loans, various interest rate derivatives are used to adjust
interest rate sensitivity. At year-end, the average fixed inter-
est term, excluding pension liabilities, was 32 months (16).

Credit risk
Credit risk arises in ordinary business operations and as a
result of the financial transactions carried out by Group Trea-
sury. Trade receivables are spread across a large number of
customers, which reduces the credit risk. Credit risks relat-
ing to operational business activities are managed locally at
company level and monitored at division level.

Financial risk management exposes ASSA ABLOY to cer-
tain counterparty risks. Such exposure may arise, for exam-
ple, as a result of the placement of surplus cash, borrowings
and derivative financial instruments. Counterparty limits are
set for each financial counterparty and are continuously
monitored.

Pension obligations
At year-end 2012, ASSA ABLOY had obligations for pensions
and other post-employment benefits of SEK 5,437 M
(5,300). The Group manages pension assets valued at SEK
3,193 M (3,115). Provisions in the balance sheet for pension
plans and post-employment healthcare benefits totaled SEK
1,224 M (1,173). Unrecognized actuarial losses and
expenses relating to past service in accordance with applica-
ble regulations, the so-called corridor, amounted at year-
end 2012 to SEK 1,073 M. Changes in the value of assets and
liabilities from year to year are due partly to the develop-
ment of equity and debt capital markets and partly to the
actuarial assumptions made. These assumptions include
discount rates, as well as anticipated inflation and salary
increases.

ASSA ABLOY AnnuAL RepORt 2012

RepORt OF the BOARD OF DiReCtORS 67

Report of the Board of Directors
Corporate governance

Important external rules
and regulations
• Swedish Companies Act
• NASDAQ OMX

Stockholm Rule Book
for Issuers

• Swedish Code of

Corporate Governance
(www.corporate-
governanceboard.se)

Important internal rules
and regulations
• Articles of association
• Board of Directors’ rules

of procedure
• Financial policy
• Accounting Manual
• Communications Policy
Insider Trading Policy
•
Internal control
•
procedures

• Code of Conduct and
Anti-Bribery Policy

ASSA ABLOY is a Swedish public limited liability company,
with registered office in Stockholm, Sweden, whose series B
share is listed on the NASDAQ OMX Stockholm.

The Group’s corporate governance is based on the
Swedish Companies Act, the rules and regulations of NAS-
DAQ OMX Stockholm and the Swedish Code of Corporate
Governance, as well as other applicable external laws, reg-
ulations and recommendations, and internal rules and reg-
ulations.

This Corporate Governance Report has been prepared
as part of ASSA ABLOY’s application of the Swedish Code of
Corporate Governance. ASSA ABLOY reports no deviations
from the Swedish Code of Corporate Governance for 2012.
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 gov-
ernance for ASSA ABLOY can be summarized in a number
of interacting components, which are described below.

orting
Financial rep

Share-
holders
General Meeting
Nomination
Committee

Board of Directors
Audit Committee
Remuneration Committee

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

Decentralized organization

shareholders
At year-end ASSA ABLOY had 17,591 shareholders (18,697).
The principal shareholders are Investment AB Latour (9.5
percent of the share capital and 29.5 percent of the votes)
and Melker Schörling AB (3.9 percent of the share capital
and 11.5 percent of the votes). Foreign shareholders
accounted for around 68 percent (64) of the share capital
and around 46 percent (44) of the votes. The ten largest
shareholders accounted for around 38 percent (38) of the
share capital and around 58 percent (58) of the votes. For
further information on shareholders, see page 123.

A shareholders’ agreement exists between Gustaf Douglas,

Melker Schörling and related companies and includes an
agreement on right of first refusal if any party disposes of
Series A shares. The Board of ASSA ABLOY is not aware of any
other shareholders’ agreements or other agreements
between shareholders in ASSA ABLOY.

Share capital and voting rights
ASSA ABLOY’s share capital amounted at year-end to SEK
370,858,778 distributed among 19,175,323 Series A shares
and 351,683,455 Series B shares. The total number of votes
was 543,436,685. Each Series A share carries ten votes and
each Series B share one vote. All shares have a par value of

SEK 1.00 and give shareholders equal rights to the compa-
ny’s assets and earnings.

Repurchase of own shares
Since 2010 the Board has requested and received a man-
date from the Annual General Meeting to repurchase and
transfer ASSA ABLOY shares. The aim has been to be able to
adapt the company’s capital structure and thereby contrib-
uting to increased shareholder value, to be able to exploit
acquisition opportunities by fully or partly financing com-
pany acquisitions with its own shares, and to secure the
company’s long-term incentive programs. The 2012 Annual
General Meeting authorized the Board to repurchase, dur-
ing the period until the next Annual General Meeting, a
maximum number of Series B shares so that after each
repurchase ASSA ABLOY holds a maximum 10 percent of
the total number of shares in the company.

ASSA ABLOY holds a total of 600,000 (400,000) Series B
shares after repurchase to secure the company’s undertak-
ings in connection with the company’s long-term incentive
programs (LTI 2010, LTI 2011 and LTI 2012). These shares
account for around 0.2 percent (0.1) of the share capital
and each share has a par value of SEK 1.00. The purchase
consideration amounted to SEK 103 M (65).

Of the above shares, 200,000 (100,000) Series B shares
were repurchased in 2012. These account for around 0.05
percent (0.03) of the share capital and each share has a par
value of SEK 1.00. The purchase consideration amounted to
SEK 38 M (17).

Share and dividend policy
ASSA ABLOY’s Series B share is listed on the NASDAQ OMX
Stockholm Large Cap list. At year-end ASSA ABLOY’s market
capitalization amounted to SEK 90,082 M. The Board’s
objective is that, in the long term, the dividend should be
equivalent to 33–50 percent of income after standard tax,
but always taking into account ASSA ABLOY’s long-term
financing requirements.

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

The Annual General Meeting should be held within six

months of the end of the company’s financial year. Mat-
ters considered at the Annual General Meeting include
among other things: dividend distribution; adoption of the
income statement and balance sheet; discharge of the Board
of Directors and the CEO from liability; election of board

RepoRt of the BoaRd of diRectoRs

assa aBLoY annuaL RepoRt 2012

members and Chairman of the Board of Directors; appoint-
ment of the Nomination Committee and auditors; determi-
nation of remuneration guidelines for senior management
and fees for the Board of Directors and auditors. An Extraor-
dinary General Meeting may be held if the Board of Directors
considers this necessary or if ASSA ABLOY’s auditors or share-
holders holding at least 10 percent of the shares so request.

2012 Annual General Meeting
The Annual General Meeting in April 2012 was attended by
shareholders representing 60.2 percent of the share capital
and 73.0 percent of the votes.

At the Annual General Meeting, Carl Douglas, Birgitta
Klasén, Eva Lindqvist, Johan Molin, Sven-Christer Nilsson,
Lars Renström and Ulrik Svensson were re-elected as mem-
bers of the Board of Directors. Jan Svensson was elected as
a new member of the Board of Directors. Further, Lars Ren-
ström was elected as the new Chairman, and Carl Douglas as
Vice Chairman. Gustaf Douglas declined re-election and was
thanked for over 17 years’ service as a member of the Board
of Directors, including the past six years as Chairman.

The Annual General Meeting approved a dividend of
SEK 4.50 per share, in accordance with the proposal of the
Board of Directors and the CEO. In addition, the Annual
General Meeting passed resolutions on fees payable to the
Board of Directors, remuneration guidelines for senior
management, authorization of the Board of Directors
regarding repurchase and transfers of own Series B shares,
and the implementation of a long-term incentive program
(LTI 2012) for senior management and other key staff in the
Group, as well as appointing members of the Nomination
Committee prior to the 2013 Annual General Meeting.

Nomination Committee
The Nomination Committee prior to the 2013 Annual Gen-
eral Meeting comprises Gustaf Douglas (Investment AB
Latour), Mikael Ekdahl (Melker Schörling AB), Liselott Ledin
(Alecta), Marianne Nilsson (Swedbank Robur fonder) and
Per-Erik Mohlin (SEB fonder/SEB Trygg Liv). Gustaf Douglas 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
appoint another representative of one of the major share-
holders to replace 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 2013 Annual General Meeting for
any other reason.

The Nomination Committee has the task of preparing,
on behalf of the shareholders, resolutions on the election of
the Chairman, the Vice Chairman and other members of the
Board of Directors, the appointment of the auditor, the elec-
tion of the Chairman of the Annual General Meeting, the
appointment of the Nomination Committee prior to the
Annual General Meeting, and fees and associated matters.
Prior to the 2013 Annual General Meeting, the Nomina-

tion Committee has made an assessment of whether the
current Board of Directors is appropriately composed and

fulfills the demands made on the Board of Directors by the
company’s present situation and future direction. The
annual evaluation of the Board of Directors was part of the
basis for this assessment. The search for suitable board
members is carried on throughout the year and proposals
for new board members are based in each individual case on
a profile of requirements established by the Nomination
Committee.

Shareholders wishing to submit proposals to the Nomi-

nation Committee can do so by emailing:
nominationcommittee@assaabloy.com.

The Nomination Committee’s proposals are published
at the latest in conjunction with the formal notification of
the Annual General Meeting, which is expected to be issued
around 21 March 2013.

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 of Directors decides on the Group’s
overall objectives, strategies and policies, as well as on
acquisitions, divestments and investments. The Board of
Directors approves the Annual Report and Interim Reports,
proposes a dividend and remuneration guidelines for senior
management to the Annual General Meeting, and makes
decisions concerning the Group’s financial structure.

The Board’s other duties include among other things:
• 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,
• ensuring that the company’s information provision is

transparent, accurate, relevant and reliable,

• ensuring that there is satisfactory control of the compa-
ny’s compliance with laws and other regulations apply-
ing to the company’s operations, and

• ensuring that necessary ethical guidelines for the com-

pany’s conduct are established.

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

In addition to leading the work of the Board of Directors,

the Chairman should continuously monitor the Group’s
operations and development through contact with the CEO.
The Chairman should consult the CEO on strategic issues
and represent the company in matters concerning the 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 of Directors is evaluated annually, and that new
members of the Board of Directors receive appropriate
training.

assa aBLoY annuaL RepoRt 2012

RepoRt of the BoaRd of diRectoRs 69

Report of the Board of Directors
Corporate governance

The Board of Directors has at least four scheduled meetings
and one statutory meeting per year. The scheduled meetings
take place in connection with the company’s publication of
its year-end or quarterly results. At least once a year the
Board of Directors visits one of the Group’s businesses, possi-
bly combined with a board meeting. In addition, extra board
meetings are held when necessary. All meetings follow an
approved agenda. Prior to each meeting, a draft agenda
including documentation is sent to all board members.

The Board of Directors has a Remuneration Committee
and an Audit Committee. The purpose of these Committees
is to deepen and streamline the work of the Board of Direc-
tors and to prepare matters in these areas. The Committees
have no decision-making powers. The members of the Com-
mittees are appointed annually by the Board of Directors at
the statutory board meeting. Instructions for the Commit-
tees are included in the Board of Directors’ rules of proce-
dure.

Board of Directors’ work in 2012
During the year the Board of Directors held nine meetings
(five scheduled meetings, one statutory meeting and three
extraordinary meetings). One board member was absent at
two meetings. All board members were present at the other
meetings. At the scheduled board meetings, the CEO
reported on the Group’s performance and financial posi-
tion, including the outlook for the coming quarters. Invest-
ments, acquisitions and divestments were also considered.
All acquisitions and divestments with a value (on a debt-free
basis) exceeding SEK 100 M are decided by the Board of
Directors. This amount presumes that the matter relates to
acquisitions or divestments within the framework of the
strategy agreed by the Board of Directors.

More important matters dealt with by the Board of
Directors during the year included, among other things,
ASSA ABLOY’s investment in Seos, a commercial ecosystem
for creating and managing digital keys in NFC cell phones.
In addition, the Board of Directors dealt with a number of
acquisitions, including Guoqiang and 4Front. During the
year, the Board of Directors conducted in-depth reviews of
the Group’s operations in Entrance Systems and EMEA and
visited Americas’ operations Curries and Graham in the USA.

Remuneration Committee
During 2012 the Remuneration Committee comprised Lars
Renström (Chairman), Jan Svensson and Sven-Christer Nilsson.
The Remuneration Committee’s task is to draw up remu-

neration guidelines for senior management, which the
Board of Directors proposes to the Annual General Meeting
for resolution. The Board of Directors’ proposal for guide-
lines prior to the 2013 Annual General Meeting can be seen
on page 77.

The Remuneration Committee also prepares, negotiates

and evaluates matters regarding salaries, bonus, pension,
severance pay and incentive programs for the CEO and
other senior executives.

The Committee held one meeting in 2012 at which all

members were present.

The Remuneration Committee’s work included, among
other things, preparing a proposal for the remuneration of
the Executive Team, evaluating existing incentive programs,
and preparing a proposal for a long-term incentive program
for 2013. The meetings of the Committee are minuted, the
minutes are distributed with material for the Board of Direc-
tors and a verbal report is given at board meetings.

Audit Committee
During 2012 the Audit Committee comprised Ulrik
Svensson (Chairman), Birgitta Klasén and Jan Svensson.

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 operations. The Audit Committee held four meetings
in 2012 at which all members, the company’s auditor and
representatives of senior management were present. More
important matters dealt with by the Audit Committee dur-
ing the year included internal control, financial statements
and valuation matters, tax matters and legal risk areas.

The meetings of the Committee are minuted, the min-
utes are distributed with material for the Board of Directors
and a verbal report is given at board meetings.

ASSA ABLOY’s Board of Directors
The Board of Directors is elected annually at the Annual
General Meeting for the period until the end of the next
Annual General Meeting and shall according to the articles
of association comprise a minimum six and a maximum ten
members elected by the Meeting. Two of the members are
appointed by the employee organizations in accordance
with Swedish law. The employee organizations also appoint
two deputies. The Board of Directors currently consists of
eight elected members and two employee representatives.
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 of Directors
The Annual General Meeting passes a resolution on the
remuneration to be paid to board members. The 2012
Annual General Meeting passed a resolution on board fees
totaling SEK 4,600,000 (excluding remuneration for commit-
tee work), to be allocated between the members as follows:
SEK 1,350,000 to the Chairman, SEK 750,000 to the Vice
Chairman and SEK 500,000 to each of the other members
appointed by the Annual General Meeting and not employed
by the company. As remuneration for committee work, the
Chairman of the Audit Committee is to receive SEK 200,000,
the Chairman of the Remuneration Committee SEK 100,000,
members of the Audit Committee (the Chairman excluded)
SEK 100,000, and members of the Remuneration Committee
(the Chairman excluded) SEK 50,000.

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assa aBLoY annuaL RepoRt 2012

The Chairman of the Board of Directors and other board
members have no pension benefits or severance pay agree-
ments. The CEO and employee representatives do not

receive board fees. For further information on the remuner-
ation of board members in 2012, see Note 33.

Independence of the Board of Directors

ASSA ABLOY’s Board of
Directors fulfills the require-
ments for independence
in accordance with the
Swedish Code of Corporate
Governance.

name

Lars Renström
Carl Douglas
Birgitta Klasén
Eva Lindqvist
Johan Molin
Sven-Christer Nilsson
Jan Svensson
Ulrik Svensson

position

independent of the company
and its management

independent of the company’s
major shareholders

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

Yes
Yes
Yes
Yes
No
Yes
Yes
Yes

Yes
No
Yes
Yes
–
Yes
No
No

The Board of Directors’ composition and shareholdings

position

elected

Born

Remuneration
committee

audit
committee

name

Lars Renström
Carl Douglas
Birgitta Klasén
Eva Lindqvist
Johan Molin

Chairman of the Board
Vice Chairman
Board member
Board member
Board member,
President and CEO

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

Per Edvin Nyström

Mats Persson

Rune Hjälm

2008
2004
2008
2008

2006
2001
2012
2008

1951
1965
1949
1958

1959
1944
1956
1961

2003

1950

1994

1955

2005

1964

1994

1955

Chairman
–
–
–

–
Member
Member
–

–
–
Member
–

–
–
Member
Chairman

–

series a
shares¹

–
13,865,243
–
–

series B
shares¹

10,000
21,300,000
7,000
2,300

–
–
–
–

–

526,267
5,000
2,000
3,000

2,600

–

5,727

1 Including related parties and through companies. Shareholdings as at 31 December 2012. This information is updated regularly at www.assaabloy.com

assa aBLoY annuaL RepoRt 2012

RepoRt of the BoaRd of diRectoRs 71

Report of the Board of Directors
Corporate governance Board of Directors

Board members elected at the 2012 Annual General Meeting

Lars Renström
Chairman.
Board member since 2008.
Born 1951.
Master of Science in Engineering and Bachelor of Science in
Business Administration and 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 related parties and through
companies): 10,000 Series B shares.

carl douglas
Vice Chairman.
Board member since 2004.
Born 1965.
BA (Bachelor of Arts).
Self-employed.
Other appointments: Vice Chairman of Securitas AB. Board
member of Investment AB Latour and Swegon AB.
Shareholdings (including related parties and through
companies): 13,865,243 Series A shares and 21,300,000
Series B shares through Investment AB Latour.

Birgitta Klasén
Board member 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. Prior to that, CIO of Telia. Held
various posts at IBM 1976–1994.
Other appointments: Board member of Acando AB and IFS AB.
Shareholdings (including related parties and through
companies): 7,000 Series B shares.

eva Lindqvist
Board member since 2008.
Born 1958.
Master of Science in Engineering and Bachelor of Science in
Business Administration and Economics.
Senior Vice President of Mobile Business at Telia Sonera AB
2006–2007. Prior to that, several senior posts at TeliaSonera
AB, including President and Head of Business Operation
International Carrier, and various posts in the Ericsson Group
1981–1999.
Other appointments: Board member of companies
including Tieto Oy, Transmode AB and Episerver AB. Member
of the Royal Swedish Academy of Engineering Sciences (IVA).
Shareholdings (including related parties and through
companies): 2,300 Series B shares.

Johan Molin
Board member since 2006.
Born 1959.
Bachelor of Science in Business Administration and
Economics.
President and CEO of ASSA ABLOY AB since 2005. CEO of
Nilfisk-Advance 2001–2005. Various senior positions mainly
in finance and marketing, later divisional head in the Atlas
Copco Group 1983–2001.
Other appointments: Chairman of Nobia AB.
Shareholdings (including related parties and through
companies): 526,267 Series B shares.

sven-christer nilsson
Board member since 2001.
Born 1944.
Bachelor of Science.
President and CEO of Telefonaktiebolaget LM Ericsson 1998–
1999, various executive positions mainly in marketing and
general management in the Ericsson Group 1982–1997.
Other appointments: Chairman of the Swedish Defence
Materiel Administration (FMV). Board member of Sprint
Nextel Corporation and CEVA, Inc.
Shareholdings (including related parties and through
companies): 5,000 Series B shares.

Lars Renström

Carl Douglas

Birgitta Klasén

Eva Lindqvist

Johan Molin

Sven-Christer Nilsson

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assa aBLoY annuaL RepoRt 2012

Shareholdings as at 31 December 2012. This information is updated regularly at www.assaabloy.com

ulrik svensson
Board member since 2008.
Born 1961.
Bachelor of Science in Business Administration and
Economics.
CEO of Melker Schörling AB. CFO of Swiss International
Airlines Ltd. 2003–2006. CFO of Esselte AB 2000–2003 and
Controller/CFO of the Stenbeck Group’s foreign telecoms
ventures 1992–2000.
Other appointments: Board member of AarhusKarlshamn AB,
Loomis AB, Hexagon AB, Hexpol AB and Flughafen Zürich AG.
Shareholdings (including related parties and through
companies): 3,000 Series B shares.

Jan svensson
Board member since 2012.
Born 1956.
Mechanical Engineer and Bachelor of Science in Business
Administration and Economics.
President and CEO of Investment AB Latour since 2003.
Other appointments: Chairman of AB Fagerhult, Nederman
Holding AB and Oxeon AB. Board member of Loomis AB,
Investment AB Latour and Tomra Systems ASA.
Shareholdings (including related parties and through
companies): 2,000 Series B shares.

Board members appointed by employee organizations

seppo Liimatainen
Board member since 2003.
Born 1950.
Employee representative, Federation of Salaried Employees
in Industry and Services.
Shareholdings: 2,600 Series B shares.

Mats persson
Board member since 1994.
Born 1955.
Employee representative, Swedish Metal Workers Union.
Shareholdings: –

Rune hjälm
Deputy board member since 2005.
Born 1964.
Employee representative, Swedish Metal Workers Union.
Chairman of EWC, European Works Council in the
ASSA ABLOY Group.
Shareholdings: –

per edvin nyström
Deputy board member since 1994.
Born 1955.
Employee representative, Swedish Metal Workers Union.
Shareholdings: 5,727 Series B shares.

Ulrik Svensson

Jan Svensson

Seppo Liimatainen

Mats Persson

Rune Hjälm

Per Edvin Nyström

assa aBLoY annuaL RepoRt 2012

RepoRt of the BoaRd of diRectoRs 73

Shareholdings as at 31 December 2012. This information is updated regularly at www.assaabloy.com

Report of the Board of Directors
Corporate governance The Executive Team

Johan Molin

Tzachi Wiesenfeld

Carolina Dybeck Happe

Thanasis Molokotos

Denis Hébert

Tim Shea

Jonas Persson

Juan Vargues

Ulf Södergren

tzachi Wiesenfeld
Born 1958.
Bachelor of Science in Industrial
Engineering, MBA.
Executive Vice President.
Head of EMEA division.
Employed since: 2000.
Shareholdings: 11,113 Series B shares.

thanasis Molokotos
Born 1958.
Master of Science in Engineering.
Executive Vice President.
Head of Americas division.
Employed since: 1996.
Shareholdings: 37,157 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: 5,584 Series B shares.

Juan Vargues
Born 1959.
Degree in Mechanical Engineering, MBA.
Executive Vice President.
Head of Entrance Systems division.
Employed since: 2002.
Shareholdings: 10,677 Series B shares.

The Executive Team

Johan Molin
Born 1959.
Bachelor of Science in Business
Administration and Economics.
President and CEO.
Head of Global Technologies division.
Employed since: 2005.
Shareholdings: 526,267 Series B shares.

carolina dybeck happe
Born 1972.
Masters degree in Finance.
Executive Vice President and
Chief Financial Officer (CFO).
Employed since: 2012.
Shareholdings: 5,769 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: 9,301 Series B shares.

Jonas persson
Born 1969.
Master of Science in Engineering.
Executive Vice President.
Head of Asia Pacific division.
Employed since: 2009.
Shareholdings: 13,333 Series B shares.

ulf södergren
Born 1953.
Master of Science in Engineering and
Bachelor of Science in Business
Administration and Economics.
Executive Vice President.
Chief Technology Officer (CTO).
Employed since: 2000.
Shareholdings: 6,907 Series B shares.

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Shareholdings as at 31 December 2012. This information is updated regularly at www.assaabloy.com

the executive team and organization
The Executive Team consists of the CEO, the heads of the
Group’s divisions, the Chief Financial Officer and the Chief
Technology Officer. ASSA ABLOY’s operations are divided
into five divisions, where the fundamental principle is that
the divisions should be responsible, as far as possible, for
business operations, while various functions at headoffice
are responsible for coordination, monitoring, policies and
guidelines at an overall level. The Group’s structure results
in a geographical and strategic spread of responsibility
ensuring short-decision-making paths. The Group’s man-
agement philosophy is based on trust and 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
employee development. These principles are described in
the publication ‘Our Road to the Future’, which has been
provided to all employees in the Group. Other important
guidelines and policies concern financial control, communi-
cation issues, insider issues, the Group’s brands, business
ethics, export control, and environmental issues.
ASSA ABLOY’s financial policy and accounting manual pro-
vide the framework for financial control and monitoring.
The Group’s communications policy aims to ensure essen-
tial information is provided at the right time and in compli-
ance with applicable rules and regulations. ASSA ABLOY has
adopted an insider policy to complement applicable Swed-
ish insider legislation. This policy applies to all persons
reported to the Swedish Financial Supervisory Authority as
holding insider position in ASSA ABLOY AB (including sub-
sidiaries) as well as certain other categories of employees.
Brand guidelines 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 and safety, business ethics, working
conditions, human rights and social responsibility. Applica-
tion of the Code of Conduct in the Group’s different units is
monitored regularly to ensure compliance and relevance.
ASSA ABLOY has also adopted an anti-bribery policy and an
export control policy that applies to the whole Group.

Decentralized organization
ASSA ABLOY’s operations are decentralized. Decentraliza-
tion is a deliberate strategic choice based on the industry’s
local nature and a conviction of the benefits of a divisional
control model.

ASSA ABLOY’s operating structure is designed to create

maximum transparency, to facilitate financial and opera-
tional monitoring, and to promote the flow of information
and communication across the Group. The Group consists
of five divisions, which are divided into around 30 business
units. These consist in turn of a large number of sales and
production units, depending on the structure of the busi-
ness unit concerned. Apart from monitoring by unit, moni-
toring of products and markets is also carried out.

internal control of financial reporting
ASSA ABLOY’s process for internal control of financial
reporting is designed to provide reasonable assurance of
reliable financial reporting, which is in compliance with
generally accepted accounting principles, applicable laws
and regulations, and other requirements for listed compa-
nies. The process is based on the internal control framework
issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). It can be divided into a
number of sub-components, as defined in the above frame-
work, and is described in more detail below.

Control environment
The Board of Directors is responsible for effective internal
control and has therefore established fundamental docu-
ments of significance for financial reporting. These docu-
ments include, among other things, the Board of Directors’
rules of procedure and instructions to the CEO, the Code of
Conduct, financial policy, and an annual financial evaluation
plan. Regular meetings are held with the Audit Committee.
The Group has an internal control function whose primary
objective is ensuring 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. Minimum levels for
internal control of financial reporting have been established
and are monitored annually for all operating companies.
The Code of Conduct was previously reviewed and updated,
and compliance is monitored systematically in operations.

assa aBLoY annuaL RepoRt 2012

RepoRt of the BoaRd of diRectoRs 75

Risk assessment
Risk assessment includes identifying and evaluating the risk
of material errors in accounting and financial reporting at
Group, division and local levels. A number of previously
established documents govern the procedures to be used
for accounting, finalizing accounts, financial reporting and
review. The entire Group uses a financial reporting system
with pre-defined report templates.

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.

A global financial internal audit function has been estab-
lished and carries out annual financial evaluations in accord-
ance with the plan annually adopted by the Audit Commit-
tee. The results of the financial evaluations for 2012 are sub-
mitted to the Audit Committee and the auditors. Group-
wide internal control guidelines are reviewed annually.
These guidelines affect various procedures, such as ordering
and purchasing (including payments), finalizing accounts
and plants, as well as compliance with various relevant poli-
cies, legal issues and HR issues.

Information and communication
Reporting and accounting manuals as well as other financial
reporting guidelines are available to all employees con-
cerned on the Group’s intranet. A regular review and analy-
sis of financial outcomes is carried out at both business unit
and division level and as part of the Board of Directors’
established operating structure. The Group also has estab-
lished procedures for external communication of financial
information, in accordance with the rules and regulations
for listed companies.

Review process
The Board of Directors and the Audit Committee evaluate
and review the Annual Report and Interim Reports prior to
publication. The Audit Committee monitors the financial
reporting and 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 legal and operating review. Operating reviews con-
form to a structure in which sales, earnings, cash flow, capi-
tal employed and other important key figures and trends for
the Group are compiled, and form the basis for analysis and
actions by management and controllers at different levels.
Financial reviews take place quarterly at divisional board
meetings, monthly in the form of performance reviews and
through more informal analysis. Other important group-
wide components of internal control are the annual busi-
ness planning process and monthly and quarterly forecasts.

The Group-wide internal control guidelines were
reviewed during the year in all operating companies
through self-assessment and in some cases a second opin-
ion from external auditors. These self-assessments are then
reviewed at division and Group level to further improve the
reliability of the financial reporting.

external audit
At the 2010 Annual General Meeting, Pricewaterhouse-
Coopers (PwC) were appointed as the company’s external
auditors for a four-year period up to the end of the 2014
Annual General 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 1966, is responsible for auditing SEB, Securi-
tas and Ericsson as well as ASSA ABLOY.

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

The company’s auditor attends all 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 conducted in accordance with
International Standards in Auditing (ISA), which has been
good auditing practice in Sweden since 2011. The audit of
the financial statements for legal entities outside Sweden is
conducted in accordance with statutory requirements and
other applicable rules in each country. For information
about the fees paid to auditors and other assignments car-
ried out in the Group in the past three financial years, see
Note 3 and the Annual Report for 2011, Note 3.

RepoRt of the BoaRd of diRectoRs

assa aBLoY annuaL RepoRt 2012

Report of the Board of Directors
Remuneration guidelines
for senior management

the Board of directors’ proposal for remuneration
guidelines for senior management
The Board of Directors of ASSA ABLOY proposes that the
2013 Annual General Meeting adopts the following guide-
lines for the remuneration and other employment condi-
tions of the President and CEO and the other members of
the Executive Team. The proposed guidelines below do not
involve any material change, compared with the guidelines
adopted by the 2012 Annual General Meeting. The basic
principle is that remuneration and other employment con-
ditions should be in line with market conditions and be
competitive. ASSA ABLOY takes into account both global
remuneration practice and practice in the home country of
each member of the Executive Team. The total remunera-
tion of the Executive Team should consist of basic salary,
variable components in the form of annual and long-term
variable remuneration, other benefits and pension.

The total remuneration of the Executive Team, including
previous commitments not yet due for payment, is reported
in Note 33.

Fixed and variable remuneration
The basic salary should be competitive and reflect responsi-
bility and performance. The variable part consists of remu-
neration paid partly in cash and partly in the form of shares.
The Executive Team should be able to receive variable cash
remuneration, based on the outcome in relation to financial
targets and, when applicable, individual targets. This remu-
neration should be equivalent to a maximum 75 percent of
the basic salary (excluding social security costs).

In addition, the Executive Team should, within the frame-

work of the Board of Directors’ proposal for a long-term
incentive program, be able to receive variable remunera-
tion in the form of shares, based on the outcome in rela-
tion to a range determined by the Board of Directors for the

performance of earnings per share during 2013. This remu-
neration model also includes the right, when purchasing a
share under certain conditions, to receive a free matching
share from the company. This remuneration should, if the
share price is unchanged, be equivalent to a maximum 75
percent of the basic salary (excluding social security costs).

The cost of variable remuneration for the Executive Team

as above, assuming maximum outcome, totals around SEK
61 M (excluding social security costs). This calculation is
made on the basis of the current members of the Executive
Team.

Other benefits and pension
Other benefits, such as company car, extra health insurance
or occupational healthcare, should be payable to the extent
this is considered to be in line with market conditions in the
market concerned. All members of the Executive Team
should be covered by defined contribution pension plans,
for which pension premiums are allocated from the execu-
tive’s total remuneration and paid by the company during
the period of employment.

Notice and severance pay
If the CEO is given notice, the company is liable to pay the
equivalent of 24 months’ basic salary and other employ-
ment benefits. If one of the other members of the Executive
Team is given notice, the company is liable to pay a maxi-
mum six months’ basic salary and other employment bene-
fits plus an additional 12 months’ basic salary.

Deviations from guidelines
The Board of Directors should have the right to deviate from
these guidelines if there are particular reasons for doing so
in an individual case.

assa aBLoY annuaL RepoRt 2012

RepoRt of the BoaRd of diRectoRs 77

Sales and income

• Organic growth was 2 percent (4), while acquired growth was 9 percent (17).

• Operating income (EBIT) increased by 13 percent to SEK 7,501 M (6,624),

equivalent to an operating margin of 16.1 percent (15.9).

• Earnings per share after full dilution increased by 13 percent to SEK 13.84 (12.30).

Sales
The Group’s sales amounted to SEK 46,619 M (41,786).
Exchange rate effects had an impact on sales of SEK 290 M
(–2,309).

Change in sales

Organic growth
Acquired growth
Exchange rate effects
Total

2011

2012

4
17
–8
13

2
9
1
12

The total change in sales for 2012 was 12 percent (13). Organic
growth was 2 percent (4) and acquired units made a positive
contribution of 9 percent (17).

Sales by product group
Mechanical locks, lock systems and fittings accounted for 36
percent (38) of total sales. Electromechanical and electronic
locks rose to 46 percent (42) of sales, of which entrance
automation accounted for 24 percentage points (20). Secu-
rity doors and hardware accounted for 18 percent (20) of
sales.

Cost structure
Total wage costs, including social security expenses and pen-
sion expenses, amounted to SEK 12,705 M (11,835), equiva-
lent to 27 percent (28) of sales. The average number of
employees in the Group was 42,762 (41,070).

The Group’s material costs amounted to SEK 16,111 M

(14,655), equivalent to 35 percent (35) of sales.

Other purchasing costs totaled SEK 9,256 M (7,616),

equivalent to 20 percent (18) of sales.

Depreciation and amortization of non-current assets
amounted to SEK 1,034 M (1,022), equivalent to 2 percent
(2) of sales.

Operating income
Operating income (EBIT) excluding restructuring costs rose
to SEK 7,501 M (6,624), due to efficiency savings and contin-
ued growth in operations. The corresponding operating
margin was 16.1 percent (15.9). Exchange rate effects
amounted to SEK 37 M (–430).

Operating income before depreciation and amortization
(EBITDA) excluding restructuring costs totaled SEK 8,536 M
(7,646). The corresponding margin was 18.3 percent (18.3).

Items affecting comparability
Operating income for the year was not reduced by restructur-
ing costs (–1,420). Net income for the year from assets held
for sale and discontinued operations amounted to SEK 11 M
(404). In 2011 Cardo Flow Solutions and Lorentzen & Wettre
were divested, giving rise to a capital gain of SEK 404 M.

Income before tax
Income before tax excluding restructuring costs totaled SEK
6,731 M (5,979). The exchange rate effect amounted to SEK
28 M (–399). Net financial items amounted to SEK –770 M
(–645). The change in net financial items is mainly due to
increased pension and interest expenses. The profit margin,
defined as income before tax in relation to sales, was 14.4
percent (14.3) excluding restructuring costs.

The parent company’s income before tax was SEK

3,507 M (2,297).

Tax
The Group’s tax expense totaled SEK 1,617 M (1,095), equiv-
alent to an effective tax rate of 24 percent (24).

Earnings per share
Earnings per share after full dilution, excluding items affect-
ing comparability, amounted to SEK 13.84 (12.30), an
increase of 13 percent.

SALES AND OPERATING INCOME

SEK M

50,000

40,000

30,000

20,000

10,000

SEK M

7,500

6,000

4,500

3,000

1,500

 Sales

Operating income1

1 Excluding items affecting comparability
2008, 2009 and 2011.

CONSOLIDATED fINANCIAL STATEMENTS

ASSA ABLOY ANNuAL rEpOrT 2012

Consolidated income statement and
Statement of comprehensive income

Income statement, 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 from continuing operations

Net income of disposal group classified as held for sale and
discontinued operations
Net income

Net income attributable to:
Parent company’s shareholders
Non-controlling interest

Earnings per share
before dilution, SEK
after dilution, SEK
after dilution and excluding items affecting comparability, SEK

Statement of comprehensive income, SEK M

Net income

Other comprehensive income
Share of other comprehensive income of associates
Cashflow hedges
Net investment hedges
Exchange rate differences
Total comprehensive income

Total comprehensive income attributable to:
– Parent company’s shareholders
– Non-controlling interest

Note

4
5
6–9, 33

10
9, 11

13
13
13

2011

41,786
–26,829
14,957

–6,408
–2,109
–1,202
–77
43
5,204

59
–704
4,559

–1,095
3,465

404
3,869

3,843
26

10.45
10.33
12.30

2011

3,869

21
–30
–108
327
4,079

4,040
39

2012

46,619
–28,190
18,429

–7,162
–2,410
–1,344
–82
70
7,501

32
–802
6,731

–1,617
5,114

11
5,125

5,112
14

13.85
13.84
13.84

2012

5,125

–96
–1
181
–978
4,232

4,226
6

SALES BY PRODUCT GROUP, 2012

EARNINGS PER SHARE AFTER TAX AND DILUTION

 Mechanical locks, lock systems

and fittings, 36% (38)

 Entrance automation, 24% (20)
 Electromechanical and

electronic locks, 22% (22)

 Security doors and
hardware, 18% (20)

SEK

 Earnings per share

after tax and dilution1

1 Excluding items affecting comparability
2008, 2009 and 2011.

ASSA ABLOY ANNuAL rEpOrT 2012

CONSOLIDATED fINANCIAL STATEMENTS 79

Comments by division

ASSA ABLOY is organized into five divisions. EMEA (Europe, Middle East and Africa) division, Americas (North
and South America) division and Asia Pacific (Asia, Australia and New Zealand) division manufacture and sell
mechanical and electromechanical locks, security doors and hardware in their respective geographical markets.
Global Technologies division operates worldwide in the product areas of access control systems, secure card
issuance, identification technology and hotel locks. Entrance Systems division is a global supplier of entrance
automation products and service.

Global Technologies
Sales totaled SEK 6,262 M (5,756), with organic growth of
6 percent (11). Acquired units contributed 1 percent (13)
to sales. Operating income excluding restructuring costs
amounted to SEK 1,073 M (897), with an operating margin
(EBIT) of 17.1 percent (15.6). Return on capital employed
excluding restructuring costs was 17.3 percent (14.3). Ope-
rating cash flow before interest paid was SEK 1,140 M (933).
The division showed continued strong organic growth

during the year for both business units, HID Global and
Hospitality, driven by new products and services. Operating
margin and operating cash flow increased considerably.

Entrance Systems
Sales totaled SEK 10,979 M (8,278), with organic growth of
–2 percent (5). Acquired units contributed 37 percent (110)
to sales. Operating income excluding restructuring costs
amounted to SEK 1,546 M (1,197), with an operating margin
(EBIT) of 14.1 percent (14.5). Return on capital employed
excluding restructuring costs was 12.3 percent (12.2). Ope-
rating cash flow before interest paid was SEK 1,648 M
(1,317).

Demand was stable but weak in Europe during the year.
The market position continued to strengthen considerably
due to major acquisitions. Sales and operating cash flow
increased substantially, compared with the previous year.

Other
The costs of group-wide functions, such as corporate man-
agement, accounting and finance, supply management and
group-wide product development, amounted to SEK 382 M
(418). Elimination of sales between the Group’s segments
and restructuring costs are included in ‘Other’.

EMEA
Sales totaled SEK 13,382 M (13,030), with organic growth
of 1 percent (0). Acquired units contributed 4 percent (5)
to sales. Operating income excluding restructuring costs
amounted to SEK 2,279 M (2,203), with an operating margin
(EBIT) of 17.0 percent (16.9). Return on capital employed
excluding restructuring costs was 22.6 percent (22.0). Ope r-
ating cash flow before interest paid was SEK 2,241 M
(2,142).

Demand on mature European markets remained weak
during the year. Continued intensive efforts on market pres-
ence, cost-efficiency, and the launch of new products
improved the operating margin.

Americas
Sales totaled SEK 9,671 M (8,906), with organic growth of
4 percent (2). Acquired units contributed 1 percent (1) to
sales. Operating income excluding restructuring costs
amounted to SEK 2,007 M (1,812), with an operating margin
(EBIT) of 20.8 percent (20.3). Return on capital employed
excluding restructuring costs was 23.6 percent (22.8). Oper-
ating cash flow before interest paid was SEK 1,797 M
(1,731).

Sales rose mainly in high-security products and electro-

mechanical products, combined with a recovery on the
American residential market. The operating margin
remained high due to strengthened market presence and
a broad product portfolio.

Asia pacific
Sales totaled SEK 7,224 M (6,633), with organic growth of
3 percent (9). Acquired units contributed 1 percent net (4)
to sales. Operating income excluding restructuring costs
amounted to SEK 978 M (933), with an operating margin
(EBIT) of 13.5 percent (14.1). Return on capital employed
excluding restructuring costs was 20.7 percent (23.6). Ope-
rating cash flow before interest paid was SEK 1,348 M (912).
Sales rose further in China, where market demand slowed
during the year. Demand was strong on the majority of other
Asian markets, but negative in Australia. Operating margin
and cash flow were maintained at a good level.

EXTERNAL SALES, 2012

 EMEA, 28% (30)
 Americas, 21% (21)
 Asia Pacific, 14% (15)
 Global Technologies, 13% (14)
 Entrance Systems, 24% (20)

CONSOLIDATED fINANCIAL STATEMENTS

ASSA ABLOY ANNuAL rEpOrT 2012

Results by division

SEK M

Sales, external
Sales, internal
Sales

Organic growth
Share of earnings in associates

Operating income (EBIT) excluding
items affecting comparability
Operating margin (EBIT) excluding
items affecting comparability
Items affecting comparability 6

Operating income (EBIT)
Operating margin (EBIT)
Net financial items
Tax on income
Net income from discontinued operations
Net income

Capital employed
–of which goodwill
– of which other intangible
and tangible assets
–of which shares in associates
Return on capital employed excluding
items affecting comparability

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
Interest paid and received
Operating cash flow 5

EMEA1

Americas2

Asia pacific3

Global
Technologies4

Entrance
Systems

Other

Total

2011

2012

12,762 13,177
204
13,030 13,382

268

0%
2

1%
–6

2011

8,867
39
8,906

2%
–

2012

9,623
48
9,671

4%
–

2011

6,243
391
6,633

9%
–

2012

6,705
518
7,224

3%
5

2011

5,688
67
5,756

11%
–

2012

6,191
71
6,262

6%
–

2011

2012

2011

8,226 10,923
57
8,278 10,979

–
–817 7
–817

2012

–
–8987
–898

2011

2012

41,786 46,619
–
41,786 46,619

–

5%
41

–2%
71

–
–

4%
43

2%
70

2,203

2,279

1,812

2,007

933

978

897

1,073

1,197

1,546

–418

–382

6,624

7,501

16.9%
–587

1,616
12.4%

17.0%
–

2,279
17.0%

20.3%
–150

1,662
18.7%

20.8%
–

2,007
20.8%

14.1%
–48

885
13.3%

13.5%
–

978
13.5%

15.6%
–87

810
14.1%

17.1%
–

1,073
17.1%

14.5%
–423

774
9.3%

14.1%
–

1,546
14.1%

–
–125

–543
–

–
–

–382
–

15.9%
–1,420

5,204
12.5%
–645
–1,095
404
3,869

16.1%
–

7,501
16.1%
–770
–1,617
11
5,125

8,950
5,564

2,590
33

9,217
5,846

2,556
22

8,468
6,041

1,484
–

8,301
5,913

1,442
–

4,278
3,410

2,464
–

5,168
4,326

2,488
315

6,449
4,846

1,258
–

1,133
–

2,237
1,178

3,377
1,182

5,717 10,837 13,189
8,323
7,153
4,524

–1,041
–

–518
–

37,942 41,073
27,014 28,932

22.0%

22.6%

22.8%

23.6%

20.7%

14.3%

17.3%

12.2%

12.3%

1,616
587
385
–331
8
–123
2,142

2,279
–
353
–441
128
–79
2,241

1,662
150
182
–140
5
–128
1,731

2,007
–
176
–211
9
–185
1,797

885
48
148
–215
10
35
912

978
–
162
–203
274
135
1,348

810
87
169
–98
0
–35
933

1,073
–
172
–112
0
8
1,140

774
423
126
–111
19
86
1,317

1,546
–
164
–113
109
–59
1,648

93
–

–

–543
125
12
–3
10
–73
–472

0
–482

97
–

10,126 11,093
1,519

1,211

–

17.4%

18.2%

–382
–
6
–7
9
102
–272

–312
–546

5,204
1,420
1,022
–898
52
–238
6,563

0
–482
6,080

7,501
–
1,034
–1,086
530
–77
7,902

–312
–546
7,044

Average number of employees

10,071 10,260

6,658

6,620 15,784 15,284

2,819

3,029

5,605

7,429

133

140

41,070 42,762

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.
7 Of which eliminations SEK 898 M
(817).

The segments have been determined on the basis of report-
ing to the CEO, who monitors the overall performance and
makes decisions on resource allocation.

The breakdown of sales is based on customer sales in the
respective country. Sales between segments are carried out
at arm’s length.

The different segments generate their revenue from the
manufacture and the sale of mechanical, electromechanical
and electronic locks, lock systems and fittings, and security
doors and hardware.

For further information on sales, see Note 2.

OPERATING INCOME, 2012 1, 2

AVERAGE NUMBER OF EMPLOYEES, 2012

 EMEA, 29% (31)
 Americas, 25% (26)
 Asia Pacific, 12% (13)
 Global Technologies, 14% (13)
 Entrance Systems, 20% (17)

1 Operating income excluding
items affecting comparability.

2 “Other” is not included in the
calculation. See section Com-
ments by division for what is
included in “Other”.

 EMEA, 24% (25)
 Americas, 16% (16)
 Asia Pacific, 36% (38)
 Global Technologies, 7% (7)
 Entrance Systems, 17% (14)

ASSA ABLOY ANNuAL rEpOrT 2012

CONSOLIDATED fINANCIAL STATEMENTS 81

Financial position

• Capital employed amounted to SEK 41,073 M (37,942).

• Return on capital employed remained high at 18.2 percent (17.4).

• The net debt/equity ratio was 0.55 (0.60).

SEK M

Capital employed
– of which goodwill
Assets and liabilities of disposal group
held for sale
Net debt
Equity
–of which non-controlling interests

2011

37,942
27,014

–
14,207
23,735
208

2012

41,073
28,932

384
14,732
26,725
183

Capital employed
Capital employed in the Group, defined as total assets less
interest-bearing assets and non-interest-bearing liabilities
including deferred tax liabilities, amounted to SEK 41,073 M
(37,942). The return on capital employed excluding items
affecting comparability was 18.2 percent (17.4).

Intangible assets amounted to SEK 34,422 M (31,455).
The increase is mainly due to the effects of completed acqui-
sitions. During the year, goodwill and other intangible assets
with an indefinite useful life have arisen to a preliminary
value of SEK 3,768 M as a result of completed acquisitions.
A valuation model based on discounted future cash flows is
used for impairment testing of goodwill and other intangi-
ble assets with an indefinite useful life.

Tangible assets amounted to SEK 5,603 M (5,684). Capi-
tal expenditure on tangible and intangible assets, less sales
of tangible and intangible assets, totaled SEK 556 M (846).
Depreciation amounted to SEK 1,034 M (1,022).

Trade receivables amounted to SEK 7,557 M (6,924) and
inventories totaled SEK 5,905 M (5,704). The average collec-
tion period for trade receivables was 51 days (47). Material
throughput time was 98 days (97). The Group is making sys-
tematic efforts to increase capital efficiency.

Net debt
Net debt amounted to SEK 14,732 M (14,207), of which pen-
sion commitments and other post-employment benefits
accounted for SEK 1,224 M (1,173).

Net debt was increased by acquisitions and the dividend
to shareholders and reduced by the continued strong posi-
tive operating cash flow. The net increase is mainly due to
increased acquisition activity.

External financing
The Group’s long-term loan financing mainly consists of a
Private Placement Program in the USA totaling USD 750 M,
of which USD 698 M (500) is long-term, a GMTN program of
SEK 5,392 M (2,656), and a loan from the European Invest-
ment Bank of EUR 110 M (110). During the year new issues
were made under the Private Placement Program in the USA.
A total of USD 250 M was raised divided into three tranches
of 7, 10 and 12 years. In addition, nine issues were made
under the GMTN program for a total amount of around SEK
2,800 M. Other changes in long-term loans are mainly due to
some of the original long-term loans now having less than
one year to maturity.

The Group’s short-term loan financing mainly consists of
two Commercial Paper Programs for a maximum USD 1,000
M (1,000) and SEK 5,000 M (5,000) respectively. At year-end,
SEK 2,152 M (4,242) of the Commercial Paper Programs had
been utilized. In addition, substantial credit facilities are
available, mainly in the form of a Multi-Currency Revolving
Credit Facility of EUR 1,100 M (1,100), which was wholly
unutilized at year-end. The reduction in short-term financ-
ing is mainly linked to the increase in long-term capital mar-
ket issues implemented to extend the Group’s maturity
structure. The interest coverage ratio, defined as income
before tax plus net interest, divided by net interest, was 10.4
(8.8). Fixed interest terms fell somewhat during the year,
with an average term of 32 months (16) at year-end.

Cash and cash equivalents amounted to SEK 907 M
(1,665) and are invested in banks with high credit ratings.
Some of the Group’s main financing agreements contain a
customary Change of Control clause. This clause means that
lenders have the right in certain circumstances to demand
the renegotiation of conditions or to terminate the agree-
ments should control of the company change.

Equity
The Group’s equity totaled SEK 26,725 M (23,735) at year-
end. The return on equity was 20.1 percent (16.7). The
equity ratio was 44.6 percent (42.9). The debt/equity ratio,
defined as net debt divided by equity, was 0.55 (0.60).

NET DEBT

CAPITAL EMPLOYED AND RETURN ON CAPITAL EMPLOYED

SEK M

15,000

12,000

9,000

6,000

3,000

 Net debt

Net debt / equity

1.0

0.8

0.6

0.4

0.2

SEK M

42,000

36,000

30,000

24,000

18,000

12,000

6,000

 Capital employed
Return on capital
employed1

1 Excluding items affecting comparability
2008, 2009 and 2011.

CONSOLIDATED fINANCIAL STATEMENTS

ASSA ABLOY ANNuAL rEpOrT 2012

Consolidated balance sheet

SEK M

ASSETS
Non-current assets
Intangible assets
Tangible assets
Investments in associates
Other financial assets
Deferred tax assets
Total non-current assets

Current assets
Inventories
Trade receivables
Current tax receivables
Other current receivables
Prepaid expenses and accrued income
Derivative financial instruments
Short-term investments
Cash and cash equivalents
Assets of disposal group classified as held for sale
Total current assets
TOTAL ASSETS

EQuITY AND LIABILITIES
Equity
Parent company's shareholders
Share capital
Other contributed capital
Reserves
Retained earnings

Non-controlling interest
Total equity

Non-current liabilities
Long-term loans
Deferred tax liabilities
Pension provisions
Other non-current provisions
Other non-current liabilities
Total non-current liabilities

Current liabilities
Short-term loans
Convertible debentures
Derivative financial instruments
Trade payables
Current tax liabilities
Current provisions
Other current liabilities
Accrued expenses and deferred income
Liabilities of disposal group classified as held for sale
Total current liabilities
TOTAL EQuITY AND LIABILITIES

Note

2011

2012

14
15
17
19
18

20
21

34
34
34
31

34
18
24
25
34

34
34
34

25
26
27
31

31,455
5,684
1,211
164
786
39,301

5,704
6,924
325
620
551
234
50
1,665
–
16,072
55,373

368
9,227
–287
14,219
23,527
208
23,735

7,422
497
1,173
1,315
2,668
13,075

6,531
896
179
3,796
330
2,028
1,642
3,161
–
18,563
55,373

34,422
5,603
1,519
89
1,370
43,003

5,905
7,557
336
822
578
114
24
907
610
16,853
59,856

371
9,675
–1,173
17,670
26,543
183
26,725

11,194
1,226
1,224
1,871
704
16,219

3,301
–
87
3,883
822
1,204
3,991
3,397
226
16,911
59,856

ASSA ABLOY ANNuAL rEpOrT 2012

CONSOLIDATED fINANCIAL STATEMENTS 83

Cash flow

• Operating cash flow remained very strong and amounted to SEK 7,044 M (6,080).

• Net capital expenditure totaled SEK 557 M (846).

relationship between cash flow from operating activities
and operating cash flow

SEK M

Cash flow from operating activities
Restructuring payments
Net capital expenditure
Reversal of tax paid
Operating cash flow

2011

5,347
373
–846
1,206
6,080

2012

5,990
498
–557
1,113
7,044

Investments in subsidiaries
The total purchase price of investments in subsidiaries
amounted to SEK 4,799 M (13,600), of which the cash flow
effect was SEK –3,836 M (–12,297). Acquired cash totaled
SEK 345 M (411).

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

SEK M

Net debt at 1 January
Operating cash flow
Restructuring payments
Tax paid
Acquisitions/Disposals
Dividend
Share issue
Purchase of treasury shares
Exchange rate differences and others
Cash and cash equivalents of disposal
group classified as held for sale
Net debt at 31 December

2011

10,564
–6,080
373
1,206
6,511
1,472
–308
17
452

2012

14,207
–7,044
498
1,113
4,619
1,683
–450
38
–321

–
14,207

390
14,732

Operating cash flow

SEK M

Operating income (EBIT)
Restructuring costs
Depreciation
Net capital expenditure
Change in working capital
Interest paid and received
Non-cash items
Operating cash flow1

Operating cash flow/
Income before tax

1 Excluding restructuring payments.
² Excluding restructuring costs.

2011

5,204
1,420
1,022
–846
–238
–482
0
6,080

2012

7,501
–
1,034
–557
–77
–546
–312
7,044

1.022

1.05

The Group’s operating cash flow amounted to SEK 7,044 M
(6,080), equivalent to 105 percent (102) of income before
tax excluding restructuring costs.

Net capital expenditure
Net capital expenditure on intangible and tangible assets
totaled SEK 556 M (846), equivalent to 54 percent (83) of
the depreciation on intangible and tangible assets. The low
net capital expenditure is mainly due to real estate sales dur-
ing the year. In addition, the Group’s long-term efforts to
streamline the production structure contributed to the low
net capital expenditure.

Change in working capital

SEK M

Inventories
Trade receivables
Trade payables
Other working capital
Change in working capital

2011

–32
–249
235
–192
–238

2012

0
–192
–22
136
–77

The material throughput time was 98 days (97) at year-end.
Capital tied up in working capital increased to a lesser extent
during the year, which had an impact on cash flow of SEK –77 M
(–238) overall.

INCOME BEFORE TAX AND OPERATING CASH FLOW

CAPITAL EXPENDITURE

SEK M

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

 Income before tax1
 Operating cash flow2

1 Excluding items affecting comparability
2008, 2009 and 2011.

2 Excluding restructuring payments.

SEK M

1,000

800

600

400

200

 Net capital
expenditure
 Depreciation
Net capital
expenditure
% of sales

2.5

2.0

1.5

1.0

0.5

CONSOLIDATED fINANCIAL STATEMENTS

ASSA ABLOY ANNuAL rEpOrT 2012

Consolidated cash flow statement

SEK M

OpErATING ACTIVITIES
Operating income
Depreciation
Reversal of restructuring costs
Restructuring payments
Other 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
Investments in subsidiaries
Investments in associates
Disposals of subsidiaries
Other investments
Cash flow from investing activities

fINANCING ACTIVITES
Dividends
Long-term loans raised
Long-term loans repaid
Share issue
Purchase of treasury shares
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 of disposal group held for sale
Cash and cash equivalents at 31 December

Note

14, 15
14, 15
32

32
32

2011

5,204
1,022
1,420
–373
0
7,273

–512
30
–1,206
5,585

–238
5,347

–898
52
–12,297
–
6,690
–904
–7,357

–1,472
1,512
–646
308
–17
2,641
2,326
316

1,302
316
47
–
1,665

2012

7,501
1,034
–
–498
–312
7,726

–596
50
–1,113
6,067

–77
5,990

–1,086
530
–3,836
–352
–12
19
–4,738

–1,683
4,507
–2,169
450
–38
–2,632
–1,564
–312

1,665
–312
–56
–390
907

ASSA ABLOY ANNuAL rEpOrT 2012

CONSOLIDATED fINANCIAL STATEMENTS 85

Changes in consolidated equity

parent company’s shareholders

Share
capital

Other con-
tributed
capital

366

8,921

Note

SEK M

Opening balance 1 January 2011
Net income
Other comprehensive income
Total comprehensive income
Dividend for 2010
Stock purchase plans
Share issue
Purchase of treasury shares
Total transactions with parent
company’s shareholders
Closing balance 31 December 2011

Opening balance 1 January 2012
Net income
Other comprehensive income
Total comprehensive income
Dividend for 2011
Stock purchase plans
Share issue
Purchase of treasury shares
Change in non-controlling interest
Total transactions with parent
company’s shareholders
Closing balance 31 December 2012

reserves

–484

197
197

–287

–886
–886

retained
earnings

Non-controlling
interest

11,849
3,843

3,843
–1,472
16

–17

–1,473
14,219

14,219
5,112

5,112
–1,655
27

–38
5

–1,660
17,670

169
26
13
39

208

208
14
–7
6
–27

–4

–32
183

Total

20,821
3,869
210
4,079
–1,472
16
308
–17

–1,165
23,735

23,735
5,125
–893
4,232
–1,683
27
450
–38
1

–1,242
26,725

306

2
368

306
9,227

368

9,227

448

3
371

448
9,675

–1,173

EQUITY PER SHARE AFTER DILUTION AND
RETURN ON EQUITY AFTER TAX

DIVIDEND

SEK

 Equity per share after

dilution, SEK

 Return on equity after tax, %

SEK

 Dividend per share
 Earnings per share

after tax and dilution1

1 Excluding items affecting comparability
2008, 2009 and 2011.

CONSOLIDATED fINANCIAL STATEMENTS

ASSA ABLOY ANNuAL rEpOrT 2012

ASSA ABLOY secures
state-of-the-art hospital

St. Alexius Medical Center and its recently constructed Women & Children’s
Hospital, supports the prevention, treatment and elimination of pediatric disease
through its 60 medical and surgical specialties. This state-of-the-art, child-friendly
environment also offers flexible visiting hours, convenient meal options, and
private spaces meeting the needs of Chicago’s northwest suburbs.

Challenge:

Solution:

Having established door opening standards for its facilities, St. Alexius Medical Center sought to balance this consistency with
the evaluation and integration of relevant life-safety and security solutions to help the new facility meet its goals for the patient
experience. Since it was a pediatric facility, it was equally important that safety and security be seamless.

ASSA ABLOY, with a close end-user relationship, proposed the use of new product innovations to modernize the safety and
security of the 500 door opening facility. The new Medeco X4 key system with patent protection until 2027, allowed the facility
to update its mechanical security and also allow for future upgrade of other hospital facilities.
New SARGENT wireless access control solutions extended the reach of the EAC system and provided the security and audit
capabilities necessary to meet healthcare privacy requirements. Electromechanical exit devices and the recently designed push/
pull trim, all with the MicroShield antimicrobial finish became new standards for the facility.
Product Brands – Hardware and Access Control: HES, Markar, McKinney, Norton, Rixson, Rockwood, Sargent; Hollow Metal
Doors and Frames: Curries; Key System: Medeco; Solutions: MicroShield.

ASSA ABLOY ANNuAL rEpOrT 2012

CONSOLIDATED fINANCIAL STATEMENTS 87

Parent company financial statements

Income statement
– parent company

SEK M

Administrative expenses
Research and development costs
Other operating income and expenses
Operating income

Statement of
comprehensive income
– parent company

Balance sheet
– parent company

Financial income
Financial expenses
Group contributions
Income before tax

Tax on income
Net income

SEK M

Net income

Other comprehensive income
Changes in value of financial instruments
Total comprehensive income

SEK M

ASSETS
Non-current assets
Intangible assets
Tangible assets
Shares in subsidiaries
Other financial assets
Total non-current assets

Current assets
Receivables from subsidiaries
Other current 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
Non-restricted equity
Share premium reserve
Retained earnings
Net income
Total equity

provisions
Other provisions
Total provisions

Non-current liabilities
Long-term loans
Total non-current liabilities

Current liabilities
Short-term loans
Convertible debentures
Trade payables
Current liabilities to subsidiaries
Other current liabilities
Accrued expenses and deferred 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

2011

–662
–297
1,808
849

2,394
–714
–232
2,297

–29
2,268

2011

2,268

258
2,526

2012

–775
–313
1,938
850

9,975
–6,970
–348
3,507

–11
3,496

2012

3,496

84
3,580

Note

2011

2012

14
15
16
19

34
34

29
28

109
3
31,789
1,141
33,042

2,825
45
27
0
2,897
35,939

368
8,905

340
2,261
2,268
14,142

76
76

2,646
2,646

549
896
65
17,413
7
145
19,075
35,939

–
10,613

923
3
28,100
1,489
30,515

2,411
38
17
4
2,470
32,985

371
8,905

788
2,947
3,496
16,507

73
73

5,386
5,386

–
–
55
10,779
4
181
11,019
32,985

–
9,405

pArENT COMpANY fINANCIAL STATEMENTS

ASSA ABLOY ANNuAL rEpOrT 2012

Cash flow statement
– parent company

Change in equity
– parent company

SEK M

OpErATING ACTIVITIES
Operating income
Depreciation
Cash flow before interest and tax

Interest paid and received
Dividends received
Tax paid and received
Cash flow before changes in working capital

Changes in working capital
Cash flow from operating activities

INVESTING ACTIVITIES
Investments in tangible and intangible assets
Sales of tangible and intangible assets
Investments in subsidiaries
Other investments
Cash flow from investing activities

fINANCING ACTIVITIES
Dividends
Loans raised
Loans repaid
Share issue
Purchase of treasury shares
Cash flow from financing activities
CASH fLOW

CASH AND CASH EQuIVALENTS
Cash and cash equivalents at 1 January
Cash flow
Cash and cash equivalents at 31 December

Note

2011

849
157
1,006

–558
2,280
–1
2,727

–86
2,641

–117
0
–11,825
–951
–12,893

–1,472
13,050
–1,617
308
–17
10,252
0

0
0
0

SEK M

Opening balance 1 January 2011
Net income
Hedge accounting
Write-up of shares in subsidiaries
Total comprehensive income
Dividend for 2010
Stock purchase plans
Share issue
Purchase of treasury shares
Total transactions with parent
company’s shareholders
Closing balance 31 December 2011

Opening balance 1 January 2012
Net income
Hedge accounting
Total comprehensive income
Dividend for 2011
Stock purchase plans
Share issue
Purchase of treasury shares
Total transactions with parent
company’s shareholders
Closing balance 31 December 2012

restricted equity

Non-restricted equity

Note

Share
capital

Statutory
reserve

366

8,905

fair value
reserve

–

Share
premium
reserve

2
368

8,905

368

8,905

–

306

340
340

340

448

371

8,905

–

788

retained
earnings

3,476
2,268
–17
275
2,526
–1,472
16

–17

–1,473
4,529

4,529
3,496
84
3,580
–1,655
27

–38

–1,666
6,443

2012

850
250
1,100

–473
9,775
3
10,405

–242
10,163

–1,063
0
–2,592
–331
–3,986

–1,655
4,109
–9,039
450
–38
–6,173
4

0
4
4

Total

12,781
2,268
–17
275
2,526
–1,472
16
308
–17

–1,165
14,142

14,142
3,496
84
3,580
–1,655
27
450
–38

–1,215
16,507

ASSA ABLOY ANNuAL rEpOrT 2012

pArENT COMpANY fINANCIAL STATEMENTS 89

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 of the
Swedish Financial Reporting Board. The accounting princi-
ples are based on IFRS as endorsed by 31 December 2012
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 statements, which comprise the information
appearing on pages 63–120.

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 in
accordance with the cost method, except regarding finan-
cial assets and liabilities (including derivatives) measured at
fair value through profit and loss.

Key estimates and assessments for accounting purposes
The preparation of financial statements requires estimates
and assessments to be made for accounting purposes. The
management also makes assessments when applying the
Group’s accounting principles. Estimates and assessments
may affect the income statement and balance sheet as well
as the supplementary information that appears in the finan-
cial statements. Thus changes in estimates and assessments
may lead to changes in the financial statements.

Estimates and assessments play an important part in the
valuation of items such as identifiable assets and liabilities in
acquisitions, impairment testing of goodwill and other
assets, in determining actuarial assumptions for calculating
employee benefits and other types of provisions, as well as
in the valuation of deferred taxes. Estimates and assess-
ments are continually reassessed and are based on a combi-
nation of historical experience and reasonable expectations
about the future.

The Group considers that estimates and assessments
relating to impairment testing of goodwill and other intan-
gible assets with indefinite useful life are of material impor-
tance to the consolidated financial statements. The Group
tests carrying amounts for impairment on an annual basis.
The recoverable amounts of cash generating units are deter-
mined by calculating their values in use. The calculations are
based on certain assumptions about the future which, for
the Group, are associated with the risk of material adjust-
ments in carrying amounts during the next financial year.
Material assumptions and the effects of reasonable changes
in them are described in Note 14.

The actuarial assumptions made when calculating post-
employment benefits to employees also have material impor-
tance for the consolidated financial statements. Information
on these actuarial assumptions is to be found in Note 24.

New and revised standards applied by the Group
None of the standards and interpretations to be applied for the
first time for the financial year beginning 1 January 2012 had a
significant impact on the consolidated financial statements.

New and revised IFRS not yet effective
The following new IFRS and revisions to current IFRS have
been published but are not yet effective, and have not been
applied in the preparation of the financial statements.
•
•
•

IAS 1 (Revised) Presentation of Financial Statements
IAS 19 (Revised) Employee Benefits.
IFRS 9 Financial instruments.

•
•
•

IFRS 10 Consolidated financial statements.
IFRS 12 Disclosures of interests in other entities.
IFRS 13 Fair value measurement.

The above new and revised standards apply from 1 January
2013, with the exception of IFRS 10 and 12 which become
effective on 1 January 2014, and IFRS 9 which becomes
effective on 1 January 2015. All the standards except IFRS 9
have been adopted by the EU. Management analyzes the
impact of the new and revised IFRS on the financial state-
ments. The new IFRS 10 and the revised IAS 19 require retro-
active application, while the other standards are applied
prospectively, and consequently have no impact on financial
statements prepared before the respective effective date.
The agreed revision of IAS 19 Employee Benefits means
that the ‘corridor’ method is no longer applicable. Instead
actuarial gains and losses are to be recognized in other com-
prehensive income when they arise, and expenses relating to
service provided in previous years are to be recognized
immediately. In addition, interest expenses and anticipated
return on plan assets are replaced by a net interest rate,
which is to be equivalent to the discount rate. These changes
are being implemented retroactively, which means that com-
parative information for the financial year 2012 is to be recal-
culated when preparing the financial statements for 2013. In
this recalculation, unrecognized expenses relating to service
provided in previous years and unrecognized actuarial losses
as at 31 December 2011 are accounted for as an adjustment
of opening equity after taking into account tax effects. These
items total SEK 1,092 M as at 31 December 2011 and SEK
1,073 M as at 31 December 2012. The Group’s total pension
provision, adjusted for amounts in the ‘corridor’, conse-
quently totals SEK 2,297 M (2,265) at year-end 2012 (see
Note 24).

In other respects, none of the new IFRS listed above are
considered to have a significant impact on the consolidated
financial statements.

Consolidated financial statements
The consolidated financial statements include 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 compa-
nies in which the Parent company otherwise has a control-
ling interest, for example by having the right to formulate
financial and operating strategies. Companies acquired dur-
ing the year are included in the consolidated financial state-
ments with effect from the date when a controlling interest
was obtained. Companies sold during the year are included
in the consolidated financial statements up to the date when
a controlling interest ceased.

The consolidated financial statements have been pre-

pared in accordance with the purchase method, which
means that the cost of shares in subsidiaries was eliminated
against their equity at the acquisition date. In this context,
equity in subsidiaries is determined on the basis of the fair
value of assets, liabilities and contingent liabilities at the
acquisition date. Consequently only that part of the equity
in subsidiaries that has arisen after the acquisition date is
included in consolidated equity. The Group determines on
an individual basis for each acquisition whether a non-con-
trolling interest in the acquired company shall be recog-
nized at fair value or at the interest’s proportional share of
the acquired company’s net assets. Any negative difference,
negative goodwill, is recognized as revenue immediately
after determination.

Additional purchase considerations for acquisitions
completed after 1 January 2010 are classified as financial lia-

AssA ABLoY ANNuAL report 2012

Notes

Note 1 cont.

bilities and revalued through profit or loss in operating
income. Substantial additional purchase considerations are
discounted to present value. Acquisition-related transaction
costs are expensed as incurred. Revaluation of additional
purchase considerations for acquisitions completed before
1 January 2010 is recognized as a change in goodwill.

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

age rate for the period. Foreign exchange differences arising
from the translation of foreign subsidiaries are reported as
translation differences in comprehensive income.

The table below shows the weighted average rate and
the closing rate for currencies used in the Group, relative to
the Group’s presentation currency (SEK).

Country

Currency

2011

2012

2011

2012

Average rate

Closing rate

Non-controlling interests
Non-controlling interests are based on subsidiaries’
accounts with application of fair value adjustments resulting
from a completed acquisition analysis. Non-controlling
interests’ share in subsidiaries’ earnings is shown in the
income statement, in which net income is attributed to the
Parent company’s shareholders and to non-controlling
interests. Non-controlling interests’ share in subsidiaries’
equity is shown separately in consolidated equity. Transac-
tions with non-controlling interests are shown as transac-
tions with the Group’s shareholders.

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

Investments in associates are accounted for in accor-
dance with the equity method. In the consolidated balance
sheet, shareholdings in associates are reported at cost, and
the carrying amount is adjusted for the share of associates’
earnings after the acquisition date. Dividends from associ-
ates are reported as a reduction in the carrying amount of
the holdings. The share of associates’ earnings is reported in
the consolidated income statement in operating income as
the holdings are related to business operations.

Segment reporting
Operating segments are reported in accordance with internal
reporting to the chief operating decision maker. Chief operat-
ing decision maker is the function that is responsible for allo-
cation of resources and assessing performance of the operat-
ing segments. The divisions form the operational structure for
internal control and reporting and also constitute the Group’s
segments for external financial reporting. The Group’s busi-
ness is divided 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.

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 on the transac-
tion date. Foreign exchange gains and losses arising from the
settlement of such transactions are normally reported in the
income statement, as are those arising from translation of
monetary balance sheet items in foreign currencies at the year-
end rate. Exceptions are transactions relating to qualifying cash
flow hedges, which are reported in comprehensive income.
Receivables and liabilities are valued at the year-end 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 trans-
lated at the year-end rate and net income is translated at the
average rate. The income statement is translated at the aver-

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

1.57
6.73
3.88
6.57
7.31
0.013
1.01

0.37
1.21
9.02
10.38
0.83
0.032
1.81
0.139
0.074

1.48
6.98
3.46
6.74
7.22
0.014
1.07
0.0035 0.0037
0.35
1.17
8.71
10.70
0.87
0.030
1.75
0.126
0.080
0.0059 0.0060
2.52
0.51
2.18
1.16
5.46
2.08
1.96
0.22
5.39
0.22
3.74
6.74
0.82

2.61
0.52
2.12
1.16
5.16
2.19
2.13
0.22
5.16
0.21
3.88
6.50
0.90

1.61
7.03
3.71
6.78
7.36
0.013
1.10

0.35
1.20
8.96
10.68
0.89
0.029
1.82
0.130
0.081

1.32
6.76
3.18
6.54
7.13
0.014
1.04
0.0036 0.0037
0.34
1.16
8.62
10.49
0.84
0.030
1.74
0.119
0.076
0.0060 0.0061
2.50
0.50
2.12
1.17
5.34
2.12
1.95
0.21
5.32
0.21
3.63
6.51
0.77

2.59
0.49
2.18
1.15
5.35
2.04
2.08
0.22
5.33
0.22
3.61
6.92
0.85

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 lim-
ited fraction of revenue. Revenue from sales of the Group’s
products is recognized when all significant risks and rewards
associated with ownership are transferred to the purchaser
in accordance with applicable conditions of sale, which is
normally upon delivery. If the product requires installation
at the customer’s premises, revenue is recognized when
installation is completed. Revenue from service contracts is
recognized on a continuous basis 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
and the like are reported when there is reasonable assur-
ance that the company will comply with the conditions
attaching to the grant and that the grant will be received.
Grants relating to assets are reported after reducing the car-
rying amount of the asset by the amount of the grant.

AssA ABLoY ANNuAL report 2012

Notes 91

Note 1 cont.

Notes

Research and development
Research costs are expensed as they are incurred. Develop-
ment costs are reported in the balance sheet only to the
extent that they are expected to generate future economic
benefits for the Group and provided such benefits can be
reliably measured.

Capitalized development expenditure is amortized over

the expected useful life. Such intangible assets, which are
not yet in use, are tested annually for impairment. Expendi-
ture on the development of existing products is expensed as
incurred.

Borrowing costs
Borrowing costs are interest expenses and other expenses
directly related to borrowing. Borrowing costs directly relat-
ing to acquisition, construction or production of a qualified
asset (an asset that necessarily takes a substantial period of
time to complete for its intended use or sale) are capitalized
as part of the cost of that asset. Other borrowing costs are rec-
ognized 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 at 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 or compre-
hensive income are themselves reported against equity or
comprehensive income. Deferred tax is accounted for using
the liability method. This means that deferred tax is
accounted for on all temporary differences between the car-
rying amounts of assets and liabilities and their respective
tax bases. Deferred tax assets 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 offset
against taxable income in future taxation. Deferred tax liabil-
ities relating to temporary differences resulting from invest-
ments in subsidiaries are not reported in the consolidated
financial statements, since the Parent company can control
the time at which the temporary differences are reversed,
and it is not considered likely that such reversal will occur in
the foreseeable future. Deferred tax assets 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 trans-
actions 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 acquisition date.

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 acqui-
sition date, and is reported at cost less accumulated impair-
ment losses. Goodwill is allocated to cash generating units
(CGU) and is tested annually to identify any impairment loss.

Cash generating units are subject to systematic annual
impairment testing using a valuation model based on dis-
counted future cash flows. Deferred tax assets based on
local tax rates are reported in terms of tax-deductible good-
will (with corresponding reduction of the goodwill value).
Such deferred tax assets are expensed as the tax deduction
is utilized. Other acquisition-related intangible assets con-
sist chiefly of various types of intellectual property rights,
such as brands, technology and customer relationships.
Identifiable acquisition-related intellectual property rights
are initially recognized at fair value at the acquisition date
and subsequently at cost less accumulated amortization
and impairment losses. Amortization is on a straight-line
basis over the estimated useful life. Acquisition-related
intangible assets with an indefinite useful life are tested for
impairment annually in the same way as goodwill.

Other intangible assets
An intangible asset that is not acquisition-related is reported
only if it is likely that the future economic benefits associ-
ated with the asset will flow to the Group, and if the cost of
the asset can be measured reliably. Such an asset is initially
recognized at cost and is amortized over its estimated useful
life, usually between three and five years. Its carrying
amount is cost less accumulated amortization and impair-
ment 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 capitalized if it is probable that
economic benefits associated with the asset 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 estimated
residual value. No depreciation is applied to land. For other
assets, cost is depreciated over the estimated useful life,
which for the Group results in the following average depre-
ciation periods:
• Office buildings 50 years.
•
Industrial buildings 25 years.
• Plant and machinery 7–10 years.
• Equipment and tools 3–6 years.

The residual value and useful life of assets are reviewed at
each financial year-end and adjusted when necessary. Profit
or loss on the disposal of tangible assets 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 operating leasing. The lease
payments are expensed at a constant rate over the period of
the contract and are reported as operating expenses.

Impairment
Assets with an 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 an impairment loss has been established, the value of
the asset is reduced to its recoverable amount. The recover-

AssA ABLoY ANNuAL report 2012

Note 1 cont.

able amount is the higher of the asset’s fair value less selling
expenses, 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 pro-
gress and finished goods include both direct costs incurred
and a fair allocation of indirect manufacturing costs.

Trade receivables
Trade receivables are recognized initially at fair value and
subsequently measured at amortized 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 as selling expenses.

Financial assets
Financial assets include cash and cash equivalents, trade
receivables, short-term investments and derivatives and are
classified in the following categories; financial assets valued
at fair value through the income statement, available-for-
sale assets, loan receivables and trade receivables. Manage-
ment determines the classification of its financial assets at
initial recognition.

Financial assets valued at fair value through
the income statement
This category has two sub-categories: financial assets held-
for-trading and those designated at fair value through
income statement at inception. A financial asset is classified
in this category if acquired principally for the purpose of sell-
ing in the short term or if so designated by management.
Derivatives are also classified as held-for-trading unless they
are designated as hedges. Assets in this category are classi-
fied as current assets.

Available-for-sale financial assets
Available-for-sale financial assets are non-derivative assets that
have been identified as available for sale or assets that have not
been classified in any other category. They are included in Non-
current assets, unless management intends to sell the asset
within 12 months of the end of the reporting period. Changes
in fair value are reported in Other comprehensive income.

Loan receivables and trade receivables
Trade receivables and short-term investments are non-
derivative financial assets with fixed or determinable pay-
ments that are not quoted in an active market. They are
included in current assets, except for maturities greater than
12 months after the reporting date, which are classified as
non-current assets.

Financial liabilities
Financial liabilities include additional purchase considerations,
loan liabilities, trade payables and derivative instruments.
Reporting depends on how the liability is classified.

Financial liabilities valued at fair value through
the income statement
This category includes derivatives with negative fair value
that are not used for hedging, additional purchase consider-
ations and financial liabilities held for trading. Liabilities are
measured at fair value on a continuous basis and changes in
value are reported in the income statement as a financial item.

Loan liabilities
Loan liabilities are valued initially at fair value after transac-
tion costs, and thereafter at amortized cost. The amortized
cost is determined based on the effective interest rate when
the loan was raised. Accordingly, surplus values and negative
surplus values as well as direct issue expenses are allocated
over the loan period. Non-current loan liabilities have an
anticipated term to maturity exceeding one year, while cur-
rent loan liabilities have a term to maturity of less than one
year.

Trade payables
Trade payables are initially valued at fair value and thereafter
at amortized cost using the effective interest method.

Recognition and measurement of financial
assets and liabilities
Regular purchases and sales of financial assets are recognized
on the trade date, the date on which the Group commits to
purchase or sell the asset. Investments are initially recog-
nized at fair value plus transaction costs for all financial assets
not carried at fair value through the income statement,
where the transaction cost is reported in the income state-
ment. The fair values of quoted investments are based on
current bid prices. If the market for a financial asset is not
active, the Group establishes fair value by using various valua-
tion techniques. These include the use of available informa-
tion on recent arm’s-length transactions, reference to other
instruments that are substantially the same and discounted
cash-flow analysis. The Group assesses at each reporting date
whether there is objective evidence that a financial asset or a
group of financial assets is impaired. A financial asset is derec-
ognized when the right to receive cash flows from the asset
expires or is transferred to another party through the transfer
of all the risks and benefits associated with the asset to the
other party. A financial liability is derecognized when the
obligation is fulfilled, cancelled or expires, see above.

Derivative instruments and hedging
Derivatives are recognized in the balance sheet at transac-
tion date and are measured at fair value, both initially and on
subsequent revaluations. The method of reporting profit or
loss depends on whether the derivative is classified as a
hedging instrument, and if so, the nature of the item being
hedged. Derivatives are classified within the Group as either
fair value hedges of recognized assets or liabilities or a firm
commitment (fair value hedge).

For fair value hedges, changes in 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. Changes in fair value of derivatives not de-
signated as hedging instruments are reported on a continu-
ous basis in the income statement (financial items). For net
investment hedges, the part of changes in fair value classi-
fied as effective is recognized in other comprehensive
income. The ineffective part of the profit or loss is recog-
nized immediately in the income for the period as financial
items. Accumulated profit or loss in other comprehensive
income is recognized in the income for the period when for-
eign operations, or part thereof, are sold.

Changes in fair value for derivatives not designated as
hedging instruments are reported on a continuous basis in
the income statement (financial items).

When the transaction is entered into, the Group docu-
ments the relationship between the hedging instrument
and the hedged item, as well as the Group’s risk management
objectives and risk management strategy as regards the hedg-
ing. The Group also documents its assessment, both when

AssA ABLoY ANNuAL report 2012

Notes 93

Note 1 cont.

Notes

hedging is entered into and on a regular basis, of whether the
derivative instruments used in hedge transactions are effec-
tive in counteracting changes in fair value that relate to the
hedged items. The fair value of currency derivatives is calcu-
lated at net present value based on prevailing forward con-
tract prices on the reporting date, while interest rate swaps
are valued using estimates of future discounted cash flows.

Provisions
A provision is recognized when the Group has a legal or con-
structive obligation resulting from a past event and it is prob-
able 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 representing
the probable outflow of resources that will be needed to set-
tle the obligation. The amount of a provision is discounted to
present value where the effect of time value is material.

Assets and liabilities in disposal groups classified
as held for sale
Assets and liabilities are classified as held for sale when their
carrying amounts are to be recovered principally through a
sale transaction and a sale is considered highly probable.
They are stated at the lower of carrying amount and fair value
less selling expenses.

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-employ-
ment medical benefits also exist, mainly in the USA, which
are reported in the same way as defined benefit pension
plans. Calculations relating 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. Obligations are valued
on the reporting date 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 expenses for defined
benefit plans are spread over the employee’s service period.
The Group’s payments relating to defined contribution pen-
sion plans are reported as an expense in the period to which
they refer, based on the services performed by the employee.
Swedish Group companies apply UFR 4, which means that tax
on pension costs is calculated on the difference between
pension expense in accordance with IAS 19 and pension
expense determined in accordance with local regulations.

Equity-based incentive programs
Equity-based remuneration refers to remuneration to
employees, including senior executives, in accordance with
ASSA ABLOY’s long-term incentive program presented for
the first time at the 2010 Annual General Meeting. A com-
pany must report the personnel costs relating to equity-
based incentive programs based on a measure of the value
to the company of the services provided by the employees
during the programs. Since the value of the employees’ ser-
vices cannot be reliably calculated, the cost of the program
is based on the value of the assigned share instrument. Since
the long-term incentive program in its entirety is equity
regulated, an amount equivalent to the personnel cost is
reported in the balance sheet as equity in retained earnings.
The personnel cost is also reported in the income state-
ment, where it is allocated to the respective function.

Long-term incentive program
ASSA ABLOY has equity-based remuneration plans where
settlement will be in the form of shares. For the long-term
incentive program, personnel costs during the vesting
period are reported based on the shares’ fair value on the
assignment date, that is, when the company and the
employees entered into an agreement on the terms and
conditions for the program. The long-term incentive pro-
gram comprises two parts: a matching part where the
employee receives one share for every share the latter
invests during the term of the program and a performance-
based part where the outcome is based on the company’s
financial results (EPS target) during the period. The program
requires that the employee continues to invest in the long-
term incentive program and that the latter remains
employed in the ASSA ABLOY Group.

Fair value is based on the share price on the assignment
date, a reduction in fair value relating to the anticipated divi-
dend has not been made as the participants are compen-
sated for this. The employees pay a price equivalent to the
share price on the investment date. The vesting terms are
not stock market based and affect the number of shares that
ASSA ABLOY will give to the employee when matching. If an
employee stops investing in the program, all remaining per-
sonnel costs are immediately recognized in the income state-
ment. Personnel costs for shares relating to the perform ance-
based program are calculated on each accounting date
based on an assessment of the probability of the perform-
ance targets being achieved. The costs are calculated based
on the number of shares that ASSA ABLOY expects to need
to issue at the end of the vesting period. When matching
shares, social security contributions must be paid in some
countries to the value of the employee’s benefit. This value is
based on fair value on each accounting date and reported as
a provision for social security contributions.

Earnings per share
Earnings per share before dilution is calculated by dividing
the net income attributable to the Parent company’s share-
holders by the weighted average number of outstanding
shares (less treasury shares). Earnings per share after dilu-
tion is calculated by dividing the net income attributable to
the Parent company’s shareholders by the sum of the
weighted average number of ordinary shares and potential
ordinary shares that may give rise to a dilutive effect. The
dilutive effect of potential ordinary shares is only reported if
their conversion to ordinary shares would lead to a reduc-
tion in earnings per share after dilution.

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 provides group-wide
functions. The Parent company’s revenue consists of intra-
group franchise and royalty revenues. The significant bal-
ance sheet items consist of shares in subsidiaries, intra-
group receivables and liabilities, and external borrowing.
The Parent company has prepared its annual accounts in
accordance with the Swedish Annual Accounts Act
(1995:1554) and standard RFR 2 of the Swedish Financial
Reporting Board. RFR 2 requires the Parent company, in its
annual accounts, to apply all the International Financial
Reporting Standards (IFRS) endorsed by the EU in so far as
this is possible within the framework of the Annual Accounts
Act and with regard to the relationship between accounting

AssA ABLoY ANNuAL report 2012

Note 1 cont.

and taxation. The recommendation states what exceptions
from, and additions to, IFRS should be made.

Note 2 sales

Customer sales by country

Group

2011

9,772
3,861
2,979
2,652
2,192
1,977
1,793
1,273
1,462
1,049
1,068
852
793
726
903
820
614
526
522
396
277
308
284
281
297
284
199
173
230
236
214
195
176
159
195
116
136
125
91
51
91
92
66
1,280
41,786

2012

11,220
4,304
3,147
2,986
2,567
2,354
1,869
1,659
1,548
1,221
1,118
927
906
895
748
727
624
602
531
388
374
333
311
296
284
272
264
234
234
226
212
193
188
176
167
162
158
147
111
103
102
99
95
1,537
46,619

Sales by product group

seK M

Mechanical locks, lock systems
and fittings
Entrance automation
Electromechanical
and electronic locks
Security doors and hardware
total

Group

2011

2012

15,877
8,444

9,044
8,421
41,786

16,762
11,100

10,193
8,564
46,619

seK M

USA
China
France
Sweden
Germany
United Kingdom
Australia
Canada
Netherlands
Norway
Finland
Denmark
South Korea
Belgium
Italy
Spain
Mexico
Austria
Switzerland
Czech Republic
Saudi Arabia
Poland
New Zealand
United Arab Emirates
South Africa
Brazil
Russia
Indonesia
Hong Kong
Romania
India
Israel
Turkey
Singapore
Portugal
Thailand
Colombia
Chile
Ireland
Croatia
Slovakia
Estonia
Japan
Other countries
total

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 with external business.

Pension obligations
Pension obligations for the Parent company are accounted
for in accordance with FAR RedR 4 and 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 assets. They are amortized over 4–5 years.

Tangible assets
Tangible assets owned by the Parent company are reported
at cost less accumulated depreciation and any impairment
losses in the same way as for the Group. They are depreci-
ated over their estimated useful life, which is 5–10 years for
equipment and 4 years for IT equipment.

Leasing
In the Parent company all lease agreements are treated as
rental agreements (operating leases) regardless of whether
they are financial or operating leases.

Shares in subsidiaries
Shares in subsidiaries are reported at cost less impairment
losses. When there is an indication that the value of shares
and interests in subsidiaries or associates has fallen, the
recoverable amount is calculated. If this is lower than the
carrying amount, an impairment loss is recognized. Impair-
ment losses are reported in Earnings from participations in
subsidiaries, which is included in Financial items in the
income statement.

Financial instruments
Derivative instruments are recorded at fair value. Changes in
the fair values of derivative instruments are reported in the
income statement with the exception of exchange rate
changes relating 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 parent company reports group contributions in accord-
ance with RFR 2. Group contributions received and paid
are recognized as financial income and financial expenses
respectively in the income statement. The tax effect of
group contributions is recognized in accordance with IAS 12
in the income statement.

Contingent liabilities
The Parent company has guarantees on behalf of its subsid-
iaries. Such an obligation is classified as a financial guarantee
in accordance with IFRS. For these guarantees, the Parent
company applies the allowed exception in RFR 2, reporting
these guarantees as a contingent liability.

AssA ABLoY ANNuAL report 2012

Notes 95

Note 3 Auditors’ fees

Note 6 operating leases

seK M

Audit assignment
PwC
Other

Audit related services in
addition to audit
assignment
PwC
Other

tax advice
PwC
Other

other services
PwC
Other
total

Group

parent company

Group

parent company

2011

2012

2011

2012

seK M

2011

2012

2011

2012

30
11

1
–

8
2

19
3
74

37
10

1
–

13
2

14
1
78

3
–

1
–

15
–
20

3
–

1
–

2
–

5
–
11

Lease payments
during the year
total

Nominal value of agreed
future lease payments:
Due for payment in
(2012) 2013
Due for payment in
(2013) 2014
Due for payment in
(2014) 2015
Due for payment in
(2015) 2016
Due for payment in
(2016) 2017
Due for payment in
(2017) 2018 or later
total

463
463

466
466

423

419

331

304

235

237

177

161

128

121

126
1,420

112
1,354

16
16

16
92

13
13

17
97

Note 4 other operating income and expenses
Group

seK M

2011

2012

Rent received
Business-related taxes
Transaction expenses from acquisitions
Impairment of tangible asset
Exchange rate differences
Other, net
total

12
–20
–22
–37
–15
5
–77

18
16
–39
–
–11
–66
–82

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

Note 5 share of earnings in associates

Note 7 expenses by nature
In the income statement costs are broken down by function.
Cost of goods sold, Selling expenses, Administrative
expenses and Research and development costs amount to
SEK 39,106 M (36,548). Below, these same costs are broken
down by nature:

seK M

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

Group

2011

11,835
14,655
1,022
7,616
1,420
36,548

2012

12,705
16,111
1,034
9,256
–
39,106

Note 8 Depreciation and amortization

seK M

Agta Record AG
Saudi Crawford Doors Factory Ltd
Låsgruppen Wilhelm Nielsen AS
Goal Co., Ltd
Tallares Agui S.A.
Other
total

Group

2011

2012

37
4
2
–
–
0
43

69
1
3
5
–9
0
70

seK M

Intangible assets
Machinery
Equipment
Buildings
Land improvements
total

Group

parent company

2011

183
452
228
157
2
1,022

2012

2011

2012

222
443
218
148

3
1,034

156
–
1
–
–
157

249
–
1
–
–
250

The share of earnings in Agta Record AG has been estimated
on the basis of the associated company’s latest available
financial report, which is the published Interim Report for
the first half of 2012.

Note 9 exchange differences in the income statement
parent company

Group

seK M

2011

2012

2011

2012

Exchange differences
reported in operating
income
Exchange differences
reported in financial
expenses (Note 11)
total

–15

–11

7
–8

10
0

9
9

11
11

Notes

AssA ABLoY ANNuAL report 2012

Note 10 Financial income

seK M

2011

2012

2011

2012

Group

parent company

Note 13 earnings per share

Earnings per share before dilution

seK M

Earnings attributable to the Parent
company's shareholders
Weighted average number of shares
issued (thousands)
earnings per share before dilution
(seK per share)
of which from continuing operations
of which from discontinued operations

Earnings per share after dilution

seK M

Earnings attributable to the Parent
company's shareholders
Interest expenses for convertible
debentures, after tax
Net profit for calculating earnings
per share after dilution
Weighted average number of
shares issued (thousands)
Assumed conversion of convertible
debentures (thousands)
Stock purchase plan
Weighted average number of shares
for calculations (thousands)
earnings per share after
dilution (seK per share)
of which from continuing operations
of which from discontinued operations

Group

2011

2012

3,843

5,112

367,833

369,185

10.45
9.35
1.10

13.85
13.82
0.03

Group

2011

2012

3,843

5,112

3,854

5,116

367,833

369,592

4,680
114

–
–

372,627

369,592

10.33
9.24
1.09

13.84
13.81
0.03

Earnings per share after dilution and excluding
items affecting comparability

Group

seK M

Earnings attributable to the Parent
company's shareholders
Interest expenses for convertible
debentures, after tax
Items affecting comparability, after tax
Net profit for calculating earnings
per share after dilution
Weighted average number of
shares issued (thousands)
Assumed conversion of convertible
debentures (thousands)
Stock purchase plan
Weighted average number of shares
for calculations (thousands)
earnings per share after dilution
and excluding items affecting
comparability (seK per share)
of which from continuing operations
of which from discontinued operations

2011

2012

3,843

5,112

11
736¹

4
–

4,590

5,116

367,833

369,592

4,680
114

–
–

372,627

369,592

12.30
11.21
1.09

13.84
13.81
0.03

¹ Items affecting comparability for 2011 consist of restructuring costs and net

income from discontinued operations.

Earnings from invest-
ments in subsidiaries
Earnings from invest-
ments in associates
Intra-group interest
income
Other financial
income
External interest
income and similar
items
total

–

36
59

–

2,256

9,750

114

200

–

18
32

0
2,394

0
9,975

Note 11 Financial expenses

seK M

2011

2012

2011

2012

Group

parent company

–

–14

–

–5

–429

–534

–14

–5

–562

–652

–226

–148

Intra-group interest
expenses
Interest expenses, con-
vertible debentures
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
shares and interests
Other financial expenses
total

–8

–41

–83

–1

–20

–8

–18

–
–68
–704

–

–
–74
–802

–22
–32

–6,280
–14
–714 –6,970

Fair value adjustments on shares and interests relate to
impairment losses in connection with dividends received.

Note 12 tax on income

Group

parent company

seK M

2011

2012

2011

2012

Current tax
Tax attributable to
prior years
Foreign withholding tax
Deferred tax
total

–1,048

–1,776

–142
–
95

8
–
151
–1,095 –1,617

–30

5
–4
–
–29

–11

–
–
–
–11

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

percent

2011

2012

2011

2012

Group

parent company

Swedish rate of tax on
income
Effect of foreign tax rates
Non-taxable income/non-
deductible expenses, net
Deductible goodwill
Utilized loss carry-forward
not recognized in prior
period
Non-deductible restruc-
turing costs
Other
effective tax rate in
income statement

26
4

–5
0

–2

1
0

26
4

–3
0

–3

–
0

26
–

–25
–

–

–
–

26
–

–26
–

–

–
–

AssA ABLoY ANNuAL report 2012

Notes 97

Note 14 Intangible assets

2012, seK M

opening accumulated acquisition value
Purchases
Acquisitions of subsidiaries
Sales/disposals
Reclassifications
Reclassification to assets of disposal group held for sale
Adjustments for acquisitions in the prior year
Exchange rate differences
Closing accumulated acquisition value

opening accumulated amortization/impairment
Acquisitions of subsidiaries
Sales/disposals
Reclassifications
Impairment
Amortization
Exchange rate differences
Closing accumulated amortization/impairment
Carrying amount

2011, seK M

opening accumulated acquisition value
Purchases
Acquisitions of subsidiaries
Adjustments for acquisitions in the prior year
Exchange rate differences
Closing accumulated acquisition value

opening accumulated amortization/impairment
Impairment
Amortization
Exchange rate differences
Closing accumulated amortization/impairment
Carrying amount

Group

Intangible
assets

Goodwill

27,080
–
3,146
–
–
–104
–177
–947
28,998

–66
–
–
–
–
–
0
–66
28,932

Goodwill

22,343
–
4,584
–34
187
27,080

–64
–2
–
–
–66
27,014

5,521
152
1,062
–12
433
–31
276
–225
7,176

–1,079
–7
9
–433
–10
–222
56
–1,686
5,490

Group

Intangible
assets

3,789
112
1,590
–
30
5,521

–875
–
–183
–21
–1,079
4,442

parent company

Intangible
assets

1,060
1,063
–
–
–
–
–
–
2,123

–951
–
–
–
–
–249
–
–1,200
923

parent company

Intangible
assets

945
115
–
–
–
1,060

–795
–
–156
–
–951
109

total

32,599
152
4,208
–12
433
–135
99
–1,172
36,174

–1,143
–7
9
–433
–10
–222
56
–1,752
34,422

total

26,132
112
6,174
–34
215
32,599

–939
–
–183
–21
–1,143
31,455

Intangible assets consist mainly of brands and licenses. The
carrying amount of intangible assets with an indefinite useful
life amounts to SEK 4,026 M (3,412) and relates to brands.

Useful life has been defined as indefinite where the time
period, during which an asset is deemed to contribute eco-
nomic benefits, cannot be determined.

These calculations are based on estimated future cash flows,
which in turn are based on financial budgets for a three-year
period approved by management. Cash flows beyond the
three-year period are extrapolated using estimated growth
rates according to the information below.

Amortization and impairment of intangible assets are
mainly recognized as cost of goods sold in the income state-
ment.

Material assumptions used to calculate values in use:
• Budgeted operating margin.
• Growth rate for extrapolating cash flows beyond the

The item Adjustments for acquisitions in the prior year
refers to changes in connection with adoption of a final acqui-
sition analysis for acquisitions completed in the previous year.

budget period.

• Discount rate after tax used for estimated future

cash flows.

Impairment testing of goodwill and intangible assets
with indefinite useful life
Goodwill and intangible assets with an indefinite useful life
are allocated to the Group’s Cash Generating Units (CGUs),
which consist of the Group’s five divisions.

For each cash-generating unit, the Group annually tests
goodwill and intangible assets with an indefinite useful life
for impairment, in accordance with the accounting principle
described in Note 1. Recoverable amounts for Cash Generat-
ing Units have been determined by calculating value in use.

Management has determined the budgeted operating mar-
gin based on previous results and expectations of future
market development. A growth rate of 3 percent (3) has
been used for all CGUs to extrapolate cash flows beyond the
budget period. This growth rate is considered to be a con-
servative estimate. Further, an average discount rate in local
currency after tax has been used in the calculations. The dif-
ference in value compared with using a discount rate before
tax is not deemed to be material.

Notes

AssA ABLoY ANNuAL report 2012

Note 14 cont.

2012
Overall, the discount rate used 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 assets with an indefinite useful life
were allocated to the Cash Generating Units as summarized
in the following table:

seK M

Goodwill
Intangible assets with
indefinite useful life
total

eMeA

5,846

198
6,044

Americas

Asia pacific

Global
technologies

5,913

221
6,134

4,326

1,160
5,486

4,524

349
4,873

entrance
systems

8,323

2,098
10,421

total

28,932

4,026
32,958

2011
Overall, the discount rate used 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 assets with an indefinite useful life
were allocated to the Cash Generating Units as summarized
in the following table:

seK M

Goodwill
Intangible assets with
indefinite useful life
total

eMeA

5,564

241
5,805

Americas

Asia pacific

Global
technologies

entrance
systems

6,041

245
6,286

3,410

1,022
4,432

4,846

346
5,192

7,153

1,558
8,711

total

27,014

3,412
30,426

sensitivity analysis
A sensitivity analysis has been carried out for each cash-
generating unit. The results of this analysis are summarized
below.

2012
If the estimated operating margin after the end of the budg-
et period had been one percentage point lower than the
management’s estimate, the total recoverable amount
would be 6 percent lower (EMEA 5 percent, Americas 4 per-
cent, Asia Pacific 7 percent, Global Technologies 5 percent,
and Entrance Systems 6 percent).

2011
If the estimated operating margin after the end of the budg-
et period had been one percentage point lower than the
management’s estimate, the total recoverable amount
would be 5 percent lower (EMEA 5 percent, Americas 5 per-
cent, Asia Pacific 6 percent, Global Technologies 5 percent,
and Entrance Systems 6 percent).

If the estimated growth rate used to extrapolate cash
flows beyond the budget period had been one percentage
point lower than the basic assumption of 3 percent, the 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 capital cost used for the
Group’s discounted cash flows had been one percentage
point higher than the basic assumption of 9.0 to 10.0 per-
cent, the total recoverable amount would be 14 percent
lower (EMEA 14 percent, 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 factors are any more or
less likely to change. The sensitivity analysis should therefore
be interpreted with caution.

None of the hypothetical cases above would lead to an

impairment of goodwill in an individual Cash Generating
Unit.

AssA ABLoY ANNuAL report 2012

Notes 99

Note 15 tangible assets

2012, seK M

Buildings

ments Machinery equipment

Land and
land
improve-

Construc-
tion in
progress

total

equipment

Group

parent company

opening accumulated
acquisition value
Purchases
Acquisitions of subsidiaries
Sales/disposals
Reclassification to assets of
disposal group held for sale
Reclassifications
Exchange rate differences
Closing accumulated
acquisition value

opening accumulated
depreciation/impairment
Acquisitions of subsidiaries
Sales/disposals
Depreciation
Reclassification to assets of
disposal group held for sale
Reclassifications
Exchange rate differences
Closing accumulated
depreciation/impairment
Carrying amount

4,121
129
52
–399

–
295
–153

4,045

–1,992
–28
158
–148

–
–14
72

839
1
57
–73

–
67
–21

870

–142
–2
–
–3

–
–1
3

6,629
311
296
–527

58
–15
–452

2,314
196
99
–261

–
24
–146

555
297
56
–67

–
–371
20

14,458
934
560
–1,327

58
0
–752

6,300

2,226

490

13,931

–4,852
–106
511
–443

–41
4
393

–1,786
–71
234
–218

–
11
133

–
–
–
–

–
–
–

–8,773
–207
903
–812

–41
0
602

–1,952
2,093

–145
725

–4,534
1,766

–1,697
529

–
490

–8,328
5,603

18
1
–
–

–
–
–

–15
–
–
–1

–
–
–

–16
3

2011, seK M

Buildings

ments Machinery equipment

Land and
land
improve-

Construc-
tion in
progress

total

equipment

Group

parent company

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
Reclassifications
Exchange rate differences
Closing accumulated
depreciation/impairment
Carrying amount

3,706
61
338
–23
56
–18

4,121

–1,728
11
–104
–157
0
–14

–1,992
2,128

820
7
51
–1
0
–38

839

–139
0
0
–2
0
–1

–142
697

6,272
232
142
–210
148
44

2,244
166
69
–167
–21
22

382
318
–
–6
–234
95

13,042
784
600
–407
–51
106

6,629

2,314

555

14,458

–4,436
173
–99
–452
–11
–27

–4,852
1,777

–1,698
153
–9
–228
12
–15

–1,786
528

–
–
–
–
–
–

–
555

–8,002
337
–212
–840
0
–56

–8,773
5,684

17
1
–
–
–
–

–14
–
–
–1
–
–

–15
3

100

Notes

AssA ABLoY ANNuAL report 2012

Corporate identity number,
registered office

Number of
shares

share of
equity %

Carrying
amount,
seK M

parent company

Note 16 shares in subsidiaries

Company name

ASSA Sverige AB
Timelox AB
ASSA ABLOY Entrance Systems AB
ASSA ABLOY Kredit AB
ASSA ABLOY Försäkrings 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 Holding B.V.
Pan Pan DOOR Co LTD
ASSA ABLOY France SAS
Interlock Holding AG
HID Global Switzerland S.A.
ASSA ABLOY Holding GmbH
ASSA ABLOY Ltd
ITG (UK) Ltd
HID Global Ireland 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.
Cerraduras de Colombia S.A.
ASSA ABLOY Innovation AB
ASSA ABLOY Hospitality AB
ASSA ABLOY North America AB
WHAIG Limited
ASSA ABLOY Asia Pacific Ltd
Cardo AB
ASSA ABLOY Portugal, Unipessoal, Lda (Portugal)
ASSA ABLOY Entrance Systems Italy S.p.A.
ASSA ABLOY Holding Italia S.p.A.
total

556061-8455, Eskilstuna
556214-7735, Landskrona
556204-8511, Landskrona
556047-9148, Stockholm
516406-0740, 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
52153924, Raamsdonksveer
210800004058002, Dashiqiao
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, Roodepoort
039347-83, Oregon
147126, Ontario
1148165260, St Laurent, Quebec
002098175, Ontario
ACN 095354582, Oakleigh, Victoria
199804395K, Singapore
GIP980312169, Mexico
Public Deed 2798, Bogota
556192-3201, Stockholm
556180-7156, Göteborg
556671-9851, Stockholm
EC21330, Bermuda
53451, Hong Kong
556026-8517, Malmö
PT500243700, Alfragide
IT06698790968, Milano
IT01254420597, Rome

70
15,000
1,000
400
60,000
1,000
1,000
1,000
1,000
800,000
150,000
60,500
1
180
–
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
4,300,000
27,036,635
2,201,670
2,500
1,000
1,000
100,100
1,000,000
27,000,000
1
50,000
650,000

100
100
100
100
100
100
100
100
100
100
100
100
100
100
36 2
100
98 1
100
100
100
100
100
90 1
100
100
100
100
100
100
100
100
71 1
100
100
100
100
100
100
100
100
100

1 The Group’s holdings amount to 100 percent. ² The Group’s holdings amount to 70 percent.

Note 17 Investments in associates

Group

2012 Company name

Agta Record AG
Goal Co., Ltd
Låsgruppen Wilhelm Nielsen AS
SARA Loading Bay Ltd
Talleres Agui S.A.
Saudi Crawford Doors Ltd
Other
total

Country of registration

Number of
shares

share of
equity %

Switzerland
Japan
Norway
United Kingdom
Spain
Saudi Arabia

5,077,964
2,300,790
305
4,999
4,800
800

38
38
50
50
40
40

197
22
181
3,036
60
220
0
189
0
4,257
538
376
1,086
771
567
1,964
0
47
109
3,077
1
293
901
184
2,237
0
13
17
242
48
765
142
105
14
0
303
72
5,093
0
0
973
28,100

Carrying
amount,
seK M

1,163
315
15
13
7
5
1
1,519

The share of equity in Agta Record AG has been estimated on the basis of the associated company’s latest available financial
report, which is the published Interim Report for the first half of 2012. For the period January to June, the company’s revenue
totaled SEK 1,081 M (1,019) and income after tax was SEK 65 M (41). The company’s assets totaled SEK 2,095 M (2,007)and
total liabilities amounted to SEK 722 M (720).

2011 Company name

Country of registration

Agta Record AG
Talleres Agui S.A
Låsgruppen Wilhelm Nielsen AS
Saudi Crawford Doors Ltd
Ditec Istanbul Otomatik Gecis Sistemleri Ltd
Other
total

Switzerland
Spain
Norway
Saudi Arabia
Turkey

AssA ABLoY ANNuAL report 2012

Number of
shares

5,077,964
4,800
305
800
350

Group

share of
equity %

38
40
50
40
35

Carrying
amount,
seK M

1,171
17
15
6
1
1
1,211

Notes 101

Note 18 Deferred tax

seK M

Deferred tax assets
Tangible and intangible assets
Pensions
Tax losses and other tax credits
Other deferred tax assets
Deferred tax assets

Deferred tax liabilities
Deferred tax assets, net

Change in deferred tax

Opening balance
Acquisitions of subsidiaries, net
Reported in income statement
Reclassification to liabilities of disposal
group held for sale
Exchange rate differences
Closing balance

Group

2011

2012

183
115
366
122
786

497
289

393
–205
95

–
6
289

279
87
397
607
1,370

1,226
144

289
–249
151

–27
–20
144

The Group has tax loss carryforwards and other tax credits of
SEK 2,400 M (3,500) for which deferred tax assets have not
been recognized, as it is uncertain whether they can be off-
set against taxable income in future taxation.

Deferred tax assets and deferred tax liabilities, which
were recognized net in the previous year, were recognized
gross in 2012.

Note 19 other financial assets

Group

parent
company

seK M

2011

2012

2011

2012

Investments in associates
in parent company
Other shares and
interests
Interest-bearing
non-current receivables
Other non-current
receivables
total

Note 20 Inventories

seK M

Materials and supplies
Work in progress
Finished goods
Advances paid
total

–

68
164

–

1,141

1,489

–

56
89

–
1,141

–
1,489

Group

2011

1,663
1,459
2,348
234
5,704

2012

1,751
1,397
2,561
196
5,905

Impairment of inventories amounted to SEK 181 M (43).

Note 21 trade receivables

seK M

Trade receivables
Provision for bad debts
total

Maturity analysis

Trade receivables not due
Trade receivables due not impaired:
< 3 months
3–12 months
> 12 months

Impaired trade receivables:
< 3 months
3–12 months
> 12 months

total

Group

2011

7,461
–537
6,924

2012

8,127
–570
7,557

5,075

5,279

1,675
371
340
2,386

–84
–174
–279
–537
6,924

2,064
447
337
2,848

–111
–139
–320
–570
7,557

trade receivables per currency

EUR
USD
GBP
AUD
CNY
SEK
Other currencies
total

Current year change in
provision for bad debts

Opening balance
Acquisitions and disposals
Receivables written off
Reversal of unused amounts
Provision for bad debts
Exchange rate differences
Closing balance

2011

2,374
1,675
319
282
545
443
1,286
6,924

2012

2,349
2,169
400
296
677
328
1,338
7,557

2011

2012

465
77
–80
–77
150
2
537

537
30
–67
–72
162
–20
570

Note 22 parent company’s equity
The Parent company’s equity is split between restricted and
non-restricted equity. Restricted equity consists of share
capital and the statutory reserve. Restricted funds must not
be reduced by issue of dividends. Non-restricted equity con-
sists of the share premium reserve, retained earnings and
net income for the year.

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 23 share capital, number of shares
and dividend per share

Number of shares (thousands)

series A

series B

total

share
capital,
seK K

19,175
–

347,002
2,073

366,177
2,073

19,175

349,075

368,250

191,753

349,075

540,828

19,175
–

349,075
2,609

368,250
2,609

19,175

351,684

370,859

191,753

351,684

543,437

Opening balance at
1 January 2011
Share issue
Closing balance at
31 December 2011

Number of votes,
thousands

Opening balance at
1 January 2012
Share issue
Closing balance at
31 December 2012

Number of votes,
thousands

All shares have a par value of SEK 1.00 and give shareholders
equal rights to the company’s assets and earnings. All shares
are entitled to dividends subsequently determined. Each
Series A share carries ten votes and each Series B share one
vote. All issued shares are fully paid.

The weighted average number of shares was 369,185
thousand (367,833) during the year. The weighted average
number of shares after the effects of outstanding long-term
incentive programs was 369,592 thousand (372,627) dur-
ing the year.

The total number of treasury shares as at 31 December
2012 amounted to 600,000. A total of 200,000 shares were
repurchased in 2012.

Dividend per share
The dividend paid during the financial year totaled SEK 1,655 M
(1,472), equivalent to SEK 4.50 (4.00) per share. A dividend
for 2012 of SEK 5.10 per share, a total of SEK 1,888 M, will
be proposed at the Annual General Meeting on Thursday,
25 April 2013.

102

Notes

AssA ABLoY ANNuAL report 2012

Note 24 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
obligations reported in the balance sheet mainly relate to
defined benefit pension plans. ASSA ABLOY has defined ben-
efit plans in a number of countries, those in the USA, the UK
and Germany being the most significant ones. There are also
plans for post-employment medical benefits in the USA.

Amounts recognized in the income statement

pension costs, seK M

2011

2012

Defined benefit pension plans (A)
Defined contribution pension plans
Post-employment medical benefit
plans (A)
total

80
295

27
402

163
381

22
566

Amounts recognized in the balance sheet

pension provisions, seK M

2011

2012

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

652

441

80
1,173

–23
1,150

A) Specification of amounts recognized in the income statement

pension costs, seK M

Current service cost
Interest on obligation
Expected return on plan assets
Actuarial losses (gains), net
Write-down/reversal of pension receivables ¹
Past service cost
Losses (gains) on curtailments/settlements
total
–of which, included in:
Operating income
Net financial items
total

post-employment
medical benefits

2011

2012

6
21
–
0
–
0
–
27

6
21
27

5
20
–
1
–
0
–5
22

1
21
22

Defined benefit
pension plans

total

2011

48
204
–176
28
–15
1
–10
80

39
41
80

2012

54
215
–155
69
–
–3
–17
163

34
129
163

2011

54
225
–176
28
–15
1
–10
107

45
62
107

1 In accordance with limitation rule for the valuation of pension plan surplus, IAS 19 paragraph 58.

754

418

52
1,224

–
1,224

2012

59
235
–155
70
–
–3
–21
185

35
150
185

Actuarial gains/losses arising from changes in the actuarial
assumptions for defined benefit pension plans are recog-
nized to the extent that their accumulated amount exceeds
a ‘corridor’, which is equivalent to 10 percent of the higher
of the pension obligation’s present value and the fair value of
the plan assets. The surplus/deficit outside this ‘corridor’ is
recognized over the expected average remaining service
period as from the year after the actuarial gain/loss arose.

B) Specification of amounts recognized in the balance sheet

The actual return on plan assets for defined benefit plans
amounted to SEK 274 M (32) in 2012.

Partly funded or unfunded pension plans are reported as

provisions for pensions.

specification of defined benefits, seK M

Present value of funded obligations (C)
Fair value of plan assets (D)
Net value of funded plans

Present value of unfunded obligations (C)
Unrecognized actuarial gains (losses)
Unrecognized past service cost

Provisions for defined contribution pension plans
total

post-employment
medical benefits

2011

2012

–
–
–

472
–30
–1
441

–
–
–

415
2
0
418

Defined benefit
pension plans

total

2011

4,046
–3,115
931

782
–1,033
–28
652

2012

4,083
–3,193
891

937
–1,062
–12
754

2011

4,046
–3,115
931

1,254
–1,063
–29
1,093
80
1,173

2012

4,083
–3,193
891

1,354
–1,060
–13
1,172
52
1,224

AssA ABLoY ANNuAL report 2012

Notes 103

Note 24 cont.

C) Movement in obligations

post-employment
medical benefits

Defined benefit
pension plans

total

2011

2012

438
6
21
–
22
–
–
–
–
–26
11
472

472
5
20
0
–27
0
–
–5
–
–28
–20
417

2011

4,046
48
204
–
327
–
–15
20
329
–192
61
4,828

2012

4,828
54
215
1
267
–3
–
–17
67
–212
–180
5,020

seK M

opening present value of obligations
Current service cost
Interest on obligation
Employee contributions
Actuarial losses (gains)
Past service cost
Write-down/reversal of pension receivables
Curtailments
Acqusitions/disposals
Payments
Exchange rate differences
Closing present value of obligations

D) Movement in fair value of plan assets

seK M

opening fair value of plan assets
Expected return on plan assets
Actuarial gains (losses)
Curtailments
Acqusitions/disposals
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 of medical benefits

the effect of a 1 percent change in the assumed medical cost trend, seK M

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

G) Key actuarial assumptions

2011

4,484
54
225
–
349
–
–15
20
329
–218
72
5,300

2012

5,300
59
235
1
240
–3
–
–22
67
–240
–200
5,437

Defined benefit
pension plans

2011

2,854
176
–144
–5
227
–94
101
3,115

2011

1,547
1,187
381
3,115

2012

3,115
155
119
–
–
–83
–113
3,193

2012

1,695
1,107
391
3,193

+1%

3
45

–1%

–2
–38

Key actuarial assumptions (weighted average), %

2011

2012

2011

2012

2011

2012

united Kingdom

Germany

usA

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

As at 31 December

Present value of obligations (+)
Fair value of plan assets (–)
obligations, net

4.7
6.6
n/a
2.9
n/a
2.9

4.5
5.2
n/a
2.6
n/a
2.7

4.5
n/a
2.8
1.2
n/a
1.5

3.2
n/a
2.6
2.2
n/a
1.6

4.6
6.1
3.5
2.0
9.2
3.1

4.0
5.6
4.0
2.0
9.0
3.0

2008

3,963
–2,604
1,359

2009

4,696
–2,817
1,879

2010

4,484
–2,854
1,630

2011

5,300
–3,115
2,185

2012

5,437
–3,193
2,244

1 The expected return on plan assets is determined on the basis of the expected returns on assets underlying the current investment policy. Plan assets chiefly consist
of equity instruments and interest-bearing investments. The expected return is mainly based on risk premiums and indexes for interest-bearing investments 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
2012 financial year the company has not had access to infor-
mation 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 contribution plans. The year’s pension
contributions that are contracted to Alecta total SEK 23 M

(28), of which SEK 8 M (6) relates to the Parent company.
Alecta’s surplus may be distributed to the policy-holders
and/or the persons insured. As at 30 September 2012 Alec-
ta’s surplus expressed as the collective consolidation level
amounted to 123 percent (113 as at 31 December 2011).
The collective consolidation level consists of the market
value of Alecta’s assets as a percentage of its insurance com-
mitments calculated according to Alecta’s actuarial calcula-
tion assumptions, which do not comply with IAS19.

104

Notes

AssA ABLoY ANNuAL report 2012

Note 25 other provisions

seK M

opening balance at
1 January 2011
Provisions for the year
Deferred considerations
acquisitions
Reversal of non-utilized amounts
Utilized during the year
Exchange rate differences
Closing balance at
31 December 2011

seK M

opening balance at
1 January 2012
Provisions for the year
Acquisitions of subsidiaries
Deferred considerations
acquisitions
Reclassification to liabilities of
disposal groups held for sale
Reclassifications
Reversal of non-utilized
amounts
Utilized during the year
Exchange rate differences
Closing balance at
31 December 2012

Balance sheet breakdown:

Other non-current provisions
Current provisions
total

restruc-
turing
reserve

924
1,224

1
–91
–403
10

Group

other

total

1,640
403

65
–194
–246
10

2,564
1,627

66
–285
–649
20

Note 28 Contingent liabilities
Group

parent company

seK M

2011

2012

2011

2012

Guarantees
Guarantees on behalf of
subsidiaries
total

–
74

–

10,613
61 10,613

9,405
9,405

In addition to the guarantees shown in the table above, the
Group has a large number of minor bank guarantees for per-
formance of obligations in operating activities. No material
liabilities are expected as a result of these guarantees.

1,665

1,678

3,343

Group

Maturity profile – guarantees, seK M

2011

2012

restruc-
turing
reserve

other

total

1,665
133
–

–

–12
–62

–133
–498
–25

1,678
553
39

–
62

–167
–215
–13

3,343
686
39

–12
–

–300
–713
–38

<1 year
>1<2 year
>2<5 year
>5 year
total

25
10
30
9
74

25
9
22
5
61

Note 29 Assets pledged against liabilities
to credit institutions

Group

parent company

seK M

2011

2012

2011

2012

Real estate mortgages
Other mortgages
total

305
134
439

106
32
138

–
–
–

1,068

2,007

3,075

Note 30 Business combinations

Group

seK M

2011

1,315
2,028
3,343

2012

1,871
1,204
3,075

Cash paid for acquisitions
Paid part for prior year
Deferred considerations

total purchase price

2011

12,599
555
446

13,600

1,590
843
803
1,371
411
–244
–2,038
0
2,736

–6,280

4,584

12,599

2012

3,876
–
923

4,799

1,055
410
477
818
345
–439
–1,000
–13
1,653

–

3,146

3,876

–411

–345

109

305

12,297

5,143
644
5,588

3,836

2,830
480
347

Acquired assets and liabilities
Intangible assets
Other non-current assets
Inventories
Receivables
Cash and cash equivalents
Interest-bearing liabilities
Other liabilities
Non-controlling interest
Acquired net assets at fair value

Disposed acquired net assets

Goodwill

Cash paid for acquisitions
Cash and cash equivalents in acquired
subsidiaries
Paid deferred considerations for
acquisitions in previous years
Change in cash and cash equivalents
due to acquisitions

Net sales from acquisition date
EBIT from acquisition date
Net income from acquisition date

The net sales of acquired units for 2012 totaled SEK 4,487 M
(6,601) and net income amounted to SEK 460 M (5,676).
Acquisition-related costs for 2012 totaled SEK 39 M (22)
and have been reported as other operating expenses in the
income statement.

Acquisition analyses have been prepared for all acquisi-
tions in 2012. The acquisition analysis for the acquisition of
4Front, which was completed on 24 December, is prelimi-
nary pending a final valuation of the fair value of acquired
identifiable intangible assets.

The restructuring reserve relates to the ongoing restructuring
programs launched in 2008, 2009 and 2011. The closing bal-
ance is expected to be chiefly utilized in the next three years
and mainly relates to severance payments. The non-current
part of the restructuring reserve totaled SEK 373 M. For fur-
ther information on the restructuring programs, see the
Report of the Board of Directors. Other provisions relate to
estimated deferred purchase considerations, taxes and legal
obligations including future environment-related measures.

parent company
Other provisions in the parent company relate to estimated
deferred purchase considerations.

Note 26 other current liabilities

seK M

VAT and excise duty
Employee withholding tax
Advances received
Social security contributions
and other taxes
Deferred considerations
Other current liabilities
total

Group

2011

2012

397
25
573

81
134
432
1,642

353
83
409

68
2,705
373
3,991

Note 27 Accrued expenses and deferred income

Group

parent company

seK M

Personnel-related expenses
Customer-related
expenses
Deferred income
Accrued interest expenses
Other
total

2011

1,630

611
126
131
663
3,161

2012

2011

2012

1,768

547
201
98
784
3,397

–
–
40
14
145

–
–
48
42
181

AssA ABLoY ANNuAL report 2012

Notes 105

Note 30 cont.

See below for an account of all significant acquisitions com-
pleted in 2012 and 2011.

2012
Albany Doors
On 11 January 2012, 100 percent of the share capital was
acquired in Albany Door Systems (USA), a global leader in
automatic high-performance doors. The company has
global market penetration in industrial automatic high-per-
formance doors. The products are used for industrial appli-
cations and in logistics centers, where there is a major need
for customized automatic high-performance doors with
high security and access control. Albany also offers service
and maintenance on the company’s principal markets. The
company is headquartered in Georgia, USA. Intangible
assets in the form of the brand and customer relationships
have been disclosed separately. Residual goodwill mainly
relates to synergies and other intangible assets, which do
not meet the criteria for separate recognition.

Dynaco
On 1 March 2012, 100 percent of the share capital was
acquired in Dynaco (Belgium). Dynaco is a leading manufac-
turer of automatic high-performance doors specializing in
sales to a global distributor network. The acquisition of
Dynaco further strengthens ASSA ABLOY’s position in the
fast-growing market segment of high-performance doors.
Dynaco provides manufacturing expertise, with many lead-
ing patented products and a global distribution channel. The
company is headquartered in Moorsel, Belgium. Intangible
assets in the form of the brand and customer relationships
have been disclosed separately. Residual goodwill mainly
relates to synergies and other intangible assets, which do
not meet the criteria for separate recognition.

Guoqiang
On 29 May 2012, 100 percent of the share capital was
acquired in Guoqiang, a Chinese manufacturer of window
hardware. Guoqiang offers a complete range of window
hardware mainly for the Chinese market. The company has a
good market presence in China through an extensive net-
work of sales offices. Guoqiang provides a good fit with the
existing offering in total door opening solutions in China and
gives access to the Chinese window hardware market. The
company is headquartered in Leling, Shandong Province,
China. The brand has been disclosed separately, and residual
goodwill mainly relates to synergies and other intangible
assets, which do not meet the criteria for separate recogni-
tion.

Other acquisitions
Other significant acquisitions during the year comprised
Securistyle (UK), Traka (UK), Helton (Canada), Sanhe Metal
(China) and 4Front (USA).

2011
LaserCard
On 31 January 2011 the Group acquired 100 percent of the
share capital in LaserCard Corporation, a leading provider of
secure ID solutions to government and commercial custom-
ers worldwide. LaserCard has a unique product portfolio of
smart cards, services and product solutions for complex ID
systems management, which are used by more than 400
customers in 44 countries. The company’s strength lies in

its knowledge and management of various types of secure
identities and technologies, such as personal identification,
border controls, secure government services, and access to
buildings. Its product portfolio complements ASSA ABLOY’s
HID Global business unit. LaserCard is headquartered in
California, USA. Intangible assets in the form of brand and
customer relationships have been disclosed. Residual good-
will is mainly attributable to synergies and other intangible
assets, which do not meet the criteria for separate recogni-
tion.

FlexiForce
On 6 April 2011 the Group acquired 100 percent of the
share capital in FlexiForce, a global leader in components for
industrial sectional doors and residential garage doors. Flexi-
Force specializes in the manufacture and distribution of
components for overhead sectional doors and has a strong
position in product development and marketing as well as a
solid customer base.

FlexiForce adds a new and very important distribution

channel for reaching industrial door manufacturers. The
company is headquartered in the Netherlands. Intangible
assets in the form of brand and customer relationships have
been disclosed separately. Residual goodwill is mainly attrib-
utable to synergies and other intangible assets, which do not
meet the criteria for separate recognition.

Swesafe
On 6 April 2011 the Group acquired 100 percent of the
share capital in Swesafe, Sweden’s largest locksmith. This
acquisition is an important step in the development of the
Swedish market in the fast-growing electromechanical seg-
ment. Ownership of the largest locksmith in Sweden means
that locksmiths and systems integrators will become more
project oriented and focused on electronic products and
the service offering. In addition, it will provide a further
understanding of end-customer needs. Goodwill is mainly
attributable to synergies and other intangible assets, which
do not meet the criteria for separate recognition.

Cardo Entrance Solutions
Cardo’s Entrance Solutions division is a leading supplier of
industrial doors, logistics systems, garage doors, customer
service and other services. The acquisition of Cardo Entrance
Solutions represents a strategically important step in the
development of ASSA ABLOY’s operations in the Entrance
Systems division. Overall, this will strengthen the Group’s
product offering and create a strong entrance automation
supplier with a wide range of products, customer service
and other services. The acquisition of Cardo is expected to
generate considerable synergies largely through a combina-
tion of the companies’ respective offerings.

Cardo Entrance Solutions was created in 2010 through
the coordination of two previous divisions, Door & Logistic
Solutions and Residential Garage Doors. Under the Crawford
and Megadoor brands, it offers total industrial door, docking
and service solutions for service-intensive customers in
transport, logistics and trade. The division also offers stan-
dardized and customized garage doors for the consumer
market. The range includes up and over doors, overhead sec-
tional doors, side sectional doors and the automation for
these products. These doors are positioned as exclusive,
offering good design, quality and high security. The main
brands are Crawford and Normstahl.

106

Notes

AssA ABLoY ANNuAL report 2012

Discontinued operations
In 2011, Cardo Flow Solutions and Lorentzen & Wettre,
which were part of Cardo Entrance Solutions acquired
during the year, were divested. These divestments were
reported in accordance with IFRS 5 Non-current Assets Held
for Sale and Discontinued Operations. The cash flow effect
and the result from divestments are shown in the table
below:

seK M

Disposed net assets
Assets of disposal group held for sale
Liabilities of disposal group held for sale
total

Purchase prices received
Less: Cash and cash equivalents in dis-
posed subsidiaries
Change in cash and cash equivalents
due to disposal

Net income after tax from discontinued
operations during the holding period
Net income from discontinued
operations

Note 32 Cash flow

seK M

Adjustments for non-cash items
Profit on sales of non-current assets
Change in pension provision
Other
Adjustments for non-cash items

Change in working capital
Inventories increase/decrease (–/+)
Trade receivables increase/
decrease (–/+)
Trade payables increase/
decrease (+/–)
Other working capital increase/
decrease (–/+)
Change in working capital

Investments in subsidiaries
Total purchase price
Less, part of purchase prices paid in
prior year
Less, acquired cash and cash equivalents
Less, unpaid parts of purchase prices
Paid purchase prices
relating to acquisitions in prior years
Investments in subsidiaries

Disposal of subsidiaries
Purchase prices received
Less, disposed cash and cash equivalents
Disposal of subsidiaries

other investments
Investments in/sales of other shares
and interests
Investments in/sales of other
non-current receivables
other investments

Group

2011

2012

–7,539
1,161
–6,378

6,690

–

6,690

404

–
–
–

–

Group

2011

2012

3
40
–43
0

–32

–347
48
–13
–312

–249

–192

235

–192
–238

–22

136
–77

–13,600

–4,799

555
411
446

–
345
923

–109
–12,297

–305
–3,836

6,690
–
6,690

–876

–28
–904

–12
–
–12

14
19

Note 30 cont.

Intangible assets in the form of the brand and customer rela-
tionships have been disclosed separately. Residual goodwill
mainly relates to synergies and other intangible assets,
which do not meet the criteria for separate recognition.

The table below shows the final purchase price allocation

for Cardo Entrance Solutions.

seK M
Cash paid
Less: Discontinued operations
total purchase price

Fair value of acquired net assets
Goodwill

Acquired assets and liabilities in accor-
dance with purchase price allocations
Intangible assets
Other non-current assets
Inventories
Receivables
Cash and cash equivalents
Interest-bearing liabilities
Other liabilities
Acquired net assets at fair value

Purchase prices settled in cash
Purchase prices discontinued operations
Cash and cash equivalents in acquired
subsidiaries
Change in Group cash and cash equiva-
lents resulting from acquisitions

Net sales from acquisition date
EBIT from acquisition date
Net income from acquisition date

2011
11,340
–6,280
5,060

–2,009
3,051

1,597
555
515
919
176
–111
–1,642
2,009

11,340
–6,690

–176

4,474

3,709
455
5,699

Note 31 Assets of disposal group classified as held for
sale and discontinued operations

seK M

Assets of disposal group classified as
held for sale
Intangible assets
Tangible assets
Deferred tax assets
Inventories
Trade receivables
Cash and cash equivalents
total

Liabilities of disposal group classified as
held for sale
Provisions
Trade payables
Current tax liabilities
Other current liabilities
Accrued expenses and deferred income
total

Net income of disposal group classified
as held for sale
Sales
Costs
Income before tax
Tax on income
Impairment of assets of disposal group
held for sale
Net income of disposal group classified
as held for sale

Cash flow from disposal group classified
as held for sale
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Cash flow from disposal group classified
as held for sale

Group

2011

2012

–
–
–
–
–
–
–

–
–
–
–
–
–

–
–
–
–

–

–
–
–

–

135
17
26
33
9
390
610

12
92
9
80
33
226

568
–542
26
–6

–9

54
–3
3

AssA ABLoY ANNuAL report 2012

Notes 107

Note 33 employees

Salaries, wages, other remuneration and social security costs

seK M

Salaries, wages and other remuneration
Social security costs
– of which pensions
total

Group

2011

9,704
2,131
402
11,835

2012

10,627
2,078
416
12,705

Fees to Board members in 2012 (including committee work), SEK thousand

Name and post

Lars Renström, Chairman
Carl Douglas, Vice Chairman
Birgitta Klasén, Member
Eva Lindqvist, Member
Johan Molin, President and CEO
Sven-Christer Nilsson, Member
Ulrik Svensson, Member
Jan Svensson, Member
Employee representatives (2)
total

Board

1,350
750
500
500
–
500
500
500
–
4,600

remuneration
Committee

Audit
Committee

100
–
–
–
–
50
–
50
–
200

–
–
100
–
–
–
200
100
–
400

parent company

2011

2012

115
59
21
174

118
53
24
171

total

1,450
750
600
500
–
550
700
650
–
5,200

Total fees for Board members amounted to SEK 4.6 M in 2011.

Remuneration and other benefits of the Executive Team in 2012

seK thousands

Fixed salary Variable salary

benefits other benefits

pension costs

Johan Molin
Other members of the Executive Team (8)
total remuneration and benefits
Total remuneration and other benefits for the Executive Team amounted to SEK 90 M in 2011.

12,536
34,498
47,034

9,270
16,014
25,284

4,742
9,244
13,986

126
3,280
3,406

4,326
8,234
12,560

stockrelated

Salaries and remuneration for the Board of Directors
and the parent company’s Executive Team
Salaries and remuneration for the Board of Directors and the
parent company’s Executive Team totaled SEK 44 M (37).
Social security costs amounted to SEK 33 M (20), of which
8 SEK M (7) were pension costs.

Long-term incentive programs
At the 2010 Annual General Meeting, it was decided to
launch a long-term incentive program (LTI 2010) for senior
executives and other key staff in the Group. The aim of LTI
2010 is to create the prerequisites for retaining and recruit-
ing competent staff for the Group, providing competitive
remuneration and uniting the interests of shareholders,
senior executives and key staff.

At the 2011 and 2012 Annual General Meetings, it was

decided to implement further long-term incentive pro-
grams for senior executives and other key staff in the Group.
The new long-term incentive programs, LTI 2011 and LTI
2012, have been drawn up with similar terms to LTI 2010.
For each Series B share acquired by the CEO within the
framework of LTI 2010, LTI 2011 and LTI 2012, the company
awards one matching stock option and four performance-
based stock options. For each Series B share acquired by
other members of the Executive Team, the company awards
one matching stock option and three performance-based
stock options. For other participants, the company awards
one matching stock option and one performance-based
stock option. In accordance with the terms of the incentive

programs, employees have acquired a total of 264,670
shares in ASSA ABLOY AB, of which 90,038 shares were
acquired in 2012 within the framework of LTI 2012.

Each matching stock option entitles the holder to receive
one free Series B share in the company after three years, pro-
vided that the holder, with certain exceptions, is still
employed in the Group when the interim report for Q1
2013, 2014 and 2015 for the respective program is pub-
lished, and has retained the shares acquired within the
framework of the long-term incentive programs. Each per-
formance-based stock option entitles the holder to receive
one free Series B share in the company three years after
allotment, provided that the above conditions have been
fulfilled. In addition, the maximum level in a range deter-
mined by the Board for the performance of the company’s
earnings per share must have been fulfilled. The perfor-
mance based condition for each respective year has been
fulfilled for all three programs.

Outstanding matching and performance-based stock
options for LTI 2012 total 264,027. The total number of out-
standing matching and performance-based stock options
for LTI 2010, LTI 2011 and LTI 2012 amounted to 701,941 on
the reporting date.

Fair value is based on the share price on the allotment
date. The present value calculation is based on data from an
external party. Fair value is adjusted for participants who do
not retain their holding of shares for the duration of the pro-
gram. In the case of performance-based shares, the com-
pany assesses the probability of the performance targets

108

Notes

AssA ABLoY ANNuAL report 2012

Note 33 cont.

being met when calculating the compensation expense.

The fair value of ASSA ABLOY’s Series B share on the allot-

ment date for LTI 2012 of 22 May 2012 was SEK 187.77. The
equivalent value on the allotment date for LTI 2011 of 25
May 2011 was SEK 173.29. The equivalent value on the allot-
ment date for LTI 2010 of 28 July 2010 was SEK 161.79.

The total cost of the Group’s three long-term incentive

programs amounted to SEK 27 M (16) in 2012.

Other equity-based incentive programs
ASSA ABLOY has previously issued a number of convertible
debentures to employees in the Group. At year-end 2012,

there were no outstanding convertible debentures issued to
employees in the Group. For further information on other
equity-based incentive programs, see the section on the
ASSA ABLOY share (page 122).

Average number of employees per country, broken down by gender

China
USA
France
Sweden
Germany
United Kingdom
Czech Republic
Mexico
Netherlands
Finland
Australia
Italy
Romania
South Korea
Malaysia
Spain
Canada
Norway
Belgium
Denmark
Israel
South Africa
Brazil
Switzerland
New Zealand
Colombia
Austria
Ireland
Chile
Other
total

Sweden
total

total

14,781
5,861
2,200
1,857
1,453
1,319
1,139
1,128
949
955
764
802
539
669
472
733
434
550
306
448
353
418
336
343
316
389
190
208
167
993
41,070

total

124
124

Group

2011

of which
women

of which
men

6,083
1,855
703
517
475
466
550
527
167
340
209
202
228
255
260
183
104
139
85
131
102
187
74
112
108
46
42
88
37
264
14,538

8,698
4,006
1,497
1,340
978
853
586
601
782
615
556
600
312
414
212
550
330
411
222
317
251
231
262
231
208
343
148
120
130
730
26,532

2012

of which
women

of which
men

6,293
1,870
696
569
530
532
583
477
176
316
221
178
265
242
421
165
157
134
114
188
122
166
92
101
95
41
47
77
42
320
15,229

8,252
4,045
1,563
1,588
1,257
1,062
605
594
873
607
533
556
419
436
233
485
488
446
354
274
283
214
264
218
205
249
171
138
133
987
27,533

total

14,545
5,915
2,259
2,156
1,788
1,594
1,188
1,071
1,050
924
754
733
684
678
655
650
645
580
468
462
405
380
356
319
300
290
217
215
175
1,307
42,762

parent company

2011

of which
women

of which
men

26
26

98
98

2012

of which
women

of which
men

25
25

100
100

2012

of which
women

of which
men

2
1

1
3

6
8

2
14

total

125
125

total

8
9

3
17

Gender distribution of Board of Directors and Executive Team

Board of Directors 1
Executive Team
–of which Parent company's
Executive Team
total

1 Excluding employee representatives.

2011

of which
women

of which
men

2
–

–
2

6
9

3
15

total

8
9

3
17

AssA ABLoY ANNuAL report 2012

Notes 109

Note 34 Financial risk management

and financial instruments

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

ing capital to shareholders, issuing new shares or selling assets
to reduce debt. The capital requirement is assessed on the
basis of factors such as the net debt/equity ratio.

Net debt is defined as interest-bearing liabilities, includ-
ing negative market values of derivatives, plus pension provi-
sions, less cash and cash equivalents, other interest-bearing
investments and positive market values of derivatives. The
table ’Net debt and equity’ shows the position as at 31
December.

Organization and activities
ASSA ABLOY’s financial policy, which is determined by the
Board of Directors, provides a framework of guidelines and
regulations for the management of financial risks and finan-
cial activities.

ASSA ABLOY’s financial activities are coordinated cen-

trally and the majority of financial transactions are con-
ducted by the subsidiary ASSA ABLOY Financial Services AB,
which is the Group’s internal bank. External financial transac-
tions are conducted by Treasury. Treasury achieves signifi-
cant economies of scale when negotiating borrowing agree-
ments, using interest rate derivatives and managing cur-
rency flows.

Net debt and equity

seK M

Non-current interest-bearing receivables
Short-term interest-bearing investments
incl. positive market values of derivatives
Cash and bank balances
Pension provisions
Non-current interest-bearing liabilities
Current interest-bearing liabilities incl.
negative market values of derivatives
total
equity
Net debt/equity ratio, times

Group

2011

–44

–284
–1,665
1,173
7,422

7,605
14,207
23,735
0.60

2012

–29

–138
–907
1,224
11,194

3,388
14,732
26,725
0.55

Capital structure
The objective of the Group’s capital structure is to safeguard
its ability to continue as a going concern, and to generate
good returns for shareholders and benefit for other stake-
holders. Maintaining an optimal capital structure enables
the Group to keep capital costs as low as possible. The Group
can adjust the capital structure based on the requirements
that arise by varying the dividend paid to shareholders, return-

Another important variable in the assessment of the Group’s
capital structure is the credit rating assigned by credit rating
agencies to the Group’s debt. It is essential to maintain a
good credit rating in order to have access to both long-term
and short-term financing from the capital markets when
needed. 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

<1 year >1<2 year >2<5 year

>5 year

<1 year >1<2 year >2<5 year

>5 year

31 December 2011

31 December 2012

Long-term bank loans
Long-term capital market loans
Convertible loans
Short-term bank loans
Commercial papers and
short-term capital market loans
Derivatives
total by period

Cash and cash equivalents incl.
interest-bearing receivables
Non-current interest-bearing
receivables
Deferred considerations
Trade receivables
Trade payables
Net total

Confirmed credit facilities
Credit facilities maturing < 1 year
Adjusted maturity profile¹

–7
–284
–903
–1,213

–5,396
20
–7,781

1,949

44
–134
6,924
–3,796
–2,794

10,306
–455
7,057

1 For maturity structure of guarantees, see Note 28.

–49
–648
–
–

–
29
–669

–341
–3,804
–
–

–
65
–4,080

–1,070
–2,734
–
–

–
–2
–3,806

–9
–351
–
–804

–2,519
29
–3,654

–74
–2,308
–
–

–
43
–2,340

–538
–4,764
–
–

–
43
–5,259

–648
–4,415
–
–

–
19
–5,044

–

1,045

–

–
–2,288
–
–
–2,957

–
–
–2,957

–
–166
–
–
–4,246

–9,851
–
–14,097

–
–
–
–
–3,806

–
–
–3,806

29
–2,705
7,557
–3,883
–1,611

9,957
–472
7,874

–
–257
–
–
–2,596

–9,485
–
–12,081

–
–144
–
–
–5,403

–
–
–5,403

–
–8
–
–
–5,052

–
–
–5,052

110

Notes

AssA ABLoY ANNuAL report 2012

Note 34 cont.

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 EIB
Global MTN Program

Amount,
seK M

521
491
325
325
794
163
456
976
488
9,485
949
12,934

Other long-term loans
total long-term loans/facilities
US Private Placement Program
Incentive Program
Global CP Program

Swedish CP Program
Other bank loans
Overdraft facility
total short-term loans/facilities
total loans/facilities

259
28,165
342
–
6,507

5,000
201
1,132
13,181
41,346

Maturity

May 2015
Dec 2016
Apr 2017
May 2017
Dec 2018
Aug 2019
May 2020
Aug 2022
Aug 2024
Jun 2014
Jul 2018 2
Mar 2014
Jun 2014
Dec 2014
Jan 2015
Aug 2015
Oct 2015
Oct 2015
Jun 2016
Jun 2016
Aug 2016
May 2017
Jun 2018
Dec 2020
Feb 2027

Dec 2013

Carrying
amount,
seK M

Currency

Amount
2011

Amount
2012

of which
parent
company,
seK M

USD
USD
USD
USD
USD
USD
USD
USD
USD
EUR
EUR
EUR
EUR
SEK
EUR
SEK
SEK
JPY
NOK
NOK
SEK
SEK
SEK
EUR
EUR

USD
EUR
USD
EUR
SEK

80
76
50
50
122
0
70
0
0
1,100
110
45
150
0
0
0
0
0
250
100
0
0
500
0
0

53
100
220
10
2,650

80
76
50
50
122
25
70
150
75
1,100
110
45
150
300
30
250
500
3,000
250
100
250
500
500
30
30

53
–
25
110
1,050

388
1,293
300
259
250
500
226
286
117
250
500
500
259
259

567 1
491
325
325
794
163
456
976
488
0
948
388
1,293
300
259
248
500
226
304 1
117
250
500
500
257 1
261
259
11,194
342
–
162
948
1,042
201
605
3,301
14,495

–907

Cash and bank balances
Short-term interest-bearing
investments
Long-term interest-bearing
investments
Market value of derivatives
Pensions
Net debt
1 The loans are subject to hedge accounting.
2 The loan amortizes starting November 2016. In the table the average date of maturity of the loan has been stated.

–29
–27
1,224
14,732

–24

Rating

Agency

short- term outlook Long-term

Standard & Poor’s
Moody’s

A2
P2

Stable
Stable

A –
n/a

Credit
outlook

Stable

In March 2012 Standard & Poor’s revised the outlook on the
long-term rating from negative to stable. This was confirmed
in November 2012.

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 external financing. ASSA ABLOY
manages financing risk at Group level. Treasury is responsi-
ble for external borrowing and external investments. ASSA
ABLOY strives to have access on every occasion to both
short-term and long-term loan facilities. In accordance with
financial policy, the available loan facilities should include a

AssA ABLoY ANNuAL report 2012

Notes 111

Note 34 cont.

reserve (facilities available but not utilized) equivalent to
10 percent of the Group’s total annual sales.

Maturity profile
The table ‘Maturity profile’ on page 110 shows the maturi-
ties for ASSA ABLOY’s financial instruments, including con-
firmed credit facilities. During the year, the maturity profile
was extended through a number of capital market transac-
tions. The maturities are not concentrated to a particular
date in the immediate future. When the refinancing require-
ment is assessed, the credit facility of EUR 1,100 M maturing
in June 2014, which was wholly unutilized at year-end, is
taken into account. Moreover, existing financial assets are
also taken into account. The table shows undiscounted
future cash flows relating to the Group’s financial instru-
ments at the reporting date, and these amounts are there-
fore not found in the balance sheet.

Interest-bearing liabilities
The Group’s long-term loan financing mainly consists of a
Private Placement Program in the USA totaling USD 750 M,
of which USD 698 M (500) is long-term, a GMTN program of
SEK 5,392 M (2,656), and a loan from the European Invest-
ment Bank of EUR 110 M (110). During the year new issues
were made under the Private Placement Program in the USA.
A total of USD 250 M was raised divided into three tranches
of 7, 10 and 12 years. In addition, nine issues were made
under the GMTN program for a total amount of around SEK
2,800 M. Other changes in long-term loans are mainly due to
some of the original long-term loans now having less than
one year to maturity.

The Group’s short-term loan financing mainly consists of
two Commercial Paper Programs for a maximum USD 1,000
M (1,000) and SEK 5,000 M (5,000) respectively. At year-end,
SEK 2,152 M (4,242) of the Commercial Paper Programs had
been utilized. In addition, substantial credit facilities are
available, mainly in the form of a Multi-Currency Revolving
Credit Facility of EUR 1,100 M (1,100), which was wholly
unutilized at year-end. The reduction in short-term financ-
ing is mainly linked to the increase in long-term capital mar-
ket issues implemented to extend the Group’s maturity
structure. At year-end the average time to maturity for the
Group’s interest-bearing liabilities, excluding the pension
provision, was 47 months (31).

Some of the Group’s main financing agreements contain

a customary Change of Control clause. This clause means
that lenders have the right in certain circumstances to
demand the renegotiation of conditions or to terminate the
agreements should control of the company change.

Convertible debentures
Incentive 2006 matured in 2011 and the debentures were
converted in full. Conversion was managed by an external
party and began in 2010. A further 2,073,184 Series B shares
were issued in 2011. A total of 2,332,344 Series B shares
were issued in connection with Incentive 2006.

Incentive 2007 matured in 2012. Half of the convertible

debentures relating to Incentive 2007 were converted.
Conversion was managed by an external party and took
place in 2012. A total of 2,608,400 Series B shares were
issued in connection with Incentive 2007.

Currency composition
The currency composition of ASSA ABLOY’s borrowing
depends on the currency composition of the Group’s assets
and other liabilities. Currency swaps are used to achieve the
desired currency composition. See the table ‘Net debt by
currency’ on page 113.

Cash and cash equivalents and other interest-bearing
receivables
Short-term interest-bearing investments amounted to SEK
24 M (50) at year-end. In addition, ASSA ABLOY has long-
term interest-bearing receivables of SEK 29 M (44) and
financial derivatives with a positive market value of SEK 114
M (234) 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 bank accounts or
interest-bearing instruments with high liquidity from issuers
with a credit rating of at least A-, according to Standard &
Poor’s or similar rating agency. The average term for cash
and cash equivalents was 1 day (1.0) at year-end 2012.

The parent company’s cash and cash equivalents are held

in a sub-account to the Group account.

Group

parent company

seK M

Cash and bank balances
Short-term investments
with maturity less than
3 months
Cash and cash
equivalents

Short-term investments
with maturity more than
3 months
Long-term interest-
bearing receivables
Positive market value
of derivatives
total

2011

1,665

2012

907

–

1,665

907

234
1,993

114
1,074

2011

2012

–

–
27

–

–
42

112

Notes

AssA ABLoY ANNuAL report 2012

Note 34 cont.

Net debt by currency

seK M

USD
EUR
SEK
AUD
DKK
CZK
CAD
KRW
Other
total

31 December 2011

31 December 2012

Net debt excluding
currency swaps

Net debt including
currency swaps

Net debt excluding
currency swaps

Net debt including
currency swaps

5,937
4,510
3,913
–4
13
3
–29
265
–402
14,207

5,465
2,399
5,791
661
260
178
–141
265
–672
14,207

5,488
5,314
3,497
30
16
19
30
171
169
14,732

6,406
4,882
2,045
650
250
226
212
171
–108
14,732

Interest rate risks in interest-bearing assets
Treasury manages interest rate risk in interest-bearing
assets. Derivative instruments such as interest rate swaps
and FRAs (Forward Rate Agreements) may be used to man-
age interest rate risk. These investments are mostly short-
term. The term for the majority of these investments is three
months or less. The fixed interest term for these short-term
investments was 1 day (1.0) at year-end 2012. A downward
change in the yield curve of one percentage point would
reduce the Group’s interest income by around SEK 8 M (8)
and consolidated equity by SEK 6 M (6).

Interest rate risks in borrowing
Changes in interest rates have a direct impact 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 income of changes in interest rates on a rolling 12-month
basis. The Group strives for a mix of fixed rate and variable
rate borrowings, and uses interest rate swaps to continu-
ously adjust the fixed interest term. The financial policy stip-
ulates that the average fixed interest term should normally
be 24 months. At year-end, the average fixed interest term
on gross debt, excluding pension obligations, was around 34
months (16). An upward change in the yield curve of one
percentage point would increase the Group’s interest
expense by around SEK 74 M (93) and reduce consolidated
equity by SEK 56 M (71).

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

Transaction exposure
Currency risk in the form of transaction exposure, or exports
and imports of goods respectively, is relatively limited in the
Group, even though it can be significant for individual busi-
ness units. The main principle is to allow currency fluctua-
tions to have an impact on the business as quickly as possi-
ble. As a result of this strategy, current currency flows are not
normally hedged.

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

Currency, seK M

AUD
CAD
CNY
CZK
EUR
GBP
PLN
RON
SEK

Currency exposure

2011

410
439
–754
–203
742
357
91
–41
–756

2012

325
537
–1,094
–165
1,049
459
145
–199
–822

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

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

Currency, seK M

2011

2012

AUD
CAD
CNY
EUR
GBP
HKD
NOK
USD

38
16
53
151
18
6
23
201

39
18
51
158
26
22
26
234

AssA ABLoY ANNuAL report 2012

Notes 113

Note 34 cont.

Translation exposure in the balance sheet
The impact of translation of equity is limited by the fact that
a large part of financing is in local currency.

The capital structure in each country is optimized based

on local legislation. As far as possible, gearing per currency
should generally aim to be the same as for the Group as a
whole to limit the impact of fluctuations in individual cur-
rencies. Treasury uses currency derivatives to achieve appro-
priate financing and to eliminate undesirable currency expo-
sure.

The table ‘Net debt by currency’ on page 113 shows the
use of currency forward contracts in relation to financing in
major currencies. These forward contracts are used to neu-
tralize the exposure arising between external debt and
internal requirements.

Financial credit risk
Financial risk management exposes ASSA ABLOY to certain
counterparty risks. Such exposure may arise from the invest-
ment of surplus cash as well as from investment in debt
instruments and derivative instruments.

ASSA ABLOY’s policy is to minimize the potential credit
risk relating to surplus cash by using cash flow from subsid-
iaries to repay the Group’s loans. This is primarily achieved
through cash pools put in place by Treasury. Around 85 per-
cent (85) of the Group’s sales were settled through cash
pools in 2012. However, the Group can in the short term
invest surplus cash in banks to match borrowing and cash
flow.

Derivative instruments are allocated between banks
based on risk levels defined in the financial policy, in order to
limit counterparty risk. Treasury only enters into derivative
contracts with banks that have a good credit rating.

ISDA agreements (full netting of transactions in case of
counterparty default) have been entered into in the case of
interest rate and currency derivatives.

Commercial credit risk
The Group’s trade receivables are distributed across a large
number of customers who are spread globally. The concen-
tration of credit risk associated with trade receivables is
therefore limited. The fair value of trade receivables corre-
sponds to the carrying amount. Credit risks relating to oper-
ating activities are managed locally at company level and
monitored at division level.

Commodity risk
The Group is exposed to price risks relating to purchases of
certain commodities (primarily metals) used in production.
Forward contracts are not used to hedge commodity pur-
chases.

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 instruments is limited to reducing exposure to
financial risks.

The positive and negative fair values in the table ‘Out-
standing derivative financial instruments’ on page 115 show
the fair values of outstanding instruments at year-end, based
on available fair values, and are the same as the carrying
amounts in the balance sheet. The nominal value represents
the gross value of the contracts.

For accounting purposes, financial instruments are classi-

fied into measurement categories in accordance with IAS
39. The table ‘Financial instruments’ on page 115 provides
an overview of financial assets and liabilities, measurement
category, and carrying amount and fair value per item.

When calculating fair value only general changes in mar-
ket rates are taken into account and not credit spread move-
ments for the individual company.

114

Notes

AssA ABLoY ANNuAL report 2012

Note 34 cont.

Outstanding derivative financial instruments at 31 December

Instrument, seK M

Foreign exchange forwards, funding
Interest rate swaps
Forward Rate Agreements
total

31 December 2011

31 December 2012

positive fair
value

Negative
fair value

Nominal
value

positive fair
value

Negative
fair value

Nominal
value

106
112
16
234

–126
–37
–16
–179

9,936
14,845
502
25,283

25
89
0
114

–34
–49
–4
–87

2,688
4,059
1,295
8,042

Financial instruments: carrying amounts and fair values by measurement category

2011

2012

IAs 39
category*

Carrying
amount

Fair value

Carrying
amount

Fair value

3
1
1
5
2

1
1

2
4

4
2
4
2
4
2

52
112
6,924
95
139
234

50
1,665

922
6,500
7,422

896
562
5,969
179
3,796
2,531

52
112
6,924
95
139
234

50
1,665

922
6,907
7,829

896
562
5,969
179
3,796
2,531

4
1,519
7,557
75
39
114

24
907

2,041
9,153
11,194

–
65
3,235
87
3,883
3,114

4
1,519
7,557
75
39
114

24
907

2,041
9,543
11,584

–
65
3,235
87
3,883
3,114

seK M

Financial assets
Other shares and interests
Other financial assets
Trade receivables
Derivative instruments – hedge accounting
Derivative instruments – held for trading
Derivative instruments, total

Short-term investments
Cash and cash equivalents

Financial liabilities
Long-term loans – hedge accounting
Long-term loans – not hedge accounting
Long-term loans, total

Convertible debentures
Short-term loans – hedge accounting
Short-term loans – not hedge accounting
Derivative instruments – held for trading
Trade payables
Deferred considerations

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

Financial instruments: measured at fair value

seK M

Financial assets
Derivative instruments
Other shares and interests

Financial liabilities
Long-term loans –
hedge accounting
Short-term loans –
hedge accounting
Derivative instruments
Deferred considerations¹

2011

2012

Carrying
amounts

Quoted
prices

observ-
able data

Non-
observ-
able data

Carrying
amounts

Quoted
prices

observ-
able data

Non-
observ-
able data

139
–

917

562
179
2,531

–
–

–

–
–
–

139
–

917

562
179
–

–
–

–

–
–
2,531

39
–

2,041

65
87
3,114

–
–

–

–
–
–

39
–

2,041

65
87
–

–
–

–

–
–
3,114

1 Deferred considerations often depend on the earnings trend of an acquired business over a certain period. Measurement of the additional purchase consideration is

based on the management’s best judgment. Discounting to present value takes place in the case of significant amounts.

AssA ABLoY ANNuAL report 2012

Notes 115

Comments on five years in summary

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 launched on the market. The
economic situation weakened towards the end of the year
as the financial crisis had a negative impact on investments
in new construction.

2009
The financial crisis led to a downturn in both the housing
and commercial construction markets worldwide, which
was unprecedented in the Group’s history. ASSA ABLOY was
nevertheless able to maintain good profitability and
strengthen its market position even under very trying mar-
ket conditions. Efficient product development with a strong
customer focus, a stronger market presence and continued
cost cutting contributed substantially to the good perfor-
mance. Cash flow and working capital utilization showed
positive development during the year.

2011
2011 was a successful year for ASSA ABLOY despite challeng-
ing market conditions and some slowdown in the second
half of the year on mature markets. Organic growth was 4
percent, driven by continued investments in new products
and the marketing organization. The year saw high acquisi-
tion activity in general, with 18 completed acquisitions,
increasing sales by 17 percent. The acquisition of Crawford
was the Group’s largest ever structural transaction.

The year also saw two major disposals of acquired busi-

nesses, which were not considered to be a good fit with
ASSA ABLOY in the long term.

A new restructuring program was launched during the
year to further increase the Group’s cost-efficiency. The pre-
vious programs have proved to be very successful, resulting
in major savings and further increased efficiency in the pro-
duction units.

Continued streamlining, a strengthened market position

and the launch of innovative new products consolidated
ASSA ABLOY’s leading position and the Group is well posi-
tioned for long-term sustainable growth.

Cost adjustments in the form of staff redundancies and

Operating income excluding restructuring costs

the relocation of components and basic products to low-
cost countries continued at a high rate during the year. A
third restructuring program was launched towards the end
of the year. The new products launched were well received
by customers and strengthened ASSA ABLOY’s market-lead-
ing position in total door opening solutions.

Eight acquisitions were made during the year, consolidat-

ing the Group’s position in industrial and automatic doors
and increasing annual sales by around SEK 1,200 M.

2010
Organic growth was 3 percent, with Asia and South America
reporting strong growth and North America showing good
and increasing growth. Europe began the year well but
growth gradually slowed. Continued investments in the
marketing organization and the launch of new products
strengthened the Group’s market leadership. Acquired
growth was 8 percent.

Operating income rose 12 percent and cash flow devel-

oped well during the year.

A total of 13 acquisitions were completed during the
year, including Pan Pan (China), King Door Closers (South
Korea), ActivIdentity (USA) and Paddock (UK). These acqui-
sitions increase annual sales by SEK 2,880 M. An agreement
was signed to acquire a majority share holding in Cardo, a
leading Swedish industrial door company.

increased 10 percent and cash flow remained strong. Earn-
ings per share after full dilution excluding items affecting
comparability increased 13 percent.

2012
Organic growth was 2 percent, despite the continued weak
market conditions globally. The share of sales on emerging
markets continued to increase to over 25 percent of total
sales. The major investments in product development in
recent years have been fruitful. This can be seen from the
share of products launched in the past three years, which
has increased considerably and currently accounts for
around 25 percent of total sales.

Operating income excluding items affecting comparabil-

ity increased by 13 percent during the year and operating
cash flow remained very strong. Earnings per share after full
dilution, excluding items affecting comparability, increased
by 13 percent, compared with 2011.

A total of 13 acquisitions were completed during the
year, which mainly strengthened the position in entrance
automation for high-performance doors and docking sys-
tems. These acquisitions increase annual sales by a total of
around SEK 4,500 M and provide important products and
technology.

Activities in the ongoing restructuring programs

remained at a high level during the year. The transfer of pro-
duction to low-cost countries continued, combined with
conversion of plants from production to assembly and
installation. More than 6,700 employees have left the Group,
as a result of these activities since the programs began in
2006.

In summary, it may be stated that ASSA ABLOY continued
gradually to expand and consolidate its leading market posi-
tion during the year, and showed good earnings capacity
under the prevailing economic circumstances.

116

Comments on five years in summary

assa aBLoy annuaL report 2012

Five years in summary

amounts in seK m unless stated otherwise

2008

2009

2010

2011

2012

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 flow3

Capital employed and financing
Capital employed
– of which goodwill
– of which other intangible and tangible assets
– of which investments in associates
Assets and liabilities of disposal group classified as held for sale
Net debt
Non-controlling interest
Shareholders' equity, excluding non-controlling interest

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
Operating margin (EBITDA), %
Operating margin (EBIT), %
Profit margin (EBT), %
Return on capital employed, %
Return on capital employed excluding items
affecting comparability, %
Return on shareholders' equity, %
Equity ratio, %
Net debt/equity ratio, times
Interest coverage ratio, times
Interest on convertible debentures net after tax
Number of shares, thousands
Number of shares after dilution, thousands
Average number of employees

34,8294
0
4
6,4471
–921
5,5261
3,499
2,438

4,369
–2,648
–1,311
410
4,769

32,850
20,669
7,945
38
–
14,013
163
18,674

6.60
9.211
55.91
3.60
88.50

34,9634
–12
3
6,4261
–1,014
5,4131
3,740
2,659

5,924
–1,835
–3,741
348
6,843

30,382
20,333
7,541
39
–
11,048
162
19,172

7.18
9.221
54.76
3.60
137.80

36,823
3
8
7,041
–995
6,046
5,366
4,080

5,729
–4,027
–2,597
–895
6,285

31,385
22,279
8,336
37
–
10,564
169
20,652

11.07
10.89
58.64
4.00
189.50

18.51,4
15.91,4
10.0
13.3

18.41,4
15.51,4
10.7
13.1

17.2
12.8
41.9
0.74
5.7
81.0
365,918
380,713
32,723

16.2
12.7
45.4
0.57
7.2
31.9
365,918
372,931
29,375

19.1
16.4
14.6
18.5

18.5
19.1
45.9
0.51
10.1
9.9
366,177
372,736
37,279

41,786
4
17
7,6461
–1,022
6,6241
4,559
3,869

5,347
–7,357
2,326
316
6,080

37,942
27,014
10,126
1,211
–
14,207
208
23,527

10.45
12.301
65.54
4.50
172.60

18.31
15.91
10.9
13.6

17.4
16.7
42.9
0.60
8.8
10.5
368,250
371,213
41,070

46,619
2
9
8,536
–1,034
7,501
6,731
5,125

5,990
–4,738
–1,564
–312
7,044

41,073
28,932
11,093
1,519
385
14,732
183
26,543

13.85
13.84
71.82
5,102
242.90

18.3
16.1
14.4
18.2

18.2
20.1
44.6
0.55
10.4
3.9
370,859
370,859
42,762

¹ Excluding items affecting comparability in 2008, 2009 and 2011.
² For 2012, as proposed by the Board.
³ Excluding restructuring payments
4 Reclassification has been made for 2008 and 2009. Reclassification has not been made for 2007. The Group has made a reclassification that affects direct distribution
costs and depreciation on capitalized product development expenditure. The reason is to give a true and fair view of the allocation between direct and indirect costs
as well as for product development expenses. In order to maintain comparability, the financial statements for 2008 and 2009 have been adjusted. The reclassification
involves the transfer of direct distribution costs from selling expenses and administrative expenses, and where appropriate from sales, to cost of goods sold. In addition,
depreciation on product development has been moved from cost of goods sold to selling expenses and administrative expenses. Both these adjustments affect gross
income. Operating income is not affected.

RETURN ON CAPITAL EMPLOYED¹

OPERATING MARGIN (EBIT)¹

AVERAGE NUMBER OF EMPLOYEES

Number

45,000

37,500

30,000

22,500

15,000

7,500

1 Excluding items affecting compara-

bility 2008, 2009 and 2011.

assa aBLoy annuaL report 2012

five years in summary 117

Quarterly information

tHe Group in summary
amounts in seK m unless stated otherwise

Q 1
2011

Q 2
2011

Q 3
2011

Q 4
2011

full
year
2011

Q 1
2012

Q 2
2012

Q 3
2012

Q 4
2012

full
year
2012

Sales
Organic growth
Gross income excluding items
affecting comparability
Gross income/ Sales
operating income before depreciation
(eBitDa) excluding restructuring costs
Operating margin (EBITDA)
Depreciation
operating income (eBit) excluding
items affecting comparability
Operating margin (EBIT)
Items affecting comparability1
operating income (eBit)
Net financial items
income before tax (eBt)
Profit margin (EBT)
Tax
Net income of disposal group classified as
held for sale and discontinued operations
net income

allocation of net income:
Parent company shareholders’
Non-controlling interests

operatinG CasH fLoW

Operating income (EBIT)
Restructuring costs
Depreciation
Net capital expenditure
Change in working capital
Interest paid and received
Non-cash items
operating cashflow 2
Operating cash flow / Income before tax

CHanGe in net DeBt

Net debt at start of period
Operating cash flow
Restructuring payments
Tax paid
Acquisitions/Disposals
Dividend
Purchase of treasury shares
Share issue
Cash and cash equivalents of disposal
group classified as held for sale
Exchange rate differences and other
net debt at end of period
Net debt / equity ratio

net DeBt

Long-term interest-bearing receivables
Short-term interest-bearing
investments including derivatives
Cash and bank balances
Pension provisions
Long-term interest-bearing liabilities
Short-term interest-bearing liabilities
including derivatives
total

8,699 10,502 10,841 11,744
4%

41,786 10,839 11,997 11,545 12,239 46,619
2%

3,560
40.9%

4,050
38.6%

4,208
38.8%

4,469
38.0%

16,287
39.0%

4,307
39.7%

4,687
39.1%

4,603
39.9%

4,832 18,429
39.5%
39.5%

1,630
18.7%
–253

1,377
15.8%
–
1,377
–162
1,215
14.0%
–268

1,863
17.7%
–248

1,615
15.4%
–
1,615
–156
1,460
13.9%
–321

2,002
18.5%
–251

1,751
16.2%
–
1,751
–169
1,582
14.6%
–348

–4
943

17
1,156

419
1,653

941
2

1,143
13

1,644
8

2,151
18.3%
–270

1,881
16.0%
–1,420
461
–158
303
2.6%
–158

–27
118

114
4

7,646
18.3%
–1,022

6,624
15.9%
–1,420
5,204
–645
4,559
10.9%
–1,095

1,929
17.8%
–274

1,655
15.3%
–
1,655
–173
1,481
13.7%
–341

2,157
18.0%
–272

1,885
15.7%
–
1,885
–208
1,677
14.0%
–385

2,183
18.9%
–251

1,932
16.7%
–
1,932
–184
1,748
15.1%
–452

2,268
18.5%
–238

2,030
16.6%
–
2,030
–205
1,825
14.9%
–439

8,536
18.3%
–1,034

7,501
16.1%
–
7,501
–770
6,731
14.4%
–1,617

404
3,869

–
1,140

4
1,295

7
1,303

–
1,386

11
5,125

3,843
26

1,138
2

1,293
2

1,294
9

1,386
0

5,111
14

Q 1
2011

Q 2
2011

Q 3
2011

Q 4
2011

1,377
–
253
–161
–963
–74
16
448
0.37

1,615
–
248
–223
–181
–152
4
1,311
0.90

1,751
–
251
–216
–125
–121
–12
1,528
0.97

461
1,420
270
–245
1,031
–135
–8
2,794
1.622

Q 1
2011

Q 2
2011

Q 3
2011

Q 4
2011

full
year
2011

5,204
1,420
1,022
–846
–238
–482
0
6,080
1.023

full
year
2011

Q 1
2012

Q 2
2012

Q 3
2012

Q 4
2012

1,655
–
274
–183
–1,155
–482
4
483
0.33

1,885
–
272
–165
–300
–180
–77
1,435
0.86

1,932
–
251
–265
266
–100
–116
1,967
1.13

2,030
–
238
57
1,112
–154
–123
3,160
1.73

Q 1
2012

Q 2
2012

Q 3
2012

Q 4
2012

full
year
2012

7,501
–
1,034
–557
–77
–546
–312
7,044
1.05

full
year
2012

10,564 21,586 23,403 16,159
–2,794
183
418
324
–
–
–

–448
48
235
11,606
–
–
–

–1,528
75
190
–6,415
–
–
–308

–1,311
67
363
996
1,472
17
–

10,564 14,207 15,749 18,003 16,509 14,207
–7,044
–6,080
498
373
1,113
1,206
4,181
6,511
1,683
1,472
38
17
–450
–308

–1,967
118
173
452
28
–
–

–1,435
86
341
1,221
1,655
38
–450

–3,160
202
239
1,019
–
–
–

–483
92
360
1,489
–
–
–

–
213

–
–419

–
–84
21,586 23,403 16,159 14,207
0.60

–
742

1.10

1.03

0.69

–
83

–
452

390
118
14,207 15,749 18,003 16,509 14,732 14,732
0.55

59
–356

324
474

7
–84

0.72

0.60

0.66

0.64

0.55

Q 1
2011

–64

Q 2
2011

–58

Q 3
2011

–49

Q 4
2011

–44

Q 1
2012

–32

Q 2
2012

–33

Q 3
2012

–30

Q 4
2012

–29

–378
–1,298
1,179
7,479

–315
–1,299
1,214
6,582

–488
–1,582
1,233
6,535

–284
–1,665
1,173
7,422

14,668 17,279 10,510
7,605
21,586 23,403 16,159 14,207

–202
–1,208
1,215
8,153

–138
–211
–256
–907
–971
–1,143
1,237
1,224
1,214
8,726 10,028 11,194

7,824

3,388
15,749 18,003 16,509 14,732

6,479

9,472

118

QuarterLy information

assa aBLoy annuaL report 2012

CapitaL empLoyeD anD finanCinG

Capital employed
– of which goodwill
– of which other intangible and

tangible assets

– of which investments in associates
Assets and liabilities of disposal groups
held for sale
Net debt
Non-controlling interests
Shareholders' equity, excluding
non-controlling interests

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
excluding items affecting comparability 1
Shareholders' equity per share
after dilution

numBer of sHares

Number of shares before dilution,
thousands
Weighted average number of shares
after dilution, thousands

Q 1
2011

Q 2
2011

Q 3
2011

Q 4
2011

36,267 38,232 39,667 37,942
25,343 25,663 27,138 27,014

Q 1
2012

Q 2
2012

Q 3
2012

Q 4
2012

40,193 42,603 41,285 41,073
27,824 29,924 28,635 28,932

8,496 10,129 10,043 10,126
1,211
1,111

1,234

1,121

10,436 10,599 10,917 11,093
1,519

1,444

1,231

1,206

6,379

6,299

–
21,586 23,403 16,159 14,207
208

301

198

201

–

396

385
15,749 18,003 16,509 14,732
183

183

382

214

211

20,783 20,907 23,308 23,527

24,231 24,785 24,975 26,543

Q 1
2011

Q 2
2011

Q 3
2011

Q 4
2011

full
year
2011

Q 1
2012

Q 2
2012

Q 3
2012

Q 4
2012

full
year
2012

2.57
2.53

3.08
3.07

4.40
4.42

0.40
0.30

10.45
10.33

3.09
3.10

3.51
3.51

3.50
3.49

3.74
3.74

13.85
13.84

2.52

3.05

3.30

3.43

12.30

3.10

3.51

3.49

3.73

13.84

58.34

59.35

65.91

65.79

65.54

68.24

67.24

67.39

71.61

71.82

mar
2011

Jun
2011

sep
2011

Dec
2011

full
year
2011

mar
2012

Jun
2012

sep
2012

Dec
2012

full
year
2012

367,732 368,250 368,250 368,250 368,250 368,250 370,859 370,859 370,859 370,859

373,038 373,000 372,946 372,627 372,627 368,057 368,352 369,155 369,592 369,592

Definitions of key data

1 Items affecting comparability consist of restructuring costs and net income from discontinued operations in 2011.
2 Excluding restructuring payments.
3 Operating income before tax excluding items affecting comparability.

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

operating 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 operating cash flow for detailed information.

net capital expenditure
Investments in fixed assets less disposals of fixed assets.

Depreciation
Depreciation/amortization of tangible and intangible assets.

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.

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 non-controlling interests, plus interest
expenses after tax for convertible debentures, as a
percentage of average shareholders’ equity (excluding
non-controlling interests) after dilution.

return on capital employed
Income before tax plus net interest as a percentage of average
capital employed.

earnings per share after tax and before dilution
Net income excluding non-controlling interests divided by
weighted average number of shares before dilution.

earnings per share after tax and dilution
Net income excluding non-controlling interests, plus inter-
est expenses after tax for convertible debentures, divided by
weighted average number of shares after dilution.

shareholders’ equity per share after dilution
Equity excluding non-controlling interests, plus convertible
debentures, divided by number of shares after dilution.

assa aBLoy annuaL report 2012

QuarterLy information 119

Proposed distribution of earnings

The following earnings are at the disposal of the Annual General Meeting:

Share premium reserve: SEK 788 M
Retained earnings brought forward: SEK 2,947 M
Net income for the year: SEK 3,496 M
TOTAL: SEK 7,231 M

The Board of Directors and the President and CEO propose that a dividend of SEK 5.10 per share, a total of SEK 1,888 M,
be distributed to shareholders and that the remainder, SEK 5,343 M, be carried forward to the new financial year.
The dividend amount is calculated on the number of outstanding shares as per 6 February 2013.

No dividend is payable on ASSA ABLOY AB’s holding of treasury shares, the exact number of which is determined
on the record date for payment of dividend. ASSA ABLOY AB held 600,000 treasury shares as at 6 February 2013.

Tuesday, 30 April 2013 has been proposed as the record date for dividends. If the Annual General Meeting confirms this
proposal, dividends are expected to be distributed by Euroclear Sweden AB on Monday, 6 May 2013.

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 view of the development of
the Group’s and the Parent company’s business operations, financial position and results, and describes material risks and
uncertainties to which the Parent company and the other companies in the Group are exposed.

Stockholm, 6 February 2013

Lars Renström
Chairman of the Board

Carl Douglas
Vice Chairman of the Board

Birgitta Klasén
Board member

Sven-Christer Nilsson
Board member

Eva Lindqvist
Board member

Jan Svensson
Board member

Johan Molin
President and CEO

Ulrik Svensson
Board member

Seppo Liimatainen
Employee representative

Mats Persson
Employee representative

Our audit report was issued on 6 February 2013

PricewaterhouseCoopers AB

Peter Nyllinge
Authorized Public Accountant

120

proposeD DistriBution of earninGs

assa aBLoy annuaL report 2012

Auditor’s report

to the annual meeting
of the shareholders of assa aBLoy aB,
corporate identity number 556059-3575

report on the annual accounts and consolidated accounts
We have audited the annual accounts and consolidated
accounts of ASSA ABLOY AB for the year 2012. The annual
accounts and consolidated accounts of the company are
included in the printed version of this document on pages
63–120.

Responsibilities of the Board of Directors and the President and
CEO for the annual accounts and consolidated accounts
The Board of Directors and the President and CEO are respon-
sible for the preparation and fair presentation of these annual
accounts and consolidated accounts in accordance with
International Financial Reporting Standards , as adopted by
the EU, and the Annual Accounts Act, and for such internal
control as the Board of Directors and the President and CEO
determine is necessary to enable the preparation of annual
accounts and consolidated accounts that are free from mate-
rial misstatement, whether due to fraud or error.

Auditor’s responsibility
Our responsibility is to express an opinion on these annual
accounts and consolidated accounts based on our audit. We
conducted our audit in accordance with International Stan-
dards on Auditing and generally accepted auditing stan-
dards in Sweden. Those standards require that we comply
with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the annual
accounts and consolidated accounts are free from material
misstatement.

An audit involves performing procedures to obtain audit

evidence about the amounts and disclosures in the annual
accounts and consolidated accounts. The procedures
selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the
annual accounts and consolidated accounts, whether due to
fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the company’s prepa-
ration and fair presentation of the annual accounts and con-
solidated accounts in order to design audit procedures that
are appropriate in the circumstances, but not for the pur-
pose of expressing an opinion on the effectiveness of the
company’s internal control. An audit also includes evaluat-
ing the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Board
of Directors and the President and CEO, as well as evaluating
the overall presentation of the annual accounts and consoli-
dated accounts.

We believe that the audit evidence we have obtained is suf-
ficient and appropriate to provide a basis for our audit opinion.

Opinions
In our opinion, the annual accounts have been prepared in
accordance with the Annual Accounts Act and present fairly,
in all material respects, the financial position of the parent
company as of 31 December 2012 and of its financial perfor-
mance and its cash flows for the year then ended in accor-
dance with the Annual Accounts Act. The consolidated
accounts have been prepared in accordance with the Annual
Accounts Act and present fairly, in all material respects, the
financial position of the group as of 31 December 2012 and
of their financial performance and cash flows for the year
then ended in accordance with International Financial

Reporting Standards, as adopted by the EU, and the Annual
Accounts Act. A corporate governance statement has been
prepared. The statutory administration report and the cor-
porate governance statement are consistent with the other
parts of the annual accounts and consolidated accounts.
We therefore recommend that the annual meeting of

shareholders adopt the income statement and balance
sheet for the parent company and the group.

report on other legal and regulatory requirements
In addition to our audit of the annual accounts and consoli-
dated accounts, we have examined the proposed appropria-
tions of the company’s profit or loss and the administration
of the Board of Directors and the President and CEO of ASSA
ABLOY AB for the year 2012.

Responsibilities of the Board of Directors and
the President and CEO
The Board of Directors is responsible for the proposal for
appropriations of the company’s profit or loss, and the Board
of Directors and the President and CEO are responsible for
administration under the Companies Act.

Auditor’s responsibility
Our responsibility is to express an opinion with reasonable
assurance on the proposed appropriations of the company’s
profit or loss and on the administration based on our audit.
We conducted the audit in accordance with generally
accepted auditing standards in Sweden.

As a basis for our opinion on the Board of Directors’ pro-

posed appropriations of the company’s profit or loss, we
examined the Board of Directors’ reasoned statement and a
selection of supporting evidence in order to be able to
assess whether the proposal is in accordance with the Com-
panies Act.

As a basis for our opinion concerning discharge from lia-

bility, in addition to our audit of the annual accounts and
consolidated accounts, we examined significant decisions,
actions taken and circumstances of the company in order to
determine whether any member of the Board of Directors or
the President and CEO is liable to the company. We also
examined whether any member of the Board of Directors or
the President and CEO has, in any other way, acted in contra-
vention of the Companies Act, the Annual Accounts Act or
the Articles of Association.

We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinions.

Opinions
We recommend to the annual meeting of shareholders that
the profit be appropriated in accordance with the proposal
in the statutory administration report and that the mem-
bers of the Board of Directors and the President and CEO be
discharged from liability for the financial year.

Stockholm, 6 February 2013

PricewaterhouseCoopers AB

Peter Nyllinge
Authorized Public Accountant

assa aBLoy annuaL report 2012

auDit report 121

The ASSA ABLOY share

share price trend in 2012
2012 was a good year on NASDAQ OMX Stockholm, with a
12 percent rise in the index. It was also a very good year for
ASSA ABLOY’s Series B share, whose value increased by fully
41 percent from SEK 172.60 to SEK 242.90. Market capital-
ization amounted to SEK 90,082 M (63,560) at year-end.

The lowest closing price during the year was SEK 171.70

recorded on 4 January, while the highest closing price was
SEK 244.80 recorded on 27 December.

Listing and trading
ASSA ABLOY’s Series B share has been listed on NASDAQ
OMX Stockholm, Large Cap since 8 November 1994. Total
turnover of the Series B share on all markets amounted to
746 million (918) shares in 2012, equivalent to a turnover
rate of 201 percent (249). Turnover of the series B share on
NASDAQ OMX Stockholm amounted to 270 million (391)
shares, equivalent to a turnover rate of 73 percent (106).
The average turnover rate was 74 percent (96) on NASDAQ
OMX Stockholm, and 77 percent (101) on the Large Cap list.
The implementation of the EU’s Markets in Financial
Instruments Directive (MiFID) in late 2007 has changed the
structure of equity trading in Europe. Now that a share can

be traded on markets other than the stock exchanges where
it is listed, trading has become more fragmented, while the
total turnover of many shares has increased. The ASSA
ABLOY share is now not only traded on NASDAQ OMX Stock-
holm, but was traded on more than ten different markets in
2012, such as Boat, Bats Chi-X, Burgundy and Turquoise.
Increasingly fragmented trading means that an ever-increas-
ing share of trading in most Swedish shares takes place on
markets other than NASDAQ OMX Stockholm. Trading on
NASDAQ OMX Stockholm accounted for 36 percent of turn-
over of the share in 2012, compared with 43 percent in
2011, 51 percent in 2010, and 65 percent in 2009.

ownership structure
The number of shareholders at year-end was 17,591
(18,697) and the ten largest shareholders accounted for
around 38 percent (38) of the share capital and 58 percent
(58) of the votes. Shareholders with more than 50,000
shares, a total of 361 shareholders, accounted for 95 percent
(97) of the share capital and 98 percent (97) of the votes.

Investors outside Sweden accounted for around 68 per-

cent (64) of the share capital and 46 percent (44) of the
votes, and were mainly in the USA and the United Kingdom.

SHARE PRICE TREND AND TURNOVER 2003–2012

DIVIDEND PER SHARE 2003–2012

SEK

300

240

180

120

No. of shares traded, thousands

200,000

180,000

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

SEK

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Series B share

OMX Stockholm

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

2012 proposed dividend

Data per share

seK/share 1

2003

2004

2005

Earnings after tax and dilution ²
Dividend
Dividend yield, % 5
Dividend, % 2, 6
Share price at year-end
Highest share price
Lowest share price
Equity²
Number of shares, thousands 7
1 Adjustments made for new issues.
2 2003 has not been adjusted for IFRS.
3 Excluding items affecting comparability 2006, 2008, 2009 and 2011.
4 Proposed dividend by the Board.

2007

2010

2012

3.31
1.25
1.5
33.9
85.50
110.00
67.00
31.23

13.84
5.104
2.1
36.8
242.90
244.80
171.70
71.82
370,935 378,718 378,718 376,033 380,713 380,713 372,931 372,736 371,213 370,859

10.89
4.00
2.1
37.0
189.50
199.20
126.60
58.64

9.02
3.60
2.8
40.5
129.75
164.00
124.50
46.76

6.97
3.25
2.6
47.6
125.00
126.00
89.25
42.85

6.33
2.60
2.3
42.0
113.50
113.50
84.00
34.74

2008
9.213
3.60
4.1
52.3
88.50
126.00
69.75
55.91

2009
9.223
3.60
2.6
47.8
137.80
142.50
71.50
54.76

2011
12.303
4.50
2.6
36.6
172.60
194.90
133.50
65.54

2006
7.993
3.25
2.2
64.0
149.00
151.00
109.00
39.13

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.

122

tHe assa aBLoy sHare

assa aBLoy annuaL report 2012

ASSA ABLOY’s ten largest shareholders
Based on the share register at 31 December 2012.

shareholders

series a shares

series B shares

Investment AB Latour
Melker Schörling AB
Capital Group fonder
BlackRock fonder
Swedbank Robur fonder
Norges Bank
SHB fonder
AMF Försäkring & Fonder
Harris Associates fonder
SEB fonder & SEB Trygg Liv
Other shareholders
total number

13,865,243
5,310,080

19,175,323

21,300,000
9,162,136
31,693,500
18,730,437
10,135,991
9,402,027
5,542,930
5,046,500
4,894,400
4,622,692
231,152,842
351,683,455

Source: SIS Ägarservice AB and Euroclear Sweden AB.

total number
of shares

35,165,243
14,472,216
31,693,500
18,730,437
10,135,991
9,402,027
5,542,930
5,046,500
4,894,400
4,622,692
231,152,842
370,858,778

share capital, %

votes, %

9.5
3.9
8.5
5.1
2.7
2.5
1.5
1.4
1.3
1.2
62.3
100.0

29.5
11.5
5.8
3.4
1.9
1.7
1.0
0.9
0.9
0.9
42.5
100.0

OWNERSHIP STRUCTURE (SHARE CAPITAL)

OWNERSHIP STRUCTURE (VOTES)

Investment AB Latour, 9.5%
Capital Group Funds, 8.5%
BlackRock Funds, 5.1%
Melker Schörling AB, 3.9%
Swedbank Robur Funds, 2.7%
Norges Bank, 2.5%
SHB Funds, 1.5%
AMF Insurance & Funds, 1.4%
Harris Associates Funds, 1.3%
SEB fonder & SEB Trygg Liv, 1.2%
Other shareholders, 62.3%

Investment AB Latour, 29.5%
Melker Schörling AB, 11.5%
Capital Group Funds, 5.8%
BlackRock Funds, 3.4%
Swedbank Robur Funds, 1.9%
Norges Bank, 1.7%
SHB fonder, 1.0%
AMF Insurance & Funds, 0.9%
Harris Associates Funds 0.9%
SEB fonder & SEB Trygg Liv, 0.9%
Other shareholders, 42.5%

Share capital
The share capital amounted to SEK 370,858,778 at year-end,
distributed among a total of 370,858,778 shares, comprising
19,175,323 Series A shares and 351,683,455 Series B shares.

All shares have a par value of SEK 1.00 and give shareholders
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
2010
2011
2012
2012

transaction

Split 100:1
Bonus issue
Non-cash issue
New share issue
Conversion of Series C shares into Series 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
Converted debentures
Converted debentures
Converted debentures
Converted debentures
Number of shares after dilution

series a
shares

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
19,175,323
19,175,323
19,175,323
19,175,323

series C
shares

20,000

1,428,550
1,714,260

series 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
347,001,871
349,075,055
349,075,055
351,683,455
351,683,455

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
366,177,194
368,250,378
368,250,378
370,858,778
370,858,778

assa aBLoy annuaL report 2012

tHe assa aBLoy sHare 123

The ASSA ABLOY share

share capital and voting rights
The share capital amounted to SEK 370,858,778 at year-end,
distributed among a total of 370,858,778 shares, comprising
19,175,323 Series A shares and 351,683,455 Series B shares.
All shares have a par value of SEK 1.00 and give shareholders
equal rights to the company’s assets and earnings. The total
number of votes amounts to 543,436,685. Each Series A
share carries ten votes and each Series B share one vote.

Repurchase of own shares
Since 2010 the Board has requested and received a mandate
from the Annual General Meeting to repurchase and transfer
ASSA ABLOY shares. The aim has been to be able to adapt the
company’s capital structure, and thereby contributing to
increased shareholder value, to be able to exploit acquisi-
tion opportunities by fully or partly financing company
acquisitions with its own shares, and to secure the compa-
ny’s long-term incentive programs. The 2012 Annual Gen-
eral Meeting authorized the Board to repurchase, during the
period until the next Annual General Meeting, a maximum
number of Series B shares so that after each repurchase
ASSA ABLOY holds a maximum 10 percent of the total num-
ber of shares in the company.

ASSA ABLOY holds a total of 600,000 (400,000) Series B
shares after repurchase, to secure the company’s obligations
in connection with the company’s long-term incentive pro-
grams (LTI). These shares account for 0.2 percent (0.1) of the
share capital and each share has a par value of SEK 1.00. The
purchase consideration amounted to SEK 103 M (65).

Of the above shares, 200,000 (100,000) Series B shares were
repurchased in 2012. These account for 0.05 percent (0.03) of
the share capital and each share has a par value of SEK 1.00. The
purchase consideration amounted to SEK 38 M (17).

Dividend and dividend policy
The objective of the dividend policy is that, in the long term,
the dividend should be equivalent to 33–50 percent of
income after standard tax, but always taking into account
ASSA ABLOY’s long-term financing requirements.

The Board of Directors and the Precident and CEO pro-
pose that a dividend of SEK 5.10 per share (4.50) be paid to
shareholders for the 2012 financial year, equivalent to a divi-
dend yield on the Series B share of 2.10 percent (2.6).

other equity-based incentive programs
ASSA ABLOY has issued a number of convertible debentures
to employees in the Group.

In 2007 it was decided to launch an incentive program,
Incentive 2007. The program matured in 2012. Half of the
convertible debentures relating to Incentive 2007 were con-
verted. Conversion was managed by an external party and
took place in 2012. A total of 2,608,400 Series B shares were
issued in connection with Incentive 2007.

At year-end 2012, there were no outstanding convertible

debentures issued to employees in the Group.

For long-term incentive programs see Note 33.

Analysts who cover ASSA ABLOY

Company

name

telephone

ABG Sundal Collier
Bank of America Merrill Lynch
Barclays Capital
Carnegie
Carnegie
Cheuvreux
Credit Suisse
Danske Bank
Deutsche Bank
DnB NOR
Dresdner Kleinwort
Enskilda Securities
Erik Penser
Exane BNP Paribas
Goldman Sachs
Handelsbanken Capital Markets
Handelsbanken Capital Markets
ICAP Securities Ltd
J.P. Morgan
Nomura
Nomura
Pareto Securities
Redburn Partners
Sanford C. Bernstein
Société Générale
Swedbank Markets
UBS
UBS
UniCredit Bank AG

Anders Idborg
Ben Maslen
Allan Smylie
Kenneth Toll Johansson
Agnieszka Vilela
Andreas Dahl
Andre Kukhnin
Oscar Stjerngren
Johan Wettergren
Lars Brorson
Colin Grant
Stefan Andersson
Max Frydén
Jonathan Mounsey
Aaron Ibbotson
Peder Frölén
Jon Hyltner
Nick Wilson
Andreas Willi
Klas Bergelind
Daniel Cunliffe
David Jacobsson
James Moore
Martin Prozesky
Sébastien Grunter
Niclas Höglund
Guillermo Peigneux
Fredric Stahl
Alasdair Leslie

+46 8 566 286 74
+44 207 996 4783
+44 207 773 4873
+46 8 5886 8911
+46 8 5886 8586
+46 8 723 51 63
+44 207 888 0350
+46 8 5688 0606
+46 8 463 55 18
+44 207 621 6149
+44 207 475 9161
+46 8 522 296 57
+46 8 463 8463
+44 207 039 9529
+44 207 774 6661
+46 8 701 1251
+46 8 701 1275
+44 207 532 4683
+44 207 134 4569
+44 207 102 5097
+44 207 102 5096
+46 8 402 5272
+44 207 000 2135
+44 207 170 0577
+33 1 4213 4722
+46 8 5859 1800
+46 8 453 7308
+46 8 493 7309
+44 207 826 7961

anders.idborg@abgsc.se
ben.maslen@baml.com
allan.smylie@barcap.com
kentol@carnegie.se
agnvil@carnegie.se
adahl@cheuvreux.com
andre.kukhnin@credit-suisse.com
oscar.stjerngren@danskebank.se
johan.wettergren@db.com
lars.brorson@dnbnor.no
colin.grant@dkib.com
stefan.andersson@enskilda.se
max.fryden@penser.se
jonathan.mounsey@exanebnpparibas.com
aaron.ibbotson@gs.com
pefr15@handelsbanken.se
johy01@handelsbanken.se
nicholas.wilson@icap.com
andreas.p.willi@jpmorgan.com
klas.bergelind@nomura.com
daniel.cunliffe@nomura.com
david.jacobsson@paretoohman.se
james.moore@redburn.com
martin.prozesky@bernstein.com
sebastien.grunter@sgcib.com
niclas.hoglund@swedbank.se
guillermo.peigneux-lojo@ubs.com
fredric.stahl@ubs.com
alasdair.leslie@unicreditgroup.de

124

tHe assa aBLoy sHare

assa aBLoy annuaL report 2012

Information for shareholders

Annual General Meeting
The Annual General Meeting of ASSA ABLOY AB will be held
at Moderna Museet (Museum of Modern Art), Skeppshol-
men, Stockholm at 15.00 on Thursday, 25 April 2013.
Shareholders wishing to attend the Annual General Meeting
should:
• Be registered in the share register kept by Euroclear

Sweden AB by Friday, 19 April 2013.

• Notify ASSA ABLOY AB of their intention to attend by

Friday, 19 April 2013.

Registration in the share register
In addition to notification of intention to attend, sharehold-
ers whose shares are nominee registered must be tempo-
rarily registered in their own name in the share register (so
called voting right registration) to be able to attend the
Annual General Meeting. In order for this registration to be
completed by Friday, 19 April 2013, the shareholder should
contact his/her bank or nominee well in advance of this
date.

Notification of intention to attend
• Website www.assaabloy.com
• Address ASSA ABLOY AB, Annual General Meeting
Box 7842, SE-103 98 Stockholm, Sweden

• Telephone +46 (0)8 506 485 14

The notification should state:
• Name
• Personal or corporate identity number
• Address and daytime telephone number
• Number of shares
• Any assistants attending

Nomination Committee
The Nomination Committee has the task of preparing reso-
lutions on the election of the Chairman, the Vice Chairman
and other members of the Board of Directors, the appoint-
ment of the auditor, the election of the Chairman of the
Annual General Meeting, and fees and associated matters.
The Nomination Committee prior to the 2013 Annual
General Meeting comprises Gustaf Douglas (Investment AB
Latour), Mikael Ekdahl (Melker Schörling AB), Liselott Ledin
(Alecta), Marianne Nilsson (Swedbank Robur Fonder) and
Per-Erik Mohlin (SEB Fonder/SEB Trygg Liv). Gustaf Douglas
is Chairman of the Nomination Committee.

Dividend
Tuesday, 30 April 2013 has been proposed as the record
date for dividends. If the Annual General Meeting approves
the proposal, dividends are expected to be distributed by
Euroclear Sweden AB on Monday, 6 May 2013.

Further information
Niklas Ribbing, Head of 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

A shareholder who is to be represented by a proxy should
submit the proxy in connection with the notification of in-
tention to attend the Annual General Meeting. Proxy forms
are available at: www.assaabloy.com.

Financial reporting
First quarter: 24 April 2013
Second quarter: 19 July 2013
Third quarter: 28 October 2013
Fourth quarter and Year-end report: February 2014
Annual Report 2013: March 2014

Production: ASSA ABLOY in cooperation with Hallvarsson & Halvarsson.
Photo: Peter Hoelstad/Molly & Co, Gerard Jörén, Getty Images and ASSA ABLOYs photographic library, among others.
Printing: Elanders AB, Falköping in March 2013.

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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

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

» Future shareholder value is based on organic
and acquired growth as well as continued
rationalization and synergies in the Group «

– Johan Molin, President and CEO