ASSA ABLOY Annual Report 2014

FY2014 Annual Report · ASSA ABLOY

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Annual Report
2014

The global leader in
door opening solutions

ASSA ABLOY ANNUAL REPORT 2014

Contents

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

Divisions
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
Report of the Board of Directors

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

2
8
10
22
30
36

40
42
44
46
48
52

62
65
68
72
74
77

Financial statements
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 ratios
Proposed distribution of earnings
Auditor’s report

Shareholder information
The ASSA ABLOY share
Information for shareholders

78
79

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

122
125

Annual Report
2014

The global leader in
door opening solutions

For further information about the company
and its operations visit: www.assaabloy.com

Seamless security for new university

CUSTOMER: The new Florida Polytechnic University opened for

classes in August 2014. The 15,000 square-meter Innovation,
Science and Technology Building is the first facility on campus,
housing offices for the faculty and university administration, along
with classrooms and a library.

CHALLENGE: School officials wanted to create a safe learning
environment anchored by a doorway security system that would
seamlessly blend with the overall architectural motif and operate
with the designated building control software.

SOLUTION: After examining the available access control

systems on the market, Florida Polytechnic University chose the
Harmony Integrated Wiegand lockset from ASSA ABLOY Group
brand Sargent, along with doors and hardware from Corbin

Russwin, Curries, Graham, McKinney, Pemko, Rixson, Rockwood
and Securitron.

The stylish Harmony locks feature an open architecture
platform that enables them to integrate with the school’s access
control system software provider S2. This feature enables school
personnel to monitor doors in real time and instantly change
access control privileges.

In addition, Harmony locks combine all standard access control

components – the card reader, door position switch and request-
to-exit sensor – into a single device, instead of installing numerous
separate components around the door opening. This integrated
approach creates a streamlined aesthetic that blends flawlessly
into any environment. Installation of the locksets was further
simplified by the use of ElectroLynx quick connect hinges from
McKinney and Securitron power supplies.

ASSA ABLOY IN BRIEF

ASSA ABLOY is
the global leader
in door opening
solutions

ASSA ABLOY is represented on both
mature and emerging markets world-
wide, with leading positions in much of
Europe, North America and Asia Pacific.

ASSA ABLOY offers a complete range
of door opening solutions.

Since its formation in 1994, ASSA ABLOY
has grown from a regional company
into an international Group with
around 44,000 employees and sales
of close to SEK 57 billion.

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

ASSA ABLOY’s product offering satisfies
end-user needs for security, safety and
convenience.

ASSA ABLOY’s STRATEGY

ASSA ABLOY
FINANCIALS IN BRIEF 2014

ASSA ABLOY’s strategy for profitable growth.

Read more on pages 10–39.

Market presence

Product leadership

Cost-efficiency

Increasing growth in the core
business and expanding into
new markets and segments.

Continuously developing
innovative products, offering
enhanced customer value and
lower product costs.

Reducing the cost base
through improved processes,
flexible final assembly close to
the customer and production
in low-cost countries.

17%

Sales increased by 17 percent

to SEK 56,843 M (48,481).

SEK 17.38

Earnings per share after full dilution
increased to SEK 17.38 (14.84).

SEK 9,257 M

Operating income amounted

to SEK 9,257 M (7,923).

SEK 8,238 M

Operating cash flow amounted

to SEK 8,238 M (6,803).

Investments

in product development continued

at an accelerated rate and a number

of new products were launched.

Share of Group sales
by region 2014

EUROPE
AFRICA
NORTH AMERICA
SOUTH AMERICA
ASIA
OCEANIA

41%
1%
36%
2%
16%
4%

Key data
Sales, SEK M
of which: Organic growth, %
of which: Acquired growth, %
of which: Exchange rate effects, %
Operating income (EBIT), SEK M
Operating margin (EBIT), %
Income before tax (EBT), SEK M
Operating cash flow, SEK M2
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
Weighted average number of shares after dilution, thousands

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

2012
46,619
2
9
1
7,501
16.1
6,784
7,044
18.1

2012

13.97
69.86
5.10
369,592

2013
48,481
2
4
–2
7,9231
16.31
7,3811
6,803
17.11

2013

14.841
77.83
5.70
370,259

2014
56,843
3
9
5
9 257
16.3
8,698
8,238
16.9

2014

17.38
97.49
6.503
370,259

Change
17%

17%

18%
21%

Change

17%
25%
14%

Statement by the President and CEO

High innovation rate creates
value in a weak market

2014 was a record year for ASSA ABLOY. Sales increased 17 percent to SEK 56,843 M with
3 percent organic growth. Operating income increased by 17 percent to SEK 9,257 M.
The Group could look back on its first 20 years, with sales growth of 1,500 percent and an
increase in operating income of 5,800 percent, an exceptional achievement in modern
Swedish industrial history. With successful strategies for increased market presence, prod-
uct leadership and cost-efficiency, the Group is well positioned for continued long-term
profitable growth driven by the major economic trends of our times: urbanization, rapid
technological development and increased security requirements.

During the year ASSA ABLOY celebrated 20 years and the
Group’s 44,000 employees in 70 countries have every
reason to be proud. We have grown from sales of SEK 3.5
billion to nearly SEK 57 billion, with a global leading
position in our industry, and operating income (EBIT) of
over SEK 9 billion.

With hindsight, my reflection is that it has been
a competitive advantage to be a young business in
a traditional industry. Consistent strategies for mar-
ket presence, innovative product leadership and high
cost-efficiency have stimulated us to more rapid learning
and decision-making, creating global leadership in a very
short time. But at the same time it requires long-term
and committed owners, good management teams and
not least competent employees. And the right control of
processes that not only confronts but also drives change,
which is decisive now that ASSA ABLOY is entering a
dynamic and challenging development phase in the
coming years.

I shall return to this strategy theme. But first may I
provide a slightly more detailed review of our divisions
over the past year.

The divisions
EMEA division. Recent years have seen a divided eco-
nomic and demand situation in Europe. In 2014 demand
was strong in Germany, northern Europe and emerging

markets in eastern Europe and Africa, and good in Fin-
land and the UK. In southern Europe, demand remained
negative in large countries such as France and Italy,
while beginning to turn upward from low levels in Spain.
Despite the overall fairly sluggish market development,
EMEA had a good year with 3 percent organic growth.
The high investment levels of recent years in innovation,
product development and market presence are now
giving good results. Products launched in the past three
years have rapidly increased their share of annual sales
to 29 percent. The proportion of staff in direct sales
activities has increased considerably, as has the number
of specifiers, resulting in an increase of large advanced
specification projects. The division’s High Impact Prod-
ucts (HIP) continued to be successful, with the launch of
another four products increasing the total to 10, which
are sold in large volumes in all markets. The Group’s
latest program for rationalization of the production
structure continues according to plan, with significant
efficiency gains as a result of fewer plants and offices,
increased automation and sustainability. The rate of
automation of administrative flows, Seamless Flow, also
increased during the year. Other cost-reduction activi-
ties contributed positively to stable margin growth.

Americas division. The division performed strongly
during the year with good organic growth of 4 percent.
Despite a slow start following a severe winter in North

DEVELOPMENT KEY FIGURES

SALES AND OPERATING INCOME

INCOME BEFORE TAX AND OPERATING CASH FLOW

Sales
SEK M

60,000

50,000

40,000

30,000

20,000

10,000

Operating income
SEK M

12,000

10,000

8,000

6,000

4,000

2,000

Sales
Operating income1

1 Excluding items affecting
comparability 2011 and
2013.

SEK M

10,000

8,000

6,000

4,000

2,000

Income before tax1
Operating cash flow2

¹ Excluding items affecting

comparability 2011 and 2013.

² Excluding restructuring

payments.

STATEMENT BY THE PRESIDENT AND CEO

ASSA ABLOY ANNUAL REPORT 2014

America, growth was good in the USA where the impor-
tant commercial and institutional market improved
in the second half of the year, following several years
of weak development, while the residential market
continued to expand at a good rate for the fourth con-
secutive year. Sales growth was good in Latin American
markets, despite subdued demand in large countries
such as Mexico and Brazil. A clear, forward-looking trend
is the increasing demand for advanced electronic door
opening solutions in both the consumer segment for
smart homes and from commercial and institutional
customers looking for highly efficient and sustainable
total door opening and access control solutions. The
trend towards more and more wireless and mobile tech-
nologies is striking. ASSA ABLOY has a very competitive
range of electronic and electromechanical products and
solutions following several years of significant invest-
ments in product development. These accounted for 28
percent of total sales during the year. Following several
years of rationalization, the division has a well-dimen-
sioned production structure, which is now being further
streamlined. Major investments are being made in fur-
ther automation and more robots, intensified Lean ini-
tiatives and increased activity to reduce administrative
costs through Seamless Flow. This further strengthened
already good margin development.

Asia Pacific division. ASSA ABLOY is by far the largest
player in the Asian markets for door opening solutions,
where well over half the global population lives. This
leadership was strengthened further during the year.
The previous high growth rate in China slowed, turning
negative at the end of the year. Despite a weaker market,
ASSA ABLOY won several large project orders, including
the total delivery for China’s highest building and for a
large housing project in a new green city, the division’s
largest ever order. Australia, New Zealand and South-
east Asia also grew at a good rate, as well as marketing
investments in populous emerging markets such as Viet-
nam, the Philippines and Indonesia. Pakistan was added
as a new market. The Indian business performed well
with increased distribution networks and new product
launches. The first Indian acquisition strengthened the
position in the lock segment. In China, one of the coun-
try’s largest security lock producers was acquired, as well
as the country’s leading digital door lock company. The
Group’s hi-tech profile was further enhanced, when new

DEVELOPMENT OF EARNINGS PER SHARE1)

SEK

Earnings per share has
increased by 1,800
percent since 1996.

1) Excluding items

affecting comparability.

products increased to 35 percent of total sales. The trend
towards increased sustainability is clear especially in the
Chinese market, and the Group has a number of green
products in the launch phase in the coming years. A large
share of the Group’s employees are located at the divi-
sion’s units in China, which are now being consolidated
and streamlined. Cost savings also include outsourcing
and professionalization of sourcing, as well as efficien-
cies through various Lean methods to further strengthen
weakly positive margin growth.

Global Technologies division. The division launched
several key products in interesting growth areas such as
mobile keys, biometrics and secure identification, cre-
ating platforms for future growth. HID Global’s focus on
emerging markets resulted in substantial growth in Latin
America and Africa and good growth in North America
and northern Europe, while southern Europe remained
weak. ASSA ABLOY Hospitality had another year of good
growth with high renovation and upgrade demand
and strong interest in technically advanced solutions.
Growth was strong for secure identity solutions for
institutional customers and biometric solutions, positive
for identity and access management, but negative for
major project orders. The year’s acquisition of Lumidigm
in biometric identification rapidly showed its value. The
division received a major contract to supply a keyless
access control system, in which hotel guests can use
their smartphones as keys, from the global hotel group
Starwood Hotels & Resorts. Demand was strong for a
number of new products and solutions, including mobile
access and identity solutions and new access control
technology. This is the result of several years of invest-
ments in product development, which has increased
the share of new products to nearly 40 percent of total
sales. The program to restructure and consolidate the
production structure proceeded at a high rate, which
combined with other efficiency programs increased an
already good margin.

Entrance Systems division. The division’s sales
increased with 4 percent organic growth. Growth was
particularly strong on the U.S. market, while Europe
remained weak. Demand in China was high but slowed
during the year, while Australia and emerging markets
in Southeast Asia and eastern Europe grew at a good
rate. Sales of automatic, overhead sectional and high-
perform ance doors and logistics solutions to industrial
customers rose. The residential segment was weaker
particularly in Europe, which showed negative growth.
Following several years of high growth and a large
number of acquisitions, the division devoted the year to
consolidation, internal efficiency initiatives and contin-
ued investments in a high innovation rate. The year saw
several important product launches, which increased
the share of new products to over 25 percent of total
sales. New product generations of sliding, swing, revolv-
ing, overhead sectional and high-performance doors
were launched on newly developed product platforms.
Efforts to increase cost-efficiency focused on relocating
manufacturing from high-cost to low-cost countries in
a smaller number of large factories for common basic

ASSA ABLOY ANNUAL REPORT 2014

STATEMENT BY THE PRESIDENT AND CEO 3

Statement by the President and CEO

components on global, modular platforms. Outsourc-
ing and professional sourcing reduced the number of
subcontractors. Development and streamlining of the
division’s processes continued at an undiminished rate.

A stable foundation
ASSA ABLOY has grown very rapidly over 20 years into
the global market leader. The Group’s employees have
shown a constant ability to see and interpret the major
drivers in urbanization, the increasing rate of technology
shift to electromechanical solutions, changes in applica-
tions and codes, and the rising demand for increasingly
sustainable solutions. These are trends rooted in the

+ Market presence

global growth in prosperity, driving good, very long-term
demand for the Group’s products and solutions.

ASSA ABLOY has a stable foundation, with the world’s

largest base of lock and door installations providing a
significant, growing aftermarket, which accounts for
two-thirds of total sales. The commercial and institu-
tional segment, with its higher profitability, accounts for
75 percent of sales. Since 2006 market positioning has
also focused on emerging markets. Sales in these mar-
kets have risen fourfold in eight years from a 10 percent
share of total sales to 25 percent today. At the same time
a very deliberate focus on innovation and
product development has increased the
share of products launched in the past
three years, with ever-better margins,
from 16 percent in 2010 to around 30
percent in 2014. Market positioning is supported by
an active acquisition strategy, which has contributed
around 5 percent per year. The Group has made over
120 acquisitions since 2006.

In this light, I am convinced that ASSA ABLOY has
excellent prospects of maintaining good profitable
growth and successfully addressing the challenges
posed by globalization and rapid technological develop-
ment. Our consistent, well-tried strategies are a guide in
this task.

Strengthening market presence
ASSA ABLOY’s leading market presence is based on the
industry’s largest and most valuable brand portfolio, the
large installed lock base, a strong position in all distribu-
tion channels, and the competence of the Group’s mar-
keting and sales staff in their day-to-day relationships with
customers. This creates high barriers to market entry.
Security is increasingly becoming an integrated
concept in which technological development is driving
new smart electronic and effective solutions in whole
systems, increasing complexity. The continued focus
on specifiers has been one of this year’s successful
prioritized marketing activities. We now have over 500
specifiers, with a substantial focus in Asia. These act as
advisers in an environment of rapid technical and regula-
tory changes. They have a key role in the trend for selling
solutions and functions rather than components and are
supported by a number of tools developed by the Group
for drawings and configurations in the design process,
which together with e-commerce solutions make it easy
to do business with ASSA ABLOY. We see a growing value
factor in this consultancy role, which drives demand and
strengthens our grip on the end-customer market. We
are continuing to increase the number of specifiers in
our global expansion. We also see an increased impor-
tance for the aftermarket, with good margins, in the
wake of technological development with opportunities
for increased sales of digital keys and licenses for func-
tions, upgrades and service.

+ Product leadership

The focus on emerging markets continues. We have long
been the market leader in China, which now accounts
for about one-tenth of Group sales. During the year we
enjoyed the good results of our marketing investments
in Southeast Asia, South America, Africa and eastern
Europe, with double-digit growth figures.

Brand strength is increasing with a constant flow of
new, attractive products, which strengthen the differen-
tiation of our global brands and support the ASSA ABLOY
master brand. The latter is now combined with local spe-
cialist brands in 70 percent of Group sales. Digital door

ASSA ABLOY’s DEVELOPMENT 1994–2014

1994 ASSA ABLOY is
formed through the merger
of ASSA (Sweden) and ABLOY
(Finland).

1997 A French touch The French
lock group Vachette is acquired,
with units such as Vachette, JPM,
Laperche and Bezault in France and
Litto in Belgium.

1999 Increased security The Group
acquires the lock manufacturer Mul-T-Lock
(Israel). The acquisition of effeff (Germany)
gives ASSA ABLOY a good position in the
electromechanical lock market.

2001 Global integration
ASSA ABLOY takes part in the Volvo
Ocean Race as part of the integration
of over 100 companies worldwide.

1996 Acquisitions show
the way The Group increases
its product portfolio with the
Sargent, McKinney, Curries and
Graham brands through the
acquisition of ESSEX (USA).

1998 Expansion in the USA
ASSA ABLOY expands in North
America through the acquisition
of Medeco. The Group opens an
office in China.

2000 Double size ASSA ABLOY
acquires Yale Intruder Security
becoming the world’s leading
lock group almost overnight. HID
Corporation (USA) increases the
Group’s offering with electronic
identification products. CLIQ
technology is launched.

2002 New opportunities
in door automation
The Group acquires Besam
(Sweden), a company with
door automation products.
ASSA ABLOY comes second in
the Volvo Ocean Race.

STATEMENT BY THE PRESIDENT AND CEO

ASSA ABLOY ANNUAL REPORT 2014

ASSA ABLOY’s DEVELOPMENT 1994–2014

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

lock sales, including the Yale brand, rose sharply during
the year with good prospects of becoming a new major
demand trend.

result, ASSA ABLOY has established a high, stable delivery
rate for new products for the future, providing custom-
ers with increased value at lower cost.

Innovation for product leadership
Innovation is the single most important driver of organic
growth. Over the past nine years, investments in product
development have increased by nearly 160 percent and
the number of development engineers has risen sharply,
particularly employees with electronics expertise. The
ambition is to double the innovation rate, radically
reduce the costs of each new product, and for products
launched in the past three years to account for 25 per-
cent of total sales. This target has been achieved in all
divisions and is nearing 30 percent at group level. As a

Product development processes are constantly
being improved. Significant resources are invested in
understanding customer needs and behaviors. Cost and
functional benefits for the customer are created through
many small steps at the Group’s more than 80 product
development centers. Lean methods are also applied in
innovation processes to increase cost-efficiency.

Demand for electromechanical and electronic

products and solutions is increasing sharply. Since 2004
Group sales of electromechanical products have risen by
SEK 22 billion. Their share has increased from 27 to 50
percent of total sales. New electromechanical products

2003 Stronger position
Nemef (Netherlands) and
Corbin (Italy) strengthen
the Group’s position in
their respective markets.

2005 Increased presence in China
ASSA ABLOY forms a joint venture
with Wangli (China), a leading
supplier of high-security doors and
locks.

2007 17 new acquisitions A new
brand strategy is launched, with
ASSA ABLOY as master brand. The
Group acquires iRevo (South Korea), a
major player in digital door locks.

2010 Mobile Keys ASSA ABLOY Mobile Keys is launched.
The Group strengthens its customer offering in Asia through
the acquisition of Pan Pan, China’s largest manufacturer
of high-security steel doors, and King Door Closers, South
Korea’s leading manufacturer of door and floor closers.

2012
cont.

2004 Hi-O is launched The
launch of Hi-O technology involves
a new concept for electronic
door opening solutions, in which
connected devices exchange
encrypted information, simplifying
both installation and service.

2006 Secure identities
ASSA ABLOY acquires Fargo
Electronics, a company
developing secure technologies
for ID card issuance systems.

2009 Wireless technology
ASSA ABLOY launches the new wireless
Aperio technology, which enables
customers to upgrade their access
control systems simply and smoothly.

2011 Global leader in entrance
automation The acquisition
of Crawford and FlexiForce
strengthens the customer offering
in industrial doors, docking
solutions and garage doors.

ASSA ABLOY ANNUAL REPORT 2014

STATEMENT BY THE PRESIDENT AND CEO 5

Statement by the President and CEO

generally have higher margins, and significant profitabil-
ity potential is anticipated from increasing aftermarket
sales of service and continuous upgrades.

ASSA ABLOY has developed a number of unique
platform families for hi-tech door and entrance environ-
ments. One example is Seos, a complete ecosystem for
the use of digital keys on smartphones and other mobile
devices. Another is wireless Aperio technology, which is
now being launched globally and enables cost-efficient
connection of many doors in an existing access con-
trol system. In an increasingly digital world, the Group
is developing standardized software, combinations of
hardware and software for the functions customers want
in their door opening solutions. Selling functionality,
software, licenses and virtual keys
opens up a large aftermarket.

An increasingly important driver

is the growing demand for sustain-
able solutions. The Group works
with EPDs (Environmental Product
Declarations), which have become a

+ Cost-

efficiency

prerequisite for market competitiveness. The Group’s
sustainability initiatives are integrated into all develop-
ment processes from the concept stage to recycling of
worn-out products, and are based on an estimate of life
cycle costs and a reduction in energy consumption and
other climate impact, as well as economies in materials
consumption, packaging and transportation solutions.

Increased cost-efficiency
ASSA ABLOY’s program to radically reduce break-even
costs through increased efficiency in all production and
process stages continues to deliver good results. For
several years the Group has had stable margin growth in
line with the EBIT margin target of 16–17 percent over

CONT. ASSA ABLOY’S DEVELOPMENT 1994–2014

a business cycle. Despite margin dilution from many
acquisitions, we have maintained our margin target due
to good cost-efficiency. Rationalization of the produc-
tion structure is a basis for cost-efficiency initiatives. This
is a constantly recurring task, which reflects the Group’s
active acquisition strategy with over 120 acquisitions
since 2006. The direction is concentrating assembly
to factories close to customers in high-cost countries,
relocating production of strategic components to our
own production in low-cost countries, and increasing
the share of sourcing.

As a result of the latest ongoing program, the Group

will have closed around 80 factories, converted some
90 plants to assembly and closed 47 office units. The pro-
grams result in a staff reduction of nearly 9,000 persons.
Resources and costs have consequently been transferred
to a low-cost environment with more efficient and more
sustainable production processes. At the same time
sourcing has increased sharply and has been concen-
trated to fewer and more competent partners.

Process and product development are the focus of
cost-efficiency efforts, with Lean methods in all stages
and VA/VE analyses to avoid materials waste. The number
of components and materials consumption can often be
reduced by 20 to 40 percent in new designs. A signifi-
cant focus is now on Seamless Flow. This involves strong
streamlining and automation of the Group’s admin-
istrative flows, which account for 45 percent of total
personnel costs. These flows often concern paper-based
and digital information such as orders, invoices, produc-
tion control and payments. ASSA ABLOY is working on
standardization, automation and real-time processing of
these information flows, offering significant potential for
economies. Integration and consolidation of the Group’s
different IT environments are an important step in this

2012 Increased offering
of total lock and security
solutions ASSA ABLOY launches
Seos, the world’s first commercial
ecosystem for digital keys.

2013 Focus on innovation
ASSA ABLOY is ranked 78th on
Forbes’ list of the world’s 100
most innovative companies.

2014 20th anniversary
Today the Group is 15 times larger
than in 1994. ASSA ABLOY has
successfully expanded through a
combination of organic growth
and over 200 acquisitions. During
this impressive journey we have
grown from a traditional lock
company into a global leader in
door opening solutions.
ASSA ABLOY is again ranked on
Forbes’ list of the world’s 100
most innovative companies.

Increased growth and profitability

Rörelseresultat
EBIT, SEK M
MSEK

Omsättning
Sales, SEK M
MSEK

60 000
60,000

50 000
50,000

40 000
40,000

30 000
30,000

20,000
20 000

10,000
10 000

0
0

04
94 95 961 971 981 991 001 011 021 031 04 05 062 07 082, 3092, 310 112 12 132 14

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

Sales
Operating income (EBIT)

12 000
12,000

10 000
10,000

8 000
8,000

6,000
6 000

4,000
4 000

2,000
2 000

0
0

STATEMENT BY THE PRESIDENT AND CEO

ASSA ABLOY ANNUAL REPORT 2014

CONT. ASSA ABLOY’S DEVELOPMENT 1994–2014

task. Finally, we have also further developed our should
cost methodology, which involves detailed analyses of
what our purchases should cost.

Responsibility and speed
These strategies are the tools with which the manage-
ment team manages our strictly decentralized divisions.
Important guiding themes are own responsibility and
speed. Operational responsibility should be close to
customers, the market and sales, as well as close to prod-
uct development and production. A strong trend in the
Group’s development is the gradual relocation of more
and more resources closer to the market where they
create customer value. Speed in implementation is an
important tool in competition. Fast and early follow-up
of processes and rapid problem solving are part of our
corporate culture. We are constantly striving for sim-
plification and concentration on what is important for
delivering customer value, efficiency and low costs.

Outlook
My judgment is that the global economic trend is mov-
ing sideways, with America showing a positive trend
while Europe and emerging markets are stagnating.
This is despite significant financial stimuli in the form
of record-low interest rates and substantial liquidity
injections via the central banking system. However, the
U.S. economy expanded considerably during the year
and now shows good growth levels in a longer perspec-
tive. But Europe remains a disappointment with its slow
growth, which is moreover strongly divided. Northern
Europe shows good growth, while southern Europe,

which has shown low growth for several years, is hardly
growing at all. Emerging markets offer good long-term
demand even though we can see a weakening in China
and parts of South America in the short term. In the
long er term, emerging markets in Asia, South America
and Africa have very good prospects.

Global uncertainty remains high with significant risks

regarding the balance between liabilities and assets
in various regions and countries between the public,
private and household sectors, which may restrain the
global economic recovery.

However, ASSA ABLOY’s strategies have proved able
to manage macroeconomic challenges during the crisis
years since 2008, while maintaining profitable growth.
The course is clear with a shift in emphasis in market
presence to fast-growing countries and a relocation of
costs from high-cost to low-cost countries. In addition,
our product leadership positions us as a winner in the
increasingly rapid technological development. We are
in an industry with basically stable and good long-term
growth. With many thanks to all our employees for their
excellent efforts during the year, I want to express my
strong confidence in ASSA ABLOY’s future as the global
leading, most innovative and efficient supplier of door
opening solutions.

Stockholm, 4 February 2015

Johan Molin
President and CEO

INCREASE IN SALES 1994–2014

INCREASE IN OPERATING INCOME 1994–2014

+1,500 %

ASSA ABLOY ANNUAL REPORT 2014

+5,800 %

STATEMENT BY THE PRESIDENT AND CEO 7

Value creation strategy

Vision

• To be the true world leader, the most successful and
innovative provider of total door opening solutions.

• To lead in innovation and provide well-designed,

convenient, safe and secure solutions that give true
added value to our customers.

• To offer an attractive company to our employees.

Strategy and targets

Long-term and as an average over a business cycle

10% annual growth through a combination

of organic and acquired growth 16 –17% operating margin

Strategy for growth and profitability

The Group’s overall strategic direction is to spearhead the trend
towards increased security with a product-driven offering centered on the customer. The strategic action plans
are focused on three areas: market presence, product leadership and cost-efficiency.

Market
presence

Increasing growth in
the core business and
expanding into new
markets and
segments.

Product
leadership

Continuously devel-
oping innovative
products offering
enhanced customer
value and lower
product costs.

Cost-
efficiency

Reducing the cost
base through
improved processes,
flexible final assem-
bly close to the cus-
tomer and produc-
tion in low-cost
countries.

page 10–21

page 22–29

page 30–35

Employees

Values

Sustainability

Continuing professional
development, skills and values
are the basis for the Group’s
success.

are based on accountability, equality
principles and collaboration for a
focused, results-driven company with
high business ethics.

is integrated in all Group
processes: innovation, product
development, manufacturing,
logistics and sales.

ASSA ABLOY’s strategy

Market presence

Global leader
in door opening solutions

x 4

25 percent of sales are on
emerging markets, a
fourfold increase in eight
years

A world-leading market presence is achieved by increasing
customer value and expanding into new markets and seg-
ments through organic growth and acquisitions. Customer
value is supported by efficient segmentation of sales channels
and the strength of the brand portfolio, which includes many
of the industry’s strongest brands and the global ASSA ABLOY
master brand.

50%

Electromechanical solutions
account for 50 percent of
sales

Market presence

Increased market presence
for profitable growth

Global drivers

Three customer needs

Need for
increased security

Urbanization

Technological
development

Living

Living. Another billion people are estimated to have migrated to
cities by 2025, where more than 60 percent of the global population
will then live, equivalent to around 4.8 billion people, compared
with 3.9 billion today. New and upgraded housing with good security
is a high-priority welfare factor and residential investment is forecast
to grow faster than global GDP.

Working

Working. Most new jobs are being created in the cities especially
in the service sector. The strong growth in sectors such as educa-
tion, healthcare, and public and private administration requires
significant investment in new buildings. A substantial increase in
the number of buildings in the 600 largest cities is expected to take
place by 2025. The need for secure, flexible solutions for entry and
exit is increasing rapidly.

Shopping

Shopping. The global middle class is forecast to have increased
from one to two billion by 2030. A rapid increase in consumer
demand is driving new construction, expansions and upgrades of
shopping centers, malls, and convenience stores. Together with an
increased flow of goods, this requires major investments and smart,
energy-efficient door opening and access control solutions.

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2014

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.

Market segmentation

Aftermarket

75%

Institutional and
commercial market
– share of sales.

25 %

Private customers
and residential market
– share of sales.

Institutional and commercial market
– complex, demanding projects
The largest, most demanding and dynamic customer
segment is institutional and commercial custom-
ers. These include corporate workplaces, univer-
sities, hospitals, government agencies, airports
and shopping malls, buildings with high security
requirements where a large number of people and
goods enter and exit daily. The segment accounts for
around 75 percent of sales and offers a higher profit-
ability potential. Procurement is in the form of large,
complex projects, involving many people on the cus-
tomer side, such as property and security managers.
Demand for total electromechanical and advanced
door opening and access control solutions is strong.
ASSA ABLOY’s common sales force has expertise in
understanding the multifaceted needs of end-cus-
tomers and has contact with many stakeholders in
the value chain to develop optimal solutions for the
customer. Distribution and installation are largely
handled by installers and locksmiths.

Small and medium-sized customers in the
institutional, commercial and residential markets
generally have a considerable need for professional
advice and installation. ASSA ABLOY has a complete
product and service offering, and is actively working
to train distributors and to develop more standard-
ized solutions for small and medium-sized busi-
nesses, 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, consumer
demand for electromechanical and digital locks is
growing very rapidly.

Private customers have a considerable need for
advice and installation assistance. ASSA ABLOY sup-
ports its distribution partners in this work. In some
geographical markets, the Group also cooperates
with door and window manufacturers or specialist
distribution channels such as DIY stores and lock-
smiths.

Stability, profitability and potential
Due to its unique global market penetration and the
world’s largest installed base of door opening solutions,
two-thirds of ASSA ABLOY’s sales are to the aftermar-
ket, which is more stable than new construction. The
aftermarket is increasing in importance as the elec-
tronics content of our products increases. It consists
of renovations, refurbishments, extensions, replace-
ments and upgrades. Digital and mobile door open-
ing and access control technologies offer major future
potential. ASSA ABLOY’s software platforms for flexible
solutions enable customers to constantly upgrade their
security with more and new functions, such as advanced
digital, virtual keys. This results in increased customer
sales of licenses and subscriptions for ID credentials and
upgrades as technology and customers’ security needs
develop.

STABILITY IN THE AFTERMARKET

 Aftermarket, 67%
 New construction, 33%

The aftermarket consists of renovations, refurbishments,
extensions, replacements and upgrades.

ASSA ABLOY ANNUAL REPORT 2014

MARKET PRESENCE 13

Market presence

Distribution

Distribution is a key factor for ASSA ABLOY’s market presence, which is undergoing rapid
change in the light of technological development and increased customer demand for
total door opening and access control solutions. Depending on customer needs, the
product and solution, and national and local requirements and standards, the Group
reaches its end-customers through a variety of distribution channels at various stages in
the supply chain. The number of customer-facing staff has increased substantially over a
number of years. ASSA ABLOY has a competitive edge thanks to its well-developed coop-
eration with distribution players due to its specialist advisers, the specifiers. The aim is to
increase knowledge and demand by offering competence as early as possible in the
planning and specification of door opening solutions.

Distributors – a close partner
ASSA ABLOY is increasingly becoming a supplier of
integrated concepts for total door environments to end-
customers. This takes place in close collaboration with
its distribution channels, which creates good customer
relations, market demand and entry barriers for com-
petitors. Distributors also have a key role in providing
service and support after installation.

The distributor’s role may vary between different
customer segments. In the commercial segment, dis-

tributors in some markets act as consultants and project
managers to create good security solutions. They have a
good knowledge of customer needs and ensure that the
products comply with local regulations.

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

Distribution channels for the security market

ASSA ABLOY
representative Distributor

ASSA ABLOY

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.

STAKEHOLDERS

CODES AND SECURITY STANDARDS

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

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2014

Specification of door opening solutions
– competence increasingly important
Rapid technological development, the growing number
of requirements and standards, especially in the area
of sustainability, are constantly increasing complexity
for developers and other end-customers. The trend is
from component order to prefabricated door openings
and advanced total door opening solutions. This is also
increasing the competence required by distributors.
A central role in marketing is therefore played by the
Group’s specifiers, who have increased to around 500 in
a few years and continue to increase rapidly, especially in
emerging markets. Specification teams work as special-
ist advisers to customers, to specify products and choice
of total, well-functioning and economic security solu-
tions. They also collaborate with other key groups early
in the order chain, such as building consultants, archi-
tects, security consultants and building standards agen-
cies, to introduce new, innovative security solutions and
to create demand with their business-driving compe-

tence. They have access to the market’s most advanced
technology for product configuration and 3D modelling
(BIM), which facilitates the work of architects and build-
ing consultants. Distributors have constant access to the
Group’s e-commerce and telephone support.

Building and lock wholesalers, security consultants
and locksmiths have a key role in delivering the products
specified for different construction projects. Many
door and window manufacturers install lockcases and
hardware in their products before delivering them to
customers.

ASSA ABLOY also shares competence with lock-
smiths, a key distributor of mechanical and electrome-
chanical security products in many markets. They buy
direct from ASSA ABLOY or through 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.

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

ASSA ABLOY
representative

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

ASSA ABLOY
representative

INSTALLERS

SPECIFICATION

END-CUSTOMERS

Installer

ASSA ABLOY
representative

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
consultants, public authorities
responsible for security stan-
dards 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
lockcases and hardware in their products before delivering them to customers.

ASSA ABLOY ANNUAL REPORT 2014

MARKET PRESENCE 15

Market presence

Markets

The global market for door opening solutions is growing more rapidly than global GDP.
ASSA ABLOY is the industry’s most global player and is represented in more than 70 coun-
tries, with sales worldwide. The Group has been focusing for several years on increased
market presence in emerging markets, which have a considerably higher growth rate than
mature markets. Their share of sales has increased from 10 to 25 percent in eight years.
ASSA ABLOY’s global expansion takes place through organic growth and acquisitions.

Major differences and globalization
– advantage for ASSA ABLOY
The difference in demand between continents and
countries is significant due to different climates, regula-
tions, standards and development level. As the most
global player with a regional and local presence on all
major markets, this gives ASSA ABLOY competitive
advantages. The same applies to the globalization trend,
which means a more similar safety approach, especially
among global companies with installations in many
countries, which seek large-scale smart and cost-effi-
cient corporate solutions.

The mature markets of North America, Europe and
Australia account for three-quarters of ASSA ABLOY’s
sales, with demand growth around or just over GDP
growth. Demand is now shifting rapidly from mechani-
cal to electromechanical solutions with higher value
content. The mature markets’ share of the Group’s total
sales will fall in favor of emerging markets, which have
considerably faster growth. Demand for mechanical
locks is higher in these countries than in mature markets,
but the rapid spread of technology and the increase in
prosperity result in very high growth figures for electro-
mechanical solutions. The major global shift towards
more electromechanical products is mainly driven by
the commercial segment, but sharply increased demand
has also been seen in the consumer market over the past
two years.

Among emerging markets, China remains an impor-
tant expansion area. As a result of organic growth and
more than ten acquisitions, ASSA ABLOY’s sales in China
have risen from SEK 457 M in 2006 to SEK 5,151 M. Today
the Group is the country’s largest manufacturer and
supplier of lock solutions. The profitable aftermarket for
maintenance and upgrades already accounts for around

one-third of sales, a share that is expected to increase
in the future. Africa has high growth and consider-
able potential. The Group is concentrating its market
presence to the 40 largest cities, which account for 90
percent of the continent’s GDP. Eastern Europe is also an
interesting market in the longer term. The Group has a
large part of its production in the region and has recently
formed a regional door group. Sales have doubled to
nearly SEK 2,500 M since 2006.

Acquisitions are an important part of the strategy
to increase market presence. The ambition is 5 percent
acquired growth per year. Since 2006 the Group has
made over 120 acquisitions, with a focus on expanding in
emerging markets, upgrading technology and comple-
menting existing operations.

Fragmented competition
– continued consolidation
The global door opening solutions market remains
fragmented, particularly in emerging markets, despite
ongoing consolidation over the past 10 years, in which
ASSA ABLOY is a driving force. It is still quite common for
companies in Europe, for example, to be family owned
and have a good position in their respective domes-
tic markets. They are often well established and have
strong ties with local distributors. In emerging markets,
established lock standards and brands are less common
and markets are even more fragmented, such as in Asia
where the largest manufacturers have a limited market
share.

ASSA ABLOY is the global market leader and has five
main competitors, which wholly or partly operate in its
segments: Allegion (USA), Stanley Black & Decker (USA),
Dorma (Germany), Kaba (Switzerland) and Hörmann
(Germany).

SALES BY PRODUCT GROUP

Mechanical locks, lock
systems and fittings, 30%

Entrance automation, 27%

Electromechanical and
electronic locks, 23%

Security doors and
hardware, 20%

Mechanical locks, lock systems and fittings are still the
largest, and growing, sub-market in door opening solutions.
Growth is, however, considerably higher in electro-
mechanical products and entrance automation.
ASSA ABLOY is the global product and market leader in all
major product segments.

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2014

Growth in Group sales
by region 2014

EUROPE

+6 %

AFRICA

+17 %

Geographical expansion is mainly achieved through acquisi-
tions 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.
Emerging markets have increased their share of Group sales
from 10 percent eight years ago to 25 percent in 2014.

NORTH AMERICA

+26 %
+21 %

SOUTH AMERICA

ASIA

+3 %

OCEANIA

+7 %

SALES BY REGION

SALES ON EMERGING MARKETS1

Europe, 41%

Africa, 1%

North America, 36%

South America, 2%

Asia, 16%

Oceania, 4%

SEK M

15,000

12,000

9,000

6,000

3,000

ASSA ABLOY ANNUAL REPORT 2014

1 Emerging markets are Africa,
Asia, the Middle East, South
America and eastern Europe.

MARKET PRESENCE 17

OceanienAsienSydamerikaNordamerikaAfrikaEuropa
Market presence

Market strategies

ASSA ABLOY’s world-leading market presence strengthens customer relevance and is a
strategic cornerstone in the Group for creating profitable growth. Market strategy is based
on long-term technology-driven growth in demand on mature markets in Europe and
North America and fast-growing demand on emerging markets driven by urbanization.
It has six sub-strategies: developing and exploiting the strength of the brand portfolio,
increasing growth in the core business by segmentation, building customer relationships
through competence and specification, increasing market share with distributors,
expanding in new markets and product segments, and acquiring companies.

Increasing growth in the core business
by segmentation
Over the past seven years ASSA ABLOY has made a sig-
nificant global strategic shift to an increasingly mar-
ket-oriented organization in close collaboration with
architects, security consultants, major end-users and
distributors. The main growth potential is found in exist-
ing market channels, partly driven by 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 cus-
tomer needs, build relationships and generate demand,
thereby becoming the end-user’s door opening solu-
tions expert. Segmentation aims at total door opening

solutions customized to the doors’ applications, security
and convenience aspects, special requirements for com-
pliance with standards and regulations, and the need for
integration into new or existing security systems and IT
networks.

This focus includes investments in employees with

a clear, direct demand-generating responsibility. In
ASSA ABLOY Door Security Solutions, the leading sales
organization for the USA and Canada, for example, the
share of customer-facing staff has risen from 35 percent
in 2004 to 58 percent. In the EMEA division, the share
has risen from 42 percent to more than 50 percent. The
share is also rising in the other divisions. The number of
specifiers is increasing each year and has now reached
around 500. This is an ongoing trend.

Guest experience enhanced at Starwood Hotels &
Resorts Worldwide, Inc. with Mobile Access Solution

CUSTOMER: Starwood Hotels & Resorts Worldwide,Inc. based in the US, is one of the
world’s largest hospitality companies. It owns, manages or franchises over 1,200 properties
worldwide.

CHALLENGE: Starwood wanted to introduce an entry system using the broadest possible

range of smartphones and smart devices as a key for guests to access their hotel rooms.

SOLUTION: Starwood installed ASSA ABLOY Mobile Access enabled locks from

ASSA ABLOY Hospitality and, in partnership with ASSA ABLOY, designed functionality for
seamless customer interaction.
ASSA ABLOY Mobile Access uses standard mobile device technologies to create a solution
that is universally accessible, easy to deploy, and simple to manage. It can be used with iOS
and Android-based smartphones and other smart devices and has been showcased working
the Apple Watch.
Starwood Preferred Guest (SPG) members with Bluetooth Smart-enabled smartphones
who have opted-in to the service receive a guest room Seos Mobile ID with their room num-
ber via the SPG app before arriving at the hotel – allowing them to proceed straight to their
room, where available, and gain access by presenting the smartphone to the reader on the
hotel room door.
Starwood is rapidly rolling out this system and is targeting 30,000 doors in 150 hotels
in 2015.

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2014

70 percent of products are
co-branded with the local brand and
the ASSA ABLOY master brand.

70 %

ASSA ABLOY’s brand strategy

The ASSA ABLOY
master brand

Examples of product brands

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

Global brands
with a unique market
position

Examples
of non-endorsed
product brands

Exploiting the strength of the brand portfolio
and the sales force
ASSA ABLOY has significant value in its leading well-
known brands, several of which have been acquired
through the Group’s many acquisitions. To achieve
optimal leverage and cross-fertilization on the brand
portfolio globally, regionally and locally, the brands are
being consolidated in parallel with market and customer
segmentation. Significant investments are also being
made in marketing and launching new products that add
value to the different brands.

ASSA ABLOY is the global master brand, which is
combined with individual brands well established in
local knowledge, regulations and security standards. The
Group thus capitalizes on its large global installed base,
while increasing the visibility of the ASSA ABLOY master
brand, which unites the Group’s sales departments and
represents innovation, leading technology and total
door opening solutions. 70 percent of Group sales are
co-branded with the master brand and local brands.

The ASSA ABLOY master brand is complemented by

global brands, which are all leaders in their respective
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. These brands account for around 18
percent of Group sales.

The Group also has non-endorsed product brands,
such as Entrematic, FlexiForce and JPM. These brands
represent leading expertise in specialty products and
service, with a unique market positioning that is impor-
tant to exploit.

In order to compete effectively on a global market,
the sales force operates as an integrated organization
and represents the ASSA ABLOY master brand. They cre-
ate solutions for the customer using various products
manufactured under established local brands. Conse-
quently, customers can be offered total door opening
solutions, while recognizing well-known local brands.
During the year a specialist brand organization was
established with the task of strengthening brand and
design development. The organization is driving the
development of the ASSA ABLOY master brand and is
intended to systematize product design, brand identity
and IP protection.

ASSA ABLOY ANNUAL REPORT 2014

MARKET PRESENCE 19

Market presence

Emerging trends in the security market

Demand in the global market for door opening solutions is undergoing a technology shift,
with an increase in electromechanical products. ASSA ABLOY is leading this trend and
electromechanical products and access control solutions now account for 50 percent of
sales, compared with 27 percent in 2004. Demand for mechanical products is continuing
to increase, but their share of total Group sales is falling. Entrance automation is also
growing very rapidly and the Group now has a global market-leading position.

EMERGING TRENDS: ELECTROMECHANICAL LOCKS, SECURITY DOORS AND ENTRANCE AUTOMATION

Mechanical locks, lock systems and fittings
Security doors and hardware
Electromechanical locks
Entrance automation

SEK 3.5 billion

1994

20%

27%

SEK
26 billion

53%

2004

20%

23%

SEK 57 billion

30%

27%

2014

Growing market segments
Electromechanical products
The increased demand for electromechanical prod-
ucts is a clear trend, with customers looking for total
security solutions and flexible door environments with
convenient digital and mobile technology. In emerging
markets, more and more people are skipping the tradi-
tional mechanical stage in favor of electromechanical
solutions. Increased technical standardization is driving
integration of various components in the security solu-
tion. 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 digi-
tal and mobile technology is creating interesting new
growth areas.

Security doors
Security doors are a relatively new segment for
ASSA ABLOY, which has expanded strongly through

acquisitions into a leader on several markets, such as
China. The Group has a complete global range of prod-
ucts and services for most environments with excep-
tional security requirements, with a high innovation and
product development rate.

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 global GDP and is still very frag-
mented. The largest potential is in retail, transportation,
logistics and manufacturing in the wake of increased
globalization. ASSA ABLOY has a unique offering of total
automatic door opening solutions, rapid product devel-
opment and a comprehensive service concept.

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2014

New Beijing landmark secured by ASSA ABLOY

CUSTOMER: Funded by leading steel-making company POSCO, the

SOLUTION: ASSA ABLOY Fire Doors in China formed a special project

Beijing POSCO Center is designed to be an iconic commercial structure in a
new business district in Beijing. It consists of two towers of 31 and 26 floors
and houses offices, meeting facilities, shops and restaurants.

CHALLENGE: As a landmark commercial building, the Beijing POSCO
Center has high standards in terms of functionality and aesthetics. All fire
doors and interior doors should fit the usage of designated areas, while
being soundproof, airtight and pleasing to the eye. In addition, the sizes of
glass partitions need to be tailored to different office areas, and should have
appearances to match the environment. All the doors and partitions should
reflect the POSCO building’s status as a modern multi-functional business
center.

team with members from R&D, sales and specification departments to look
into the needs of the customer.
The team improved the soundproof and heat-resistance performance of
existing fire doors, and used environmentally-sound raw materials and green
manufacturing processes.
To determine the most suitable sizes and locations of glass partitions,
ASSA ABLOY conducted site visits and took measurements to make sure they
fit different office areas. Steel interior doors were specified for high quality
and durability. Folding-and-lifting shutters were specified for shops and
other commercial premises.

ASSA ABLOY ANNUAL REPORT 2014

MARKET PRESENCE 21

ASSA ABLOY’s strategy

Product leadership

No.1

The most innovative
supplier of total
door opening solutions

50%

Electromechanical products
and entrance automation have
increased from 27 percent to
50 percent of total sales in
10 years

Product leadership is achieved through innovation and continuous
product development to enhance customer value and reduce
product costs. Customer benefits are developed in close cooperation
with end-users in a constant process with many small steps.
The main objective is to meet or exceed customer expectations.

30%

Products launched in the
past three years account for
30 percent of total sales

Product leadership

Continuing focus on innovation
increases value of new products

ASSA ABLOY’s vision is to be the most innovative supplier of total door opening solutions
in order to deliver trouble-free, secure and well-designed security solutions that provide
real added value to customers. A constant flow of new, innovative and sustainable
products to the market is the single most important driver for the Group’s target of
5 percent organic growth.

Product leadership

The Group is well established as the global product leader. R&D investment has increased
by 160 percent since 2005, reaching a new record level in 2014. The share of products
launched in the past three years has accelerated from 16 percent in 2010 to 30 percent
of Group sales in 2014. The group-wide structured innovation process is under constant
development with the ambition of doubling the innovation rate.

The overall objective is to meet or exceed customer
expectations. Each new product should considerably
increase customer value. Identifying and defining cus-
tomer value as early as possible increases value creation
in the development process.

The focus on product leadership has been consis-
tent. The number of product development engineers
has increased by more than 70 percent to over 1,400
employees in eight years, of whom a growing share have

an electronics focus. Sales of products launched in the
past three years have increased to 30 percent, exceed-
ing the Group’s target of 25 percent. This is a well-con-
sidered target in view of the Group’s average product
life cycle of 10 to 15 years. ASSA ABLOY’s innovation
strength has been noted for the second consecutive
year by the U.S. business magazine Forbes, which ranked
the company as one of the world’s 100 most innovative
companies.

The strategy for product leadership is based on four points:

Developing and exploiting
the advantages of a
group-wide, structured

innovation process.1
2

Applying Lean technologies
in product development
based on product manage-
ment and customer insight.

Developing and using
common technology
platforms and common

technologies. 3
close to customers.4

Continuing to expand
the number of R&D
competence centers

PRODUCT LEADERSHIP

ASSA ABLOY ANNUAL REPORT 2014

CHANGE IN PRODUCT MIX

2004
SEK 26 billion

Mechanical products, 53%
Electromechanical products, 27%
Security doors, 20%

Total door opening solutions are
ASSA ABLOY’s strength
ASSA ABLOY’s strength is the wide variety of traditional
and new products with which a large number of different
door environments can be created and constantly devel-
oped. The company can meet requirements for products
that function in various climates, different types of build-
ings, and plants with varied safety and security require-
ments, without affecting quality, design or cost. Secure
door and entrance environments are increasingly being
developed into total concepts for buildings in interac-
tion with IT development and sustainability require-
ments, making demands on suppliers to develop new,
secure and convenient solutions.

2014
SEK 57 billion

Mechanical products, 30%
Entrance automation, 27%
Electromechanical products, 23%
Security doors, 20%

Since 2004 electro-
mechanical products,
including entrance automa-
tion, have increased from
27 percent to 50 percent of
Group sales.

Entrance automation is an area making rapid techno-
logical progress within Entrance Systems division, which
has market and product leadership. The division devel-
ops sensors and electronics that ensure a convenient,
energy-saving door environment in stores, hotels and
hospitals. It is increasingly important to be able to offer a
total solution comprising automatic door opening solu-
tions, industrial doors and high-performance doors.
The service offering can then also be expanded to

Legend

include all automatic entrances for pedestrian traf-
fic at the front of a commercial building and for goods
deliveries at the rear of the building, with central control
systems monitoring the building’s energy efficiency and
security.

Legend

Future security solutions
The main driver for innovation and product develop-
ment is the development of digital technologies and
fast-growing demand for electromechanical products
and solutions. Since 2004 these have increased from 27
percent to 50 percent of ASSA ABLOY’s sales, equivalent
to SEK 22 billion growth. Mechanical products continue
to increase, but electromechanical products are growing
considerably faster. A larger share of electromechanical
products also means an increase in the sales value per
door, as well as in the recurring revenue from service
and upgrades. The number of installed doors fitted with
some form of electromechanical solution is estimated
at around 5 percent and is forecast to reach 20 percent
or more in the future, representing a strongly expanding
market for upgrades and new sales.

Another important driver is the demand for sustain-

able solutions. Investments in sustainable buildings
are increasing worldwide, with increased demand for
energy savings and the choice of renewable or recycled
materials. Demand for Environmental Product Declara-
tions (EPD) has shown a marked increase and is already
a prerequisite for taking part in much of the market. As
a result, the product’s environmental impact has to be
documented for the whole chain from materials choice,
manufacturing processes and transportation to use and
recycling.

ASSA ABLOY’s sustainability program is integrated
into the development process from the concept stage

to recycling of worn-out products. Specifications for
the development of new products and customer solu-
tions may be based on life cycle costs and a reduction
in energy consumption in buildings, as well as concrete
savings in materials consumption, packaging and trans-
port solutions.

Internal process development is intensive with the
ambition of increasing the share of new products, halv-
ing the development time and considerably reducing
the costs of each new product. ASSA ABLOY can stan-
dardize materials, reduce the number of components
and constantly improve quality by developing common
technology platforms and modular systems.

Future technology
Much indicates that cell phones and wearables will be
the main key and identity carriers of the future. The
Group’s latest technology platform, Seos, enables the
creation and distribution of secure digital identities to
these mobile units. Its goal is to create an ecosystem
for securely managing the digital identities of products
from different manufacturers (card readers, digital locks,
desk readers, printers etc.) and protecting the identity’s
integrity. Seos opens up new business opportunities for
supporting customer management of different mobile
units and access to computers and other workplace
equipment, developing new applications, and creating
new recurring revenue streams.

Central to future access control systems is the capac-

ity to create digital identities, which are represented
in mechanical systems by holding a key that fits a lock.
ASSA ABLOY has a broad offering for secure identity
management and access authentication, with various
layers of security and control. Customers subscribe to
these solutions, which are offered by the Group through
cloud services, making high demands on correct security
management.

The trend is towards doors and entrances becom-
ing sufficiently intelligent to securely identify people
approaching, automatically open and allow access
without further action. Access may also be allowed
following a simple gesture with a cell phone, biometric
scanning of a forefinger, or rapid presentation of an ID
card. ASSA ABLOY’s innovation and technical expertise
are leading this trend.

Modular systems
A strategy for adopting a modular approach to devel-
opment work is an important complement to imple-
menting Lean principles in the innovation process. A
modular design provides opportunities for reusing a
design and substituting parts of a product or solution
without needing to redevelop the whole. For a group
with ASSA ABLOY’s wide product portfolio, it is especially
important to benefit from synergies in the development
process even between products that have little in com-
mon at first sight.

ASSA ABLOY ANNUAL REPORT 2014

PRODUCT LEADERSHIP 25

Product leadership

Innovation management
– for effective innovation

ASSA ABLOY’s common innovation process and organization are driven by
enhanced customer value, sustainability and lower product costs, based on insight
into customer needs and behaviors. The Group aims for a cost-efficient innovation
process, which eliminates unnecessary waste, such as waste of time.

The product innovation target is that new products
should account for at least 25 percent and contribute to
higher margins. Innovation efficiency is to be doubled
through a combination of more efficient processes and
higher product value.

The goal is not only to focus on functions that increase
energy efficiency on entry and exit and temperature
control, but also to reduce energy consumption in the
operation of doors and industrial doors.

Objectives
• Creating significant customer value
• Developing more cost-efficient solutions
• Developing products with minimal environmental

impact that help our customers make their buildings
more energy efficient

• Developing products with an attractive, functional

design

Value creating products
Value creating products aim to create as much customer
value as possible, while addressing the cost side in the
form of more efficient designs, better materials and
component choices, better process choices etc.

The strategy is to create cost and functional benefits
for the customer. All new projects aim to solve an identi-
fied customer need and are based on insight into under-
lying customer needs and requirements.

Sustainability at the innovation stage
Sustainability is a prerequisite for successful sales and
innovation today. ASSA ABLOY’s products play an impor-
tant role in customers’ energy efficiencies, since the
building’s various openings can account for up to 20 per-
cent of energy consumption. Today around half of all U.S.
buildings already have an energy rating, which affects
the prices developers and landlords can charge tenants.
Sustainability is therefore one of the most important
parameters in the innovation process.

INVESTMENTS IN RESEARCH AND DEVELOPMENT

SEK M

1,600

1,200

800

400

A common design language
During the year ASSA ABLOY established a function for
development of industrial design and a common design
language. In markets with competent competition and
professional customers, the importance of smart, attrac-
tive and functional design is vital. ASSA ABLOY has a
long, successful history of acquisitions and integration of
people, products and brands, and there is considerable
reason for creating a common identity not only to bring
together the different parts, but also to facilitate matters
for customers. A common design center is the next step
in the development, to create an even clearer expression
of ASSA ABLOY’s basic values and the physical experience
of products with common guidelines for design, location
of brand names, colors and visuals.

Management

PRODUCT MANAGEMENT

PRE PRODUCT INNOVATION (PPI)

CUSTOMER NEEDS

Organization and knowledge

INNOVATION CULTURE AND PRINCIPLES

PRODUCT LEADERSHIP

ASSA ABLOY ANNUAL REPORT 2014

Innovation management
– our method

Innovation management is ASSA ABLOY’s common method for the development of
new products and solutions. It is about focusing on the right initiatives and implement-
ing them in the right way to optimize the use of human resources, knowledge and
financial resources.

Product management focuses on drawing up long-term
guidelines for each product group based on an under-
standing of social trends, technology development
and customer needs, as well as our competence and
technology portfolio. With the aid of portfolio manage-
ment, a balanced mix of initiatives is then selected for
implementation, based on the resources available. The
projects are planned and run on Lean principles with
cross-functional participation and visual management.
Similarly, all innovation operations are run visually with
regular interaction between all decision-makers and
those needing information and decisions. This results
in high transparency, quality and momentum (pulse) in
the innovation process.

Customer insight
To maintain a leading position in innovation ASSA ABLOY
needs a deep understanding of customers and their
expressed but also their long-term, non-expressed
needs. Broad monitoring and collection of market data
and surveys of different customer segments are there-
fore conducted on an ongoing basis. The Group attaches
great importance to ethnographic and market surveys
in order to understand non-expressed needs. Many

employees take part each year in special programs to
systematize customer insight collection. This knowl-
edge is used for both generating product concepts and
planning for the future.

Product and portfolio management
Product management is a critical component of
ASSA ABLOY’s innovation system. Product managers
ensure that each product group has a vision-based,
long-term plan founded on input from the market as
well as technology development, customer understand-
ing and insight into the particular product’s strengths.
These plans form the basis for the portfolio balancing
that must then take place across all product groups
within each unit. This preliminary work is critical for
the efficient functioning of the rest of the innovation
process.

Product development
Product development is divided into three categories:
pre product innovation, new product innovation and
continuous product innovation. All project types are run
on Lean principles, focusing on results, cross-functional
teams, and visual planning and management.

NEW PRODUCT INNOVATION (NPI)

CONTINUOUS PRODUCT INNOVATION (CPI)

Innovation management
– our method
Innovation management is
ASSA ABLOY’s common method for
the development of new products
and solutions. It is about focusing on
the right initiatives and implementing
them in the right way to optimize the
use of human resources, knowledge
and financial resources.

ASSA ABLOY ANNUAL REPORT 2014

PRODUCT LEADERSHIP 27

PRODUCT MANAGEMENT

CUSTOMER NEEDS

Organization and knowledge

Product leadership

Pulse the system
To achieve momentum and effectiveness in the whole
innovation process, visual systems and a pulse method
based on Lean principles are used. All key functions
involved in the innovation process meet regularly each
week in the pulse room where all operations are visu-
ally presented. The need for decisions is reviewed and
escalated to the level necessary to move on. This may
concern resource allocation, functionality prioritization
etc. As a result, no problems remain unaddressed longer
than a week before receiving the management atten-
tion necessary. This results in very high participation and
effectiveness in the innovation process.

Total door opening solutions are ASSA ABLOY’s strength

Electic strike

Automatic
door controller

Access control reader

Electromechanical lock

Electronic handle

Emergency
exit device

Magnetic lock

Hinge

Electromechanical
cylinders

Complementary
products

PRODUCT LEADERSHIP

ASSA ABLOY ANNUAL REPORT 2014

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

The core of the new, fully electronic eCLIQ locking
system is its unique, innovative locking cylinder
technology. eCLIQ enables keys to be programmed
so that they can only be used at certain times. All data
and communications are protected by encryption
algorithms and the keys can be updated online.

The new panic exit device, ePED, enables integration of
electrically controlled emergency exit technology into
the door system using ASSA ABLOY’s Hi-O technology.
This means that security functions such as electronic
locking can easily be added.

Yale Real Living is a complete electromechanical
outer door lock without any mechanical keys. It can
be used as a standalone solution, with a PIN code
or be integrated into existing home automation
systems.

Aperio technology allows mechanical locks to be
wirelessly connected to new or existing access control
systems. The same card can be used for all doors without
the need for cabling or alterations to doors.

Crawford OH1042 is a robust, flexible overhead
sectional door with optimized design and life. Ideal for
warehouses and logistics centers, it can be used in all
types of environments due to its extra strong panels,
which are Class 3 certified for wind load and air and
water permeability.

Pan Pan’s latest security door with an opening in the
center of the door panel. The innovative aluminum
opening enhances the door’s appearance, while
increasing air flow from the outside, efficiently reducing
the indoor temperature and saving energy.

ASSA ABLOY ANNUAL REPORT 2014

PRODUCT LEADERSHIP 29

ASSA ABLOY’s strategy

Cost-efficiency

€$

Price management for
price leadership

significant results+

Production restructuring
program providing

ASSA ABLOY aims to radically reduce the cost base through cost-
efficiency and sustainable operations. This is achieved by applying Lean
methods in manufacturing, professional sourcing and outsourcing.
Production combines final assembly close to the customer with the
transfer of standard production to low-cost countries.

-27%

Number of suppliers
reduced by 27 percent
since 2006

Cost-efficiency

Successful efficiency programs

ASSA ABLOY is striving to radically reduce the breakeven point through a number of
Group programs to increase cost-efficiency. These cover the global production structure,
professional sourcing, Lean production methods, constant product cost review, and
Seamless Flow, i.e. streamlining and automation of administrative flows. These programs
contribute significant cost reductions each year, to achieve the operating margin target of
16–17 percent and are a condition for the Group being a price leader and contributing to
sustainable development.

Production structure

ASSA ABLOY is continuously streamlining and simplifying the production structure
and implementing rationalization programs with the aim of closing factories and
offices and switching to assembly. Meanwhile productivity is increasing considerably,
with reduced environmental impact.

The restructuring programs reflect the Group’s active
global acquisition strategy. Since 2006 ASSA ABLOY
has made over 120 acquisitions and implemented a
number of programs to rationalize operations and raise
productivity. The production structure has switched
from manufacturing everything itself to concentrating
efficient assembly plants close to customers, transferring
production to low-cost countries, and sourcing more
non-critical components.

The restructuring programs have been very suc-
cessful, resulting in considerable savings and increased
efficiency in the production units. Since 2006, 61 pro-
duction units have been closed, 74 have been converted
into assembly plants and 29 office units have been
closed. The majority of the remaining production units
in high-cost countries have switched from full produc-
tion to mainly final assembly and customization. As a
result of this restructuring, 9,000 employees have left
the Group. In the Europe-dominated EMEA division, for

example, the number of employees in direct production
has fallen from 7,700 to 4,700 in eight years, and in indi-
rect production from 3,100 to 1,850, as the number of
factories has fallen from 70 to 40. Meanwhile sales have
risen from SEK 12,509 M to SEK 14,753 M. The programs
are operated across all divisions.

Rationalization of the production structure has

resulted in the transfer of an increasing share of standard
production to internal and external production units
in low-cost countries. Today 45 percent of the total
number of employees are located in low-cost countries,
compared with 36 percent eight years ago. Produc-
tion processes and sustainable development have been
improved through investment in modern, efficient pro-
duction equipment, while local presence on end-cus-
tomer markets in both high- and low-cost countries has
been strengthened to ensure fast delivery and efficient
assembly of customized products.

PLANTS IN LOW-COST COUNTRIES

COST-EFFICIENCY

ASSA ABLOY ANNUAL REPORT 2014

Professional sourcing

Professional sourcing is an increasingly important strategic activity for reducing costs. The
Group has substantially increased sourcing of components and more standardized prod-
ucts as part of production rationalization. The number of suppliers has been reduced by
27 percent since 2006. The ambition is to have an increasingly limited number of large,
high-quality suppliers, mainly in low-cost countries, as strategic partners. Collaboration is
based on low cost, high quality and delivery accuracy. Compliance with the Group’s Code
of Conduct is a condition, while sustainability initiatives with suppliers are under continu-
ous development.

As ASSA ABLOY evolves from a Group with its own full
production into a customer- and market-oriented prob-
lem solver, with mainly product assembly close to the
customer, the importance of sourcing from suppliers
is increasing. The latter are increasingly integrated into
the Group’s processes from product development to
transportation and delivery, with ASSA ABLOY contrib-
uting competence transfer and production and quality
expertise. As a result, material costs are rising as a share
of sales, making sourcing one of the most important pro-
cesses. Fewer, more competent suppliers are a condition
for the demands made, and the number of suppliers has
been reduced from nearly 12,000 in 2007 to just over
8,000 in 2014, with the target of halving this number in
the next few years.

This development is driven by a focused purchasing

organization, which has moved from call off to strate-
gic sourcing. Suppliers are categorized and segmented

according to the strategic role they will play. Today the
divisions have specialist purchasing managers for each
component category. Focused purchasing in the Divi-
sions efficiently manage different component catego-
ries. Suppliers are audited in accordance with certifica-
tion programs and by our own inspectors to monitor
processes, quality, environment and ethical guidelines.

ASSA ABLOY has also developed its own competence

in what components should really cost, a should cost
model, which provides strength and knowledge when
conducting cost reduction negotiations. Should cost
analysis entails a breakdown of the value chain and a
careful analysis of each cost component. Internal bench-
marking is then used to compare key factors driving
costs and to provide insight into price formation in the
market and by suppliers. Since the start the Group has
trained around 200 employees in this methodology.

NUMBER OF SUPPLIERS
Number

SHARE OF TOTAL PURCHASES IN LOW-COST COUNTRIES
%

12,000

10,000

8,000

6,000

4,000

2,000

Reducing the number of suppliers is important for reducing costs and
improving quality. Active efforts have reduced the total number of sup-
pliers by 26 percent over the past five years.

Raw materials, components and finished goods from low-cost countries
account for 50 percent of the Group’s total purchases.

ASSA ABLOY ANNUAL REPORT 2014

COST-EFFICIENCY 33

Cost-efficiency

Process development

ASSA ABLOY applies and develops a number of methods and processes to increase cost-
efficiency. The overall Lean methodology includes all processes and results 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 identify cost
savings in existing and new products. A significant focus is now on Seamless Flow. This
involves streamlining and automation of the Group’s administrative flows, which account
for 45 percent of the Group’s total personnel costs.

Today all ASSA ABLOY’s major workplaces have well-
functioning Lean programs and organization for both
production and administrative processes. Ongoing
improvements result in more efficient production flows,
better material cost control, improved decision-making
procedures, shorter development times, and increased
collaboration with the marketing and sales organization.
In 2014 the Group implemented more Lean projects
than in any previous year.

Value Analysis (VA) is a structured process for opti-
mizing cost and customer value in existing products.
The same applies to Value Engineering (VE), which is part
of the product development process. VA/VE is carried
out by focused, cross-functional teams, with more than
3,500 employees receiving training in these methods in
recent years. Cost savings may amount to 10–40 percent
for individual products, and around 200 projects were
implemented in 2014. Since the methodology was intro-
duced in 2007, the Group has made savings of nearly
SEK 1 billion through VA/VE.

ASSA ABLOY aims to reallocate indirect personnel costs
towards investments in innovation and sales. Adminis-
trative support functions account for around 45 percent
of total personnel costs. The most important activity for
streamlining these functions across the business is auto-
mated and standardized flows, known as Seamless Flow.
The process of consolidating the number of IT sys-
tems into an integrated and optimized IT infrastructure
is fundamental. The most important activities in IT opti-
mization include a reduction in the number of ERP sys-
tems, data centers and networks. E-commerce is being
developed to facilitate and streamline contact with
the Group’s customers and suppliers. A global Product
Data Management (PDM) system is being introduced to
describe and transfer data on the Group’s products.

Implementation of an integrated and optimized IT

infrastructure facilitates seamless flows and enables
more efficient coordination of support functions.

Seamless Flow – automation of administrative flows

Seamless Flow concerns automation of all the
information intended to control the value-
creating processes from the customer’s order to
completed delivery and payment. Today these
processes involve a very large number of paper-
based or digital information flows, with a consid-
erable potential for rationalization. ASSA ABLOY’s
Seamless Flow program aims to radically
accelerate value creation by standardizing flows
and processes, which are managed automat-
ically, in real time and with improved quality. The
program is striving towards an advanced vision
of the future in which customers place their
orders on an e-commerce site or are connected
to ASSA ABLOY’s ERP system, with its modules
for handling orders and inventories, ledgers,
production planning, project planning, resource
planning, sourcing, time recording etc. The infor-
mation can then flow automatically on to the
inventory function and the purchasing organiza-
tion with information on what should be sourced

from whom and when, to the production pro-
cess, which receives an automatic instruction on
what should be produced, how, where and when,
and on to transportation and delivery. Another
example is a global product database (PDM),
which has been implemented to standardize the
Group’s product descriptions.
This vision includes manufacturing using
intelligent machinery and robots with reading
capacity and sensors for processing and move-
ment of materials. Order management, invoices
and payments, recording of revenue and costs,
and more advanced bookkeeping will then be
handled automatically.
Sales processes, marketing activities, customer
relationships, innovation and product develop-
ment, and salaries and human resources can also
receive very cost-efficient support from auto-
mated information flows. Today many of these
flows are still handled by slow, manual paper
management, with risks of errors, manual correc-

tions and delays. The basis for efficient Seamless
Flow is ASSA ABLOY’s long-term program to cre-
ate a common, structured IT environment based
on a global infrastructure of servers, IT networks,
systems and integrated data centers, as well
as the Group’s 25,000 PCs, telephony systems,
mobile networks, e-mail functions and intranets.
Today ASSA ABLOY has some 70 e-commerce
sites and websites, which are affected by the
Seamless Flow program, as well as a large number
of different digital technical systems for drawings
and designs of products and solutions. Moreover,
over 100 business systems, HR systems and digi-
tal business applications are affected. The imple-
mentation of Seamless Flow and the integration
and optimization of the IT infrastructure will
enable more efficient coordination of an increas-
ing number of support functions. By extension,
this means that the Group releases resources that
can be moved up the value chain closer to the
customer to enhance customer value.

COST-EFFICIENCY

ASSA ABLOY ANNUAL REPORT 2014

eCLIQ is the clear
choice for German
hospital

CUSTOMER: With its 32 clinics and 20 research institutes, Uni-
versity Hospital Frankfurt is the largest hospital in Hesse, Germany.
More than 4,500 employees treat around 270,000 patients per year.
Extensive new construction, expansion, and renovation in multi-phase
construction stages have been in progress since 2001.

CHALLENGE: HOST GmbH Hospital Service and Technology and its
staff of 150 employees are responsible for all technologies in the Uni-
versity Hospital. When it comes to security technology, HOST relies on
the expertise of ASSA ABLOY. A CLIQ locking system has already pro-
vided several years of faultless operation. Therefore, it was an obvious
choice for HOST to install CLIQ in a recently completed new building.

SOLUTION: Thanks to the high level of modularity and simple
operation, the decision was quickly made to install an eCLIQ locking
system. This system comprises 1,100 cylinders with an equal number
of keys, and a specific web system. There are also five wall-mounted
programmers, four of which are provided with anti-vandalism protec-
tion.
Facility management experts at HOST are so impressed with the
new eCLIQ system that various buildings will be equipped with eCLIQ
in the final construction stage of the large hospital project.

PDM

CAD

PRODUCTION

PRODUCT
CONFIGURATION

CUSTOMERS

ORDERS

LOGISTICS & WAREHOUSE

FREIGHT

ASSA ABLOY’s Seamless Flow objective is to achieve an
efficient flow in all support functions, an automated
flow of information and products across the whole
value chain.

SUPPLIERS & PARTNERS

SOURCING

ASSA ABLOY ANNUAL REPORT 2014

COST-EFFICIENCY 35

ASSA ABLOY’s strategy

Growth and
profitability

1994

1,500%

Sales growth since 1994

ASSA ABLOY’s strategic focus on market presence, product
leadership and cost-efficiency has been very successful. The
Group’s growth and earnings trend have created significant
value for customers, shareholders and employees.

2014

5,800%

Increase in operating income
since 1994

8,300%

Earnings per share
has increased in 20 years

Growth and profitability

20 years of rapid growth
and increased profitability

Over the past 20 years ASSA ABLOY has grown from a regional lock company on the
European periphery into by far the largest global supplier of door opening solutions.
Simple, clear and consistent strategies have driven rapid growth, with good profitability
and financial stability. Value creation has been very successful. High growth is surpassed by
an even better earnings trend, which has created significant value for shareholders and
other stakeholders.

ASSA ABLOY counts its origin from 8 November 1994
when the recently merged Scandinavian lock companies
– Abloy (Finland) and ASSA (Sweden) – were listed on the
Stockholm Stock Exchange. The merger had its back-
ground in the crises that hit both the Finnish and Swed-
ish economies in the early 1990s. With a stronger capital
base, a broader ownership and a new management, new
strategies were drawn up for rapid international growth.
Under the clear, long-term and committed ownership of
the Swedish industrialist families, Douglas and Schörling,
three CEO’s have over the past 20 years built up by far the
largest global player in total door opening solutions.

Group sales have risen 1,500 percent from just over
SEK 3 billion to SEK 57 billion in 20 years. From a mainly
Scandinavian player with 4,700 employees, today
the Group has operations in 70 countries and 44,000
employees. The strategic focus is long-term value cre-
ation expressed in two overall targets, which since 2006
have been 10 percent annual growth, half organic and
half acquired growth, and an operating margin of 16–17
percent. Since the start in 1994 ASSA ABLOY has grown
by 1,500 percent, while operating income has increased
by 5,800 percent.

Market leadership and growth
The first strategic dimension, market leadership, has
been achieved in several stages. Up to 2005 the Group
was internationalized through acquisitions mainly on
mature markets in Europe and the USA, with integration
and development of a common culture. ASSA ABLOY was

the main consolidating force in a strongly fragmented
industry. A new growth phase began in 2006, with the
focus on expansion in emerging markets in Asia, eastern
Europe, South America, the Middle East and Africa.
Around 120 acquisitions and major investments in mar-
keting led to global leadership. A new growth area arose
through rapid growth in entrance automation in the
Entrance Systems division.

Product leadership and innovation
With its product leadership strategy combined
with acquisitions of technically leading companies,
ASSA ABLOY has become the industry’s global tech-
nological leader. The first 10 years were dominated by
investments in the development of mechanical door
opening solutions. Since 2005 investments, R&D and
innovation have increased at a high rate each year, with
development of competence and processes to achieve
considerably faster product development. The ambi-
tion has been to double the innovation rate, with the
target that products launched in the past three years
should account for 25 percent of the Group’s total sales.
The share has accele rated from 16 percent in 2010 to
30 percent 2014. One explanation is the investments in
new electronic and digital technologies in the electro-
mechanical product segment. These products, includ-
ing entrance automation, have increased their share of
the Group’s total sales from 27 percent to 50 percent in
10 years.

Strategy

Market presence

Product leadership

Cost-efficiency

Target

Growth and profitability

GROWTH AND PROFITABILITY

ASSA ABLOY ANNUAL REPORT 2014

Cost-efficiency and sustainability
The cost-efficiency strategy has been emphasized
increasingly strongly in the Group’s development
following the first decade’s development of market
leadership. It goes hand in hand with sustainability pro-
grams based on economic resource utilization across
the whole value chain – from product development
to recycling. The production and factory structure are
undergoing constant streamlining. The number of facto-
ries and offices has been radically reduced, as the Group
focuses on fewer assembly units close to customers and
increased sourcing of components. Process develop-
ment is intensive to achieve cost reductions in all stages.
Lean methods are operated across all units, with profes-
sional teams and ongoing projects. VA/VE methods are
used to constantly cut costs in existing products and

product development. Recent years have seen a major
investment in Seamless Flow, i.e. automation of adminis-
trative processes, which account for nearly 45 percent of
the Group’s total personnel costs.

Acquisitions
Acquisitions are an important part of ASSA ABLOY’s
strategy. Since 2006 ASSA ABLOY has acquired over
120 companies, achieving its ambition of 5 percent
acquired growth per year. In 2014 the Group made 20
acquisitions, which are expected to contribute around
SEK 2,600 M to annual sales. The acquisition strategy
aims to strengthen geographical market coverage,
complement the product range and add new technolo-
gies in expansive areas.

ACQUISITION STRATEGY
AND PROCESS

STRATEGY

EVALUATION

TRANSACTION

INTEGRATION

ASSA ABLOY’s DEVELOPMENT AND ACQUISITIONS 2010–2014

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).

2013 – Continued
expansion in USA
Acquisition of Ameristar, a
manufacturer of perimeter
protection and gates for industrial
and high-security purposes, and
the fire and security door
manufacturer Mercor SA (Poland).
ASSA ABLOY also signs an
agreement to acquire Amarr, the
third largest player in the North
American sectional door market.
Other acquisitions: Xinmao and
Huasheng (China).

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.

SALES AND OPERATING INCOME (EBIT)

Sales
SEK M

60,000

50,000

40,000

30,000

20,000

10,000

96
00
04
961 971 981 991 001 011 021 031 04

Operating income
SEK M

12,000

10,000

8,000

6,000

4,000

2,000

05
05

07
06
062 07

10
08
09
082, 3092, 310

11
12
112 12

14
13
132 14

2014 – 20 years as
innovative global leader
Acquisition of ENOX (India); Jiawei,
one of the leading suppliers of
security locks in China; IdenTrust
(USA), a leading supplier of digital
authentication solutions;
Lumidigm (USA), a leading
manufacturer of biometric readers
based on patented multispectral
imaging technology; and
Turvaykköset, the second largest
locksmith in Finland.
Other acquisitions: Silvana, one of
Brazil’s leading lock companies,
and Metalika, the leading fire door
company in Brazil. ODIS Limitada,
a leading supplier of locks,
padlocks and steel doors in Chile.
Agreement to acquire Digi
Electronic Lock, the leading digital
door lock manufacturer in China.

Sales
Operating income (EBIT)

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

ASSA ABLOY ANNUAL REPORT 2014

GROWTH AND PROFITABILITY 39

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
electromechanical
locks, digital door
locks, cylinders and
security doors
adapted to the local
market’s standards
and security
requirements.

Global
divisions

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

Americas

EMEA

Share
of sales

Share of
operating income

Share
of sales

Share of
operating income

21%

27%

25%

Americas

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

emea

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

Global Technologies

Share
of sales

Share of
operating income

13%

14%

global

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

Asia Pacific

Share
of sales

Share of
operating income

14%

13%

Asia

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

25%

ASSA ABLOY is represented on both mature
and emerging markets worldwide.
Emerging markets have increased their share
of Group sales from 10 percent eight years ago
to 25 percent in 2014.

Entrance Systems

Share
of sales

Share of
operating income

27%

21%

entre

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

EMEA

Good results
in a challenging market

The recovery in demand in western Europe continued at an uneven rate during the year.
Growth was strong in northern Europe, Africa and eastern Europe, showed an upturn in
Spain and was negative in France and Italy. The high investment in product development
in recent years has strengthened competitiveness, with new products accounting for
29 percent of annual sales. Investments in increased market presence and intensive
work on rationalization and efficiency programs contributed to a continued good result.

Report on the year
• Sales: SEK 14,753 M (13,165) with 3 percent organic

growth.

• Operating income (EBIT) excluding restructuring

costs: SEK 2,432 M (2,197).

• Operating margin: 16.5 percent (16.7).

Market development
The demand growth rate showed clear differences
between the division’s various geographical markets.
Demand was strong in Scandinavia, Germany and
emerging markets in eastern Europe and Africa, and was
good in Finland and the UK. Demand showed an upturn
from low levels in the Spanish and Israeli markets, while
remaining negative in the Benelux countries, France and
Italy. The demand trend in recent years away from com-
ponent sales and towards an increasing number of major
projects for total door opening solutions strengthened.
During the year sales of digital door locks to the residen-
tial market under the Yale brand saw major successes.
Marketing investments in recent years in eastern Europe,
the Middle East, Turkey and Africa have resulted in sig-
nificant sales increases. The share of sales to emerging
markets is now 19 percent. Demand for electromechani-
cal products was particularly strong.

Market presence
EMEA’s market presence is based on a good knowledge
of local building and lock standards and long-term rela-
tionships with distributors. The division’s markets are
very diverse, with major differences in product demand.
The aftermarket accounts for a significant proportion of
sales, providing stable demand. ASSA ABLOY has the lar-
gest installed lock base compared with its competitors.

The division’s significant investments in strengthened
market presence and sales capacity are generating
increasingly good results. The proportion of staff in
direct sales activities has increased considerably, while
sales support has been streamlined. In 2014 the sales
force increased by another 100 people and a majority of
marketing staff are now employed in customer-facing
roles. The ambition is to achieve a ratio of one employee
in indirect sales support to two employees in direct sales.
Investments in specification sales, with a high consul-
tancy and advanced technology content, strengthen the
trend towards an increased share of large projects sup-
plying advanced door opening solutions in sectors such
as offices, hospitals, schools and universities. The division
now has 250 consultants in these areas. Contacts with
key partners, such as architects and security experts, are
continuously strengthened with an EMEA Building Infor-
mation Modelling (BIM) platform launched for these
specialists in 2014.

EMEA’s leading residential and consumer products
brand, Yale, continued its strong growth in both mature
and emerging markets due to product innovation, devel-
opment of the professional sales channels and increased
marketing support.

Several large security projects continued and were
delivered to global and European telecom operators,
hospitals and government agencies. Deliveries included
software for electronic door opening solutions and
identification systems based on ASSA ABLOY technology
such as Aperio and CLIQ Remote.

Africa is expected to have major growth potential,
with a high urbanization rate and increased living stan-
dards. The division is making a significant, long-term
investment in the fastest growing sub-Sahara markets,

FACTS ON EMEA
Offering: Mechanical and electromechanical locks, digital door
locks, security doors and hardware fittings.

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

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

Acquisitions 2014: Turvaykköset (Finland).

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2014

resulting in high sales growth. By 2015 EMEA will have its own presence in
40 of the 50 largest cities, which are expected to account for 90 percent
of Africa’s GDP in the coming years.

The year saw the acquisition of Turvaykköset, the second largest lock-
smith in Finland. The acquisition is a strategic step into an important dis-
tribution channel in the Nordic region, which strengthens a more project-
oriented offering in hi-tech solutions and advanced service concepts.

Product leadership
In recent years EMEA has sharply increased investments in innovation and
product development, strengthening organic growth and contributing
to cost reductions. Products launched in the past three years accounted
for 29 percent of total sales, which is more than a twofold increase in
four years. Over 200 new products are in the pipeline for the coming
years. The high product development rate meets the sharply increasing
demand for electromechanical products. These increased their share
of total sales from 26 percent to 28 percent during the year. The trend
indicates a continuing strong increase in electromechanical products in
the coming years.

The division’s High Impact products (HIP) continued to be successful,

with the number increasing to a total of 10 following the launch of four
new products. The aim is to develop products that can be sold in large vol-
umes in all EMEA’s market areas. Particular importance is placed on a high
technical standard and modern design. Marketing is coordinated across
the whole division with special competence teams that cooperate closely
with local sales teams. The year saw the launch of Watchlock, a ‘smart’ lock
with integrated GPS and a communication module; Traka electronic key
cabinets with RFID technology; and One System, a broad range of locks
specially developed for central European markets. Demand continued to
increase sharply for High Impact products such as Aperio, an electronic
cylinder that can be wirelessly connected to networks; CLIQ Remote, an
innovative electromechanical cylinder system; Smartair, an access control
system; DDL, residential digital door locks; Code Handle, a digital door and
window handle; and the innovative ASSA ABLOY door closer product line.

Cost-efficiency
The division continued implementation of the Group’s latest program
for rationalization of the production structure with the consolidation
of production plants and offices into fewer units and investments in
more efficient machinery and automation. Since 2006 these programs
have reduced the number of plants from 70 to 40, and the number of
employees in direct production from 7,700 to 4,700. During the year the
automation of administrative flows, Seamless Flow, accelerated.

An important part of intensive cost-reduction efforts during the year
was a continued increase in the focus on sourcing. The division now has
seven category managers at central level responsible for sourcing materi-
als such as steel and electronics, as well as services such as transportation,
communications, and care and maintenance of plants and offices. The
centrally coordinated share of sourcing reached 80 percent during the
year, with the remainder managed at regional or local level. The share of
purchases in low-cost countries exceeded the short-term target of 40
percent and will continue to increase in the coming years. The division
has reduced the number of suppliers from 5,250 to 3,100 in 10 years, with
several also collaborating in product development. At the same time pric-
ing and payment terms have improved considerably.

Supply management and product development aim for major cost sav-

ings through a sustainable approach to materials consumption, logistics
and packaging, where VA/VE methods in innovation processes generate
positive results. The ambition to have fewer components, more common
product platforms and less complexity has reduced the number of prod-
ucts by around 35 percent in four years. Efforts to develop and adapt the
product offering to EPD (Environmental Product Declaration) standards,
so-called green products, continued successfully during the year.

EMEA’s market presence is based on good knowledge of local building and lock
standards and long-term relationship with distributors.

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

2013

2014

13,165
–1
2,197
16.7

10,499
6,395
20.7

2,084
10,089

14,753
3
2,432
16.5

12,299
7,247
21.0

2,288
10,678

1 Excluding items affecting comparability of SEK 300 M in 2013.
2 Excluding restructuring payments.

SALES AND OPERATING INCOME

Sales
SEK M

15,000

14,000

13,000

12,000

11,000

10,000

Operating income
SEK M

3,000

2,600

2,200

1,800

1,400

1,000

Sales
Operating income1

1 Excluding items affecting
comparability in 2011 and
2013.

SALES BY PRODUCT GROUP

Mechanical locks, lock
systems and fittings, 57%

Electromechanical and
electronic locks, 27%

Security doors and
hardware, 15%

ASSA ABLOY ANNUAL REPORT 2014

ASSA ABLOY’S DIVISIONS 43

Säkerhetsdörrar och beslagElekromekaniska och elektroniskaMekaniska lås, låssystem och tillbehörAmericas

Increased marketing initiatives
strengthen sales and earnings

Sales rose during the year, with 4 percent organic growth. Due to substantial invest-
ments in innovation in recent years, the division has a leading position in the very
fast-growing markets for wireless electronic door opening solutions. Demand on the
important commercial and institutional market improved during the second half of the
year, following several years of weak growth. The U.S. residential market continued to
show high demand. Sales growth was also positive in Latin American markets, where
several important acquisitions were made during the year. Continuing rationalization
and efficiency programs contributed to an increase in operating income and an
improvement in the operating margin.

Report on the year
• Sales: SEK 12,156 M (10,121) with 4 percent organic

growth.

• Operating income (EBIT) excluding restructuring

costs: SEK 2,613 M (2,140).

• Operating margin: 21.5 percent (21.1).

Market development
Sales growth in the U.S. was positive during the year,
despite a weak start in the wake of a hard winter. The
recovery in the residential segment in the U.S. continued
for the fourth consecutive year, with good sales growth.
ASSA ABLOY’s important commercial and institutional
market accelerated in both the industrial and office seg-
ments, which will positively impact demand next year.
Demand continues to grow for advanced electronic
solutions for smart homes, and for institutional and
commercial customers looking for efficient, energy-
saving total door opening solutions. Sales of digital
door locks are rising very rapidly in both North America
and South America. The trend toward more wireless
and mobile lock solutions and increased sustainability
through energy savings promises to be a growing area
and an important feature of future demand growth. The
division has a very competitive offering of new products
due to a high innovation rate. Sales in Latin America
increased, despite the ongoing residential crisis in
Mexico and more subdued demand in Brazil.

Market presence
For several years, a main trend in strengthening market
presence has been the focus on segmentation of solu-
tions and specification, initiatives to strengthen brand
identity, and new product offerings in the electro-
mechanical segment in all the division’s markets. A key
role is played by the division’s specifiers and specialist
teams, who collaborate with the leading architectural
firms, integrators and end-customers. They provide
training and introduce new products and solutions in
their role as the end-customer’s door opening solutions
experts. ASSA ABLOY has continuously developed new
advanced BIM (Building Information Modeling) solu-
tions for architects, which provide support for proj-
ect cost savings, sustainability and design. In the U.S.,
customer-facing staff has doubled in 10 years and now
accounts for over 60 percent of marketing and sales staff.
Additional training, including online programs, has con-
tributed to increased growth and market presence.
The Yale brand’s positioning in the smart home

market, with a number of innovative wireless digital lock
products, has been a major success, with fast-accelerat-
ing sales over the past two years. The division has estab-
lished itself as a lock provider to major suppliers of smart
home solutions, including AT&T. Today green buildings
account for a growing proportion of new construction in
the non-residential sector. ASSA ABLOY has the broadest
offering of sustainable solutions in the U.S. and Canadian
markets. The division is one of the few in the industry

FACTS ON AMERICAS
Offering: Mechanical and electromechanical locks, digital door
locks, cylinders, door fittings, security doors, door frames, and
industrial high-security fencing and gates.

Markets: U.S., Canada, Mexico, Central America and South
America. The majority of sales are in the U.S. 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. These seg-
ments account for 85 percent of sales, while the private residen-
tial segment accounts for 15 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 non-residential and
residential segments.

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

Acquisitions 2014: Metalika and Silvana (Brazil), and ODIS
(Chile).

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2014

able to supply certified door opening solutions that comply with the fast-
developing regulations and standards for energy efficiency, sound control
and emissions.

ASSA ABLOY owns many of the industry’s leading brands in North
America. Brand segmentation and specialization are far advanced. Today
all brands are combined with the ASSA ABLOY master brand, signifying
total door opening solutions, an increasingly important message in line
with demand growth.

Expansion in Latin American markets is a priority. Sales of electro-
mechanical products are growing rapidly in these markets. During the
year, Latin American electromechanical sales grew 28 percent.

The acquisition of Metalika and Silvana strengthened ASSA ABLOY’s
position in the large Brazilian market, with market-leading fire doors and
doors and frames.The acquisition of ODIS in Chile doubles ASSA ABLOY’s
market presence in the country, with a leading brand in locks, padlocks
and steel doors.

Product leadership
Market leadership is based on a constant flow of new technologies,
products and solutions that meet customer demand. The division has
increased investments in innovation and product development by nearly
200 percent since 2008, with products launched in the past three years
accounting to 27 percent of total sales in 2014. Today about 190 new
products are in the pipeline. At the 2014 ASIS trade show, the division
launched 75 new products, several of which won industry awards for
innovation in the strongly expanding wireless and mobile solutions seg-
ment. The division has the market’s broadest offering in this segment
today, and is developing RFID communications solutions in collaboration
with ASSA ABLOY’s business unit, HID. Sustainability and energy efficiency
are other important demand trends. A new platform for electromechani-
cal locks offers a number of products with the potential for significant
energy savings. ASSA ABLOY’s Securitron brand has received GreenCircle
certification for its EcoPower solution, which achieves energy savings
of over 99 percent compared with linear and switching power supplies.
Similarly, Sargent and Corbin Russwin brands have received Green Circle
Certification for their EcoFlex mortise locks which achieve 96 percent
energy savings compared with traditional solenoid mortise locks.

Cost-efficiency
Americas division’s production structure has been undergoing major
rationalization since 2008, resulting in significant cost reductions. Today
production plants are an efficient size and operate at good capacity.
Efficiency programs continued during the year with investments in a new
generation of manufacturing robots, increased automation and further
implementation of Lean methods, which are also used to streamline
administrative processes. A large number of products have been updated
and processes simplified using VA/VE methods. The implementation
of Seamless Flow activities continued to generate good results. More
efficient supply management and increased outsourcing to low-cost
countries is a priority. The number of suppliers has been reduced by 28
percent in five years. More professional sourcing and consolidation to
fewer, larger suppliers have helped double cost savings since 2008.

Americas division has a number of mobile exhibitions on education, health,
aesthetics, access control, locksmith solutions and a general exhibition, all of which
present and demonstrate total door opening solutions close to the customer.

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

2013

2014

10,121
6
2,140
21.1

10,475
7,319
22.7

1,983
6,726

12,156
4
2,613
21.5

12,909
9,000
23.1

2,637
7,193

1 Excluding items affecting comparability of SEK 18 M in 2013.
2 Excluding restructuring payments.

SALES AND OPERATING INCOME

Sales
SEK M

14,000

12,000

10,000

8,000

6,000

4,000

Operating income
SEK M

3,000

2,500

2,000

1,500

1,000

500

Sales
Operating income1

1 Excluding items affecting
comparability in 2011 and
2013.

SALES BY PRODUCT GROUP

Mechanical locks, lock
systems and fittings, 41%

Electromechanical and
electronic locks, 14%

Security doors and
hardware, 45%

ASSA ABLOY ANNUAL REPORT 2014

ASSA ABLOY’S DIVISIONS 45

Säkerhetsdörrar och beslagElekromekaniska och elektroniskaMekaniska lås, låssystem och tillbehörAsia Pacific

Continuing expansion with
increased sales and earnings

Market expansion continued, with 12 percent sales growth. The high growth rate in China
slowed, turning negative at the end of the year. The Australian market recovered strongly
following a long downturn. South Korea continued to show good growth and demand
increased strongly on Southeast Asian markets including India. The division continued to
invest in increased market presence, with strategic acquisitions in India and China.

Report on the year
• Sales: SEK 8,336 M (7,420) with 1 percent organic

growth.

• Operating income (EBIT) excluding restructuring

costs: SEK 1,187 M (1,032).

• Operating margin: 14.2 percent (13.9).

Market development
The previous high growth rate in China slowed, turning
negative at the end of the year. Despite a weaker market,
the division won several large project orders for infra-
structure expansion. ASSA ABLOY is responsible for total
delivery of door opening solutions for China’s highest
building, with a height of 660 meters and a construction
start in 2015, as well as hardware for 1.5 million windows
for a housing project in a new green city, the division’s
largest ever order. The underlying growth factors in
China, with its strong urbanization, industrialization and
large demand for better housing, indicate continued
increasing prosperity and good long-term growth in
demand for the division’s products.

Marketing and sales investments continued at a high

level in Southeast Asian populous countries such as
Vietnam, Indonesia and the Philippines with high growth
potential. Pakistan was a new market during the year. The
Indian market developed well with increased distribu-
tion networks and new product launches. The division
won a large project order in the Indian oil sector based
on a CLIQ solution.

Demand increased strongly in Australia following several
years of weak growth, despite a continued downturn in
the large mining sector. New Zealand saw strong growth
during the year. The South Korean market in which the
division has a high market share continued to grow.
Export sales by the Group companies iRevo and King
to countries in the region and other Group compa-
nies increased strongly, while there was high domestic
demand for advanced digital locks, a segment in which
the South Korean Group companies are global leaders.

Market presence
Market presence in China is gradually being strength-
ened through expanding marketing investments and
acquisitions. ASSA ABLOY is the market leader, but
faces tough competition from a very large number of
small local companies. Consolidation is in progress in
the wake of cost inflation and increased investment
requirements in many areas, benefiting a global player
like ASSA ABLOY. Demand for fire doors and digital locks
is increasing rapidly, while growth in residential security
doors has slowed. The division continued to make major
investments in sales staff for specification of door open-
ing solutions and in the training of distributors.

Expansion on the very large Indian market continues

at a high rate. Market presence was strengthened dur-
ing the year by expanding into new cities and expand-
ing reach by 500 retail sales outlets. In addition, with
the acquisition of ENOX, the division now have access
to an additional 1,300 new retail outlets. The build-up

FACTS ON ASIA PACIFIC
Offering: Mechanical and electromechanical locks, digital door
locks, high-security- and fire doors and hardware.

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 work-
places. The production units in China also supply ASSA ABLOY’s

other divisions. Australia and New Zealand are mature markets
with established lock standards. Renovations and upgrades
account for the majority of sales.

Brands: In China: Baodean, Guli, Pan Pan, Liyi (Shenfei), Door-
max, Tianming, Guoqiang, Sahne, Longdian, Keylock, Xinmao
and Huasheng. In South Korea: Gateman, Angel, King, the global
Yale brand and ASSA ABLOY. In Australia and New Zealand, the
largest brands are Lockwood and Interlock.

Acquisitions 2014: Jiawei (China), Enox (India), Unilock (South
Korea), and Digi Electronic Lock (China).

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2014

of specification teams continues with staff training and has resulted in a
rapidly increasing number of contacts and orders from major commercial
and institutional customers.

Investments in market presence continued at a high rate in the fast-
growing and populous markets in Indonesia, Vietnam and the Philippines,
and were complemented by a newly established representative office in
Pakistan during the year.

The year saw the acquisition of Jiawei, one of China’s largest security
lock producers. The company had sales of SEK 500 M and 920 employees.
The acquisition increases the division’s distribution capacity and
strengthens its presence in relation to important door manufacturers
and on the growing aftermarket. Digi Electronic Lock, the leading Chinese
digital door lock manufacturer, was acquired at the end of the year. The
company’s Keylock brand is the leader in digital door locks in China, with
an extensive product range in the low to mid segments, providing a good
complement to the division’s premium products.

ASSA ABLOY also took its first major step in the fast-growing Indian

market through its acquisition of ENOX, a lock and lock component
company with sales of SEK 130 M, 220 employees and headquarters in
Mumbai.

Product leadership
The regional demand trend for electromechanical and electronic solu-
tions is strong. Digital lock sales are rising by double-digit percentages
each year in China and Southeast Asia. The number of digital door lock
distributors is also increasing sharply. ASSA ABLOY has clear product
leadership with a hi-tech profile, and products launched in the past
three years rose to 35 percent of total sales during the year. Investments
in product development continue to increase and there are now 15
development centers with nearly 300 development engineers. Another
growth trend is the increasing demand for sustainable or green products,
and the division will strengthen its product leadership with a number of
product launches in the coming years. China’s program for green cities
and housing is creating strong demand. The division has strengthened
its own sustainability competence with a new organization and central-
ized responsibility for the whole region. A sustainability board monitors
developments on the division’s markets. The division’s own sustainability
initiatives have focused on water consumption and carbon emissions,
resulting in good improvements during the year.

Cost-efficiency
The division’s Chinese production plants, which employ around 9,000
people, account for a large share of the Group’s production and employ-
ees. The number of production staff has been reduced by 35 percent over
the past three years. The division continues to streamline the production
structure with factory consolidation, process outsourcing and a focus
on increased professionalization of sourcing. The year saw the contin-
ued expansion of organization and management to increase purchase
categorization. At the same time the division is investing in increasingly
automated production and more efficient flows. The focus on Lean meth-
ods and processes was strengthened during the year by a new Lean man-
ager and staff training. These efficiency measures are necessary to meet
increased cost pressure particularly from wage rises in China, but also to
reduce the division’s sensitivity to cyclical fluctuations, thereby improv-
ing margin development.

Market presence in China is gradually being strengthened through expanding
marketing investments and acquisitions.

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

2013

2014

7,420
4
1,032
13.9

7,436
4,311
16.3

8,336
1
1,187
14.2

9,810
7,931
14.2

932
14,243

931
13,439

1 Excluding items affecting comparability of SEK 183 M in 2013.
2 Excluding restructuring payments.

SALES AND OPERATING INCOME

Sales
SEK M

10,000

8,000

6,000

4,000

2,000

Sales
Operating income1

Operating income
SEK M

1,400

1,200

1,000

800

600

1 Excluding items affecting

400

comparability in 2011 and
2013.

SALES BY PRODUCT GROUP

Mechanical locks, lock
systems and fittings, 49%

Electromechanical and
electronic locks, 11%

Security doors and
hardware, 40%

ASSA ABLOY ANNUAL REPORT 2014

ASSA ABLOY’S DIVISIONS 47

Säkerhetsdörrar och beslagElekromekaniska och elektroniskaMekaniska lås, låssystem och tillbehörGlobal Technologies

Key product launches create
growth and profitability

The division launched several key products in interesting growth areas such as mobile
keys, biometrics and secure identification, creating platforms for future growth. Sales
were strong for HID’s secure identity solutions for institutional customers and biometric
solutions, positive for identity and access management, but negative for project orders.
With strong sales growth in Hospitality, together with efficiencies and a cost focus, the
division’s good earnings and margin trend once again improved.

Report on the year
• Sales: SEK 7,207 M (6,472) with 1 percent organic

growth.

• Operating income (EBIT) excluding restructuring
costs: SEK 1,368 M (1,184), a 16 percent increase.

• Operating margin: (EBIT): 19.0 percent (18.3).

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

HID GLOBAL

Market development
Sales continued to increase sharply in emerging markets
such as China, Africa and Latin America and accele-
rated strongly in North America in the second half of
the year after a sluggish start in the first half of the year.
The European market was divided, with relatively strong
demand in northern Europe, while southern Europe was
considerably weaker. Following a very strong year for
major project orders, demand fell back sharply in 2014.
Demand from institutional customers in mature markets
remains restrained in the light of ongoing budget restric-
tions, while secure identity sales to governments and
institutional customers in Africa, Latin America and parts
of Europe were strong. HID Global’s solutions are now
found in a large number of national programs for various
types of ID cards, passports, driving licenses and vehicle
registration. In addition, HID Global reader technology
is used by the world’s five largest electronic document
reader suppliers in the government market.

HID Global’s investments in emerging markets are
clearly yielding positive results, with many institutional
customers investing in advanced hi-tech secure identity

solutions, including biometric solutions. At the same
time HID Global is experiencing strong demand for a
number of new products and solutions, as a result of
innovative product launches in areas such as mobile
access and identity solutions, more efficient card print-
ers, and new technology in access solutions combining
physical access control with logical access control and
other integrated solutions.

Market presence
HID Global has a strong global position in an increas-
ingly global market for identity and access management.
The latter is undergoing very rapid development due to
advances particularly in communications technology,
where digital mobile solutions are experiencing strong
demand. HID Global is investing for the long term in a
complete range of secure identity solutions. The empha-
sis is on unique offerings, a scalable ecosystem of secu-
rity solutions, and a global partnering program.

For several years the market positioning strategy has
prioritized significant investments in emerging markets
and a sharp increase in the innovation rate. This year’s
acquisition of the U.S. company Lumidigm, active in
biometric identification, has rapidly shown its value,
not least in emerging markets where many national ID
programs are now focusing on fingerprint identification,
often to complement various code systems.

The acquisition of the U.S. company IdenTrust
has helped strengthen the business offering with
world-leading technology in digital authentication solu-
tions for financial institutions, companies, healthcare
and government agencies requiring the highest security
level. The strategy also includes stronger segmentation,
with sales teams that have contact with partners in the

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
commercial sectors worldwide.

Brands: HID Global and VingCard.

Acquisitions 2014: Lumidigm and IdenTrust.

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2014

sales channels and end-users, and act as close advisers in designing secu-
rity solutions.

Product leadership
HID Global has a very high investment rate in new products and solutions
in the light of rapid technical developments particularly in communica-
tions technology. New products account for nearly 40 percent of annual
sales. Development takes place at six Centers of Excellence with category
responsibility in three continents and with intensive collaboration with
other parts of the Group. HID Global develops complete ecosystems for
customer segments such as manufacturing companies, the financial sec-
tor, government agencies, healthcare and educational institutions, with
solutions for all parts of the value chain.

Working with open standards is an important principle, which facili-
tates the development of new solutions for upgrades of many different
systems and adaptation to new technology and new applications. The
business unit is an important development partner to many major players
in the global IT industry and is actively involved in standards develop-
ment.

HID Global is a market leader in fast-growing mobile access control
technology. The hub is the Group’s Seos technology, which is the world’s
first commercial ecosystem for digital identities on various platforms.
During the year the business unit took a further step forward by utilizing
Bluetooth Smart, which makes it possible to open a door from a distance
combined with a patented gesture technology, ‘Twist and Go’. A light
twist with the cell phone opens an internal or external door. The solution
was awarded a prize by a jury comprising both end-users and technology
experts in the leading industry organization ASIS and has met with con-
siderable interest, with deliveries to several customers in Europe and the
USA during the year.

Facilities for personalizing identity and access solutions are an increas-

ingly strong sales argument. HID Global has launched a number of new
functions that facilitate customers in creating their own Seos-based solu-
tions for smart cards or cell phones. Other new products and solutions
launched during the year included a new, inexpensive card printer in the
Fargo range designed for rapid, simple installation and production of vari-
ous types of ID cards, loyalty cards, charge cards, and membership cards.

Cost-efficiency
HID Global’s implementation of the Group’s latest program for restruc-
turing and consolidation of the production structure is in line with
budget and ahead of schedule. The closure of five production and
distribution plants will be implemented in the first quarter of 2015. The
North American production center is now located in a newly built plant
in Austin, Texas, and headquarters were also relocated there from Irvine,
California during the year. The total security solution for the building and
all input products and sub-solutions, ranging from internal and external
doors and hinges to identity and access management, were supplied by
ASSA ABLOY, a total of around 3,000 products. The plant has received sev-
eral awards for sustainability performance, most recently LEED Platinum

Certification from the U.S. Green Building Council. The transition
from four production units to a single integrated process in one plant
has resulted in significant resource and cost savings. Sustainability
initiatives continue to yield positive results, with lower energy, water
and materials consumption as well as efficiencies, simplifications and
savings due to Lean Production, Seamless Flow and VA/VE programs.
Continuous sustainability audits of key suppliers now cover nearly
100 percent of the annual materials flow. The new production plant
in Malaysia, which mainly supplies the fast-growing Asian markets,
was certified to ISO 14001 and now produces 15 million units per
month due to high automation.

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

2013

2014

6,472
6
1,184
18.3

6,114
4,511
19.7

870
3,136

7,207
1
1,368
19.0

8,239
5,984
19.6

1,282
3,331

1 Excluding items affecting comparability of SEK 38 M in 2013.
2 Excluding restructuring payments.

SALES AND OPERATING INCOME

Sales
SEK M

10,000

8,000

6,000

4,000

2,000

Sales
Operating income1

Operating income
SEK M

1,500

1,300

1,100

900

700

1 Excluding items

500

affecting comparability
in 2011 and 2013.

SALES BY PRODUCT GROUP

Access control, 46%

Identification technology, 31%

Hotel locks, 23%

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

PRODUCT AND SERVICE OFFERING
Physical access control: Smart cards, card readers, visitor
management, identity management, and HID’s mobile access
control solutions.
Secure issuance: Card printers, printer accessories and software.
Identity assurance: Smart cards, readers and software for creden-
tial management and digital certificates.

Biometrics: Multispectral imaging technology for fingerprint identification.
Government ID: Cards, eID cards, card printers, readers, software and professional
services for government-issued credentials.
Mobil access control, Seos: Digital keys and reader technology for NFC and Bluetooth
smartphones.
Identification technologies: RFID tags, readers and Trusted Tag services.

ASSA ABLOY ANNUAL REPORT 2014

ASSA ABLOY’S DIVISIONS 49

HotellåsIdentifieringPasserkontrollASSA ABLOY HOSPITALITY

Report on the year
ASSA ABLOY Hospitality’s sales growth continued in
2014, with improvements in profit and operating margins
from a good level. Demand was high in the renovation
and upgrade market, with considerable interest in more
advanced technical solutions. Customer behavior is a
clear example of the rapid market trend towards increas-
ingly advanced electromechanical technology. For several
years ASSA ABLOY Hospitality’s marketing initiatives have
focused on promoting the replacement or upgrade of
installed lock systems based on magnetic stripe cards,
where online wireless technologies are gaining ground.

The new construction market has been more subdued

globally, but the rate of increase in the number of new
hotel rooms rose during the year, as well as the number of
construction starts.

The North American market showed good growth,
which accelerated in the second half of the year. Europe,
the Middle East and Africa continued to show a more mixed
trend, with good growth in the Middle East and the United
Kingdom. Emerging markets in Latin America showed
good sales growth overall. The important Chinese market
remained strong, while Australia and New Zealand weak-
ened, partly due to the fall in room demand.

RFID (Radio Frequency Identification) locks increased

during the year to nearly 90 percent of total deliveries.
ASSA ABLOY Hospitality is the industry’s global market
leader. The technology provides an enhanced customer
experience and improved security. Mobile access control
solutions launched during the year further strengthen
user-friendliness.

Market presence
Global market presence has gradually strengthened in
recent years, with a presence and customers in all impor-
tant markets. Sales have risen rapidly in new emerging
markets due to targeted marketing initiatives. Market pres-
ence in China strengthened further during the year. South
America is a key emerging market, with increased sales.
Global market presence is considerably strengthened by
the Group’s innovation capacity in electromechanics, with
rapidly increasing demand for electronic and mobile solu-
tions. Consequently, the process of building ASSA ABLOY
Hospitality as an overall brand is now also being acceler-
ated, linking it to the Group’s world-leading technical com-
petence, while VingCard will be a product brand for locks
and Elsafe a product brand for in-room safes.

Product leadership
The Group’s common product development is an increas-
ingly important competitive factor in keeping pace with
customer demand for convenient hi-tech solutions.

ASSA ABLOY Hospitality’s contract with Starwood Hotels
& Resorts Worldwide, Inc. for a keyless access control
system would not have been possible without collabora-
tion with HID and the Group’s mobile access development
unit, ASSA ABLOY Mobile Keys. The system shell is based
on the Group’s Seos technology. ASSA ABLOY’s mobile
access solution is the world’s first commercial ecosystem
for digital keys on smartphones. The guest can check in
and receive their electronic key using their cell phone. On
arrival the guest can gain access to their hotel room with
their cell phone.

ASSA ABLOY Hospitality develops technology road-
maps for several large global hotel chains and has regular
technology meetings with major customers, strengthening
customer relationships and knowledge sharing. Conve-
nience and design are increasingly important dimensions
in the offering. Recently developed Essence is the world’s
first ‘invisible’ door lock, with all components embedded in
the door, creating totally new opportunities for design-con-
scious hotels. Essence is well positioned for increased activ-
ity in the new construction segment.

Another design-focused product is Allure, a hi-tech
premium product – ‘no lock on the door’ – giving hotel
designers extreme aesthetic flexibility in a luxury envi-
ronment with wireless installation. Last year’s launch of
Orion for premium hotels was complemented this year by
a simpler model for budget hotels. Sensors that can detect
guest presence in the room and information from the
door lock when the guest enters and exits the room allow
Orion to efficiently manage energy consumption. The
technology can contribute to energy cost savings of up to
20–30 percent.

Cost-efficiency
The relocation in recent years of component production
was completed during the year. ASSA ABLOY Hospitality
now has no component production in high-cost countries.
The next stage is developing operations into a highly effi-
cient, global logistics organization to exploit a continuing
large potential for cost reductions. ASSA ABLOY Hospi-
tality has 15 Seamless Flow teams working to streamline
all the information flows affecting customers, suppliers,
its own production and administration. All business units
now use the same business management system, AX ERP,
facilitating joint measures to reduce costs. External sourc-
ing has increased sharply in recent years, helping to reduce
costs, with the support of VA/VE methods and the appli-
cation of ‘should cost’ methods. This work takes place in
parallel with sustainability initiatives, and sub-contractors
are supported and systematically audited for quality, flow,
efficiency, social conditions and environmental projects in
a lifecycle perspective.

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 lock systems and

in-room safes, with products installed in over seven million hotel rooms in more
than 42,000 hotels worldwide.

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2014

Smartphones open doors
at Vanderbilt University

CUSTOMER: Vanderbilt University, Nashville, US, has earned many distinctions,
including Princeton Review’s top ranking for colleges with the happiest students.

CHALLENGE: Administrators at Vanderbilt University wanted to understand and
assess the value of mobile credentials in the university environment, and experience
the process of issuing, managing and revoking mobile IDs to smartphones.
The university was interested in the benefits of HID Mobile Access, but also needed
to be sure that the solution was easy to use and manage. Plus, while administrators
wanted an innovative alternative to existing access cards, it was also important that
the solution supported legacy cards and new smart card technology as well as the
new mobile IDs.

SOLUTION: The HID Mobile Access solution that Vanderbilt piloted supports Blue-
tooth Smart and includes Mobile IDs, Mobile Apps, mobile-enabled iCLASS SE readers
powered by Seos, and the HID Secure Identity Services portal for provisioning and
revoking Mobile IDs to a variety of Apple and Android mobile devices.
Mobile-enabled iCLASS SE readers were deployed at 16 entry points, and the uni-
versity was also able to use existing iCLASS smart cards with them. Pilot participants
were able to open doors with a “tap” to the reader, or use their Bluetooth connection
and HID Global’s patented “Twist and Go” gesture technology to open doors as well as
gates from a distance.

Collaboration for complete solution
for new Parkland Hospital

CUSTOMER: Parkland Memorial Hospital, Dallas, US, was built in 1954. It

needed a brand new facility to bring it up to modern standards.

CHALLENGE: The customer wanted the new 17-floor facility’s doors and
opening solutions to provide a modern, upscale feel. They also required solu-
tions that would serve the unique requirements of the hospital environment:
easy-cleaning doors that contribute to the sterile environment; key systems
with long patent lives to eliminate duplication of keys; and secure areas for
infants. The project parameters were immense – 9,000 openings, including up
to 600 exit device openings and 1,200 card readers.

SOLUTION: ASSA ABLOY collaborated with two architectural firms, HDR

and Corgan, and distributor partner Performance Door & Hardware.
Because of the internal collaboration, they were able to ensure that the
doors (automatic, hollow, metal and thermal fused), hardware and other solu-
tions worked together. By having a single point of contact working through all
the manufacturers, it was easy to solve issues and offer one voice.
Working across divisions, ASSA ABLOY was able to offer a complete suite of
products that met Parkland’s requirements for design aesthetics, durability,
sterility and security.

ASSA ABLOY ANNUAL REPORT 2014

ASSA ABLOY’S DIVISIONS 51

Entrance Systems

Market focus and product
development strengthen growth

Organic growth was 4 percent with particularly strong growth on the U.S. market,
while Europe remained weak but with signs of an incipient upturn on several markets.
Australia and emerging markets in eastern Europe and Southeast Asia showed good
sales growth. Demand slowed from a high level in China. Global industrial demand was
strong for overhead sectional doors and high-performance doors with increased sales in
Europe and North America, while the European residential segment showed negative
growth. Following several years of high growth and a large number of acquisitions, 2014
saw a focus on consolidation, internal efficiency initiatives and a continued high innova-
tion rate.

Report on the year
• Sales: SEK 15,409 M (12,237) with 4 percent organic

growth.

• Operating income (EBIT) excluding restructuring

costs: SEK 2,054 M (1,733).

• Operating margin: 13.3 percent (14.2).

Market development
The U.S. market developed strongly during the year, with
very good sales growth in the residential, commercial,
industrial and institutional markets. Market invest-
ments increased, with new construction and upgrades
and rising demand for automatic, industrial and high-
perform ance doors and loading dock solutions. Europe
saw weakly increasing demand in industrial segments
from a low leveI, while the residential market continued
to show negative growth. Europe remains divided with
strong growth in eastern Europe except Russia, a grow-
ing market in German-speaking countries, the UK and
Scandinavia, and stable but continued weak demand in
southern Europe. The Chinese market slowed slightly
following several years of strong growth. Southeast Asia
continued to grow strongly, while growth accelerated in
Australia following a few weak years.

Nearly one-third of the division’s sales are generated

by the comprehensive service offering, with its high,
regular sales that increased during the year. The division
also services competitors’ products and successfully

launched a new service concept, which provides signifi-
cant cost savings for customers through preventive and
improvement measures.

Market presence
The division has grown very strongly over the past few
years, mainly through acquisitions. Sales have more than
tripled since 2010. As a result, ASSA ABLOY has achieved
a world-leading market position in entrance automation.
The division is now geographically and technologically
positioned for continued rapid global growth. Work con-
tinued during the year to integrate the acquisitions and
consolidate the organization and the brand structure,
to achieve a more market-oriented differentiation and
specialization of the customer offering based on three
marketing channels.

In the direct channel, total solutions for major cus-
tomer segments such as retail, healthcare, manufactur-
ing, distribution, logistics, transportation and mining
are marketed under the ASSA ABLOY brand. Close
cooperation with architects and technical consultants
drives demand. A number of new, key product launches
met with good demand in all business areas, resulting in
increased market shares. A common, enhanced concept
for the important service business was also launched.
This is mainly aimed at upgrading and modernizing exist-
ing equipment to optimize performance and energy
efficiency.

FACTS ON ENTRANCE SYSTEMS
Offering: Entrance automation products, components and ser-
vice. The product range includes automatic swing, sliding and
revolving doors, gate automation, hardware for overhead sec-
tional doors, 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 over 30 countries and distribu-
tors in 90 countries. Service operations account for nearly one-
third of sales. The products are sold through three channels. In
the direct channel, new equipment and comprehensive service

are sold direct to end-customers under the ASSA ABLOY brand.
The indirect channel caters mainly to large and medium-sized
distributors under the Entrematic brand. FlexiForce sells com-
ponents and hardware for overhead sectional doors in the
industrial and residential segments.

Brands: Besam, Crawford, TKO, Megadoor, Albany, FlexiForce,
Amarr Kelley, Serco, Normstahl, Dynaco, Ditec, and EM.

Acquisitions 2014: A number of smaller acquisitions were
made during the year to strengthen market presence.

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2014

Component and hardware sales have been combined under the Flexi-
Force brand. The components are mainly for overhead sectional doors
in the industrial, commercial and residential segments, which are sold
through distributors and installers. The product range is comprehensive.
The third channel, indirect sales, targets local distributors and install-

ers under the Entrematic brand. Entrematic has a complete offering in
of sectional doors, loading dock solutions, high perfomance doors and
entrance automation. Following the acquisition of Amarr (USA) in 2013,
the division now has a very effective, broad offering for the important U.S.
market. Marketing activities focus on product and customer segmenta-
tion, and an emphasis on Entrematic’s complete offering to enhance cus-
tomer value. Prioritized areas are innovative product development, high
delivery reliability and an efficient sales process in which e-commerce is
set to increase.

Strengthening presence in emerging markets, with the ambition of
achieving a 25 percent share of the division’s total sales, is an important
task for the next three years. Investments in an expanded range of mod-
ern door opening solutions increased during the year, in order to raise the
organic growth rate in these key markets.

Product leadership
The new product development organization established in recent years
in the various business areas has substantially streamlined and increased
the rate of new product development. The 2014 launch rate resulted in
the division now exceeding the Group target for products launched in
the past three years to account for 25 percent of sales. During the year
the division launched several new product generations of sliding, swing,
revolving, overhead sectional and high-performance doors on newly
developed product platforms. These platforms provide great flexibil-
ity for differentiating the product range using modular solutions, with
increased functionality and at a much more rapid rate. New product
platform launches also result in less complexity and shorter lead times,
reducing costs. Expertise is being developed through the build-up of
technology centers in western Europe and the establishment of R&D
capacity in eastern Europe and China.

Cost-efficiency
Following several years of high growth and a large number of acquisitions,
consolidation of the production structure remained the focus of cost-effi-
ciency initiatives. The division is relocating manufacturing from high-cost
to low-cost countries, where production is concentrated in a small num-
ber of large factories for common basic components on global, modular
platforms. Customized final assembly close to the customer takes place
in high-cost countries to achieve more flexible and efficient regional
distribution. During the year factory consolidation began in China and a
new assembly plant was established in Turkey. Relocation of production
capacity from the Netherlands to Hungary and from Spain to Romania
also began. Development and streamlining of the division’s processes
continued at an undiminished rate. Coordinated sourcing continues to
reduce the number of suppliers and increase efficiency. The application of
Lean and Seamless Flow processes is spreading and intensifying, making
increasing contributions to cost savings, as are VA/VE methods in product
development in close cooperation with the production organization.
Sustainability initiatives continued to reduce raw materials and energy
consumption.

ASSA ABLOY Entrance Systems sliding doors provide convenient and
aesthetic solutions.

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

2013

2014

12,237
0
1,733
14.2

14,592
9,282
12.1

1,792
8,191

15,409
4
2,054
13.3

16,245
9,615
13.1

2,007
9,420

1 Excluding items affecting comparability of SEK 313 M in 2013.
2 Excluding restructuring payments.

SALES AND OPERATING INCOME

Sales
SEK M

16,000

12,800

9,600

6,400

3,200

Operating income
SEK M

2,500

2,000

1,500

1,000

500

Sales
Operating income1

1 Excluding items

affecting comparability
in 2011 and 2013.

SALES BY PRODUCT GROUP

Products, 71%

Service, 29%

ASSA ABLOY ANNUAL REPORT 2014

ASSA ABLOY’S DIVISIONS 53

ServiceProdukterSustainable development

Demand for sustainable
products and solutions
is a commercial driver

The Group’s strategies for growth and profitability underlie ASSA ABLOY’s sustainability
priorities and initiatives across the whole value chain – from product development to
recycling. The Group’s business opportunities linked to the demand for products and
solutions with sustainability performance are growing every year.

Creating products and solutions with higher sustainabil-
ity performance that help customers reduce resource
consumption, and reducing the Group’s own resource
consumption through efficient production are very strong
drivers for ASSA ABLOY. Sustainability initiatives support
the Group’s overall objectives. Managing and reducing
business risks and managing business opportunities are
part of meeting customer expectations. This includes
focusing on product leadership, expanding in the market
and creating value for the Group and customers.

Sustainability control
ASSA ABLOY’s Group-wide Code of Conduct establishes
the principles that the Group has defined for its employ-
ees, suppliers and external stakeholders. It is an important
support in the Group’s decentralized organization where
important decisions are made close to the local market.
The Code is based on international guidelines and
conventions and is available in 22 languages. All employ-
ees are included and undertake to comply with the Code

of Conduct. The Code of Conduct is a compulsory part of
the induction of new employees. A new employee shall be
introduced to its content within three months and then
training should be repeated every three years. Whistle-
blowing procedures are in place to enable all employ-
ees to report suspected infringements. Reported cases
are investigated by a special committee headed by the
Group’s HR director. The procedure is described in detail
in the Code of Conduct and on the Group’s intranet.

Suppliers are informed of the Code of Conduct and

and suppliers of direct material in low cost countries
undertake in writing to comply with it in their collabora-
tion with the Group. ASSA ABLOY monitors compliance
with the Code of Conduct through internal audits and
supplier audits. Action is taken in case of non-compli-
ance with the Code.

Since 2011 the Group has had a Group-wide anti-
corruption program including an anti-corruption policy
and a number of activities that are implemented con-
tinuously, including risk analysis, employee training, and

SOME OF THE RESULTS OF THE SUSTAINABILITY PROGRAM

Improvement

Unchanged

Deterioration

Target

Energy consumtion1 – 15 percent reduction
in consumption in 2015 compared with 2010,
based on normalized values.

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

Health and safety7
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 equality7 – Improve current levels
of gender equality at senior levels.

Results
2010

Results
2011

Results
2012

Results
2013

Results
2014

Trend

603 GWh

627 GWh

691 GWh

652 GWh2

32 tons

22 tons

20 tons

14 tons

1.7 tons 3

IR: 7.6
ILDR: 157

IR: 9.2
ILDR: 182

IR: 9.14
ILDR: 1875

IR: 7.24
ILDR: 1645

6.64
1425

1006

1016

1086

376
sustain abi l-
ity audits
in China

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

493
sustainabil-
ity audits
in Asia

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

795
sustainabil-
ity audits
in Asia

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

885
sustainabil-
ity audits
in Asia

Level 2: 27%
Level 3: 12%
Level 4: 19%
Level 5: 24%

812
sustainabil-
ity audits
in LCC

Level 2: 27%
Level 3: 16%
Level 4: 17%
Level 5: 24%

Sustainability Report
2014

The global leader in
door opening solutions

An automatic sliding door from ASSA ABLOY is saving energy costs,
improving the indoor environment and enhancing comfort, privacy
and safety for VIPs traveling through Stockholm’s main airport.

The 2014 Sustainability Report,
reporting on the Group’s
prioritized environmental
activities and providing other
information on sustainable
development, is available on the
company’s website:
www.assaabloy.com

1 The historical numbers have
been adjusted with proforma
data.

2 For comparable units. Total

energy consumption amounted
to 732 GWh including units
acquired during the year and
increased reporting.

3 For comparable units. Total con-
sumption amounted to 1.7 tons
including units acquired during
the year and increased reporting.
4 For comparable units. The total
injury rate (IR) was 6.4 including
units acquired during the year
and increased reporting.

5 For comparable units. The total
injury lost day rate (ILDR) was
137 including units acquired
during the year and increased
reporting.

6 For comparable units. Number
of certificates and correspond-
ing certifiable systems for North
American units amounted to
111. 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 report-
ing from 2012.

7 The definition of management
positions has been revised dur-
ing 2014. 2012 and 2013 have
been restated to be comparable
with 2014.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY ANNUAL REPORT 2014

internal control. In 2014 the focus was on implement-
ing a third-party due diligence process for distributors
within each division on markets where corruption is
perceived to be higher. Further, the Group continued to
conduct specific anti-corruption compliance testing at
selected operating companies.

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.

The divisions and Group companies are responsible
for compliance with the Code of Conduct and other poli-
cies, and providing feedback to headquarters. Appointed
staff at divisional and company level monitor the avail-
ability and implementation of environmental guidelines,
programs and tools. HR functions at Group and divisional
level monitor the management of social and business
ethical issues.

ASSA ABLOY provides information, guidelines and
tools to support the Group companies in their daily work
on relevant sustainability issues. A Group-wide database
for reporting and monitoring sustainability initiatives
collects good practice from Group companies. This
database is a knowledge bank for everyone working in
the area.

tion, chemicals management, energy efficiency, emis-
sions of green house gases, sustainability performance in
the supply chain, health and safety, employee issues, and
overall sustainability control.

The Group has been successful in integrating

acquired companies, which have to operate in accord-
ance with the Group’s targets. In 2014, 331 (327) com-
panies were included in Group reporting, an increase of
1 (12) percent on 2013.

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. Internal reporting takes place
every six months.

ASSA ABLOY’s customer offering
Contributing solutions that create customer value is cru-
cial for retaining a strong market position, while having
efficient processes is crucial for maintaining profitable
growth.

Demand for products and solutions with a sustain-

ability profile is increasing. Customers are turning

REPORTING UNITS 2014

In 2013 ASSA ABLOY implemented a new Group-wide

Number

reporting system, which has simplified the integration
of new companies and improved the quality of informa-
tion. This has in turn facilitated monitoring, control and
knowledge transfer.

A target-based activity
ASSA ABLOY’s current sustainability targets are for the
period 2010 –2015. These targets include the Group’s
most important sustainability issues: water consump-

350

300

250

200

150

100

The number of reporting units
in the Group has increased to
331 (327).

SUSTAINABILITY INITIATIVES ARE INTEGRATED ACROSS THE VALUE CHAIN

Innovation

Sourcing

Manufacturing

Market presence

Customers

Employees | Code of Conduct | Corporate Governance

INNOVATION
New products are evaluated using life cycle assess-
ment (LCA) and the result forms the basis of the
next development stage. The aim is to improve
product performance and reduce resource con-
sumption in manufacturing and transportation.
Many new products save energy for customers
through more efficient functions and intelligent
control of various door opening solutions with
advanced electromechanical technology.

SOURCING
The Group’s suppliers in low-cost countries are
audited from a sustainability perspective. Suppliers
failing to comply with the Group’s requirements
have 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 alter-
natives.

MARKET PRESENCE
ASSA ABLOY respects the laws and regulations
concerning sustainability aspects and business
ethics in the countries in which it operates, and
requires all partners to do likewise.

CUSTOMERS
ASSA ABLOY should supply high-quality products
that fulfill customer needs, have a long service
life and are manufactured with minimal resource
consumption and environmental impact over their
life cycle.

ASSA ABLOY ANNUAL REPORT 2014

SUSTAINABLE DEVELOPMENT 55

Sustainable development

towards sustainable solutions, particularly in terms
of energy savings. Development of energy-efficient
products is a central part of product development for
ASSA ABLOY. Products that reduce the user’s energy
consumption, create a better indoor environment
and higher security, and reduce total operating costs
account for an increasing share of Group sales.

The application of certifications strengthens
ASSA ABLOY’s sustainability initiatives. Increased use
of various certifications for sustainable and green
construction has driven development and made these
products more attractive.

At the end of 2014 ASSA ABLOY had developed Envi-
ronmental Product Declarations (EPD) for all strategic
product groups and more than 100 products will have
achieved certification by the beginning of 2015. The
Group has a clear ambition to grow the number of of
certified products.

Progress towards more sustainable products
and solutions
ASSA ABLOY has world-class product development. This
requires a good knowledge of customer needs today
and tomorrow, as well as knowledge of the product’s
total value chain. ASSA ABLOY takes account of relevant

sustainability parameters throughout the development
process, which is common to the Group.

Product life cycle assessments and value analysis/
value engineering (VA/VE) provide ASSA ABLOY with
knowledge that enables modification and development
of products, with more efficient use of materials and
reduced power consumption. Lower energy consump-
tion is increasingly relevant as digital and electrome-
chanical products and solutions are growing as a share
of the Group’s business. Product life cycle assessments
have also provided ASSA ABLOY with knowledge of
where the greatest environmental impact occurs. This is
important knowledge when prioritizing resources.
ASSA ABLOY can reduce its total environmental
impact and costs through a reduced and efficient use of
water, chemicals, energy and materials in the produc-
tion process. The Group’s checklist provides a structured
review of materials selection, design and manufacturing
processes to make processes sustainable and efficient.
Moreover, initiatives to reduce the amount of packag-
ing materials for different customer groups and forms
of delivery are important for more resource-efficient
operations, including fuel consumption in transporta-
tion, particularly as transportation needs grow in pace
with the Group’s expansion.

SUSTAINABLE DEVELOPMENT PROGRAM IN BRIEF

2010
Increased audit of suppliers
in low-cost countries
Targets for 2015 are defined
for all monitored areas

2004–2008
Code of Conduct with updates
Whistle-blowing
Internal audits
Due diligence directive
Tools for supplier control
Employee survey
Sustainability strategy
for product development
including checklists
Marketing and sales training
Training in supplier control

2012
Increased reporting of environ-
mental data on water usage and
greenhouse gases1
15 percent more group
companies included in reporting
Internal semi-annual reporting
for increased control
More than 6,000 employees
participated in anti-corruption
training

¹ The increased reporting is
presented in ASSA ABLOY’s
Sustainability Report 2012.

2014
EPDs for all strategic product
groups
812 sustainability audits
Decision to introduce
ASSA ABLOY’s Sustainability
Compass for product
development
A number of energy-saving
products were launched

2009
Sales companies and offices are
included in reported figures
Increased monitoring of energy
consumption and CO2
Launch of joint recruitment and
selection guide

2013
12 percent more group companies
included in reporting
Introduced new reporting system
for increased control
Conducted 885 sustainability audits
during the year
Pilot projects for EPD certification
of important product groups

2011
Increased reporting of
environmental data
25 percent more group
companies included in reporting
Improved analysis and
benchmarking opportunities
between group companies
Updated Code of Conduct
Implementation of an anti-
corruption policy across the
Group
Target of 30 percent women in
management positions within
ASSA ABLOY

SUSTAINABLE DEVELOPMENT

ASSA ABLOY ANNUAL REPORT 2014

Initiatives at Medeco produce dramatic savings

CHALLENGE: ASSA ABLOY’s Group company Medeco’s plating and finish-
ing department was using about 12,000 gallons of water per day, rising to as
much as 15,000 gallons per day based on the number of shifts and produc-
tion needs. Water supplier costs were high and Medeco was identified as a
“large” producer of wastewater by the state of Virginia. The company had to
find a way to reduce wastewater and water usage.

SOLUTION : Plating and finishing manager Leslie Samuel has taken a
practical approach to sustainability improvements and has reduced water

usage and cut costs. By capping overflow tanks, turning the water lines off
during non-working hours, and optimizing the plating line’s performance
so fewer shifts were required, water usage has dramatically reduced from
12,000 gallons per day to just 1,000 gallons.

RESULT: A common sense approach has led Medeco to reduce the water

used in its plating line by 93 percent. The initiatives have not only reduced
water costs but also electricity, which together have reduced the operating
costs of the plating line by 58 percent over the past two years.

Energy efficient doors
for Australian cold store

CUSTOMER: Oxford Cold Storage provides temperature-controlled
warehouse facilities for food manufacturers and importers. The company
occupies a 450m x 510m site in Laverton North, Australia. The facility
handles and stores frozen and chilled products at temperatures ranging
from –27 °C to 18 °C.

CHALLENGE: With a sharp increase in electricity costs due to the introduc-

tion of carbon tax, Oxford was challenged to design and construct a facility
that would increase capacity but at the same time minimize increases in
power consumption – therefore meeting the targets set for an efficient and
sustainable facility.
The main challenge in a cold store is to prevent the infiltration of warm
and humid outside air and the leakage of refrigerated air. The facility has

more than 800 truck movements daily. The trucks are loaded and unloaded
through 90 dock levelers leading into refrigerated loading docks.

SOLUTION: ASSA ABLOY Entrance Systems worked closely with Oxford to
identify the best door solutions to meet the performance and sustainability
needs of the new cold store extension.
The cold store extension has Albany RR300 Clean doors to all freezer
openings, meeting the needs for a one-door solution in an extreme environ-
ment. Crawford sectional doors were used on all dock entries along with
stepdocks, meeting the requirement for a well-sealed and insulated loading/
unloading station.

ASSA ABLOY ANNUAL REPORT 2014

SUSTAINABLE DEVELOPMENT 57

Sustainable development

Development of supplier relations
ASSA ABLOY is working systematically with its suppliers
to improve sustainability performance across the sup-
ply chain. Evaluation and improvement of the supplier
base is a continuous process. Supplier selection is based
on standardized criteria for both quality and work on
relevant sustainability issues. Good supplier control and
working in accordance with jointly agreed action plans
result in increased product quality and more efficient
and 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 audit program is constantly being upgraded and

third-party audit was introduced in 2014, while geo-
graphical coverage was increased. Supplier audits are
based on the Code of Conduct. Areas monitored include
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 make necessary improvements in
accordance with an action plan. The contract is termi-
nated unless this plan is complied with.

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 require-
ments.

• Extended sustainability audit: this complements the

standard audit.

The supplier is evaluated and graded using a color
coding system. Green means the supplier is approved.
Yellow, orange and purple mean that the supplier is
underperforming to various extents and needs to
improve within a specific time frame, while red means
the supplier is not approved.

A red, purple, orange or yellow rating can be

upgraded, if the supplier improves in line with an action
plan. If no action is taken, the supplier is immediately
classed as red. Suppliers rated red are put on new
business hold. If not improved within agreed period of
time, all purchasing is stopped. ASSA ABLOY monitors
approved suppliers. Sustainability audit results override
quality audit results with respect to non-compliance.
This means that a supplier rejected for poor manage-
ment of relevant sustainability issues is either stopped
immediately or must wait for approval until the deficien-
cies have been addressed.

Audits conducted
In 2014 ASSA ABLOY conducted 812 (885) sustain-
ability audits. At year-end, 1,053 (994) active suppliers
had satisfied the minimum requirements for quality
and relevant sustainability issues. This correspond to an
audited spend in excess of 95 percent in Asian low-cost
countries. 43 (31) suppliers were blacklisted.

ASSA ABLOY’s supplier database
Over 95 (95) percent of the Group’s supplier costs in
low-cost countries are included in ASSA ABLOY’s data-
base.

Suppliers are listed, graded and monitored in the
supplier database. Audit reports on both quality and
relevant sustainability issues are regularly entered into
the database. Information on green-rated suppliers is
entered to enable delivery to several group companies.

The database also lists non-approved and blacklisted

suppliers to ensure that they are not used again.

SUSTAINABILITY AUDITS OF SUPPLIERS
IN LOW-COST COUNTRIES

Number

1,000

800

600

400

200

In 2014 ASSA ABLOY conducted
812 (885) sustainability audits.

SHARE OF TOTAL PURCHASES IN LOW-COST COUNTRIES

The share of the Group’s total
purchases of raw materials,
components and finished goods
from low-cost countries has risen
to 50 percent.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY ANNUAL REPORT 2014

More efficient production
Energy and carbon emissions
ASSA ABLOY is striving to reduce energy consumption
and carbon emissions. The Group is working in several
areas to reduce energy consumption. By concentrating
manufacturing the Group can maintain full capacity uti-
lization, effective working practices and processes, and
high quality. Automation and smarter flows are central
for achieving more efficient production.

Cooperation with innovation, product design and
product development leads to a use of materials and
processes with less environmental impact. In addition to
energy consumption, materials selection for the product
itself and the production process are important for the
ability to reduce carbon emissions.

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. Increased
reporting has been an important tool for better monitor-
ing and clearer priorities.

Waste management
The Group applies the Reduce, Reuse, Recycle prin-
ciple. This means that ASSA ABLOY works systemati-
cally to reduce the amount of materials in products,
select optimal materials, develop products that can be
upgraded rather than replaced, and enable recycling of
both production waste and the finished products at the
end of their life cycle. Monitoring of waste from various
types of materials has been refined to better monitor
and reduce the amount of waste. The Group has reduced
the amount of waste generally and hazardous waste in
particular.

Hazardous chemicals
ASSA ABLOY works constantly to reduce the use of haz-
ardous substances in the production process and find
substitutes for them. Most production plants have suc-
cessfully phased out chlorinated organic solvents.

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 in which each individual contributes to
and has a safe workplace and good health. In 2014 the
Group’s positive trend continued and the number of
accidents fell.

ASSA ABLOY has defined targets intended to lead to a
safer working environment. More stringent safety proce-
dures have been implemented in all units and reporting
has been refined.

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

ENERGY USE

GWh

800

700

600

500

400

300

200

100

2014 represents development
for comparable units from 2013.

USE OF CHLORINATED ORGANIC SOLVENTS (PER AND TRI)

INJURIES PER MILLION HOURS WORKED

Tons

2014 represents development
for comparable units from 2013.

Number

2014 represents development
for comparable units from 2013.

ASSA ABLOY ANNUAL REPORT 2014

SUSTAINABLE DEVELOPMENT 59

Sustainable development

Employees generate success
ASSA ABLOY should be an attractive company to work
for. The Group has great confidence in its employees.
Each employee has responsibility for their professional
development. It is important that all employees feel
that they contribute. ASSA ABLOY is investing globally
and locally to offer stimulating assignments with clear
responsibility, good development opportunities, and a
positive, engaging work situation.

Career and common goals
Motivated, competent employees are key prerequisites
for an innovative and profitable company. It is up to the
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. Competition for
talent is intensifying and the Group needs to secure
competence to support the digitization of both prod-
ucts and production. 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.

A good knowledge of the company and an under-
standing of how your own efforts contribute to the over-
all goals build motivation and commitment. In order to
create a common consensus on ASSA ABLOY’s business
and how the goals are to be achieved, all employees
undergo an interactive training program ‘Entrance to
ASSA ABLOY’. This program includes the Group’s history,
organization, products, strategy, Code of Conduct, and
anti-corruption policy.

Gender equality and diversity
ASSA ABLOY’s ambition is to achieve a better gender
balance at all levels in the organization. In 2011 the
Group set a target of 30 percent women in management
positions at levels 2 to 5 by 2020. In 2014 the share was
22 (22) percent. The Group’s gender equality policy
serves as guidance. The trend in the share of women at
management level is monitored in connection with the
Talent Management Process. Other measures include
prioritizing the underrepresented gender in the recruit-
ment process provided they have equal qualifications,

and aiming for at least one person from the underrepre-
sented gender among the final candidates.

ASSA ABLOY’s global presence, many company
acquisitions and local recruitment create diversity. The
Group’s Code of Conduct states that gender, religion,
age, physical disability, sexual orientation, nationality,
political opinion or social and ethnic origin must not be
the basis for negative discrimination.

Growing with care
ASSA ABLOY is an acquisition-intensive Group, and it is
important to monitor how new units are operating in
relation to ASSA ABLOY’s Code of Conduct and policies.
Third-party social audits are therefore conducted. These
audits cover areas such as working conditions, human
rights, work environment, workplace culture and skills
development. Where warranted the audits lead to
improvement measures. In 2014 audits were conducted
at production plants in China and Romania.

ASSA ABLOY’s Employee Survey
ASSA ABLOY’s Employee Survey was carried out in 2014.
In a decentralized organization, it is an effective tool for
obtaining information on employees’ opinion of the
Group. Areas covered by the survey include: employ-
ees’ views on their work situation, how they perceive
ASSA ABLOY as an employer, how they experience health
and safety in the workplace, whether they consider
they have equal opportunities, and whether a career
appraisal has been conducted. The response rate for
2014 was 89 percent. The survey showed a better result

NUMBER OF EMPLOYEES BY REGION

Europe, 15,990

North America, 10,872

South America, 854

Africa, 511

Asia, 14,963

Oceania, 1,079

Pacific

Asia

Africa

Central and South America

North America

Europe

AVERAGE NUMBER OF EMPLOYEES

WOMEN AT DIFFERENT LEVELS OF THE ORGANIZATION

Women
Men

Number

50,000

40,000

30,000

20,000

10,000

Level
2 – reports to CEO
3 – reports to level 2
4 – reports to level 3
5 – reports to level 4
Level 2–5
All employees

2010
0
16
18
24
–
37

Share of women, %

2011 20121 20131
27
12
19
24
22
31

18
16
18
23
22
35

0
15
19
26
24
35

2014
27
16
17
24
22
31

1 The definition of management positions has been revised during 2014.
2012 and 2013 have been restated to be comparable with 2014.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY ANNUAL REPORT 2014

for several questions, compared with 2012. The results
are broken down into over 301 (275) units to enable
concrete action plans with relevance for employees.

focus on problem solving, implementation and activities
based on an analysis of various case studies.

Leadership and management training
ASSA ABLOY has a well-established global development
process for senior managers, the Talent Management
Process. The aim is to support career development in a
structured way, optimize the utilization of the Group’s
total resources, and ensure that the competence
needed to meet future requirements is available.

Every year ASSA ABLOY offers a number of senior
managers the opportunity to take part in one of its
two senior management development programs:
ASSA ABLOY Management Training (MMT) and
ASSA ABLOY Boosting Market Leadership Program in
collaboration with IMD.

MMT is intended to provide participants with an

increased knowledge of all areas of ASSA ABLOY’s
operations, develop their internal contact network, and
contribute to sharing best practices and identifying new
business opportunities. The program has three modules
based on the Group’s three strategic pillars: market pres-
ence, product leadership and cost-efficiency. This is of
particular importance for ASSA ABLOY, which acquires
several companies each year.

Over 300 of ASSA ABLOY’s senior managers from
more than 30 countries have taken part in IMD pro-
grams since 2005, when ASSA ABLOY began collabora-
tion with the world-leading Swiss business school IMD in
Lausanne. The Boosting Market Leadership Program has
been offered since 2011, with around 30 participants
per program. This is a tailor-made program developed
in collaboration with IMD. Its main aim is to support
the implementation of ASSA ABLOY’s strategies, with a

Employee development
Annual performance reviews are important for monitor-
ing and planning employee development. They provide
a platform for professional development with ongoing
feedback. ASSA ABLOY considers that a well-functioning
internal labor market and rotation across geographi-
cal boundaries and disciplines are key components for
employee development. They also contribute to knowl-
edge, experience and values being shared across the
Group. ASSA ABLOY will launch two new development
initiatives in 2015, targeting all employees. The Group
also supports short-term assignments and projects
where an exchange competence opportunity exists.

External dialogue on sustainability
Shareholders, investors, analysts, customers, suppliers,
employees, local communities, NGOs and the media are
particularly important stakeholders in ASSA ABLOY’s
sustainability initiatives. The Group’s policy of openness
means that it listens to these stakeholders and takes on
board their views.

Since 2005 ASSA ABLOY has held an annual roundta-
ble discussion with investors on ASSA ABLOY’s manage-
ment of relevant sustainability issues. This is a valuable
forum for an open discussion. In 2014 requests were
made for more externally available information on sup-
pliers in low-cost countries and consideration of sustain-
ability aspects in the acquisition process, and anti-cor-
ruption. Interest in how ASSA ABLOY manages sustain-
ability aspects in the innovation process has increased
over the years. The commercial value has become both
clearer and more relevant.

Romanian site looks to develop local skills

CHALLENGE: As a major employer in the area, ASSA ABLOY Entrance Systems in

Hunedoara, Romania, is looking for ways to be a responsible and approachable member
of the community by recruiting employees from the locality.

SOLUTION: Recruiting talented young people from the local community is being

facilitated thanks to an apprentice program.
Fifteen teenagers from a local high school have begun apprenticeships as welders at
the Hunedoara manufacturing plant. The three-year program teaches students a market-
able trade that will make them highly employable in a variety of manufacturing environ-
ments when they complete the program.

RESULT: Firstly, students received a guided tour of the factory and an explanation
of how products are manufactured, as well as information on workplace health and
safety rules that must be followed when they are on site each week. Upon completion
of their apprenticeships in three years’ time, the local students will be certified welders
with experience working in a multi-national company and the potential to be hired as
employees of ASSA ABLOY Entrance Systems in Hunedoara.

ASSA ABLOY ANNUAL REPORT 2014

SUSTAINABLE DEVELOPMENT 61

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
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

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 ratios
Proposed distribution of earnings
Auditor’s report

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

102
103
105
105
105
105

105
106

107
107
108

110

116
117
118
119
120
121

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2014

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 2014. 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 56,843 M (48,481), with
organic growth of 3 percent (2) and acquired growth of
9 percent (4). The exchange rate impact on sales was 5 per-
cent (–2).

Operating income (EBIT) excluding restructuring costs

rose 17 percent to SEK 9,257 M (7,923), equivalent to an
operating margin of 16.3 percent (16.3). Net financial items
were SEK –559 M (–542). Income before tax excluding
restructuring costs totaled SEK 8,698 M (7,381).

Operating cash flow excluding restructuring payments

remained strong and amounted to SEK 8,238 M (6,803),
an increase of 21 percent. Earnings per share after full dilu-
tion excluding restructuring costs amounted to SEK 17.38
(14.84), an increase of 17 percent.

Restructuring
The activity level in the restructuring programs launched in
previous years remained high during the year. At year-end
2014, 9,414 employees had left the Group as a result of the
changes in the production structure since the programs
began, of which 1,056 employees left during the year. A total
of 64 production plant closures have been implemented,
of which seven closures during the year. A large number of
plants in high-cost countries have switched from produc-
tion to final assembly. A total of 36 offices have also closed
during the equivalent period, of which eight closures during
the year. The Group’s production is increasingly concen-
trated in 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 453 M (647) for the full year. At year-end 2014, the
remaining provisions for restructuring measures amounted
to SEK 941 M (1,369).

Acquisitions and divestments
On 10 February 2014, 100 percent of Lumidigm (USA) was
acquired, a leading player in the fast-growing biometric
segment. The acquisition significantly advances the Group’s
position in biometrics and will create further growth oppor-
tunities for ASSA ABLOY. The company is headquartered in
Albuquerque, New Mexico.

On 1 December 2014, 95 percent of the share capital in
Jiawei (China) was acquired, one of China’s leading security
lock suppliers. The company broadens ASSA ABLOY’s pres-
ence in the OEM channel to door manufacturers and pro-
vides complementary access to the growing security lock
and cylinder aftermarket in China. Jiawei is another impor-
tant step in the strategy of increasing market presence in
China and on other emerging markets. The company is
headquartered in Jinhua, Zhejiang province, eastern China.
On 29 December 2014, 51 percent of the share capital

in Digi Electronic Lock was acquired, the leading Chinese
digital door lock manufacturer. Keylock is the leading digital
door lock brand in China, with an extensive product range
in the low to mid segments, providing a good complement
to ASSA ABLOY’s premium products. Digi Electronic Lock
is a very good addition to the current offering in the fast-
growing digital door lock segment. The company is head-
quartered in Guangzhou, southern China.

The year also saw continued acquisitions on emerging
markets, including ENOX (India) and Metalika and Silvana
(Brazil). These acquisitions increase ASSA ABLOY’s presence
on the Indian and Brazilian markets.

A total of 20 acquired businesses, including minor
acquisitions, were consolidated during the year. The total
purchase price of these acquisitions was SEK 4,669 M,
and acquisition analyses indicate that goodwill and other
intangible assets with an indefinite useful life amount to
SEK 4,151 M.

In December 2014, ASSA ABLOY signed an agreement to
acquire ODIS (Chile). The acquisition forms part of the gen-
eral strategy of strengthening the Group’s market presence
on emerging markets worldwide.

Research and development
ASSA ABLOY’s expenditure on research and development
during the year totaled SEK 1,545 M (1,390), equivalent to
2.7 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 2014

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
environment through emissions to water and air as well as
solid waste. The subsidiaries ASSA AB and ASSA OEM AB are
actively addressing environmental issues and are certified
in accordance with ISO 14001. 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 2014 Sustainability Report, reporting on the Group’s

prioritized environmental activities and providing other
information on sustainable development, is available on the
company’s website: www.assaabloy.com.

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

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

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2014

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
significant 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 responsi-
bility 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 structure
of the Group, and to keep risk analysis and risk management
as close as possible to the actual risks, a large proportion of
operational risk management takes place at division and
business unit level.

Strategic risks
The 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
emphasis is on western Europe and North America, but
the proportion of sales in Asia and in central and eastern

Europe has increased in recent years. The Group is therefore
naturally exposed to both general business environment
risks and country-specific risks, including political decisions
and comprehensive changes in the regulatory framework.
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.

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
business operations, 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, and customer dependence etc. Risks relating
to compliance with laws and regulations and to financial
reporting and internal control are also included in this category.
The table on page 67 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 of
Directors, regulates the allocation of responsibilities and

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

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

of raw materials

obligations

• Customer dependence etc.

ASSA ABLOY ANNUAL REPORT 2014

REPORT OF THE BOARD OF DIRECTORS 65

Report of the Board of Directors
Significant risks and risk management

control of the Group’s financing activities. Group Treasury
has the main responsibility for financial risks within the
framework established in the financial policy. A large num-
ber of financial instruments are used in this work. Account-
ing 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
associated 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 borrowing and a
high credit rating. The risk is further reduced by substantial
unutilized 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 sourcing. In accordance with financial policy,
the Group only hedged a very limited part of current cur-
rency flows in 2014. 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 for-
eign 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 22,327 M (19,595) at year-end 2014. 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.

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 2014, ASSA ABLOY had obligations for pen-
sions and other post-employment benefits of SEK 7,049 M
(5,440). The Group manages pension assets valued at
SEK 4,103 M (3,425). Provisions in the balance sheet for
defined benefit and defined contribution pension plans and
post-employment healthcare benefits totaled SEK 2,946 M
(2,015). Changes in the value of assets and liabilities from
year to year are due partly to the development of equity and
debt capital markets and partly to the actuarial assump-
tions made. Significant remeasurement of obligations and
plan assets is recognized on a current basis in the balance
sheet and in other comprehensive income. The assumptions
made include discount rates, as well as anticipated inflation
and salary increases.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2014

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 2014 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 cen-
tral legal function.

Guidelines and policies on compliance with cur-
rent competition, export control and anti-corrup-
tion legislation 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 2014 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 in the respective restructur-
ing program 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, Expenses by nature.

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. No individual
customer in the Group accounts for more than
10 percent of sales.

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.

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.

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 procedures
are laid down in an internal control manual. Compli-
ance 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.

An annual internal audit of financial reporting is
performed for selected group companies on a
rotating basis.

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.

ASSA ABLOY ANNUAL REPORT 2014

REPORT OF THE BOARD OF DIRECTORS 67

Report of the Board of Directors
Corporate governance

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

The Group’s corporate governance is based on the
Swedish Companies Act, the Annual Accounts Act, the
Nasdaq Stockholm Rule Book for Issuers and the Swedish
Code of Corporate Governance, as well as other applicable
external laws, regulations and recommendations, and inter-
nal rules and regulations.

This Corporate Governance Report has been pre-
pared as part of ASSA ABLOY’s application of the Swedish
Code of Corporate Governance. The report is audited by
ASSA ABLOY’s auditor. ASSA ABLOY reports no deviations
from the Swedish Code of Corporate Governance for 2014.
ASSA ABLOY’s objective is that its activities should gen-
erate good long-term returns for its shareholders and other
stakeholders. An effective scheme of corporate governance
for ASSA ABLOY can be summarized in a number of interact-
ing components, which are described below.

❶ Shareholders
At year-end, ASSA ABLOY had 17,720 shareholders (17,199).
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 capi-
tal and 11.5 percent of the votes). Foreign shareholders
accounted for around 65 percent (67) of the share capital
and around 44 percent (46) of the votes. The ten largest
shareholders accounted for around 35 percent (37) of the
share capital and 56 percent (57) 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 Directors of ASSA ABLOY is
not aware of any other shareholders’ agreements or other
agreements between shareholders in ASSA ABLOY.

Corporate governance structure

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 com-
pany’s assets and earnings.

Repurchase of own shares
Since 2010 the Board of Directors has requested and
received a mandate from the Annual General Meeting to
buy back and transfer ASSA ABLOY shares. The aim has,
among other things, been to secure the company’s under-
takings in connection with its long-term incentive programs
(LTI). The 2014 Annual General Meeting authorized the
Board of Directors 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 number of shares in the
company.

ASSA ABLOY holds a total of 600,000 (600,000) Series
B shares after repurchase. These shares account for around
0.2 percent (0.2) of the share capital and each share
has a par value of SEK 1.00. The purchase consideration
amounted to SEK 103 M (103). No shares were repurchased
in 2014.

Share and dividend policy
ASSA ABLOY’s Series B share is listed on the Nasdaq Stock-
holm Large Cap list. At year-end ASSA ABLOY’s market capi-
talization amounted to SEK 153,832 M. The Board of Direc-
tors’ 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.

Shareholders

❸

❾

❺

❻

Nomination Committee

Auditor

Remuneration Committee

Audit Committee

❶

❷

❹

❼

❽

General Meeting

Board of Directors

CEO

Executive Team

Divisions

Important external rules
and regulations
• Swedish Companies Act
• Annual Accounts Act
• Nasdaq Stockholm Rule

Book for Issuers
• Swedish Code of

Corporate Governance
(www.bolagsstyrning.se)

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

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

• Code of Conduct and
Anti-Corruption Policy

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2014

❷ 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 by
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 supported 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. Matters
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 members
of the Board of Directors and Chairman of the Board of
Directors; appointment of the Nomination Committee
and auditors; determination of remuneration guidelines
for senior management and fees for the Board of Directors
and auditors. An Extraordinary General Meeting may be
held if the Board of Directors considers this necessary or
if ASSA ABLOY’s auditors or shareholders holding at least
10 percent of the shares so request.

2014 Annual General Meeting
The Annual General Meeting in May 2014 was attended by
shareholders representing 60.4 percent of the share capital
and 73.0 percent of the votes.

At the Annual General Meeting, Lars Renström, Carl
Douglas, Birgitta Klasén, Eva Lindqvist, Johan Molin, Sven-
Christer Nilsson, Jan Svensson and Ulrik Svensson were
re-elected as members of the Board of Directors. Further,
Lars Renström was re-elected as Chairman of the Board of
Directors, and Carl Douglas as Vice Chairman.

The 2014 Annual General Meeting approved a dividend

of SEK 5.70 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 2014) for senior management and other key staff in the
Group, as well as appointing members of the Nomination
Committee prior to the 2015 Annual General Meeting.

❸ Nomination Committee
The Nomination Committee prior to the 2015 Annual
General Meeting comprises Gustaf Douglas (Investment AB
Latour), Mikael Ekdahl (Melker Schörling AB), Liselott Ledin
(Alecta), Marianne Nilsson (Swedbank Robur fonder) and
Anders Oscarsson (AMF and AMF fonder). 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 Committee has the right to appoint
another representative of one of the major shareholders 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 2015 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
election 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 2015 Annual General Meeting, the Nomi-
nation Committee 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 Nomination Committee can do so by e-mailing:
nominationcommittee@assaabloy.com.

The Nomination Committee’s proposals for the 2015
Annual General Meeting are published at the latest in con-
junction with the formal notification of the Annual General
Meeting, which is expected to be issued around 1 April 2015.

❹ Board of Directors
In accordance with the Swedish Companies Act, the Board
of Directors is responsible for the organization and admin-
istration of the Group and for ensuring satisfactory control
of bookkeeping, asset management and other financial
circumstances. 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 dividend and remuneration guidelines for senior
management to the Annual General Meeting, and makes
decisions concerning the Group’s financial structure.

The Board of Directors’ 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.

ASSA ABLOY ANNUAL REPORT 2014

REPORT OF THE BOARD OF DIRECTORS 69

Report of the Board of Directors
Corporate governance

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.

The Board of Directors has at least four scheduled meet-

ings 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, possibly 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 mem-
bers of the Board of Directors.

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
Committees are appointed annually by the Board of Direc-
tors at the statutory board meeting. Instructions for the
Committees are included in the Board of Directors’ rules of
procedure.

Board of Directors’ composition
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 of six and a maximum
of ten members elected by the Meeting. Two of the mem-
bers are appointed by the employee organizations in accord-
ance with Swedish law. The employee organizations also
appoint two deputies. The Board of Directors currently con-
sists of eight elected members and two employee represen-
tatives. With the exception of the CEO, none of the board
members are members of the Executive Team. The CEO has
no significant shareholdings or partnerships in companies
with significant business relationships with ASSA ABLOY.

Board of Directors’ work in 2014
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 discussed.
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 comprised a number of acquisi-
tions, including Jiawei, Digi Electronic Lock and Silvana.
During the year, the Board conducted in-depth reviews
of the Group’s operations in Americas division and Global
Technologies division’s HID Global business unit, and visited
Asia Pacific division’s operations in Seoul, South Korea.

❺ Remuneration Committee
During 2014 the Remuneration Committee comprised
Lars Renström (Chairman), Jan Svensson and Sven-Christer
Nilsson.

The Remuneration Committee’s task is to draw up

remuneration 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 2015 Annual General Meeting is set out 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 2014 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 2015. The meetings of the Committee are minuted and a
verbal report is given at board meetings.

❻ Audit Committee
During 2014 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 2014 at
which all members, the company’s auditor and representa-
tives of senior management were present. More important
matters dealt with by the Audit Committee during the year
included internal control, financial statements and valuation
matters, tax matters, insurance and risk management mat-
ters, and legal risk areas. The meetings of the Committee are
minuted and a verbal report is given at board meetings.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2014

Remuneration of the Board of Directors
The Annual General Meeting passes a resolution on the
remuneration to be paid to board members. The 2014
Annual General Meeting passed a resolution on board fees
totaling SEK 4,850,000 (excluding remuneration for com-
mittee work), to be allocated between the members as
follows: SEK 1,600,000 to the Chairman, SEK 750,000 to
the Vice Chairman, and SEK 500,000 to each of the other
members elected 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 250,000, the Chairman of the Remuneration Commit-
tee SEK 100,000, members of the Audit Committee (except
the Chairman) SEK 125,000, and members of the Remunera-
tion Committee (except the Chairman) SEK 50,000.

The Chairman and other board members have no pen-
sion benefits or severance pay agreements. The CEO and
employee representatives do not receive board fees. For
further information on the remuneration of board members
in 2014, see Note 33.

Independence of the Board of Directors

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

Name

Position

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

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

Independent of the company
and its management

Independent of the company’s
major shareholders

Yes
Yes
Yes
Yes
No
Yes
Yes
Yes

Yes
No
Yes
Yes
–
Yes
No
No

The Board of Directors’ composition and shareholdings

Position

Elected

Name

Lars Renström
Carl Douglas
Birgitta Klasén
Eva Lindqvist
Johan Molin

Sven-Christer Nilsson
Jan Svensson
Ulrik Svensson
Kurt Hellström

Mats Persson

Rune Hjälm

Seppo Liimatainen

Chairman
Vice Chairman
Board member
Board member
Board member, President
and CEO
Board member
Board member
Board member
Board member, employee
representative
Board member, employee
representative
Deputy, employee
representative
Deputy, employee
representative

Born

1951
1965
1949
1958

1959
1944
1956
1961

2008
2004
2008
2008

2006
2001
2012
2008

2013

1957

1994

1955

2005

1964

2013

1950

Remuneration
Committee

Audit
Committee

Series A
shares¹

Series B
shares¹

Chairman
–
–
–

–
Member
Member
–

–

–
–
Member
–

–
13,865,243
–
–

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

–
–
Member
Chairman

–

–
–
–
–

–

575,581
5,000
2,000
3,000

–

2,600

1 Including related parties and through companies. Shareholdings as at 31 December 2014. This information is updated regularly at www.assaabloy.com.

ASSA ABLOY ANNUAL REPORT 2014

REPORT OF THE BOARD OF DIRECTORS 71

Report of the Board of Directors
Corporate governance Board of Directors

Board members elected by the 2014 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 and
Tetra Laval Group.
Shareholdings (including related parties and through
companies): 10,000 Series B shares.

Carl Douglas
Vice Chairman.
Board member since 2004.
Born 1965.
Bachelor of Arts and D. Litt (h.c.) (Doctor of Letters).
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
at Pharmacia 1996–2001. Prior to that, CIO at Telia. Held
various posts at IBM 1976–1994.
Other appointments: Board member of Acando AB, Avanza
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 TeliaSonera 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, Sweco AB and Bodycote plc. 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): 575,581 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 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

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2014

Shareholdings as at 31 December 2014. This information is updated regularly at www.assaabloy.com.

Report of the Board of Directors

Corporate governance Board of Directors

Ulrik Svensson
Board member since 2008.
Born 1961.
Bachelor of Science in Business Administration and
Economics.
CEO of Melker Schörling AB since 2006. 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 AAK AB, Loomis AB,
Hexagon AB, Hexpol AB, Flughafen Zurich AG and Absolent
Group AB.
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

Kurt Hellström
Board member since 2013.
Born 1957.
Employee representative, Federation of Salaried Employees in
Industry and Services (PTK).
Shareholdings (including related parties and through
companies): –

Mats Persson
Board member since 1994.
Born 1955.
Employee representative, Swedish Metal Workers Union.
Shareholdings (including related parties and through
companies): –

Rune Hjälm
Deputy board member since 2005.
Born 1964.
Employee representative, Swedish Metal Workers Union. Chairman
of European Works Council (EWC) in the ASSA ABLOY Group.
Shareholdings (including related parties and through companies): –

Seppo Liimatainen
Deputy board member since 2013.
Born 1950.
Employee representative, Federation of Salaried Employees in
Industry and Services (PTK).
Shareholdings (including related parties and through
companies): 2,600 Series B shares

Ulrik Svensson

Jan Svensson

Kurt Hellström

Mats Persson

Rune Hjälm

Seppo Liimatainen

ASSA ABLOY ANNUAL REPORT 2014

REPORT OF THE BOARD OF DIRECTORS 73

Shareholdings as at 31 December 2014. This information is updated regularly at www.assaabloy.com.

Report of the Board of Directors
Corporate governance Executive Team

Johan Molin

Tzachi Wiesenfeld

Carolina Dybeck Happe

Thanasis Molokotos

Denis Hébert

Tim Shea

Magnus Kagevik

Juan Vargues

Ulf Södergren

Tzachi Wiesenfeld
Executive Vice President.
Head of EMEA division.
Born 1958.
Bachelor of Science in Industrial
Engineering, MBA.
Employed since: 2000.
Shareholdings: 10,100 Series B shares.

Thanasis Molokotos
Executive Vice President.
Head of Americas division.
Born 1958.
Master of Science in Engineering.
Employed since: 1996.
Shareholdings: 35,153 Series B shares.

Tim Shea
Executive Vice President.
Head of Global Technologies
business unit ASSA ABLOY Hospitality.
Born 1959.
Degree in Mechanical Engineering, MBA.
Employed since: 2004.
Shareholdings: 11,749 Series B shares.

Juan Vargues
Executive Vice President.
Head of Entrance Systems division.
Born 1959.
Degree in Mechanical Engineering, MBA.
Employed since: 2002.
Shareholdings: 41,886 Series B shares.

Executive Team

Johan Molin
President and CEO.
Head of Global Technologies division.
Born 1959.
Bachelor of Science in Business
Administration and Economics.
Employed since: 2005.
Other appointments: Chairman of Nobia AB.
Shareholdings (including related parties
and through companies): 575,581 Series B
shares.

Carolina Dybeck Happe
Executive Vice President.
Chief Financial Officer (CFO).
Born 1972.
Master Degree in Finance.
Employed since: 2012.
Shareholdings: 9,349 Series B shares.

Denis Hébert
Executive Vice President.
Head of Global Technologies
business unit HID Global.
Born 1956.
Bachelor of Commerce, MBA.
Employed since: 2002.
Shareholdings: 37,667 Series B shares.

Magnus Kagevik
Executive Vice President.
Head of Asia Pacific division.
Born 1967.
Master of Science in Mechanical
Engineering.
Employed since: 2007.
Shareholdings: 9,978 Series B shares.

Ulf Södergren
Executive Vice President.
Chief Technology Officer (CTO).
Born 1953.
Master of Science in Engineering
and Bachelor of Science in Business
Administration and Economics.
Employed since: 2000.
Shareholdings: 24,358 Series B shares.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2014

Shareholdings as at 31 December 2014. This information is updated regularly at www.assaabloy.com.

Organization
❼ CEO and Executive Team
The Executive Team consists of the CEO, the heads of the
Group’s divisions, the Chief Financial Officer and the Chief
Technology Officer. For a presentation of the CEO and the
other members of the Executive Team, see page 74.

❽ Divisions – decentralized organization
ASSA ABLOY’s operations are decentralized. Operations are
organizationally divided into five divisions: EMEA, Americas,
Asia Pacific, Global Technologies and Entrance Systems.
The fundamental principle is that the divisions should be
responsible, as far as possible, for business operations, while
various functions at ASSA ABLOY’s headquarters are respon-
sible for coordination, monitoring, policies and guidelines
at an overall level. Decentralization is a deliberate strategic
choice based on the industry’s local nature and a conviction
of the benefits of a divisional control model. The Group’s
structure results in a geographical and strategic spread of
responsibility ensuring short decision-making paths.

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 five divisions are
divided into around 40 business units. These consist in turn
of a large number of sales and production units, depending
on the structure of the business unit concerned. Apart from
monitoring by unit, monitoring of products and markets is
also carried out.

Guidelines and policies
The Group’s most important guidelines and policies define
the product areas in which the Group should operate and
describe the principles for market development, growth,
product development, organization, cost-efficiency and
staff development. These principles are described in the
publication ‘Our Road to the Future’, which has been
provided to all employees in the Group.

Other important guidelines and policies concern finan-
cial control, communication issues, insider trading issues,
the Group’s brands, business ethics, export control, and
environmental issues. ASSA ABLOY’s financial policy and
accounting manual provide the framework for financial
control and monitoring. The Group’s communication policy
aims to ensure essential information is provided at the right
time and in compliance with applicable rules and regula-
tions. ASSA ABLOY has adopted an insider trading policy to
complement applicable Swedish insider trading legislation.
This policy applies to all persons reported to the Swedish
Financial Supervisory Authority as holding an insider posi-
tion in ASSA ABLOY AB (including subsidiaries) 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 respon-
sibility. Application 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-cor-
ruption policy and an export control policy that apply to the
whole Group.

❾ Auditor
At the 2014 Annual General Meeting, Pricewaterhouse-
Coopers (PwC) was re-appointed as the company’s external
auditor up to the end of the 2015 Annual General Meet-
ing. In connection with the 2014 Annual General Meeting,
PwC informed that the authorized public accountant Bo
Karlsson would remain the auditor in charge. In addition to
ASSA ABLOY, Bo Karlsson, born 1966, is also responsible for
auditing SKF and Fagerhult.

PwC has been the Group’s auditor since its formation in
1994. 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 auditor in
charge attends all Audit Committee meetings as well as the
February board meeting, at which he reports his observa-
tions 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 2013, Note 3.

Internal control – 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 inspired by the internal control frame-
work issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).

ASSA ABLOY ANNUAL REPORT 2014

REPORT OF THE BOARD OF DIRECTORS 75

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 evalu-
ation plan. Regular meetings are held with the Audit Com-
mittee. The Group has an internal audit function whose
primary objective is ensuring reliable financial reporting.
ASSA ABLOY’s effective decentralized organizational struc-
ture makes a substantial contribution to a good control
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 moni-
tored annually for all operating companies. The Code of
Conduct was previously reviewed and updated, and compli-
ance is monitored systematically in operations.

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
established and carries out annual financial evaluations in
accordance with the plan annually adopted by the Audit
Committee. In 2014 separate compliance testing of the
Group’s anti-corruption policy was performed at four oper-
ating companies. The results of the financial evaluations
and the compliance evaluation of the anti-corruption policy
are submitted to the Audit Committee and the auditors.

Group-wide internal control guidelines are reviewed annu-
ally. These guidelines concern various processes such as
ordering, sourcing, financial statements, plant manage-
ment, compliance with various policies, legal matters and
HR matters.

Information and communication
Reporting and accounting manuals as well as other finan-
cial reporting guidelines are available to all employees
concerned on the Group’s intranet. A regular review and
analysis 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 conform to a structure
in which sales, earnings, cash flow, capital employed and
other important key figures and trends for the Group are
compiled, and form the basis for analysis and actions by
management and controllers at different levels.

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 opinion from exter-
nal auditors. These self-assessments are then reviewed at
division and Group level to further improve the reliability
of the financial reporting.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2014

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
Annual General Meeting adopts the following guidelines for
the remuneration and other employment conditions 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 2014 Annual General Meeting. The basic principle
is that remuneration and other employment conditions
should be in line with market conditions and competitive.
ASSA ABLOY takes into account both global remunera-
tion practice and practice in the home country of each
member of the Executive Team. The total remuneration 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 remuneration
in the form of shares, based on the outcome in relation to
a range determined by the Board for the performance of
the company’s earnings per share in 2015. This remunera-

tion model also includes the right, when purchasing shares
under certain conditions, to receive free matching shares
from the company. This remuneration should, if the share
price is unchanged (considering items affecting compa-
rability), be equivalent to a maximum of 75 percent of the
basic salary (excluding social security costs).

The annual cost of variable remuneration for the Execu-

tive Team as above, assuming maximum outcome, totals
around SEK 57 M (excluding social security costs and financ-
ing cost). 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 of six months’ basic salary and other employment
benefits plus an additional 12 months’ basic salary.

Deviation from guidelines
The Board of Directors should have the right to deviate
from the remuneration guidelines for senior management
adopted by the Annual General Meeting, if there are par-
ticular reasons for doing so in an individual case.

ASSA ABLOY ANNUAL REPORT 2014

REPORT OF THE BOARD OF DIRECTORS 77

Sales and income

• Organic growth was 3 percent (2), while acquired growth was 9 percent (4).

• Operating income (EBIT) excluding items affecting comparability increased by 17 per-
cent to SEK 9,257 M (7,923), equivalent to an operating margin of 16.3 percent (16.3).

• Earnings per share after full dilution, excluding items affecting comparability,

increased by 17 percent to SEK 17.38 (14.84).

Sales
The Group’s sales totaled SEK 56,843 M (48,481). Exchange
rate effects had an impact on sales of SEK 2,138 M (–1,156).

Change in sales

Organic growth
Acquired growth
Exchange rate effects
Total

2013

2014

2
4
–2
4

3
9
5
17

The total change in sales for 2014 was 17 percent (4). Organic
growth was 3 percent (2) and acquired units made a positive
contribution of 9 percent (4).

Sales by product group
Mechanical locks, lock systems and fittings accounted for 30
percent (33) of total sales. Electromechanical and electronic
locks rose to 50 percent (49) of sales, of which entrance auto-
mation accounted for 27 percentage points (25). Security
doors and hardware accounted for 20 percent (18) of sales.

Cost structure
Total wage costs, including social security expenses and
pension expenses, amounted to SEK 16,026 M (13,759),
equivalent to 28 percent (28) of sales. The average number
of employees was 44,269 (42,556).

The Group’s material costs amounted to SEK 20,763 M

(16,977), equivalent to 37 percent (35) of sales.

Other purchasing costs totaled SEK 9,866 M (9,789),

equivalent to 17 percent (20) of sales.

Depreciation and amortization of non-current assets
amounted to SEK 1,163 M (993), equivalent to 2 percent (2)
of sales.

Operating income
Operating income (EBIT) excluding restructuring costs
rose to SEK 9,257 M (7,923), due to efficiency savings and
continued growth in operations. The corresponding operat-
ing margin was 16.3 percent (16.3). Exchange rate effects
amounted to SEK 349 M (–261).

Operating income before depreciation and amorti-
zation (EBITDA) excluding restructuring costs totaled
SEK 10,419 M (8,917). The corresponding margin was
18.3 percent (18.4).

Items affecting comparability
No items affecting comparability were included in operating
income in 2014. In 2013 operating income for the year was
reduced by restructuring costs of SEK 1,000 M mainly related
to impairment of assets and costs in connection with staff
cuts and cancellation of lease agreements.

Income before tax
Income before tax excluding restructuring costs totaled
SEK 8,698 M (7,381). The exchange rate effect amounted
to SEK 326 M (–247). Net financial items amounted to
SEK –559 M (–542) and was kept on roughly the same level
as last year in spite of an increase in net debt during the year.
The profit margin, defined as income before tax in relation
to sales, was 15.3 percent (15.2) excluding restructuring
costs.

The parent company’s income before tax was

SEK 5,553 M (2,896).

Tax
The Group’s tax expense totaled SEK 2,261 M (1,595), equiv-
alent to an effective tax rate of 26 percent (25).

Earnings per share
Earnings per share after full dilution, excluding items affect-
ing comparability, amounted to SEK 17.38 (14.84), an
increase of 17 percent.

SALES AND OPERATING INCOME

SEK M

60,000

50,000

40,000

30,000

20,000

10,000

SEK M

12,000

10,000

8,000

6,000

4,000

2,000

Sales
Operating income1

1 Excluding items affecting
comparability 2011
and 2013.

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2014

Consolidated income statement and
Statement of comprehensive income

Note

4
5
6–9, 33

10
9, 11

13
13
13

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:
Items that will not be reclassified to profit or loss
Actuarial gain/loss on post-employment benefit obligations
Deferred tax from actuarial gain/loss on post-employment benefit obligations
Total

Items that may be reclassified subsequently to profit or loss
Share of other comprehensive income of associates
Cashflow hedges
Net investment hedges
Exchange rate differences
Total

Total comprehensive income

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

2013

48,481
–30,082
18,399

–7,575
–2,470
–1,390
–133
94
6,924

28
–571
6,381

–1,595
4,786

–11
4,775

4,772
2

12.89
12.89
14.84

2013

4,775

361
–136
225

–18
9
0
143
134

5,133

5,129
4

2014

56,843
–34,921
21,922

–8,684
–2,668
–1,545
100
132
9,257

28
–587
8,698

–2,261
6,436

–
6,436

6,436
0

17.38
17.38
17.38

2014

6,436

–695
152
–543

105
–3
–374
3,810
3,539

9,433

9,432
0

SALES BY PRODUCT GROUP, 2014

EARNINGS PER SHARE AFTER TAX AND DILUTION

Entrance automation, 27% (25)

Mechanical locks, lock systems
and fittings, 30% (33)

Mechanical locks, lock systems
and fittings, 33% (36)
Entrance automation, 25% (24)
Electromechanical and
Electromechanical and
electronic locks, 24% (22)
electronic locks, 23% (24)
Security doors and
hardware, 18% (18)

Security doors and
hardware, 20% (18)

SEK

Earnings per share
Earnings per share
after tax and dilution1
after tax and dilution1

1 Excluding items affecting
comparability 2011 and 2013.

ASSA ABLOY ANNUAL REPORT 2014

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.

EMEA
Sales totaled SEK 14,753 M (13,165), with organic growth
of 3 percent (–1). Acquired units contributed 5 percent (1)
to sales. Operating income excluding restructuring costs
amounted to SEK 2,432 M (2,197), with an operating
margin (EBIT) of 16.5 percent (16.7). Return on capital
employed excluding restructuring costs was 21.0 percent
(20.7). Ope r ating cash flow before interest paid was
SEK 2,288 M (2,084).

Growth in western Europe was stable but unevenly dis-
tributed between the different markets during the year. A
high share of new products, strengthened market presence
and continued cost-efficiency contributed to EMEA’s con-
tinuing good operating margin.

Americas
Sales totaled SEK 12,156 M (10,121), with organic growth of
4 percent (6). Acquired units contributed 10 percent (2) to sales.
Operating income excluding restructuring costs amounted to
SEK 2,613 M (2,140), with an operating margin (EBIT) of 21.5 per-
cent (21.1). Return on capital employed excluding restructuring
costs was 23.1 percent (22.7). Operating cash flow before inter-
est paid was SEK 2,637 M (1,983).

Demand strengthened in the latter part of the year in the

commercial and institutional market in the USA. Growth
remained good due to continued investments in innovation
and product development in the majority of product lines.
Profitability remained good due to continued expansion of
market presence and continuous rationalizations.

Asia Pacific
Sales totaled SEK 8,336 M (7,420), with organic growth of
1 percent (4). Acquired units contributed 6 percent net (2)
to sales. Operating income excluding restructuring costs
amounted to SEK 1,187 M (1,032), with an operating margin
(EBIT) of 14.2 percent (13.9). Return on capital employed
excluding restructuring costs was 14.2 percent (16.3). Ope-
rating cash flow before interest paid was SEK 931 M (932).
The high growth rate in China slowed during the year,
while demand in Australia recovered following a period of
weaker growth. Investments on emerging markets contin-
ued during the year, with strategic acquisitions in both China
and India. Operating margin and cash flow were maintained
at a good level.

Global Technologies
Sales totaled SEK 7,207 M (6,472), with organic growth of
1 percent (6). Acquired units contributed 4 percent (0)
to sales. Operating income excluding restructuring costs
amounted to SEK 1,368 M (1,184), with an operating margin
(EBIT) of 19.0 percent (18.3). Return on capital employed
excluding restructuring costs was 19.6 percent (19.7).
Ope rating cash flow before interest paid was SEK 1,282 M
(870).

Sales on emerging markets were good and gradually
improved during the year in North America for HID Global
business unit. Growth was strong for ASSA ABLOY Hospital-
ity, driven by new advanced technological solutions. The
operating margin increased and return on capital employed
remained at a good level.

Entrance Systems
Sales totaled SEK 15,409 M (12,237), with organic growth of
4 percent (0). Acquired units contributed 17 percent (14)
to sales. Operating income excluding restructuring costs
amounted to SEK 2,054 M (1,733), with an operating margin
(EBIT) of 13.3 percent (14.2). Return on capital employed
excluding restructuring costs was 13.1 percent (12.1).
Ope rating cash flow before interest paid was SEK 2,007 M
(1,792).

Demand was strong on the North American market but
more subdued in Europe during the year. A high innovation
rate with new product development and continued integra-
tion of previous years’ acquisitions characterized operations
during the year. Sales and operating cash flow increased
substantially compared with the previous year, while the
operating margin remained healthy.

Other
The costs of group-wide functions, such as corporate man-
agement, accounting and finance, supply management and
group-wide product development, totaled SEK 398 M (363).
Elimination of sales between the Group’s segments and
restructuring costs are included in ‘Other’.

EXTERNAL SALES, 2014

 EMEA, 27% (28)
EMEA, 25% (27)
 Americas, 21% (21)
Americas, 21% (21)
 Asia Pacific, 14% (14)
Asia Pacific, 14% (14)
 Global Technologies, 13% (13)
Global Technologies, 13% (13)
 Entrance Systems, 25% (24)
Entrance Systems, 27% (25)

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2014

Results by division

EMEA1

Americas2

Asia Pacific3

Global
Technologies4

Entrance
Systems

Other

Total

SEK M

Sales, external
Sales, internal
Sales

2013

2014

2013

2014

12,957 14,519 10,074 12,096
60
13,165 14,753 10,121 12,156

209

233

Organic growth
Share of earnings in associates

–1%
1

3%
–

6%
–

4%
–

2013

6,879
542
7,420

4%
19

2014

7,755
581
8,336

1%
23

2013

6,406
65
6,472

6%
–

2014

2013

2014

2013

2014

2013

2014

7,147 12,166 15,325
84
7,207 12,237 15,409

0
–9357 –1,0177
–935 –1,017

48,481 56,843
–
48,481 56,843

–

1%
–

0%
74

4%
109

–
–

2%
94

3%
132

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 and amortization
Investments in tangible
and intangible assets
Sales of tangible and intangible assets
Change in working capital
Cash flow 5

Non-cash items
Interest paid and received
Operating cash flow 5

2,197

2,432

2,140

2,613

1,032

1,187

1,184

1,368

1,733

2,054

–363

–398

7,923

9,257

16.7%
–300

1,897
14.4%

16.5%
–

2,432
16.5%

21.1%
–18

2,121
21.0%

21.5%
–

2,613
21.5%

13.9%
–183

850
11.4%

14.2%
–

1,187
14.2%

18.3%
–38

1,146
17.7%

19.0%
–

1,368
19.0%

14.2%
–313

1,420
11.6%

13.3%
–

2,054
13.3%

–
–149

–512
–

–
–

–398
–

16.3%
–1,000

6,924
14.2%
–542
–1,595
–11
4,775

16.3%
–

9,257
16.3%
–559
–2,261
–
6,436

10,499 12,299 10,475 12,909
9,000

6,395

7,319

7,247

2,703
8

3,051
9

2,384
–

2,982
–

7,436
4,311

2,481
371

9,810
7,931

3,137
414

6,114
4,511

1,338
–

1,711
–

3,850
1,296

4,021
1,438

8,239 14,592 16,245
9,615
9,282
5,984

–708
–

–1,077
–

48,408 58,425
31,817 39,778

20.7%

21.0%

22.7%

23.1%

16.3%

14.2%

19.7%

19.6%

12.1%

13.1%

1,897
300
328

–376
39
–104
2,084

2,432
–
351

–444
47
–98
2,288

2,121
18
179

–192
11
–154
1,983

2,613
–
237

–247
4
31
2,637

850
183
157

–224
24
–57
932

1,187
–
183

–280
6
–164
931

1,146
38
159

–376
1
–98
870

1,368
–
182

–205
1
–63
1,282

1,420
313
168

–138
31
–2
1,792

2,054
–
212

–153
12
–118
2,007

97
–

–

–512
149
2

–2
–
–82
–445

17
–431

87
–

12,854 14,990
1,861

1,675

–

17.1%

16.9%

–398
–
–2

–12
1
109
–302

–150
–457

6,924
1,000
993

9,257
–
1,163

–1,308
105
–497
7,218

17
–431
6,803

–1,341
69
–303
8,845

–150
–457
8,238

Average number of employees

10,089 10,678

6,726

7,193 14,243 13,439

3,136

3,331

8,191

9,420

171

208

42,556 44,269

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 –1,017 M (–935).

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, 2014 1, 2

AVERAGE NUMBER OF EMPLOYEES, 2014

EMEA, 27% (29)
EMEA, 25% (27)
Americas, 26% (25)
Americas, 27% (26)
Asia Pacific, 12% (12)
Asia Pacific, 13% (12)
Global Technologies, 14% (14)
Global Technologies, 14% (14)
Entrance Systems, 21% (20)
Entrance Systems, 21% (21)

1 Operating income excluding items

affecting compa rability.

2 “Other” is not included in the

calculation. See section Comments
by division for what is included in
“Other”.

Legend
EMEA, 24% (24)
Legend
Americas, 16% (16)
Legend
Asia Pacific, 31% (34)
Legend
Global Technologies, 8% (7)
Legend
Entrance Systems, 21% (19)

ASSA ABLOY ANNUAL REPORT 2014

CONSOLIDATED FINANCIAL STATEMENTS 81

Financial position

• Capital employed amounted to SEK 58,425 M (48,408).

• Return on capital employed remained high at 16.9 percent (17.1).

• The net debt/equity ratio was 0.62 (0.68).

SEK M

Capital employed
– of which goodwill
Net debt
Equity
–of which non-controlling interests

2013

48,408
31,817
19,595
28,813
0

2014

58,425
39,778
22,327
36,098
2

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 58,425 M
(48,408). The return on capital employed excluding items
affecting comparability was 16.9 percent (17.1).

Intangible assets amounted to SEK 47,056 M (38,280).
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 4,071 M as a result of completed acquisitions
and adjustments of acquisitions made in previous years .
A valuation model, based on discounted future cash flows,
is used for impairment testing of goodwill and other intan-
gible assets with an indefinite useful life.

Tangible assets amounted to SEK 7,712 M (6,390).
Capital expenditure on tangible and intangible assets, less
sales of tangible and intangible assets, totaled SEK 1,271 M
(1,202). Depreciation and amortization amounted to
SEK 1,163 M (993).

Trade receivables amounted to SEK 10,595 M (8,531)
and inventories totaled SEK 7,845 M (6,498). The average
collection period for trade receivables was 53 days (53).
Material throughput time was 91 days (93). The Group is
making systematic efforts to increase capital efficiency.

Net debt
Net debt amounted to SEK 22,327 M (19,595), of which pen-
sion commitments and other post-employment benefits
accounted for SEK 2,946 M (2,015).

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
high acquisition activity, deferred considerations paid for
acquisitions completed in previous years and exchange rate
differences.

External financing
The Group’s long-term loan financing mainly consists of a
Private Placement Program in the USA totaling USD 618 M
(698), a GMTN program of SEK 8,857 M (8,506), a loan from
the European Investment Bank of EUR 110 M (110), and a
loan from the Nordic Investment Bank of EUR 110 M (110).
During the year, a total of seven issues were made under the
GMTN program for a total amount of around SEK 1,900 M.
During the year a bilateral bank loan of EUR 90 M was raised.
Total financing also increased due to exchange rate fluctua-
tions, particularly USD and EUR. 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 1,287 M (1,580) 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 900 M (900), which was wholly unuti-
lized at year-end. The reduction in short-term financing is
mainly linked to the increase in long-term capital market
issues implemented to extend the Group’s maturity struc-
ture. The interest coverage ratio, defined as income before
tax plus net interest, divided by net interest, was 17.4 (13.5).
Fixed interest terms fell somewhat during the year, with an
average term of 17 months (21) at year-end.

Cash and cash equivalents amounted to SEK 667 M (362)

and are invested in banks with high credit ratings. Some of
the Group’s main financing agreements contain a custom-
ary Change of Control clause. This clause means that lend-
ers have the right in certain circumstances to demand the
renegotiation of conditions or to terminate the agreements
should control of the company change.

Equity
The Group’s equity totaled SEK 36,098 M (28,813) at year-
end. The return on equity was 19.8 percent (17.5). The
equity ratio was 45.1 percent (43.8). The debt/equity ratio,
defined as net debt divided by equity, was 0.62 (0.68).

NET DEBT

CAPITAL EMPLOYED AND RETURN ON CAPITAL EMPLOYED

SEK M

25,000

20,000

15,000

10,000

5,000

Net debt

Net debt / equity
Net debt/equity

1.0

0.8

0.6

0.4

0.2

SEK M

60,000

50,000

40,000

30,000

20,000

10,000

CONSOLIDATED FINANCIAL STATEMENTS

Capital employed

Capital employed
Return on capital employed1

Return on capital
employed1

1 Excluding items affecting
comparability 2011 and 2013.

ASSA ABLOY ANNUAL REPORT 2014

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
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
Derivative financial instruments
Trade payables
Current tax liabilities
Current provisions
Other current liabilities
Accrued expenses and deferred income
Total current liabilities
TOTAL EQUITY AND LIABILITIES

Note

2013

2014

14
15
17
19
18

20
21

34
34
34

34
18
24
25
34

34
34

25
26
27

38,280
6,390
1,675
86
1,677
48,109

6,498
8,531
352
869
699
139
204
362
17,654
65,763

371
9,675
–1,041
19,808
28,812
0
28,813

13,329
1,416
2,015
2,373
976
20,109

4,875
107
4,393
1,276
856
1,754
3,580
16,842
65,763

47,056
7,712
1,861
76
1,555
58,260

7,845
10,595
506
1,120
831
159
14
667
21,738
79,998

371
9,675
2,498
23,553
36,096
2
36,098

15,362
1,462
2,946
2,428
2,320
24,517

4,636
251
5,699
930
525
3,060
4,282
19,383
79,998

ASSA ABLOY ANNUAL REPORT 2014

CONSOLIDATED FINANCIAL STATEMENTS 83

Cash flow

• Operating cash flow remained strong and amounted to SEK 8,238 M (6,803).

• Net capital expenditure totaled SEK 1,271 M (1,202).

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

2013

6,224
647
–1,202
1,134
6,803

2014

6,679
453
–1,271
2,376
8,238

Investments in subsidiaries
The total purchase price of investments in subsidiaries
amounted to SEK 4,627 M (4,643), of which the cash flow
effect was SEK –2,454 M (–4,783). Acquired cash and cash
equivalents totaled SEK 204 M (53).

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

SEK M

Net debt at 1 January
Operating cash flow
Restructuring payments
Tax paid
Acquisitions/Disposals
Dividend
Actuarial gain/loss on post-
employment benefit obligations
Exchange rate differences and others
Net debt at 31 December

2013

15,805
–6,803
647
1,134
6,784
2,007

–361
382
19,595

2014

19,595
–8,238
453
2,376
2,454
2,110

695
2,880
22,327

Operating cash flow

SEK M

Operating income (EBIT)
Restructuring costs
Depreciation and amortization
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.

2013

6,924
1,000
993
–1,202
–497
–431
17
6,803

2014

9,257
–
1,163
–1,271
–303
–457
–150
8,238

0.922

0.95

The Group’s operating cash flow amounted to SEK 8,238 M
(6,803), equivalent to 95 percent (92) of income before tax
excluding restructuring costs.

Net capital expenditure
Net capital expenditure on intangible assets and tangible
assets totaled SEK 1,271 M (1,202), equivalent to 109 per-
cent (121) of amortization and depreciation on intangible
and tangible assets. Net investments for the full year were
at a comparable level to last year, due to continued major
construction investments and increasing investments in
information technology.

Change in working capital

SEK M

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

2013

–166
–520
333
–143
–497

2014

–261
–695
582
71
–303

The material throughput time was 91 days (93) at year-end.
Capital tied up in working capital increased somewhat dur-
ing the year, which had an impact on cash flow of SEK –303 M
(–497) overall.

INCOME BEFORE TAX AND OPERATING CASH FLOW

CAPITAL EXPENDITURE

SEK M

10,000

8,000

6,000

4,000

2,000

Income before tax1
Income before tax1
Operating cash flow2
Operating cash flow2

1 Excluding items affecting

comparability 2011 and 2013.

2 Excluding restructuring payments.

Net capital expenditure
Net capital expenditure
Amortization and depreciation
Depreciation
Net capital expenditure %
Net capital expenditure
of sales
% of sales

SEK M

1,500

1,200

900

600

300

2.5

2.0

1.5

1.0

0.5

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2014

Consolidated cash flow statement

SEK M

OPERATING ACTIVITIES
Operating income
Depreciation and amortization
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
Purchase of shares in subsidiaries from non-controlling interest
Stock purchase plans
Net cash effect of changes in other borrowings
Cash flow from financing activities
CASH FLOW

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

Note

14, 15
14, 15
32

32
32

2013

6,924
993
1,000
–647
17
8,286

–443
12
–1,134
6,721

–497
6,224

–1,308
105
–4,783
–131
85
1
–6,030

–2,007
4,000
–353
–2,155
–52
–164
–731
–537

907
–537
–9
362

2014

9,257
1,163
–
–453
–150
9,816

–477
20
–2,376
6,983

–303
6,679

–1,341
69
–2,454
–1
201
0
–3,524

–2,110
2,757
–2,131
–
–75
–1,349
–2,908
247

362
247
58
667

ASSA ABLOY ANNUAL REPORT 2014

CONSOLIDATED FINANCIAL STATEMENTS 85

Changes in consolidated equity

SEK M

Opening balance 1 January 2013
Net income
Other comprehensive income
Total comprehensive income
Dividend for 2012
Stock purchase plans
Total contributions by and distributions
to parent company’s shareholders
Change in non-controlling interest
Total transactions with parent
company’s shareholders
Closing balance 31 December 2013

Opening balance 1 January 2014
Net income
Other comprehensive income
Total comprehensive income
Dividend for 2013
Stock purchase plans
Total contributions by and distributions
to parent company’s shareholders
Change in non-controlling interest
Total transactions with parent
company’s shareholders
Closing balance 31 December 2014

Parent company’s shareholders

Share
capital

Other con-
tributed
capital

371

9,675

Reserves

–1,173

132
132

Note

371

9,675

–1,041

371

9,675

–1,041

3,539
3,539

371

9,675

2,498

Retained
earnings

Non-controlling
interest

16,946
4,772
225
4,997
–1,888
–18

–1,906
–229

–2,135
19,808

19,808
6,436
–543
5,894
–2,110
–38

–2,149
–

–2,149
23,553

183
2
2
4
–155
–

–155
–32

–187
0

0
0
0
0
–
–

–
2

2
2

Total

26,001
4,775
359
5,133
–2,044
–18

–2,062
–260

–2,322
28,813

28,813
6,436
2,996
9,433
–2,110
–38

–2,149
2

–2,147
36,098

EQUITY PER SHARE AFTER DILUTION AND
RETURN ON EQUITY AFTER TAX

DIVIDEND

SEK

100

Equity per share
Equity per share after
after dilution, SEK
dilution, SEK

Return on equity after tax, %

SEK

CONSOLIDATED FINANCIAL STATEMENTS

Dividend per share

Earnings per share
Earnings per share
after tax and dilution1
after tax and dilution1

1 Excluding items affecting

comparability 2011 and 2013.

ASSA ABLOY ANNUAL REPORT 2014

Modern door systems
for Hertz

CUSTOMER: The Hertz Corporation provides vehicle rental across the
world. Hertz prides itself in providing a fast and easy, high-quality customer
experience.

CHALLENGE: Hertz was looking for a way to streamline and effectively
manage its doors – from facility entrances, maintenance bays, Gold Plus
Rewards booths, as well as doors at its corporate facilities. It was seeking a
partner who could effectively install and maintain its door systems through-
out North America.
Due to the nature of the car and equipment rental industries, a great
variety of entrance equipment and types of locations utilize various entrance
systems. Locations include airports, neighborhoods, corporate and mainte-
nance facilities. Each of these can have a combination of pedestrian, sectional,
and high-performance doors. Hertz needed one provider to support all of
their entrance system needs for their wide range of locations, products and
services.

SOLUTION: ASSA ABLOY Entrance Systems worked with the Hertz Prop-

erty and Facilities leadership team to build a program to service selected
locations across the United States.

It was determined that a number of locations were in need of new doors
to provide better security and efficiency. ASSA ABLOY Entrance Systems was
able to replace high-performance doors along with a number of sectional
doors at locations across the US.
Hertz also wanted to improve security access at two corporate facilities
in Oklahoma City. This project incorporated a variety of doors that included
revolving doors (Besam RD4A), sliding doors (Besam SL500) along with
swing operators (Besam SW200i).

Sustainability prominent feature
of new business school building

CUSTOMER: The Darla Moore School of Business at the University of

South Carolina is a thriving site of academic excellence with approximately
4,000 undergraduate and 800 graduate students. Established in 1919, the
school recently expanded its focus to include sustainable enterprise and
development—attributes that are also featured prominently in the school’s
new academic building that was designed to LEED Platinum standards by
Rafael Vinoly Architects and opened in 2014.

CHALLENGE: The 251,891 square-foot building was designed to accom-

modate a free flow of students and staff, thus creating a sense of commu-
nity and openness that encourages personal interaction. A challenge to
achieving this design goal was presented by the number of closed in spaces:
the building has more than 400 door openings for various spaces which
includes 35 classrooms, 40 meeting rooms, 136 staff offices, a lecture hall,

café, electronic trading room and areas for group study. Each opening has its
own security, safety and sustainability needs.

SOLUTION: The vast number of openings and diversity of applications
required a broad range of solutions offered by ASSA ABLOY Group brands
Adams Rite, Curries, HES, McKinney, Norton, Pemko, Rixson, Rockwood,
Sargent and Securitron. These products—including doors, frames, hinges,
locks, exit devices, door closers, overhead stops, pivots, wall magnets, floor
closers, weather stripping and flat goods—come together to create com-
plete openings that add to the facility’s design motif, while providing reliable
electronic access control and contributing towards the recycled content
goals of the building materials. Designed with technical support from the
U.S. Dept. of Energy to identify energy efficiency opportunities, exterior ope-
nings were selected for their energy efficient contribution in the building.

ASSA ABLOY ANNUAL REPORT 2014

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

Financial income
Financial expenses
Income before appropriations and tax

Appropriations – Group contributions
Tax on income
Net income

Statement of
comprehensive income
– Parent company

SEK M

Net income

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

Balance sheet
– Parent company

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
Revaluation reserve
Statutory reserve
Fair value reserve
Non-restricted equity
Share premium reserve
Retained earnings incl. Net income for the year
Total equity

Provisions
Other provisions
Total provisions

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

Current liabilities
Short-term loans
Trade payables
Current liabilities to subsidiaries
Current tax liabilities
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

2013

–997
–438
2,261
826

2,418
–704
2,540

356
–165
2,731

2013

2,731

33
2,764

2014

–1,129
–658
3,085
1,298

5,265
–1,649
4,914

639
–352
5,201

2014

5,201

374
5,575

Note

2013

2014

14
15
16
19

29
28

1,486
3
29,673
1,619
32,781

5,628
25
42
0
5,695
38,476

371
275
8,905
101

787
6,926
17,365

9
9

5,973
5,973

2,049
40
12,658
153
4
225
15,129
38,476

–
9,088

1,062
2
33,001
1,620
35,684

7,518
17
26
0
7,561
43,245

371
275
8,905
–273

787
9,979
20,044

0
0

7,659
7,659

1,518
52
13,637
81
4
251
15,542
43,245

–
9,789

PARENT COMPANY FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2014

Cash flow statement
– Parent company

SEK M

OPERATING ACTIVITIES
Operating income
Depreciation and amortization
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
Investments in subsidiaries
Other investments
Cash flow from investing activities

FINANCING ACTIVITIES
Dividends
Loans raised
Loans repaid
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

2013

826
428
1,255

–399
1,831
13
2,700

–404
2,296

–894
208
–130
–816

–1,888
4,797
–4,393
–1,484
–4

4
–4
0

Restricted equity

Non-restricted equity

Share
capital

371

Revalu-
ation
reserve

Statutory
reserve

Fair value
reserve

–

8,905

Share
premium
reserve

788

Retained
earnings

6,443
2,731

Change in equity
– Parent company

SEK M

Opening balance 1 January 2013
Net income
Hedge accounting
Total comprehensive income
Reclassification
Dividend for 2012
Stock purchase plans
Total transactions with parent
company’s shareholders
Closing balance 31 December 2013

Opening balance 1 January 2014
Net income
Hedge accounting
Total comprehensive income
Dividend for 2013
Stock purchase plans
Total transactions with parent
company’s shareholders
Closing balance 31 December 2014

275

275
275

371

8,905

371

275

8,905

–

33
33
67

67
101

101

–374
–374

–1

–1
787

787

2,731
–341
–1,888
–18

–2,247
6,926

6,926
5,201

5,201
–2,110
–38

–2,149
9,979

371

275

8,905

–273

787

2014

1,298
436
1,735

–386
5,229
–420
6,157

–2,219
3,937

–11
–4,541
–1
–4,553

–2,110
3,442
–716
616
0

0
0
0

Total

16,507
2,731
33
2,764
–
–1,888
–18

–1,906
17,365

17,365
5,201
–374
4,828
–2,110
–38

–2,149
20,044

ASSA ABLOY ANNUAL REPORT 2014

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 the Swedish Financial
Reporting Board’s RFR 1 Supplementary Accounting Rules
for Corporate Groups. The accounting principles are based
on IFRS as endorsed by 31 December 2014 and have been
applied to all years presented, unless stated otherwise. This
Note describes the most significant accounting principles
that have been applied in the preparation of the financial
statements, which comprise the information provided 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 for financial assets
and liabilities (including derivatives) measured at fair value
through profit or loss and available-for-sale financial assets.

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 provided in the financial
statements. Consequently changes in estimates and assess-
ments may lead to changes in the financial statements.
Estimates and assessments play an important part in
the measurement of items such as identifiable assets and
liabilities in acquisitions, in impairment testing of goodwill
and other assets, in determining actuarial assumptions for
calculating employee benefits, as well as in the valutation of
deferred taxes. Estimates and assessments are continually
evaluated and are based on both 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 adjustments
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 employee benefits also have material impor-
tance for the consolidated financial statements. For informa-
tion on these actuarial assumptions, see 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
2014 had a significant impact on the consolidated financial
statementes.

New and revised IFRS not yet effective
The following IFRS have been published but are not yet
effective, and have not been applied in the preparation of
the financial statements.
•
•

IFRS 9 Financial Instruments
IFRS 15 Revenue from Contract with Customers

Of the above new standards, IFRS 9 is to be applied from the
financial year beginning 1 January 2018, while IFRS 15 takes
effect on 1 January 2017. Earlier application is allowed for
both standards. IFRS 9 is not considered to have a significant
impact on the consolidated financial statements. The Group
has not yet evaluated the effects of the implementation of
IFRS 15.

Consolidated financial statements
The consolidated financial statements include ASSA ABLOY
AB (the Parent company) and all companies over which the
Group has control. The Group controls an entity when the
group is exposed to, or has the rights to, variable returns
from its involvement with the entity and has the ability to
affect those returns through its power over the entity. Com-
panies acquired during the year are included in the consoli-
dated financial statements with effect from the date when
a controlling interest arose. Companies divested 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-
controlling 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.

Deferred considerations are classified as financial
liabilities and revalued through profit or loss in operating
income. Significant deferred considerations are discounted
to present value. Acquisition-related transaction costs are
expensed as incurred.

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

Non-controlling interests
Non-controlling interests are based on the subsidiaries’
accounts with application of fair value adjustments result-
ing from a completed acquisition analysis. Non-controlling
interests’ share in subsidiaries’ earnings is recognized 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 recognized separately in consolidated equity.
Transactions with non-controlling interests are recognized
as transactions with the Group’s shareholders in equity.

NOTES

ASSA ABLOY ANNUAL REPORT 2014

Note 1 cont.

Associates
Associates are defined as companies which are not subsid-
iaries but in which the Group has a significant (but not a
controlling) interest. This generally refers to companies in
which the Group’s shareholding represents between 20 and
50 percent of the voting rights.

Investments in associates are accounted for in accordance

with the equity method. In the consolidated balance sheet,
shareholdings in associates are recognized at cost, and the
carrying amount is adjusted for the share of associates’ earn-
ings after the acquisition date. Dividends from associates
are recognized as a reduction in the carrying amount of the
holdings. The share of associates’ earnings is recognized 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 inter-
nal reporting to the chief operating decision maker. Chief
operating decision maker is the function that is responsible
for allocation of resources and assessing performance of
the operating segments. The divisions form the operational
structure for internal control and reporting and also consti-
tute the Group’s segments for external financial reporting.
The Group’s business 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 consist of products 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 recognized 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 qualify-
ing cash flow hedges, which are recognized in other com-
prehensive income. Receivables and liabilities are measured
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 translated at the year-end rate and net income
is translated at the average rate. The income statement is
translated at the average rate for the period. Exchange diffe-
rences arising from the translation of foreign subsidiaries are
recognized as translation differences in other comprehen-
sive income.

The table below shows the weighted average rate and
the closing rate for important currencies used in the Group,
relative to the Group’s presentation currency (SEK).

Average rate

Closing rate

Country

Currency

2013

2014

2013

2014

Argentina
Australia
Brazil
Canada
Switzerland
Chile
China
Colombia
Czech Republic
Denmark

ARS
AUD
BRL
CAD
CHF
CLP
CNY
COP
CZK
DKK

1.20
6.29
3.03
6.32
7.06
0.013
1.06

0.85
6.19
2.94
6.24
7.51
0.012
1.12
0.0035 0.0034
0.33
1.22

0.33
1.16

1.00
5.77
2.79
6.09
7.32
0.012
1.08

0.92
6.39
2.90
6.73
7.92
0.013
1.26
0.0034 0.0033
0.34
1.28

0.33
1.20

Country

Currency

2013

2014

2013

2014

Average rate

Closing rate

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

8.67
10.23
0.84
0.029
1.81
0.11
0.076

9.12
11.34
0.89
0.030
1.92
0.11
0.078
0.0060 0.0066
2.64
0.52
2.10
1.09
5.69
2.18
2.06
0.18
5.43
0.21
3.16
6.90
0.64

2.51
0.51
2.06
1.11
5.33
2.06
1.97
0.20
5.21
0.21
3.41
6.52
0.68

8.97
10.75
0.84
0.030
1.87
0.105
0.076

9.53
12.16
1.01
0.030
2.00
0.123
0.086
0.0062 0.0071
2.76
0.53
2.24
1.05
6.12
2.22
2.13
0.14
5.91
0.24
3.38
7.83
0.67

2.60
0.50
1.98
1.06
5.31
2.16
2.01
0.20
5.14
0.20
3.05
6.52
0.62

Revenue
Revenue comprises the fair value of goods sold, excluding
VAT and discounts, and after eliminating intra-group sales.
The Group’s sales revenue mainly consists of product sales.
Service related to products sold represents a limited share
of revenue. Revenue from sales of the Group’s products is
recognized when all significant risks and benefits associated
with ownership have been transferred to the purchaser in
accordance with applicable terms of sale, which is normally
upon delivery. If the product requires installation at the
customer’s premises, revenue is recognized when installa-
tion has been 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 recognized 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 recognized after reducing the
carrying amount of the asset by the amount of the grant.

Research and development
Research expenditure is expensed as incurred. Development
expenditure is recognized in the balance sheet to the extent
that it is 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. Expen-
diture on the further development of existing products is
expensed as incurred.

ASSA ABLOY ANNUAL REPORT 2014

NOTES 91

Note 1 cont.

Borrowing costs
Borrowing costs are interest expenses and other expenses
directly related to borrowing. Borrowing costs directly attrib-
utable to the acquisition, construction or production of a
qualifying asset (an asset that necessarily takes a substantial
period of time to get ready for its intended use or sale) are
included in the cost of the asset. Other borrowing costs are
recognized as an expense 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. These taxes
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 recognized in the income statement, associated
tax effects are also recognized in the income statement. The
tax effects of items recognized directly against equity or in
other comprehensive income are themselves recognized
against equity or in other comprehensive income. The liabil-
ity method is used in accounting for deferred tax. This means
that deferred tax is recognized on all temporary differences
between the carrying 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
recognized to the extent that it is probable that the allow-
ance can be offset against taxable income in future taxation.
Deferred tax liabilities for temporary differences relating to
investments in subsidiaries are not recognized in the con-
solidated 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 deferred taxes relate to the same tax
authority.

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

Cash and cash equivalents
Cash and cash equivalents include cash and bank balances,
and short-term financial investments that mature within
three months of the acquisition date.

Goodwill and acquisition-related intangible assets
Goodwill represents the positive difference between the
acquisition cost and the fair value of the Group’s share of the
acquired company’s identifiable net assets at the acquisition
date, and is recognized at cost less accumulated impairment
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 impair-
ment testing using a valuation model based on discounted
future cash flows. Deferred tax assets based on local tax
rates are recognized in terms of tax-deductible goodwill
(with corresponding reduction of the goodwill value). Such
deferred tax assets are expensed as the tax deduction is
utilized. Other acquisition-related intangible assets consist
chiefly of various types of intellectual property rights, such
as brands, technology and customer relationships. Identifi-
able 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 recog-
nized only if it is likely that the future economic benefits
associated with the asset will flow to the Group, and if the
cost of the asset can be reliably measured. Such an asset is
initially recognized at cost and is amortized over its esti-
mated useful life, usually between three and five years. The
carrying amount is the cost less accumulated amortization
and impairment losses.

Tangible assets
Tangible assets are recognized at cost less accumulated
depreciation and impairment losses. Cost includes expen-
diture directly attributable to acquisition of the asset. Sub-
sequent 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. Expendi-
ture on repairs and maintenance is expensed as incurred.
Depreciable amount is the cost of an asset less its estimated
residual value. Land is not depreciated. For other assets, cost
is depreciated over the estimated useful life, which for the
Group results in the following average depreciation periods:
• Buildings 25–50 years.
• Land improvements 10–25 years.
• Machinery 7–10 years.
• Equipment 3–6 years.

The residual value and useful life of assets are reviewed at
each reporting date and adjusted when necessary. Gain or
loss on the disposal of tangible assets is recognized in the
income statement as ‘Other operating income’ or ‘Other
operating expenses’, and consists of the difference between
the selling price and the carrying amount.

Leasing
The Group’s leasing is chiefly operating leasing. The lease
payments are expensed on a straight-line basis over the
term of the lease and are recognized 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 many not be recoverable.

Impairment losses are recognized in the amount by
which the carrying amount of the asset exceeds the recover-
able amount, which is the higher of the asset’s fair value, less
selling expenses, and 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 the
reporting date. Deductions are made for internal profits aris-
ing from deliveries between Group companies. Work in prog-
ress and finished goods include both direct costs incurred and
a fair allocation of indirect production costs.

NOTES

ASSA ABLOY ANNUAL REPORT 2014

Note 1 cont.

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
recognized 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 at
fair value through profit and loss, available-for-sale financial
assets, and loans and receivables. Management determines
the classification of financial assets at initial recognition.

Financial assets at fair value through the income statement
This category is divided into two sub-categories: financial
assets held for trading, and those classified on acquisition as
financial assets at fair value through profit and loss. A finan-
cial asset is classified in this category if acquired principally
for the purpose of selling in the short term or if classified as
such by management. Derivatives are also classified as held
for trading provided they are not defined as hedges. Assets
in this category are classified 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 recognized in Other comprehensive income.

Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payment streams, which are
not quoted in an active market. They are recognized in
current assets, except for receivables maturing more than
12 months after the reporting date, which are classified as
non-current assets.

Loans and receivables are initially recognized at fair value

and subsequently carried at amortized cost using the effec-
tive interest method.

Financial liabilities
Financial liabilities include deferred considerations, loan liabili-
ties, trade payables and derivative instruments. Recognition
depends on how the liability is classified.

Financial liabilities at fair value through the income statement
This category includes derivatives with negative fair value
that are not used for hedging, deferred considerations, and
financial liabilities held for trading. Liabilities are measured
at fair value on a continuous basis and changes in value are
recognized in the income statement as a financial item.

Loan liabilities
Loan liabilities are initially valued at fair value, net of transac-
tion costs, and subsequently at amortized cost. Amortized
cost is determined based on the effective interest rate calcu-
lated when the loan was raised. Accordingly, surplus values
and negative surplus values as well a direct issue expenses
are allocated over the term of the loan. Non-current loan
liabilities have an anticipated term of more than one year,
while current loan liabilities have a term of less than one year.

Trade payables
Trade payables are initially valued at fair value, and subse-
quently at amortized cost using the effective interest method.

Recognition and measurement of financial assets
and liabilities
Acquisitions and sales of financial assets are recognized on the
trade date, the date on which the Group commits to purchase
or sell the asset. Transaction costs are initially included in fair
value for all financial instruments, except for those recognized
at fair value through profit and loss where the transaction cost
is recognized through profit and loss. The fair value of quoted
investments is based on current bid prices. In the absence of
an active market for an investment, the Group applies vari-
ous measurement techniques to determine fair value. These
include use of available information on current arm’s length
transactions, comparison with equivalent assets and analysis
of discounted cash flows. The Group assesses at each report-
ing date whether there is any objective evidence that a finan-
cial asset or a group of financial assets is impaired. A financial
asset is derecognized from the balance sheet 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 from the balance sheet when the obligation is
fulfilled, cancelled or expires, see above.

Derivative instruments and hedging
Derivative instruments are recognized in the balance sheet
at the transaction date and are measured at fair value, both
initially and in subsequent revaluations. The method for
recognizing profit or loss depends on whether the deriva-
tive instrument is designated as a hedging instrument, and
if so, the nature of the hedged item. For derivatives not de-
signated as hedging instruments, changes in value are rec-
ognized on a continuous basis through profit or loss under
financial items, either as income or expense.

The Group designates derivatives as follows:

i) Fair value hedge: a hedge of the fair value of an identified
liability;
ii) Cash flow hedge: a hedge of a certain risk associated with
a forecast cash flow for a certain transaction; or
iii) Net investment hedge: a hedge of a net investment in a
foreign subsidiary.

When entering into the hedge transaction, the Group
documents the relationship between the hedging instru-
ment and hedged items, as well as its risk management
strategy for the hedge. The Group also documents its assess-
ment, both on inception and on a regular basis, of whether
the derivative instruments used in hedge transactions are
effective in offsetting changes in fair value attributable to
the hedged items.

The fair value of forward exchange contracts is calculated
at net present value based on prevailing forward rates on the
reporting date, while interest rate swaps are measured by
estimating future discounted cash flows.

For information on the fair value of derivative instruments,

see Note 34, ‘Financial risk management and financial
instruments’. Derivatives at fair value, with a maturity of
more than 12 months, are classified as non-current inter-
est-bearing liabilities or receivables. Other derivatives are
classified as current interest-bearing liabilities and invest-
ments respectively.

ASSA ABLOY ANNUAL REPORT 2014

NOTES 93

Note 1 cont.

Fair value hedges
For derivatives that are designated and qualify as fair value
hedges, changes in value of both the hedged item and the
hedging instrument are recognized on a continuous basis
in the income statement (under financial items). Fair value
hedges are used to hedge interest rate risk in borrowing
linked to fixed interest terms. If the hedge would no longer
qualify for hedge accounting, the fair value adjustment of
the carrying amount is dissolved through profit or loss over
the remaining term using the effective interest method.

Cash flow hedges
For derivatives that are designated and qualify as cash flow
hedges, changes in value of the hedging instrument are
recognized on a continuous basis in other comprehensive
income for the part relating to the effective portion of the
hedges. Gain or loss arising from ineffective portions of
derivatives is recognized directly in the income statement
under financial items. When a hedging instrument expires,
is sold or no longer qualifies for hedge accounting, and accu-
mulated gains or losses relating to the hedge are recognized
in equity, these gains/losses remain in equity and are taken
to income, while the forecast transaction is finally recog-
nized in the income statement. When a forecast transaction
is no longer expected to occur, the accumulated gain or loss
recognized in equity is immediately transferred to Other
comprehensive income in the income statement. When a
forecast transaction is no longer expected to occur, the gain
or loss recognized in Other comprehensive income is recog-
nized directly under financial items.

Net investment hedges
For derivatives that are designated and qualify as net invest-
ment hedges, the portion of value changes in fair value
designated as effective is recognized in other comprehen-
sive income. The ineffective portion of the gain or loss is rec-
ognized directly in profit or loss for the period under finan-
cial items. Accumulated gain or loss in other comprehensive
income is recognized in the income statement when the
foreign operation, or part thereof, is sold.

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 of the amount
can be made. Provisions are recognized at a value equivalent
to the outflow of resources that will probably be required to
settle the obligation. The amount of a provision is discounted
to present value where the effect of time value is considered
material.

Assets and liabilities of a disposal group classified as
held for sale
Assets and liabilities are classified as held for sale when their
carrying amounts will principally be recovered through a sale
and when such a sale is considered highly probable. They are
recognized at the lower of carrying amount and fair value less
selling expenses.

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

the USA, and 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. Obliga-
tions are valued on the reporting date at their discounted
value. For funded plans, obligations are reduced by the fair
value of the plan assets. Actuarial gains and losses resulting
from experience-based adjustments and changes in actuarial
assumptions are recognized in other comprehensive income
during the period they arise. The pension expense for defined
benefit plans is spread over the employee’s service period.
The Group’s payments relating to defined contribution
pension plans are recognized as an expense in the period to
which they relate, 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 diffe-
rence between pension expense determined in accordance
with IAS 19 and pension expense determined in accordance
with the regulations applicable in the legal entity.

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. As
the long-term incentive programs mainly are equity settled,
an amount equivalent to the personnel cost in the balance
sheet is recognized as equity in retained earnings. The
personnel cost is also recognized in the income statement,
where it is allocated to the respective function.

Long-term incentive program
ASSA ABLOY has equity-based remuneration plans where
settlement is expected in the form of shares. For the long-
term incentive program, personnel costs during the vesting
period are recognized based on the shares’ fair value on the
allotment 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 program 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) dur-
ing 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 allotment

date; a reduction in fair value relating to the anticipated
dividend has not been made as the participants are com-
pensated 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 remain-
ing personnel costs are immediately recognized in the
income statement. Personnel costs for shares relating to
the performance-based program are calculated on each
accounting date based on an assessment of the probability

NOTES

ASSA ABLOY ANNUAL REPORT 2014

Note 1 cont.

of the performance targets being achieved. The costs are
calculated based on the number of shares that ASSA ABLOY
expects to need to settle 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 recognized as a provision for social security contri-
butions.

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 recognized
if their conversion to ordinary shares would lead to a reduc-
tion in earnings per share after dilution.

Dividend
Dividend is recognized as a liability after the Annual General
Meeting has approved the dividend.

The Parent company
The Group’s Parent company, ASSA ABLOY AB, is responsible
for group management and provides group-wide functions.
The Parent company’s revenue consists of intra-group fran-
chise and royalty revenues. The significant balance sheet
items consist of shares in subsidiaries, intra-group recei-
vables and liabilities, and external borrowing. The Parent
company has prepared its annual accounts in accordance
with the Swedish Annual Accounts Act (1995:1554) and
the Swedish Financial Reporting Board’s RFR 2 Accounting
for Legal Entities. 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
and taxation. The recommendation states which exceptions
from and additions to IFRS should be made.

Revenue
The Parent company’s revenue consists of intra-group
franchise and royalty revenues. These are recognized in the
income statement as ‘Other operating income’ to make
clear that the Parent company has no product sales like
other group companies with external operations.

Pension obligations
The Parent company’s pension obligations 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 considered certain.

Research and development costs
Research and development costs are expensed as 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 recog-
nized at cost less accumulated depreciation and any impair-
ment losses in the same way as for the Group. They are
depreciated 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 classified
as rental agreements (operating leases) irrespective of
whether they are financial or operating leases.

Shares in subsidiaries
Shares in subsidiaries are recognized 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 recognized in Financial expenses in the
income statement.

Financial instruments
Derivative instruments are recognized at fair value. Changes
in the value of derivatives are recognized in profit or loss,
with the exception of exchange rate changes relating to
monetary items that form part of the company’s net invest-
ment in a foreign operation, which are recognized in the fair
value reserve.

Group contributions
The Parent company recognizes group contributions in
accordance with the revised RFR 2. Group contributions
received and paid are recognized under appropriations in
the income statement. Figures for the comparative year
have been adjusted correspondingly. 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 alternative rule in RFR 2, reporting
these guarantees as a contingent liability.

ASSA ABLOY ANNUAL REPORT 2014

NOTES 95

Note 2 Sales

Customer sales by country

Note 3 Auditors’ fees

Group

SEK M

2013

2014

2013

2014

Group

Parent company

SEK M

USA
China
Sweden
France
Germany
United Kingdom
Canada
Australia
Netherlands
Norway
South Korea
Finland
Denmark
Belgium
Mexico
Italy
Spain
Austria
Poland
Switzerland
Czech Republic
Brazil
New Zealand
United Arab Emirates
Saudi Arabia
South Africa
India
Russia
Turkey
Singapore
Hong Kong
Israel
Colombia
Portugal
Thailand
Slovakia
Chile
Ireland
Malaysia
Estonia
Philippines
Japan
Indonesia
Romania
Hungary
Angola
Croatia
Kenya
Taiwan
Latvia
Vietnam
Macao
Egypt
Lithuania
Other countries
Total

2013

12,962
4,806
3,074
2,973
2,470
2,324
1,793
1,717
1,458
1,291
931
1,070
912
851
728
699
669
555
322
508
384
290
357
333
342
270
235
261
201
182
244
207
177
147
173
119
147
138
132
97
106
128
102
99
100
0
92
73
51
40
39
29
48
45
980
48,481

2014

17,589
5,151
3,233
3,164
2,768
2,621
2,005
1,798
1,546
1,520
1,127
1,096
978
941
874
707
705
576
559
547
524
442
406
394
387
297
257
255
253
244
218
206
193
184
166
163
157
138
130
126
123
122
122
107
101
97
80
78
65
55
52
52
50
50
1,044
56,843

Sales by product group

SEK M

Mechanical locks, lock systems and fittings
Entrance automation
Electromechanical and electronic locks
Security doors and hardware
Total

Group

2013

16,034
12,077
11,602
8,768
48,481

2014

16,960
15,465
13,297
11,121
56,843

Audit assignment
PwC
Other

Audit-related services
in addition to audit
assignment
PwC

Tax advice
PwC
Other

Other services
PwC
Other
Total

38
10

8
3

13
4
76

36
11

11
2

20
1
82

5
–

–

1
1

6
0
13

3
–

–

3
–

8
–
14

Note 4 Other operating income and expenses
Group

SEK M

Rental income
Business-related taxes
Transaction expenses from acquisitions
Exchange rate differences
Other, net
Total

2013

11
13
–56
–17
–84
–133

2014

9
18
–33
19
87
100

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

Note 5 Share of earnings in associates

SEK M

Agta Record AG
Goal Co., Ltd
Saudi Crawford Doors Factory Ltd
Låsgruppen Wilhelm Nielsen AS
Other
Total

Group

2013

2014

68
19
6
1
0
94

102
23
5
2
0
132

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 2014.

Note 6 Operating leases

SEK M

Lease payments
during the year
Total

Nominal value of agreed
future lease payments:
Due for payment in:
(2014) 2015
(2015) 2016
(2016) 2017
(2017) 2018
(2018) 2019
(2019) 2020 or later
Total

Group

Parent company

2013

2014

2013

2014

547
547

725
725

535
414
311
227
178
234
1,899

641
510
403
267
185
194
2,201

15
15

15
16
16
16
17
17
97

15
15

14
14
15
15
15
15
88

Lease payments during the year consist of fees for assets
that are held as operating leases such as rented premises,
machinery, and computer equipment. The Group has no sin-
gle substantial operating leases since the lease agreements
are spread over a large number of subsidiaries.

NOTES

ASSA ABLOY ANNUAL REPORT 2014

Note 7 Expenses by nature
In the income statement costs are broken down by function.
Below, these same costs are broken down by nature:

SEK M

Remuneration of employees (Note 33)
Direct material costs
Depreciation and amortization (Note 8, 14, 15)
Other purchase expenses
Total

Group

2013

2014

13,759 16,026
16,977 20,763
1,163
9,866
41,518 47,818

993
9,789

Note 8 Depreciation and amortization

Note 12 Tax on income

SEK M

Current tax
Tax attributable to
prior years
Foreign Coupon Tax
Deferred tax
Total

Group

Parent company

2013

2014

–1,863

–2,008

178
–
90

68
–
–322
–1,595 –2,261

2013

–178

13
–
–
–165

2014

–344

–
–7
–
–352

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

Group

Parent company

Group

Parent company

Percent

2013

2014

2013

2014

SEK M

2013

2014

2013

2014

Intangible assets
Machinery
Equipment
Buildings
Land improvements
Total

224
410
197
158
3
993

288
445
237
187

6
1,163

427
–
1
–
–
428

435
–
1
–
–
436

Note 9 Exchange differences in the income statement
Parent company

Group

SEK M

2013

2014

2013

2014

Exchange differences
recognized in operating
income
Exchange differences
recognized in financial
expenses (Note 11)
Total

–17

–4
–21

9
29

–5
–5

5
31

Note 10 Financial income

SEK M

2013

2014

2013

2014

Group

Parent company

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

–

–
10

18
28

–

–
8

2,109

5,130

281
–

98
–

19
28

0
2,418

0
5,265

Note 11 Financial expenses

SEK M

2013

2014

2013

2014

Group

Parent company

Intra-group interest
expenses
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, non-hedge
accounting
Fair value adjustments on
shares and interests
Other financial expenses
Total

–

–508

–319

–580

–305

–170

–155

–34

–42

–4

–212

–

–5

–

–
–36
–571

–
–46
–587

–
–21

–1,150
–30
–704 –1,649

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

22
7

–3
0

–1

0
0

22
8

–3
0

–1

–
0

22
–

–16
–

–

–
–

22
–

–16
–

–

–
–

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
Net profit
Weighted average number of
shares issued (thousands)
Earnings per share after
dilution (SEK per share)
of which from continuing operations
of which from discontinued operations

Group

2013

2014

4,772

6,436

370,259

12.89
12.89
–

17.38
17.38
–

Group

2013

2014

4,772
4,772

6,436
6,436

370,259

12.89
12.89
–

17.38
17.38
–

Earnings per share after dilution and excluding
items affecting comparability

Group

SEK M

Earnings attributable to the Parent
company's shareholders
Items affecting comparability, after tax1
Net profit
Weighted average number of
shares issued (thousands)
Earnings per share after dilution
and excluding items affecting
comparability (SEK per share)
of which from continuing operations
of which from discontinued operations

2013

2014

4,772
721
5,493

6,436
–
6,436

370,259

14.84
14.84
–

17.38
17.38
–

1Items affecting comparability consist of restructuring costs.

ASSA ABLOY ANNUAL REPORT 2014

NOTES 97

Note 14 Intangible assets

Group

Parent company

2014, SEK M

Goodwill

Brands

Opening accumulated acquisition cost
Purchases
Acquisitions of subsidiaries
Sales, disposals and adjustments
Reclassifications
Exchange rate differences
Closing accumulated acquisition cost

Opening accumulated amortization/impairment
Sales, disposals and adjustments
Reclassifications
Reversal of impairment
Amortization
Exchange rate differences
Closing accumulated amortization/impairment
Carrying amount

31,876
–
4,013
–
–
3,953
39,842

–59
–
–
–
–
–5
–63
39,778

4,909
1
59
2
–4
530
5,497

–24
–2
–
–
–3
–4
–33
5,464

Other
intangible
assets

3,429
177
98
54
42
438
4,238

–1,851
–57
–9
2
–285
–224
–2,424
1,814

Total

40,214
178
4,169
56
39
4,920
49,577

–1,934
–59
–9
2
–288
–233
–2,520
47,056

Intangible
assets

3,114
10
–
–
–
–
3,125

–1,627
–
–
–
–435
–
–2,063
1,062

Group

Parent company

2013, SEK M

Goodwill

Brands

Opening accumulated acquisition cost
Purchases
Acquisitions of subsidiaries
Sales, disposals and adjustments
Reclassifications
Exchange rate differences
Closing accumulated acquisition cost

Opening accumulated amortization/impairment
Sales, disposals and adjustments
Reclassifications
Amortization
Exchange rate differences
Closing accumulated amortization/impairment
Carrying amount

28,998
–
2,684
–
–
194
31,876

–66
–
–
–
7
–59
31,817

4,156
1
751
–
–62
63
4,909

–59
–
41
–6
–1
–24
4,885

Other
intangible
assets

3,020
151
163
–75
117
54
3,429

–1,627
74
–50
–219
–30
–1,851
1,578

Total

36,174
152
3,598
–75
55
311
40,214

–1,752
74
–9
–224
–24
–1,934
38,280

Intangible
assets

2,123
991
–
–
–
–
3,114

–1,200
–
–
–427
–
–1,627
1,486

Other intangible assets consist mainly of customer relations
and technology. The carrying amount of intangible assets
with an indefinite useful life, excluding goodwill, amounts to
SEK 5,419 M (4,840) 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.

Amortization and impairment of intangible assets are
mainly recognized as cost of goods sold in the income state-
ment.

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.
Material assumptions used to calculate values in use:
• Budgeted operating margin.
• Growth rate for extrapolating cash flows beyond the

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.
These calculations are based on estimated future cash flows,

Management has determined the budgeted operating
margin 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. The discount rate has been
determined by calculating the weighted average cost of
capital (WACC) for each division.

NOTES

ASSA ABLOY ANNUAL REPORT 2014

Note 14 cont.

2014
Overall, the discount rate after tax 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:

2014, SEK M

Goodwill
Intangible assets with
indefinite useful life
Total

EMEA

7,247

220
7,467

Americas

Asia Pacific

Global
Technologies

9,000

701
9,701

7,931

1,333
9,264

5,984

488
6,473

Entrance
Systems

9,615

2,677
12,292

Total

39,778

5,419
45,197

2013
Overall, the discount rate after tax 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:

2013, SEK M

Goodwill
Intangible assets with
indefinite useful life
Total

EMEA

6,395

205
6,599

Americas

Asia Pacific

Global
Technologies

7,319

586
7,905

4,311

1,153
5,463

4,511

350
4,862

Entrance
Systems

9,282

2,547
11,828

Total

31,817

4,840
36,657

Sensitivity analysis
A sensitivity analysis has been carried out for each cash-
generating unit. The results of this analysis are summarized
below.

2014
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 6 percent, Americas 4 per-
cent, Asia Pacific 6 percent, Global Technologies 5 percent,
and Entrance Systems 7 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.

2013
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 6 percent, Americas 4 per-
cent, Asia Pacific 7 percent, Global Technologies 5 percent,
and Entrance Systems 7 percent).

If the estimated weighted capital cost used for the
Group’s discounted cash flows had been one percent-
age point higher than the basic assumption of 9.0 to 10.0
percent, 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).

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

ASSA ABLOY ANNUAL REPORT 2014

NOTES 99

Note 15 Tangible assets

2014, SEK M

Buildings

ments Machinery Equipment

Land and
land
improve-

Construc-
tion in
progress

Total

Equipment

Group

Parent company

Opening accumulated
acquisition cost
Purchases
Acquisitions of subsidiaries
Sales and disposals
Reclassifications
Exchange rate differences
Closing accumulated
acquisition cost

Opening accumulated
depreciation and impairment
Sales and disposals
Impairment
Depreciation
Reclassifications
Exchange rate differences
Closing accumulated
depreciation and impairment
Carrying amount

4,239
69
76
–148
378
596

959
26
85
–14
46
108

6,581
224
87
–194
230
1,111

2,329
186
42
–200
72
404

927
657
–1
–17
–769
106

15,034
1,163
289
–573
–43
2,325

5,210

1,210

8,039

2,833

903

18,195

–1,963
140
–8
–187
5
–272

–2,286
2,924

–198
7
–
–6
–5
–9

–211
999

–4,742
182
–6
–445
4
–869

–5,877
2,163

–1,741
194
–1
–237
6
–332

–2,110
723

–
–
–
_
–
–

–8,644
524
–15
–875
9
–1,483

–
903

–10,484
7,712

20
–
–
–1
–
–

–17
1
–
–1
–
–

–17
2

2013, SEK M

Buildings

ments Machinery Equipment

Land and
land
improve-

Construc-
tion in
progress

Total

Equipment

Group

Parent company

Opening accumulated
acquisition cost
Purchases
Acquisitions of subsidiaries
Sales and disposals
Reclassifications
Exchange rate differences
Closing accumulated
acquisition cost

Opening accumulated
depreciation and impairment
Sales and disposals
Impairment
Depreciation
Reclassifications
Exchange rate differences
Closing accumulated
depreciation and impairment
Carrying amount

4,045
59
282
–234
18
69

4,239

–1,952
200
–28
–158
35
–60

–1,963
2,276

870
2
11
–40
120
–4

959

–145
1
–
–3
–48
–2

–198
761

6,300
180
205
–329
101
124

2,226
163
57
–166
48
1

490
751
23
–3
–339
4

13,931
1,156
579
–772
–52
193

6,581

2,329

927

15,034

–4,534
308
–27
–410
4
–83

–4,742
1,839

–1,697
140
0
–197
21
–9

–1,741
588

–
–
–
–
–
–

–
927

–8,328
648
–55
–769
12
–154

–8,644
6,390

19
1
–
–
–
–

–16
–
–
–1
–
–

–17
3

100

NOTES

ASSA ABLOY ANNUAL REPORT 2014

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 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
HID Global Ireland Teoranta
Mul-T-Lock Ltd
ASSA ABLOY Holdings (SA) Ltd
ASSA ABLOY Inc
Fleming Door Products, Ltd
ABLOY Canada Inc.
AAC Acquisition Inc.
ASSA ABLOY Australia Pacific Pty Ltd
Grupo Industrial Phillips, S.A de C.V.
Cerraduras de Colombia S.A.
WHAIG Limited
ASSA ABLOY Asia Pacific Ltd
Cardo AB
ASSA ABLOY Portugal, Unipessoal, Lda (Portugal)
ASSA ABLOY Mobile Services AB
ASSA ABLOY Holding Italia S.p.A.
HID SA (Argentina)
ActivIdentity Europe S.A. (France)
Dynaco US Inc
Total

1 The Group’s holdings amount to 100 percent.

Note 17 Investments in associates

2014 Company name

Agta Record AG
Goal Co., Ltd
SARA Loading Bay Ltd
Talleres Agui S.A.
Saudi Crawford Doors Ltd
Other
Total

Corporate identity number,
Registered office

Number
of shares

Share of
equity, %

Carrying
amount,
SEK M

Parent company

556061-8455, Eskilstuna
556214-7735, Landskrona
556204-8511, Landskrona
556047-9148, Stockholm
516406-0740, Stockholm
556645-4087, Stockholm
556645-0275, Stockholm
556602-4500, 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
364896, Galway
520036583, Yavne
1948/030356/06, Roodepoort
039347-83, Oregon
147126, Ontario
104722749 RC0002, Vaughn, Ontario
002098175, Ontario
ACN 095354582, Oakleigh, Victoria
GIP980312169, Mexico
Public Deed 2798, Bogota
EC21330, Bermuda
53451, Hong Kong
556026-8517, Malmö
PT500243700, Alfragide
556909-5929, Stockholm
IT01254420597, Rome
CUIT 30-61783980-2, Buenos Aires
FR21341213411, Nanterre
2979272, Illinois

70
15,000
1,000
400
60,000
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
501,000
13,787,856
100,220
100
25,846,600
1
1
48,190,000
27,036,635
2,201,670
100,100
1,000,000
27,000,000
1
50,000
650,000
2,400
1,000,000
850

100
100
100
100
100
100
100
100
100
100
100
100
100
661
100
981
100
100
100
100
90 1
100
100
100
100
100
100
100
711
100
100
100
100
100
100
21
100
100

Country of registration

Switzerland
Japan
United Kingdom
Spain
Saudi Arabia

Group

Number of
shares

Share of
equity, %

5,166,945
2,778,790
4,990
4,800
800

39
46
50
40
40

197
22
181
6,036
60
220
12
189
4,257
538
376
1,086
771
2,228
1,964
0
47
109
3,077
293
901
184
2,237
0
13
17
242
765
142
303
72
5,093
0
5
974
0
82
309
33,001

Carrying
amount,
SEK M

1,419
414
14
8
5
1
1,861

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 2014. For the period January to June, the company’s revenue
totaled SEK 1,227 M (1,061) and income after tax was SEK 76 M (72). The company’s assets totaled SEK 2,482 M (2,160) and
total liabilities amounted to SEK 831 M (708).

2013 Company name

Agta Record AG
Goal Co., Ltd
SARA Loading Bay Ltd
Talleres Agui S.A.
Saudi Crawford Doors Ltd
Other
Total

Country of registration

Switzerland
Japan
United Kingdom
Spain
Saudi Arabia

Group

Number of
shares

Share of
equity, %

5,166,945
2,778,790
4,999
4,800
800

39
46
50
40
40

Carrying
amount,
SEK M

1,277
371
14
8
5
0
1,675

ASSA ABLOY ANNUAL REPORT 2014

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
Tangible and intangible assets
Other deferred tax liabilities
Deferred tax liabilities
Deferred tax assets, net

Change in deferred tax

Opening balance
Acquisitions of subsidiaries, net
Recognized in income statement
Deferred tax from actuarial gain/loss on
post-employment benefit obligations
Exchange rate differences
Closing balance

Group

2013

2014

404
409
360
504
1,677

1,350
66
1,416
262

493
–145
90

–136
–41
262

236
536
297
486
1,555

1,411
51
1,462
93

262
67
–322

152
–66
93

The Group has tax loss carry forwards and other tax credits
of SEK 1,554 M (1,800) for which deferred tax assets have
not been recognized, as it is uncertain whether they can be
offset against taxable income in future taxation.

Note 19 Other financial assets

SEK M

2013

2014

2013

2014

Group

Parent
company

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

–
4

55
86

–
5

1,619
–

1,620
–

–

43
76

–
1,619

–
1,620

Group

2013

1,913
1,542
2,806
236
6,498

2014

2,266
1,767
3,453
359
7,845

Impairment of inventories amounted to SEK 172 M (166).

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

2013

9,073
–541
8,531

2014

11,215
–620
10,595

6,021

7,675

2,199
479
375
3,052

–70
–127
–345
–541
8,531

2,475
596
470
3,540

–81
–109
–430
–620
10,595

Trade receivables per currency

EUR
USD
CNY
SEK
GBP
CAD
AUD
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

2013

2,410
2,430
920
476
440
287
262
1,307
8,531

2013

570
18
–105
–61
110
10
541

2014

2,534
3,266
1,533
457
466
311
297
1,731
10,595

2014

541
19
–105
–31
132
63
620

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. The statutory reserve con-
tains premiums (amounts received from share issues that
exceed the nominal value of the shares) relating to shares
issued up to 2005.

Non-restricted equity consists of share premium
reserves, retained earnings and net income for the year.

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

351,684

370,859

19,175

351,684

370,859

191,753

351,684

543,437

19,175

351,684

370,859

19,175

351,684

370,859

191,753

351,684

543,437

Opening balance at
1 January 2013
Closing balance at
31 December 2013

Number of votes,
thousands
Opening balance at
1 January 2014
Closing balance at
31 December 2014

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 370,259
(370,259) during the year. None of the Group’s outstanding
long-term incentive programs are expected to result in sig-
nificant dilution in the future.

The total number of treasury shares as at 31 December

2014 amounted to 600,000. No shares have been repur-
chased during the year.

Dividend per share
The dividend paid during the financial year totaled SEK 2,110 M
(1,888), equivalent to SEK 5.70 (5.10) per share. A dividend
for 2014 of SEK 6.50 per share, a total of SEK 2,407 M, will
be proposed at the Annual General Meeting on Thursday,
7 May 2015.

102

NOTES

ASSA ABLOY ANNUAL REPORT 2014

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 in the balance sheet mainly relate to defined
benefit plans. ASSA ABLOY has defined benefit pension plans
in a number of countries, with those in the USA, the UK and
Germany being the most significant.

The defined benefit plans in the USA and the UK are

secured by assets in pension funds, while the plans in
Germany are chiefly unfunded. In the USA, there are also
unfunded plans for post-employment medical benefits.
The operations of pension funds are regulated by
national regulations and practice. The responsibility for
monitoring the pension plans and their assets rests mainly
with the boards of the pension funds, but can also rest
more directly with the company. The Group has an overall
policy for the limits within which asset allocation should
be made. Each pension fund adjusts its local asset alloca-
tion according to the nature of the local pension obliga-
tion, particularly the remaining term and the breakdown
between active members and pensioners. The Group has
not changed the processes used for managing these risks
compared with previous periods.

The investments are well diversified so that deprecia-
tion of an individual investment should not have any mate-
rial impact on the plan assets. The majority of assets are
invested in shares as the Group considers that shares pro-
duce the best long-term return at an acceptable risk level.
The total allocation to shares should not, however, exceed
60 percent of total assets. Fixed income assets are invested
in a combination of ordinary government bonds and corpo-
rate bonds but also in inflation-indexed bonds. The average
term of these is normally somewhat shorter than the term
of the underlying liability. Bonds should not account for
less than 30 percent of assets. A small proportion of assets
is also invested in real estate and alternative investments,
mainly hedge funds.

As at 31 December 2014, shares accounted for 46 per-
cent (49) and fixed income securities for 34 percent (31)
of plan assets, while other assets accounted for 20 per-
cent (20). The actual return on plan assets in 2014 was
SEK 384 M (333).

Amounts recognized in the income statement

Pension costs, SEK M

2013

2014

Defined contribution pension plans
Defined benefit pension plans
Post-employment medical benefit plans
Total

of which, included in:
Operating income
Net financial items

371
136
27
534

449
85

428
86
24
538

455
84

Amounts recognized in the balance sheet

Pension provisions, SEK M

2013

2014

Provisions for defined benefit
pension plans
Provisions for post-employment
medical benefits
Provisions for defined contribution
pension plans
Pension provisions

1,567

2,311

389

554

60
2,015

81
2,946

Pensions with Alecta
Commitments for old-age pensions and family pensions for
salaried employees in Sweden are secured in part through
insurance with Alecta. According to UFR 3, this is a defined
benefit plan that covers many employers. For the 2014
financial year, the company has not had access to informa-
tion making it possible to report this plan as a defined
benefit plan. Pension plans in accordance with ITP secured
through insurance with Alecta are therefore reported as
defined contribution plans. The year’s pension contributions
that are contracted to Alecta total SEK 27 M (25), of which
SEK 10 M (9) relates to the Parent company. Pension contri-
butions are expected to remain largely unchanged in 2015.
Alecta’s surplus can be distributed to policyholders and/

or the insured. As at 31 December 2014, Alecta’s surplus
expressed as the collective consolidation level amounted
preliminarily to 144 percent (153 percent as at 30 Septem-
ber 2013). The collective consolidation level consists of the
market value of Alecta’s assets as a percentage of its insur-
ance commitments calculated according to Alecta’s actuarial
calculation assumptions, which do not comply with IAS 19.
The collective consolidation level is normally allowed to vary
between 125 and 155 percent. If the consolidation level
deviates from this range, measures in the form of an adjust-
ment of the premium level should be taken to return to the
normal range.

Specification of defined benefit pension plans, post-employment medical benefits and plan assets by country

United Kingdom

Germany

USA

Other countries

Total

Specification of defined
benefits, SEK M

Present value of funded
obligations
Fair value of plan assets
Net value of funded plans

Present value of unfunded
obligations
Present value of unfunded
medical benefits
Net value of defined benefit
pension plans

Provisions for defined
contribution pension plans
Total

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

2,072
–1,874
199

2,689
–2,351
339

80
–23
56

142
–24
118

1,536
–1,323
213

1,976
–1,453
522

356
–205
151

469
–275
194

4,044
–3,425
619

5,275
–4,103
1,172

–

554

688

–

394

464

948

1,152

–

385

549

389

554

199

339

610

805

598

1,071

549

662

1,956

2,877

0
199

–
339

–
610

–
805

–
598

–
1,071

60
608

68
730

60
2,015

68
2,946

ASSA ABLOY ANNUAL REPORT 2014

NOTES 103

Note 24 cont.

Movement in obligations

2014, SEK M

Opening balance at 1 January 2014
Acquisitions/disposals

Reclassifications

Recognized in the income statement:
Current service cost
Past service cost
Impairment/reversal of pension receivables
Interest expense/income
Total recognized in the income statement

Recognized in other comprehensive income:
Return on plan assets,
excluding amounts included above
Gain/loss from change in demographic assumptions
Gain/loss from change in financial assumptions
Experience-based gains/losses

Remeasurement of net pension obligations
Exchange rate differences
Total recognized in other comprehensive income

Contributions and payments:
Employer contributions
Employee contributions
Payments
Total payments
Closing balance at 31 December 2014

2013, SEK M

Opening balance at 1 January 2013
Acquisitions/disposals

Recognized in the income statement:
Current service cost
Past service cost
Impairment/reversal of pension receivables
Curtailments
Interest expense/income
Total recognized in the income statement

Remeasurement of net pension obligations
Exchange rate differences
Total recognized in other comprehensive income

Contributions and payments:
Employer contributions
Employee contributions
Payments
Total payments
Closing balance at 31 December 2013

Plan assets allocation

Plan assets

Publicly traded shares
Government bonds
Corporate bonds
Inflation-linked bonds
Property
Cash and cash equivalents
Alternative investments
Other assets
Total

Key actuarial assumptions

Post-employ-
ment medical
benefits

Defined bene-
fit pension
plans

389
–

–

5
–
–
19
24

–
–
80
–

80
88
168

–
0
–27
–27
554

4,992
0

59
0
–194
220
85

–
134
719
–10

843
674
1,517

–
0
–231
–231
6,427

Post-employ-
ment medical
benefits

Defined bene-
fit pension
plans

417
–

5
1
5
–
16
27

–
–
–30
–

–30
0
–30

–
0
–25
–25
389

5,021
1

62
6
0
0
198
265

–
9
–92
–49

–133
72
–61

–
–5
–228
–233
4,992

Plan assets

–3,425
–

–55

–
–
157
–156
1

–228
–
–
–

–228
–515
–743

–59
0
178
119
–4,103

Plan assets

–3,193
–

–
–
–
–
–129
–129

–198
–
–
–

–198
–34
–231

–35
–
163
128
–3,425

2013

1,678
384
460
227
239
0
238
197
3,425

Total

1,956
0

64
0
–38
84
110

–228
134
799
–10

695
247
942

–59
0
–81
–139
2,877

Total

2,245
1

67
6
5
0
85
163

–198
9
–123
–49

–361
38
–323

–35
–5
–91
–130
1,956

2014

1,901
599
605
188
281
24
280
226
4,103

104

NOTES

ASSA ABLOY ANNUAL REPORT 2014

Note 24 cont.

United Kingdom

Germany

USA

Key actuarial assumptions (weighted average), %

2013

2014

2013

2014

2013

2014

Discount rate
Expected annual salary increases
Expected annual pension increases
Expected annual medical benefit increases
Expected annual inflation

4.4
n/a
2.3
n/a
2.3

3.5
n/a
2.0
n/a
2.0

3.5
2.8
1.8
n/a
1.8

1.8
2.3
1.8
n/a
1.8

4.8
n/a
2.0
7.3
3.0

4.0
n/a
2.0
7.2
3.0

Sensitivity analysis of defined benefit obligations and post-employment medical benefits

The effect on defined benefit obligations and post-employment medical benefits
of a 1 percent change in some actuarial assumptions, change in percent

Discount rate
Expected annual medical benefit increases

Note 25 Other provisions

Note 26 Other current liabilities

SEK M

Opening balance at
1 January 2013
Provisions for the year
Reclassifications
Reversal of non-utilized
amounts
Payments
Exchange rate differences
Closing balance at
31 December 2013

SEK M

Opening balance at
1 January 2014
Provisions for the year
Reversal of non-utilized
amounts
Payments
Utilized during the year, with-
out cash flow impact
Exchange rate differences
Closing balance at
31 December 2014

Balance sheet breakdown:

Other non-current provisions
Other current provisions
Total

Restruc-
turing
reserve

1,068
914
24

–12
–647
22

Group

Other

Total

2,007
282
–24

–291
–108
–6

3,075
1,196
–

–303
–756
17

1,369

1,860

3,229

Group

Restruc-
turing
reserve

1,369
–

–
–453

–40
65

Other

Total

1,860
224

–37
–53

–
18

3,229
224

–37
–507

–40
83

941

2,012

2,952

Group

2013

2,373
856
3,229

2014

2,428
525
2,952

The restructuring reserve relates to the ongoing restructuring
programs launched in 2008, 2009, 2011 and 2013. The clos-
ing balance 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 471 M.
For further information on the restructuring programs, see
the Report of the Board of Directors. Other provisions relate
to taxes and legal obligations including future environment-
related measures.

+1.0 %

–15.2 %
14.3 %

–1.0 %

15.5 %
–11.8 %

Group

2013

2014

446
93
398

69
273
475
1,754

545
88
528

61
1,313
526
3,060

SEK M

VAT and excise duties
Employee withholding tax
Advances received
Social security contributions
and other taxes
Deferred considerations
Other current liabilities
Total

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

2013

1,868

639
263
100
710
3,580

2014

2013

2014

2,255

140

162

753
303
102
868
4,282

–
–
57
28
225

–
–
53
36
251

Note 28 Contingent liabilities
Group

Parent company

SEK M

2013

2014

2013

2014

Guarantees
Guarantees on behalf of
subsidiaries
Total

–
89

–

–
99

9,088
9,088

9,789
9,789

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.

Group

Maturity profile – guarantees, SEK M

2013

2014

<1 year
>1<2 years
>2<5 years
>5 years
Total

45
3
33
8
89

50
16
28
5
99

Note 29 Assets pledged against liabilities
to credit institutions

Group

Parent company

SEK M

2013

2014

2013

2014

Real estate mortgages
Other mortgages
Total

44
30
74

19
87
106

–
–
–

ASSA ABLOY ANNUAL REPORT 2014

NOTES 105

Note 30 Business combinations

SEK M

Purchase prices
Cash paid for acquisitions during the year
Holdbacks and deferred consideration
for acquisitions during the year
Adjustment of purchase prices for acqui-
sitions in prior years
Fair value of investments in associates
held before the business combination

Total

Acquired assets and liabilities
at fair value
Intangible assets
Tangible assets
Deferred tax assets
Other financial assets
Inventories
Current receivables and investments
Cash and cash equivalents
Non-controlling interest
Deferred tax liabilities
Pension provisions
Other non-current liabilities
Current liabilities
Total
Acquired negative goodwill - recognized
as other operating income

Goodwill

Cash paid for acquisitions during the year
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

2013

2014

3,991

2,478

607

2,191

–42

–

4,643

4,627

914
579
23
18
464
499
53
–
–168
–1
–111
–311
1,959

–

2,684

3,991

–53

845

4,783

517
46
24

156
289
–4
–11
266
324
204
–2
71
0
–47
–627
619

4,013

2,478

–204

180

2,454

1,097
173
156

The table above includes fair value adjustments of acquired
net assets from acquisitions made in previous years.

Acquisition analyses have been prepared for all acqui-

sitions in 2014. The net sales of acquired units for 2014
totaled SEK 2,373 M (3,702) and net income amounted to
SEK 306 M (261). Acquisition-related costs for 2014 totaled
SEK 33 M (56) and have been reported as other operating
expenses in the income statement.

See below for an account of some acquisitions com-

pleted in 2014 and 2013.

2014
Lumidigm
On 10 February 2014, 100 percent of Lumidigm (USA) was
acquired, a leading player in the fast-growing biometric
segment. The acquisition significantly advances the Group’s
position in biometrics and will create further growth oppor-
tunities for ASSA ABLOY. The company is headquartered in
Albuquerque, New Mexico.

Intangible assets in the form of the brand and technology

have been disclosed in the purchase price allocation. Resid-
ual goodwill mainly relates to synergies and other intangible
assets that do not meet the criteria for separate reporting.

Digi Electronic Lock
On 29 December 2014 the Group acquired 51 per cent of
the share capital of Digi Electronic Lock, the leading digital
door lock manufacturer in China. In connection to the acqui-
sition, an agreement was signed on future acquisition of
outstanding interests, and the company is therefore consoli-
dated 100 percent from the acquisition date.

Keylock is the leading brand in China for digital door locks
with a comprehensive product range for the mid to low seg-
ments which complements ASSA ABLOY´s current premium
products. Digi Electronic Lock is a great addition to the cur-
rent offering within the rapidly growing digital door locks
segment. Digi Electronic Lock is headquartered in Guang-
zhou, southern China.

The purchase price allocation is preliminary in terms of

valuation of separately acquired intangible assets.

Jiawei
On 1 December 2014 the Group acquired 95 per cent of the
share capital of Jiawei in China, one of the leading suppliers
of security locks in China. In connection to the acquisition,
an agreement was signed on future acquisition of outstand-
ing interests, and the company is therefore consolidated
100 percent from the acquisition date.

Jiawei broadens ASSA ABLOY´s presence in the OEM

channel for door manufacturers and gives important
complementary access to the growing replacement market
for security locks and cylinders in China. Jiawei constitutes
another important step in the strategy to grow market pres-
ence in China and other emerging markets. Jiawei is head-
quartered in Jinhua, Zhejiang province, eastern China.

The purchase price allocation is preliminary in terms of

valuation of separately acquired intangible assets.

Other acquisitions
Other notable acquisitions during the year comprised the
Brazilian companies Metalika and Silvana, ENOX (India) and
Huasheng and Xinmao (China).

2013
Ameristar
On 2 November 2013 the Group acquired the assets of
Ameristar, the leading US manufacturer of perimeter secu-
rity solutions. Ameristar offers a comprehensive product
range of industrial and high security fencing and gates,
complementing the ASSA ABLOY offering of security solu-
tions in the American market. Ameristar brings new valuable
competencies to the Group as well as providing an excel-
lent fit with the Group’s broad array of security and safety
solutions. Ameristar is headquartered in Tulsa, Oklahoma.
Intangible assets in the form of the brand and patents have
been disclosed. Residual goodwill mainly relates to syner-
gies and other intangible assets that do not meet the criteria
for separate reporting.

Amarr
On 25 November 2013 the Group acquired 100 per cent of
the share capital of Amarr (USA), the third largest player in
the North American sectional door market, with a very strong
and attractive market position. Amarr is another important
building block for the ASSA ABLOY Group in building global
leadership within Entrance Automation. Amarr’s size, product
offering and market position give a strong footprint within
sectional doors in North America. Amarr is headquartered
in Winston-Salem, North Carolina. Intangible assets in the
form of brand have been disclosed. Residual goodwill mainly
relates to synergies and other intangible assets that do not
meet the criteria for separate reporting.

Other acquisitions
Other notable acquisitions during the year comprised
Monterings-service AS Norport (Norway) och Mercor (Poland,
Czech Republic and Slovakia) .

106

NOTES

ASSA ABLOY ANNUAL REPORT 2014

Note 31 Assets of disposal group classified as held

Note 32 Cash flow

for sale and discontinued operations

Group

SEK M

2013

2014

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
classified as held for sale
Net income of disposal group classified as
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

–
–
–
–
–
–
–

–
–
–
–
–
–

–
–
–
–

–

–11

–
85
–

Adjustments for non-cash items
Profit on sales of non-current assets
Change in pension provision
Share of earnings in associates
Dividend from associates
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
Adjustment of purchase prices for acqui-
sitions in prior years
Fair value of investments in associates
held before the business combination
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, net
Less, disposed cash and cash equivalents
Disposal of subsidiaries

Other investments
Investments in and sales of other shares
and interests
Investments in and sales of other non-
current receivables
Other investments

–
–
–
–
–
–
–

–
–
–
–
–
–

–
–
–
–

–

–
201
–

201

Group

2013

2014

–24
73
–94
34
27
17

–166

–520

333

–143
–497

–40
63
–132
41
–82
–150

–261

–695

582

71
–303

–4,643

–4,627

–

45
53
607

–42

–
204
2,191

–845
–4,783

–180
–2,454

85
–
–85

–3
1

201
–
201

–
0

Assets of disposal group classified as held for sale
In 2012 an agreement was signed to sell the Group’s 70 per-
cent interest in the Chinese company Wangli Security
Products Ltd. and the business was recognized in the
balance sheet as Assets of disposal group classified as held for
sale. In 2013 the sale was completed, resulting in a capital
loss of SEK 11 M. On completion the Group received a first
part payment of SEK 85 M of the purchase price. In 2014
the final payment of SEK 201 M was received.

ASSA ABLOY ANNUAL REPORT 2014

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

2013

11,395
2,363
449
13,759

2014

12,544
3,483
428
16,026

Fees to Board members in 2014 (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 (4)
Total

Board

1,600
750
500
500
–
500
500
500
–
4,850

Remuneration
Committee

Audit
Committee

100
–
–
–
–
50
–
50
–
200

–
–
125
–
–
–
250
125
–
500

Parent company

2013

2014

147
94
25
241

146
86
24
232

Total

1,700
750
625
500
–
550
750
675
–
5,550

Total fees to Board members amounted to SEK 5.2 M in 2013.

Remuneration and other benefits of the Executive Team in 2014, SEK thousands

Name

Fixed salary Variable salary

benefits Other benefits

Pension costs

Johan Molin, President and CEO
Other members of the Executive Team (8)
Total remuneration and benefits

14,646
37,150
51,796

10,541
17,086
27,627

7,080
13,606
20,686

120
3,737
3,857

6,028
9,213
15,241

Stock-related

Total remuneration and other benefits of the Executive Team amounted to SEK 113 M in 2013.

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 51 M (48).
Social security costs amounted to SEK 39 M (46), of which
30 SEK M (37) were pension costs and tax on 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, 2012, 2013 and 2014 Annual General Meet-

ings, it was decided to implement further long-term incen-
tive programs for senior executives and other key staff in
the Group. The new long-term incentive programs, named
LTI 2011, LTI 2012, LTI 2013 and LTI 2014, have been drawn
up with similar terms to LTI 2010.

For each Series B share acquired by the CEO within the
framework of LTI 2012, LTI 2013 and LTI 2014, 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 incen-
tive programs, employees have acquired a total of 210,375
shares in ASSA ABLOY AB, of which 54,419 shares were
acquired in 2014 within the framework of LTI 2014.

Each matching stock option entitles the holder to receive
one free Series B share in the company after three years,
provided that the holder, with certain exceptions, is still
employed in the Group when the interim report for Q1
2015, 2016 and 2017 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 of Directors for the performance of the
company’s earnings per share must have been fulfilled. The
performance-based condition for each respective year has
been fulfilled for all three programs.

Outstanding matching and performance-based stock
options for LTI 2014 total 158,188. The total number of out-
standing matching and performance-based stock options
for LTI 2012, LTI 2013 and LTI 2014 amounted to 573,714 on
the reporting date of 31 December 2014.

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
program. In the case of performance-based shares, the com-
pany assesses the probability of the performance targets
being met when calculating the compensation expense.
The fair value of ASSA ABLOY’s Series B share on the
allotment date for LTI 2014 of 21 May 2014 was SEK 338.57.
The fair value of ASSA ABLOY’s Series B share on the allot-
ment date for LTI 2013 of 21 May 2013 was SEK 272.33.
The equivalent value on the allotment date for LTI 2012 of
22 May 2012 was SEK 187.77.

108

NOTES

ASSA ABLOY ANNUAL REPORT 2014

Note 33 cont.

The total cost of the Group’s four long-term incentive pro-
grams excluding social security costs amounted to SEK 37 M
(34) in 2014. In April 2014 a redemption of LTI 2011 took
place and 219,350 shares (204,611) at a total market value
of SEK 75 M (52) were transferred to the participants of the
program. The payment for the transferred shares was recog-
nized in equity.

Other equity-based incentive programs
ASSA ABLOY has previously issued a number of convertible
debentures to employees in the Group. At year-end 2014,

there were no outstanding convertible debentures issued to
employees in the Group.

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 employment
benefits. If one of the other members of the Executive Team
is given notice, the company is liable to pay a maximum six
months’ basic salary and other employment benefits plus an
additional 12 months’ basic salary.

Average number of employees per country, broken down by gender

China
USA
France
Sweden
United Kingdom
Germany
Mexico
Czech Republic
Netherlands
Finland
Canada
Romania
Australia
Norway
South Korea
Malaysia
Spain
Italy
Poland
Belgium
Denmark
Brazil
South Africa
Israel
New Zealand
Switzerland
Colombia
Austria
Ireland
India
Chile
Hong Kong
Other
Total

Sweden
Total

Total

13,475
6,851
2,143
2,073
1,553
1,597
1,375
1,172
1,009
890
826
816
764
594
660
658
580
617
175
477
448
382
365
389
293
305
259
200
197
109
174
134
996
42,556

Total

136
136

Group

2013

of which
women

of which
men

4,360
2,047
651
562
502
476
473
565
169
300
202
300
209
129
234
420
137
154
29
118
117
107
162
116
92
82
52
38
66
10
52
56
205
13,192

9,115
4,804
1,492
1,511
1,051
1,120
902
607
840
590
624
516
556
465
426
238
443
463
147
360
331
275
203
273
201
223
207
162
131
99
122
78
789
29,364

2014

of which
women

of which
men

5,138
2,370
638
500
526
477
437
559
193
312
185
310
210
137
223
371
134
140
107
110
114
117
161
104
90
88
51
38
61
16
55
60
214
14,244

7,458
6,293
1,422
1,539
1,068
1,113
917
793
834
625
671
535
548
577
480
283
429
413
407
345
333
312
217
233
230
232
174
157
119
164
120
88
896
30,025

Total

12,596
8,662
2,060
2,039
1,594
1,589
1,353
1,352
1,027
937
856
845
758
714
703
654
563
553
514
455
447
429
378
337
321
320
225
195
180
180
175
148
1,110
44,269

Parent company

2013

of which
women

of which
men

27
27

109
109

2014

of which
women

of which
men

36
36

125
125

2014

of which
women

of which
men

2
1

1
3

6
8

2
14

Total

161
161

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.

2013

of which
women

of which
men

2
1

1
3

6
8

2
14

Total

8
9

3
17

ASSA ABLOY ANNUAL REPORT 2014

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. Financial risk man-
agement for ASSA ABLOY’s units has been implemented in
accordance with the Group’s financial policy. The principles
for financial risk management are described below.

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 pro-
visions, less cash and cash equivalents, and other interest-
bearing investments including positive market values of
derivatives. The table ‘Net debt and equity’ shows the posi-
tion 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
centrally and the majority of financial transactions are
conducted by the subsidiary ASSA ABLOY Financial Services
AB, which is the Group’s internal bank. External financial
transactions are conducted by Treasury. Treasury achieves
significant economies of scale when negotiating borrowing
agreements, using interest rate derivatives and managing
currency 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

Group

2013

–27

–343
–362
2,015
13,329

4,983
19,595
28,813
0.68

2014

–28

–202
–638
2,946
15,362

4,887
22,327
36,098
0.62

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 benefits 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, returning

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
solid 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 instruments1

SEK M2

Long-term bank loans
Long-term capital market loans
Short-term bank loans
Commercial papers and
short-term capital market loans
Derivatives (outflow)
Total by period

Cash and cash equivalents incl.
interest-bearing receivables
Non-current interest-bearing
receivables
Derivatives (inflow)
Deferred considerations
Trade receivables
Trade payables
Net total

Confirmed credit facilities
Credit facilities maturing < 1 year
Adjusted maturity profile¹

31 December 2013

31 December 2014

<1 year

–20
–2,408
–1,254

–3,662
–8,737
–16,080

>1<2
years

–320
–2,307
–

–
–579
–3,206

>2<5
years

–600
–5,858
–

–
–598
–7,056

>5 years

<1 year

–1,511
–4,305
–

–
–54
–5,870

–279
–2,500
–997

–1,286
–9,176
–14,240

>1<2
years

–209
–2,207
–

–
–35
–2,451

>2<5
years

–1,596
–5,736
–

–
–602
–7,934

>5 years

–1,336
–5,527
–

–
–41
–6,904

704

–

841

–

27
8,962
–273
8,531
–4,393
–2,522

8,074
–548
5,004

–
600
–284
–
–
–2,890

–
–
–2,890

–
667
–380
–
–
–6,769

–8,074
–
–14,843

–
154
–
–
–
–5,716

–
–
–5,716

28
9,058
–1,313
10,595
–5,699
–729

8,575
–598
7,248

–
70
–843
–
–
–3,224

–
–
–3,224

–
638
–1,084
–
–
–8,380

–8,575
–
–16,955

–
131
–
–
–
–6,773

–
–
–6,773

1 For maturity structure of guarantees, see Note 28.
2 The amounts in the table are undiscounted and include future known interest payments. The exact amounts are therefore not found in the balance sheet.

110

NOTES

ASSA ABLOY ANNUAL REPORT 2014

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 NIB

Bank loan EIB
Global MTN Program

Amount,
SEK M

591
392
392
955
196
548
392
782
586
8,575
523
523
1,048
14,292

985
30,780
627

7,834

5,000
406
1,702
15,571
46,357

Other long-term loans
Total long-term loans/facilities
US Private Placement Program
Global MTN Program

Global CP Program

Swedish CP Program
Other bank loans
Overdraft facility
Total short-term loans/facilities
Total loans/facilities

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

Maturity

Dec 2016
Apr 2017
May 2017
Dec 2018
Aug 2019
May 2020
Aug 2022
Aug 2022
Aug 2024
Jun 2019
Dec 2019
Dec 2021

Jul 20182
Jun 2016
Jun 2016
Aug 2016
Nov 2016
Nov 2016
May 2017
Sep 2017
Mar 2018
Jun 2018
Sep 2018
Oct 2018
Aug 2019
Sep 2019
Feb 2020
Nov 2020
Dec 2020
Feb 2021
Oct 2021
Mar 2022
Nov 2023
Mar 2025
Feb 2027

May 2015
Jan 2015
Jul 2015
Aug 2015
Oct 2015
Oct 2015

Carrying
amount,
SEK M

Currency

Amount
2013

Amount
2014

Of which
Parent
company,
SEK M

USD
USD
USD
USD
USD
USD
USD
USD
USD
EUR
EUR
EUR
EUR
NOK
NOK
SEK
EUR
EUR
SEK
CHF
EUR
SEK
USD
EUR
USD
USD
EUR
EUR
EUR
USD
EUR
EUR
USD
EUR
EUR

USD
EUR
EUR
SEK
SEK
JPY
USD
EUR
SEK

76
50
50
122
25
70
50
100
75
900
55
55
110
250
100
250
30
40
500
100

500

50
35
30

25
30
30

76
50
50
122
25
70
50
100
75
900
55
55
110
250
100
250
30
40
500
100
50
500
10
30
50
20
50
35
30
50
15
50
25
30
30

80
30
30
250
500
3,000
25
69
800

80
30
30
250
500
3,000
25
41
700

274
105
250
286
381
500
792
476
500
78
286
391
157
476

300
391
142
476

321
285
837

286
286
250
500
196

591
392
392
955
196
548
4141
782
586
0
523
523
1,048
2741
105
250
286
381
500
792
476
500
78
285
391
157
476
3541
3001
391
142
476
2071
3211
285
985
15,362

6371
286
286
250
500
196
196
391
700
406
789
4,637
19,999

–638
–43
–27
92
2,945
22,327

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.

Rating

Agency

Short-
term

Standard & Poor’s
Moody’s

A2
P2

Out-
look

Stable
Stable

Long-term

A –
n/a

Credit
outlook

Stable

The Group’s credit rating remained unchanged during the year.

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 man-
ages financing risk at Group level. Treasury is responsible for
external borrowings 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

ASSA ABLOY ANNUAL REPORT 2014

NOTES 111

Note 34 cont.

policy, the available loan facilities, including available cash
and cash equivalents, should include a 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. The maturities are not concentrated
to a particular date in the immediate future. The Group’s
Multi-Currency Revolving Credit Facility was extended by
one year during 2014 in line with an extension option in
the original agreement. Originally this facility matured in
June 2018, but has now extended to June 2019. This credit
facility was wholly unutilized at year-end. Moreover, existing
financial assets are also taken into account. The table shows
undiscounted cash flows relating to the Group’s financial
instruments at the reporting date, and these amounts are
therefore 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 698 M,
of which USD 618 M (698) is long-term, a GMTN program
of SEK 8,857 M (8,506), of which SEK 7,339 M (6,457) is
long-term, a loan from the European Investment Bank of
EUR 110 M (110), and a loan from the Nordic Investment
Bank of EUR 110 M (110). During the year, seven new issues
were made under the GMTN program for a total amount
of around SEK 1,900 M. A bilateral bank loan of 90 MEUR
with an average duration of 6 years was also raised during
the year. Other changes in long-term loans are mainly due
to some of the originally long-term loans now having less
than one year to maturity. The size of the loans has also been
affected by currency fluctuations, in particular the strenght-
ening of the USD and EUR against the SEK . In total SEK 2,757 M
was raised in new long term loans while SEK 2,131 M of origi-
nally long term loans were repaid during the year.

The Group’s short term loan financing mainly con-
sists 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 1,287 M (1,580) of the Commercial Paper Pro-
grams had been utilized. In addition, substantial credit facilities
are available, mainly in the form of a Multi-Currency Revolving
Credit Facility of EUR 900 M (900). The reduction in short-term

Net debt by currency

financing is mainly linked to the increase in long-term capital
market issues implemented to extend the Group’s maturity
profile. At year-end the average time to maturity for the Group’s
interest-bearing liabilities, excluding the pension provision, was
46 months (45).

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.

Currency composition
The currency composition of ASSA ABLOY’s borrowing depends
on the currency composition of the Group’s assets and other lia-
bilities. Currency swaps are used to achieve the desired currency
composition. See the table ‘Net debt by currency’ below.

Cash and cash equivalents and other
interest-bearing receivables
Short-term interest-bearing investments totaled SEK 14 M
(204) at year-end. In addition, ASSA ABLOY has non-current
interest-bearing receivables of SEK 28 M (27) and financial
derivatives with a positive market value of SEK 159 M (138)
which, in addition to cash and cash equivalents, are included
in the definition of net financial debt. Cash and cash equiva-
lents 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) at year-end 2014.

The Parent company’s cash and cash equivalents are held

in a sub-account to the Group account.

SEK M

2013

2014

2013

2014

Group

Parent company

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

362

638

–
362

204

138
731

29
667

159
868

–

–
–

–

–
–

–

–
–

–

–
–

SEK M

USD
EUR
SEK
AUD
NOK
CNY
CZK
DKK
Other
Total

31 December 2013

31 December 2014

Net debt excluding
currency swaps

Net debt including
currency swaps

Net debt excluding
currency swaps

Net debt including
currency swaps

5,894
8,551
4,008
27
463
–285
25
34
812
19,595

10,370
5,165
2,238
608
75
–678
343
195
220
19,595

8,117
8,998
3,282
21
462
–302
12
21
1,716
22,327

12,009
6,099
1,171
682
506
395
367
258
840
22,327

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 manage
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) at year-end 2014. A downward
change in the yield curve of one percentage point would
reduce the Group’s interest income by around SEK 0 M (1)
and consolidated equity by SEK 0 M (1).

112

NOTES

ASSA ABLOY ANNUAL REPORT 2014

Note 34 cont.

Interest rate risks in borrowing
Changes in interest rates have a direct impact on
ASSA ABLOY’s net interest expense. Treasury is responsible
for identifying and managing the Group’s interest rate expo-
sure. Treasury 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 adjust the fixed interest term. The financial
policy stipulates that the average fixed interest term should
normally be 24 months. At year-end, the average fixed
interest term on gross debt, excluding pension liabilities,
was around 17 months (21). An upward change in the yield
curve of one percentage point would increase the Group’s
interest expense by around SEK 110 M (102) and reduce
consolidated equity by SEK 81 M (76).

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 fluctuations
to have an impact on the business as quickly as possible. 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
DKK
EUR
GBP
RON
SEK
USD

Currency exposure

2013

370
535
–1,069
266
702
591
–256
–2,413
1,101

2014

135
411
–1,058
249
1,321
82
–260
–1,538
224

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, with all other vari-
ables constant.

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

Currency, SEK M

2013

2014

AUD
CAD
CNY
EUR
GBP
HKD
KRW
USD

36
18
52
167
9
21
12
233

36
14
77
147
20
39
14
341

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. Whenever possible, according to local
conditions, 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 currencies. Treasury uses currency
derivatives and loans to achieve appropriate financing and
to eliminate undesirable currency exposure.

The table ‘Net debt by currency’ on page 112 shows the
use of forward exchange contracts in relation to financing in
major currencies. Forward exchange contracts are used to
neutralize 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 88 per-
cent (87) of the Group’s sales were settled through cash pools
in 2014. However, the Group can in the short term invest sur-
plus 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 with respect
to interest rate and currency derivatives. The table on page
114 shows the impact of this netting.

Commercial credit risk
The Group’s trade receivables are distributed across a large
number of customers who are spread globally. No single
customer accounts for more than 1 percent of the Group’s
sales. The concentration of credit risk associated with trade
receivables is therefore limited. The fair value of trade
receivables is equivalent to the carrying amount. Credit risks
relating to operating activities are managed locally at com-
pany 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 produc-
tion. Forward contracts are not used to hedge commodity
purchases.

Fair value of financial instruments
Derivative financial instruments such as forward exchange
contracts and forward rate agreements 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 114 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 is equiva-
lent to the gross value of the contracts.

For accounting purposes, financial instruments are clas-
sified into measurement categories in accordance with IAS
39. The table ‘Financial instruments’ on page 114 provides
an overview of financial assets and liabilities, measurement
category, and carrying amount and fair value per item.

ASSA ABLOY ANNUAL REPORT 2014

NOTES 113

Note 34 cont.

Disclosures of offsetting of financial assets and liabilities

2013

2014

Amounts
netted
in the
balance
sheet

Net
amounts
in the
balance
sheet

Amount
covered
by net-
ting
agree-
ment but
not offset

Net
amount

Gross
amount

Amounts
netted
in the
balance
sheet

Net
amounts
in the
balance
sheet

Amount
covered
by net-
ting
agree-
ment but
not offset

Net
amount

–
–

139
107

65
60

74
47

159
251

–
–

159
251

104
104

55
147

SEK M

Financial assets
Financial liabilities

Gross
amount

139
107

Netted financial assets and financial liabilities only consist of derivative instruments.

Outstanding derivative financial instruments at 31 December

Instrument, SEK M

Foreign exchange forwards, funding
Interest rate swaps1
Cross currency swaps
Total

31 December 2013

31 December 2014

Positive fair
value

Negative
fair value

Nominal
value

Positive fair
value

Negative
fair value

Nominal
value

77
62
0
139

–13
–50
–45
–108

13,174
7,018
1,319
21,511

23
136
–
159

–117
–35
–99
–251

6,571
3,817
1,045
11,433

1 For interest rate swaps, only one leg is included in nominal value.

Financial instruments: carrying amounts and fair values by measurement category

2013

2014

IAS 39
category*

Carrying
amount

Fair value

Carrying
amount

Fair value

3
1
1
5
2
1
1

4
4

4
4
5
2
4
2

4
1,675
8,531
62
77
204
362

2,161
11,168
13,329
–
4,875
50
58
4,393
937

4
1,675
8,531
62
77
204
362

2,161
11,330
13,491
–
4,875
50
58
4,393
937

5
1,861
10,595
136
23
14
667

1,870
13,492
15,362
637
4,000
35
216
5,699
3,239

5
1,861
10,595
136
23
14
667

1,870
13,834
15,704
637
4,000
35
216
5,699
3,239

SEK M

Financial assets
Other shares and interests
Other financial assets
Trade receivables
Derivative instruments – hedge accounting
Derivative instruments – held for trading
Short-term investments
Cash and cash equivalents

Financial liabilities
Long-term loans – hedge accounting
Long-term loans – not hedge accounting
Long-term loans, total
Short-term loans – hedge accounting
Short-term loans – not hedge accounting
Derivative instruments – hedge accounting
Derivative instruments – held for trading
Trade payables
Deferred considerations

* Applicable IAS 39 categories:
1 = Loans and 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.

The fair value of long-term borrowing is based on observable data by discounting cash flows to market rate, while the fair
value of current receivables and current liabilities is considered to correspond to the carrying amount.

Financial instruments: measured at fair value

SEK M

Financial assets
Derivative instruments

Financial liabilities
Derivative instruments
Deferred considerations¹

2013

2014

Carrying
amounts

Quoted
prices

Observ-
able data

Non-
observ-
able data

Carrying
amounts

Quoted
prices

Observ-
able data

Non-
observ-
able data

139

108
937

–

–
–

139

108
–

–

–
937

159

251
3,239

–

–
–

159

251
–

–

–
3,239

1 Deferred considerations often depend on the earnings trend of an acquired business over a certain period. Measurement of the deferred consideration is based

on the management’s best judgment. Discounting to present value takes place in the case of significant amounts.

114

NOTES

ASSA ABLOY ANNUAL REPORT 2014

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innovation hubs, a 1.5-million-square-foot complex located in the heart of Canada’s largest
research cluster in downtown Toronto.

CHALLENGE: MaRS & B&H Architects were challenged to design and construct a LEED
Canada-CS Gold Certified, state of the art technology 20 story facility that would house
multiple tenants focused on work & learning, health and energy.

SOLUTION: ASSA ABLOY collaborated with B&H Architects and Trillium Architectural
Hardware to identify the best solutions to meet the everyday sustainability, clean room and
accessibility needs of the various tenants. ASSA ABLOY Entrance Systems provided a range
of pedestrian automatic door solutions as part of a sustainable state-of-the-art construction
for MaRS Phase 2. Architectural hardware, electromechanical and access control hardware
solutions were provided by Group brands Sargent, McKinney, HES, Securitron and Medeco.

ASSA ABLOY ANNUAL REPORT 2014

NOTES 115

Comments on five years in summary

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.

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
previous programs have proved to be very successful, result-
ing in major savings and further increased efficiency in the
production 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.

Operating income excluding restructuring costs
increased 10 percent and cash flow remained strong.
Earnings per share after full dilution excluding items affect-
ing 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

systems. 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. 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.

2013
Demand remained weak in Europe but leveled off during the
year, combined with a continuing recovery in the USA and
strong sales growth in emerging markets. Continued sub-
stantial investment in innovative new products further con-
solidated market leadership, with products launched in the
past three years accounting for a record 27 percent of sales.
Operating income, excluding items affecting compara-
bility, increased by 6 percent compared with 2012, and cash
flow showed a positive trend. Earnings per share after full
dilution, excluding items affecting comparability, increased
6 percent.

A total of 10 acquisitions were consolidated dur-
ing the year, which mainly strengthened the position in
entrance automation for overhead sectional doors and in
high- security fencing and gates for the North American
market. These acquisitions increase annual sales by a total
of around SEK 3,700 M and provide important products
and technology.

A new restructuring program was launched during the

year for the purpose of continuing to increase the cost-
efficiency of all divisions. Some 30 production plants and
offices are set to close with an estimated payback period
of just over three years. At year-end 2013, more than 8,500
employees had left the Group as a result of restructuring
activities since the programs began in 2006.

2014
ASSA ABLOY continued to grow rapidly during the year, with
total sales growth of 17 percent. Demand was strong in the
USA, while growth in Europe was more unevenly distributed
between the different regions. Emerging markets showed a
slowdown, partly due to a credit crunch.

The Group’s continued focus on market presence and
innovation during the year took the form of a strengthened
sales force and the launch of many new products. Integra-
tion of acquisitions made and continued efficiencies con-
tributed to maintaining good earning capacity.

Operating income, excluding items affecting compa-
rability, increased by 17 percent compared with 2013, and
cash flow remained strong. Earnings per share after full dilu-
tion, excluding items affecting comparability, increased by
17 percent.

A total of 20 acquisitions were consolidated during
the year, which both strengthened the market position in
key emerging markets such as China, India and Brazil, and
complemented the customer offering in fast-growing new
segments such as biometrics.

116

COMMENTS ON FIVE YEARS IN SUMMARY

ASSA ABLOY ANNUAL REPORT 2014

Five years in summary

Amounts in SEK M unless stated otherwise

2010

2011

2012

2013

2014

Sales and income
Sales
Organic growth, %
Acquired growth, %
Operating income before depreciation/amortization (EBITDA)
Depreciation and amortization
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

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

19.1
16.4
14.6
18.5

Key ratios
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
1 Excluding items affecting comparability in 2011 and 2013.
2 Dividend proposed by the Board of Directors.
3 Excluding restructuring payments.
4 2012 has been adjusted due to a change in accounting principles for defined benefit pension plans.

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
6,7844
5,1724

5,990
–4,738
–1,564
–312
7,044

41,4224
28,932
11,093
1,519
385
15,8054
183
25,8194

13.974
13.974
69.864
5.10
242.90

18.3
16.1
14.64
18.14

18.14
20.94
43.24
0.614
11.14
3.9
370,859
370,859
42,762

48,481
2
4
8,9171
–993
7,9231
6,381
4,775

6,224
–6,030
–731
–537
6,803

48,408
31,817
12,854
1,675
–
19,595
0
28,812

12.89
14.841
77.83
5.70
339.80

18.41
16.31
13.2
14.9

17.1
17.5
43.8
0.68
13.5
–
370,859
370,859
42,556

56,843
3
9
10,419
–1,163
9,257
8,698
6,436

6,679
–3,524
–2,908
247
8,238

58,425
39,778
14,990
1,861
–
22,327
2
36,096

17.38
17.38
97.49
6.502
414.80

18.3
16.3
15.3
16.9

16.9
19.8
45.1
0.62
17.4
–
370,859
370,859
44,269

RETURN ON CAPITAL EMPLOYED¹

OPERATING MARGIN (EBIT)¹

AVERAGE NUMBER OF EMPLOYEES

Number

50,000

40,000

30,000

20,000

10,000

1 Excluding items affecting compara-

bility 2011 and 2013.

ASSA ABLOY ANNUAL REPORT 2014

FIVE YEARS IN SUMMARY 117

Quarterly information

THE GROUP IN SUMMARY
Amounts in SEK M unless stated otherwise

Q 1
2013

Q 2
2013

Q 3
2013

Q 4
2013

Full
year
2013

Q 1
2014

Q 2
2014

Q 3
2014

Q 4
2014

Full
year
2014

Sales
Organic growth
Gross income excluding items
affecting comparability
Gross income/ Sales
Operating income before depreciation
(EBITDA) excluding items affecting
comparability
Operating margin (EBITDA)
Depreciation and amortization
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 and amortization
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
Actuarial gain/loss on post-employment
benefit obligations
Exchange rate differences and other
Net debt at end of period
Net debt / equity ratio

NET DEBT

Non-current interest-bearing receivables
Current interest-bearing
investments including derivatives
Cash and cash equivalents
Pension provisions
Other non-current interest-bearing
liabilities
Current interest-bearing liabilities includ-
ing derivatives
Total

10,868 12,239 12,131 13,242
4%

–1%

48,481 12,305 13,964 14,727 15,847 56,843
3%

4,358
40.1%

4,786
39.1%

4,839
39.9%

5,176
39.1%

19,159
39.5%

4,791
38.9%

5,368
38.4%

5,689
38.6%

6,074 21,922
38.6%
38.3%

1,911
17.6%
–250

1,662
15.3%
–
1,662
–129
1,533
14.1%
–383

2,226
18.2%
–256

1,970
16.1%
–
1,970
–138
1,832
15.0%
–458

2,339
19.3%
–249

2,090
17.2
–
2,090
–124
1,966
16.2%
–492

–11
1,138

–
1,374

–
1,474

1,138
1

1,372
2

1,474
0

2,440
18.4%
–238

2,202
16.6%
–1,000
1,202
–152
1,050
7.9%
–262

–
788

788
0

Q 1
2013

Q 2
2013

Q 3
2013

1,662
–
250
–228
–1,110
–73
–2
498
0.33

1,970
–
256
–233
–234
–165
–6
1,589
0.87

2,090
–
249
–280
232
–53
–63
2,175
1.11

Q 4
2013

1,202
1,000
238
–461
615
–139
86
2,541
1.243

Q 1
2013

Q 2
2013

Q 3
2013

Q 4
2013

8,917
18.4%
–993

7,923
16.3%
–1,000
6,924
–542
6,381
13.2%
–1,595

2,135
17.3%
–278

1,857
15.1%
–
1,857
–148
1,709
13.9%
–444

2,504
17.9%
–285

2,219
15.9%
–
2,219
–146
2,073
14.8%
–539

2,791
19.0%
–292

2,499
17.0%
–
2,499
–136
2,364
16.0%
–614

2,990 10,419
18.3%
18.9%
–1,163
–309

2,681
16.9%
–
2,681
–129
2,552
16.1%
–664

9,257
16.3%
–
9,257
–559
8,698
15.3%
–2,261

–11
4,775

–
1,264

–
1,534

–
1,749

–
1,889

–
6,436

4,772
2

1,264
0

1,534
0

1,749
0

1,889
0

6,436
0

Full
year
2013

6,924
1,000
993
–1,202
–497
–431
17
6,803
0.923

Full
year
2013

Q 1
2014

Q 2
2014

Q 3
2014

Q 4
2014

1,857
–
278
–266
–1,268
–52
8
557
0.33

2,219
–
285
–272
–6
–201
–61
1,963
0.95

2,499
–
292
–388
–93
–101
39
2,249
0.95

2,681
–
309
–345
1,064
–103
–136
3,469
1.36

Q 1
2014

Q 2
2014

Q 3
2014

Q 4
2014

Full
year
2014

9,257
–
1,163
–1,271
–303
–457
–150
8,238
0.95

Full
year
2014

15,805 15,364 16,628 17,356
–2,541
–1,589 –2,175
230
118
271
154
3,957
2,545
29
89

–498
190
357
–104
–

109
353
385
1,888

15,805 19,595 21,375 23,072 22,348 19,595
–8,238
–6,803
453
647
2,376
1,134
2,454
6,784
2,110
2,007

–2,249
107
437
109
–

–1,963
140
409
180
2,110

–3,469
119
525
1,213
–

–557
87
1,005
952
–

–148
265

–300
–86

7
286
15,364 16,628 17,356 19,595
0.68

80
–83

0.63

0.62

0.57

97
195

–361
382

695
2,880
19,595 21,375 23,072 22,348 22,327 22,327
0.62

455
1,136

73
799

71
750

0.76

0.62

0.68

0.72

Q 1
2013

–29

–375
–870
1,972

Q 2
2013

–24

–384
–940
1,908

Q 3
2013

–27

–339
–619
1,941

Q 4
2013

–27

–342
–362
2,015

Q 1
2014

–26

–148
–498
2,110

Q 2
2014

–28

–153
–615
2,242

Q 3
2014

–30

–247
–809
2,400

Q 4
2014

–28

–174
–667
2,946

12,265 11,262 11,045 13,329

14,627 14,209 14,272 15,362

2,401

4,983
15,364 16,628 17,356 19,595

5,356

4,806

5,311

4,887
21,375 23,072 22,348 22,327

6,762

7,415

118

QUARTERLY INFORMATION

ASSA ABLOY ANNUAL REPORT 2014

CAPITAL EMPLOYED AND FINANCING

Capital employed
– of which goodwill
– of which other intangible and

tangible assets

– of which investments in associates
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 comparability1
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
2013

Q 2
2013

Q 3
2013

Q 4
2013

42,170 43,433 44,884 48,408
28,742 29,446 28,841 31,817

Q 1
2014

Q 2
2014

Q 3
2014

Q 4
2014

51,141 53,282 55,359 58,425
32,930 34,052 35,423 39,778

1,466

10,937 11,302 11,094 12,854
1,675
15,364 16,628 17,356 19,595
0

1,613

1,532

1,696

12,941 13,383 14,055 14,990
1,861
21,375 23,072 22,348 22,327
2

1,790

1,805

26,738 26,805 27,527 28,812

29,766 30,210 33,010 36,096

Q 1
2013

Q 2
2013

Q 3
2013

Q 4
2013

Full
year
2013

Q 1
2014

Q 2
2014

Q 3
2014

Q 4
2014

Full
year
2014

3.07
3.07

3.71
3.71

3.98
3.98

2.13
2.13

12.89
12.89

3.41
3.41

4.14
4.14

4.72
4.72

5.10
5.10

17.38
17.38

3.07

3.71

3.98

4.08

14.84

3.41

4.14

4.72

5.10

17.38

72.21

72.39

74.35

77.83

80.39

81.59

89.15

97.49

Mar
2013

Jun
2013

Sep
2013

Dec
2013

Full
year
2013

Mar
2014

Jun
2014

Sep
2014

Dec
2014

Full
year
2014

370,859 370,859 370,859 370,859 370,859 370,859 370,859 370,859 370,859 370,859

370,259 370,259 370,259 370,259 370,259 370,259 370,259

370,259 370,259 370,259

1 Items affecting comparability consist of restructuring costs.
2 Excluding restructuring payments.
3 Operating income before tax excluding items affecting comparability.

Definitions of key ratios

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 tangible and intangible assets less disposals
of tangible and intangible assets.

Depreciation
Depreciation/amortization of intangible and tangible 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 as a
percentage of average shareholders’ equity (excluding
non-controlling interests) after any potential 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 divided
by weighted average number of shares after any potential
dilution.

Shareholders’ equity per share after dilution
Equity excluding non-controlling interests divided by
number of shares after any potential dilution.

ASSA ABLOY ANNUAL REPORT 2014

QUARTERLY INFORMATION 119

Proposed distribution of earnings

The following earnings are at the disposal of the Annual General Meeting:

Share premium reserve: SEK 787 M
Retained earnings brought forward: SEK 4,777 M
Net income for the year: SEK 5,201 M
TOTAL: SEK 10,766 M

The Board of Directors and the President and CEO propose that a dividend of SEK 6.50 per share, a total of SEK 2,407 M,
be distributed to shareholders and that the remainder, SEK 8,359 M, be carried forward to the new financial year.
The dividend amount is calculated on the number of outstanding shares as per 4 February 2015.

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 4 February 2015.

Monday, 11 May 2015 has been proposed as the record date for dividends. If the Annual General Meeting approves this
proposal, dividends are expected to be distributed by Euroclear Sweden AB on Friday, 15 May 2015.

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, 4 February 2015

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 4 February 2015

PricewaterhouseCoopers AB

Bo Karlsson
Authorized Public Accountant
Auditor in charge

Linda Corneliusson
Authorized Public Accountant

120

PROPOSED DISTRIBUTION OF EARNINGS

ASSA ABLOY ANNUAL REPORT 2014

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 2014. 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 in accordance with the Annual Accounts Act and
the 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 material misstate-
ment, 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
Standards 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
consolidated accounts in order to design audit procedures
that are appropriate in the circumstances, but not for the
purpose 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 opinions.

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 2014 and of its financial
performance and its cash flows for the year then ended in
accordance 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 2014
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 also audited the proposed appro-
priations of the company’s profit or loss and the administra-
tion of the Board of Directors and the President and CEO of
ASSA ABLOY AB for the year 2014.

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’
proposed 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
Companies Act.

As a basis for our opinion concerning discharge from
liability, 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, 4 February 2015

PricewaterhouseCoopers AB

Bo Karlsson
Authorized Public Accountant
Auditor in charge

Linda Corneliusson
Authorized Public Accountant

ASSA ABLOY ANNUAL REPORT 2014

AUDITOR’S REPORT 121

The ASSA ABLOY share

Share price trend in 2014
In 2014 Nasdaq Stockholm showed a positive trend, and
closed up 11.9 percent following a strong end to the
year. ASSA ABLOY’s Series B share rose 22.1 percent from
SEK 339.80 to SEK 414.80. The highest closing price during
the year was SEK 417.50 recorded on 29 December, while the
lowest closing price was SEK 316.90 recorded on 13 March.

At year-end, market capitalization amounted to

SEK 153,832 M (125,814), calculated on both Series A and
Series B shares.

Listing and trading
ASSA ABLOY’s Series B share has been listed on Nasdaq
Stockholm, Large Cap since 8 November 1994. Total turn-
over of the Series B share on all markets amounted to 596
million shares (585) in 2014, equivalent to a turnover rate
of 161 percent (158). Turnover of the Series B share on
Nasdaq Stockholm amounted to 207 million shares (202),

equivalent to a turnover rate of 56 percent (55). The average
turnover rate was 66 percent (67) on Nasdaq Stockholm, and
to 67 percent (68) on the Large Cap list.

The implementation of the EU’s Markets in Financial

Instruments Directive (MiFID) in late 2007 has totally
changed the structure of equity trading in Europe. Share
trading now takes place on both regulated markets and
other trading platforms, and has thus become more frag-
mented. Consequently, an ever-increasing proportion of
trading in shares in Swedish companies now takes place on
markets other than Nasdaq Stockholm.

In 2014 the ASSA ABLOY share was traded on more than

10 different markets, with trading on Nasdaq Stockholm
accounting for only around 35 percent of share turnover,
compared with 65 percent in 2009. The diagram below
shows the trend and distribution of trading in ASSA ABLOY’s
Series B share on various markets over the past five years.

SHARE PRICE TREND AND TURNOVER 2005–2014

DIVIDEND PER SHARE 2005–2014

SEK

600

500

400

300

200

100

No. of shares traded, thousands

200,000

160,000

120,000

80,000

40,000

SEK

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

ASSA ABLOY B
ASSA ABLOY B, total return

OMX Stockholm

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

2014 proposed dividend

SIX Return Index

No. of shares traded, thousands

SHARE PRICE AND TURNOVER 2014

SEK

450

400

350

300

250

200,000

150,000

100,000

50,000

ASSA ABLOY B

OMX Stockholm

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

MARKETS FOR THE SHARE

No. of shares traded, millions

1,000

800

600

400

200

BATS Chi-X
Stockholm
London
Boat

Turquoise
Burgundy
Others

Data per share

SEK/share 1

Earnings after tax and dilution
Dividend
Dividend yield, % 4
Dividend, % 5
Share price at year-end
Highest share price
Lowest share price
Equity
Number of shares, thousands 6

2005

2007

2010

2012

2014

6.97
3.25
2.6
47.6
125.00
126.00
89.25
42.85

17.38
6.503
1.6
37.4
414.80
417.50
316.90
97.49
378,718 376,033 380,713 380,713 372,931 372,736 371,213 370,859 370,859 370,859

13.97
5.10
2.1
36.5
242.90
244.80
171.70
69.86

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

2008
9.212
3.60
4.1
52.3
88.50
126.00
69.75
55.91

2009
9.222
3.60
2.6
47.8
137.80
142.50
71.50
54.76

2013
14.842
5.70
1.7
38.4
339.80
342.20
238.00
77.83

2011
12.302
4.50
2.6
36.6
172.60
194.90
133.50
65.54

2006
7.992
3.25
2.2
64.0
149.00
151.00
109.00
39.13

1 Adjustments made for new issues.
2 Excluding items affecting comparability 2006, 2008, 2009, 2011 and 2013.
3 Dividend proposed by the Board of Directors.

4 Dividend as percentage of share price at year-end.
5 Dividend as percentage of earnings per share after tax and dilution,

excluding items affecting comparability.

6 After full dilution.

122

THE ASSA ABLOY SHARE

ASSA ABLOY ANNUAL REPORT 2014

Ownership structure
The number of shareholders at year-end was 17,720
(17,199) and the ten largest shareholders accounted for
around 35 percent (37) of the share capital and 56 percent
(57) of the votes. Shareholders with more than 50,000

shares, a total of 412 shareholders, accounted for 95 percent
(96) of the share capital and 97 percent (97) of the votes.
Investors outside Sweden accounted for around 65
percent (67) of the share capital and around 44 percent
(46) of the votes, and were mainly in the USA and the United
Kingdom.

ASSA ABLOY’s ten largest shareholders
Based on the share register at 30 December 2014.

Shareholders

Series A shares

Series B shares

Investment AB Latour
Melker Schörling AB
Capital Group funds
Swedbank Robur fonder
Norges Bank
Alecta
SHB fonder & livförsäkring
AMF Försäkring & Fonder
SEB fonder & SEB Trygg Liv
Saudi Arabian Monetary Agency
Other shareholders
Total number

13,865,243
5,310,080

19,175,323

21,300,000
9,222,136
29,408,393
12,790,158
12,232,222
7,349,000
6,337,803
5,179,818
4,447,071
4,000,371
239,416,483
351,683,455

Source: SIS Ägarservice AB and Euroclear Sweden AB.

Total number
of shares

35,165,243
14,532,216
29,408,393
12,790,158
12,232,222
7,349,000
6,337,803
5,179,818
4,447,071
4,000,371
239,416,483
370,858,778

Share capital, %

Votes, %

9.50
3.90
7.90
3.40
3.30
2.00
1.70
1.40
1.20
1.10
64.60
100.00

29.50
11.50
5.40
2.40
2.30
1.40
1.20
1.00
0.80
0.70
43.80
100.00

OWNERSHIP STRUCTURE (SHARE CAPITAL)

OWNERSHIP STRUCTURE (VOTES)

Övriga ägare

Legend
Investment AB Latour, 9.5%
Legend
Melker Schörling AB, 3.9%

SEB fonder & SEB Trygg Liv

Legend
Capital Group funds, 7.9%

Saudi Arabian Monetary Agency

Legend
Investment AB Latour, 29.5%
Legend
Melker Schörling AB, 11.5%

SEB fonder & SEB-Trygg Liv

Legend
Capital Group funds, 5.4%

Saudi Arabian Monetary Agency

Swedbank Robur fonder, 3.4%
Legend

SHB fonder

Norges Bank, 3.3%
Legend
Alecta, 2.0%
Legend
SHB fonder & livförsäkring, 1.7%

Alecta

AMF Försäkringar & Fonder, 1.4%

AMF Försäkring & Fonder

Swedbank Robur fonder, 2.4%
Legend

SHB fonder

Norges Bank, 2.3%
Legend
Alecta, 1.4%
Legend
SHB fonder & livförsäkring, 1.2%

Alecta

AMF Försäkring & Fonder, 1.0%

AMF Försäkring & Fonder

SEB fonder & SEB-Trygg Liv, 1.2%

Swedbank Robur fonder

Saudi Arabian Monetary
Agency, 1.1%

Norges Bank

Other shareholders, 64.6%

Melker Schörling AB

Investment AB Latour

Capital Group fonder

SEB fonder & SEB-Trygg Liv, 0.8%

Swedbank Robur fonder

Saudi Arabian Monetary
Agency, 0.7%

Norges Bank

Other shareholders, 43.8%

Capital Group fonder

Melker Schörling AB

Investment AB Latour

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 of Directors 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, among other things, secure the com-
pany’s obligations in connection with the company’s long-
term incentive programs (LTI). The 2014 Annual General
Meeting authorized the Board of Directors 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 number of shares in the company.

ASSA ABLOY holds a total of 600,000 (600,000) Series

B shares after repurchase. These shares account for 0.2
percent (0.2) of the share capital and each share has a par

value of SEK 1.00. The purchase consideration amounted to
SEK 103 M.

No shares were repurchased in 2014.

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 President and CEO pro-
pose that a dividend of SEK 6.50 per share (5.70) be paid to
shareholders for the 2014 financial year, equivalent to a divi-
dend yield on the Series B share of 1.6 percent (1.7).

In 2014 the total return on the ASSA ABLOY share,
defined as market price movement plus reinvested divi-
dends, was 24 percent, compared with the total return SIX
Return Index, which was up 16 percent. Over the 10-year
period 2005–2014, the total return on the share was 367
percent, compared with a 199 percent rise in the SIX Return
Index and a 108 percent rise in OMX Stockholm.

ASSA ABLOY ANNUAL REPORT 2014

THE ASSA ABLOY SHARE 123

The ASSA ABLOY share

Changes in share capital

Year

1989
1994
1994
1994
1996
1996
1997
1998
1999
1999
1999
1999
1999

2000
2000
2000
2001
2002
2002
2010
2011
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 share issues
Converted debentures
New share issue
Non-cash issue
Converted debentures
New share issue
Converted debentures
Converted debentures
Converted debentures
Converted debentures

Analysts who cover ASSA ABLOY

Company

ABG Sundal Collier
Bank of America Merrill Lynch
Barclays
BESI
Carnegie
Cheuvreux
Citigroup Investment Research
Credit Suisse
Danske Bank
Deutsche Bank
DNB Bank
Enskilda Securities
Exane BNP Paribas
Goldman Sachs
Handelsbanken Capital Markets
HSBC
Imperial Capital
J.P. Morgan
Jefferies
Morgan Stanley
Pareto Securities
Redburn Partners
Sanford C. Bernstein
Société Générale
Swedbank Markets
UBS
UBS

Name

Anders Idborg
Ben Maslen
Lars Brorson
Nick Wilson
Johan Wettergren
Joakim Höglund
Natalia Mamaeva
Andre Kukhnin
Oscar Stjerngren
Andreas Koski
Johan Sjöberg
Stefan Andersson
Olivier Esnou
Daniela Costa
Peder Frölén
Colin Gibson
Jeff Kessler
Andreas Willi
Peter Reilly
Markus Almerud
David Jacobsson
James Moore
Martin Prozesky
Alasdair Leslie
Anders Roslund
Guillermo Peigneux
Fredric Stahl

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

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
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
370,858,778

Telephone

+46 8 566 286 74
+44 207 996 4783
+44 20 3134 1156
+44 20 3364 6766
+46 8 5886 8743
+46 8 723 51 63
+44 207 986 4077
+44 207 888 0350
+46 8 5688 0606
+44 20 754 565 80
+46 8 473 48 31
+46 8 522 296 57
+44 207 039 9527
+44 20 777 48354
+46 8 701 1251
+44 207 991 6592
+1 212 351 9701
+44 207 134 4569
+44 20 7029 8632
+44 207 425 9870
+46 8 402 5272
+44 207 000 2135
+44 207 170 0577
+44 207 762 4952
+46 8 5859 0093
+46 8 453 7308
+46 8 493 7309

anders.idborg@abgsc.se
ben.maslen@baml.com
lars.brorson@barclays.com
nick.wilson@espiritosantoib.co.uk
johan.wettergren@carnegie.se
jhoglund@keplercheuvreux.com
natalia.mamaeva@citi.com
andre.kukhnin@credit-suisse.com
oscar.stjerngren@danskebank.se
andreas.koski@db.com
johan.sjoberg@dnb.se
stefan.andersson@enskilda.se
olivier.esnou@exanebnpparibas.com
daniela.costa@gs.com
pefr15@handelsbanken.se
colin.gibson@hsbcib.com
JKessler@imperialcapital.com
andreas.p.willi@jpmorgan.com
peter.reilly@jefferies.com
markus.almerud@morganstanley.com
david.jacobsson@paretoohman.se
james.moore@redburn.com
martin.prozesky@bernstein.com
alasdair.leslie@sgcib.com
anders.roslund@swedbank.se
guillermo.peigneux-lojo@ubs.com
fredric.stahl@ubs.com

124

THE ASSA ABLOY SHARE

ASSA ABLOY ANNUAL REPORT 2014

Information for shareholders

Annual General Meeting
The Annual General Meeting of ASSA ABLOY AB will
be held at Moderna Museet (Museum of Modern Art),
Skeppsholmen, Stockholm at 15.00 on Thursday, 7 May
2015. Share holders wishing to attend the Annual General
Meeting should:
• Be recorded in the share register kept by Euroclear

Sweden AB by Thursday, 30 April 2015.

• Notify ASSA ABLOY AB of their intention to attend no

later than Thursday, 30 April 2015.

Registration in the share register
In addition to notification of intention to attend, shareholders
whose shares are nominee registered must be temporarily
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 comple-
ted by Thursday, 30 April 2015, the shareholder should con-
tact his/her bank or nominee well in advance of this date.

Notification of intention to attend
• Website
• Address
•
• Telephone +46 (0)8 506 485 14

www.assaabloy.com
ASSA ABLOY AB, Annual General Meeting
Box 7842, SE-103 98 Stockholm, Sweden

The notification should state:
• Name
• Personal or corporate identity number
• Address and daytime telephone number
• Number of shares
• Any assistants attending

Nomination Committe
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 2015 Annual
General Meeting comprises Gustaf Douglas (Investment AB
Latour), Mikael Ekdahl (Melker Schörling AB), Liselott Ledin
(Alecta), Marianne Nilsson (Swedbank Robur fonder) and
Anders Oscarsson (AMF and AMF fonder). Gustaf Douglas is
Chairman of the Nomination Committee.

Dividend
Monday, 11 May 2015 has been proposed as the record
date for dividend. If the Annual General Meeting approves
the proposal, dividend are expected to be distributed by
Euroclear Sweden AB on Friday, 15 May 2015.

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 intention to attend the Annual General Meeting and
must present the proxy in original at the latest at the
Annual General Meeting. Proxy forms are available at:
www.assaabloy.com.

Financial reporting
First quarter: 28 April 2015
Second quarter: 17 July 2015
Third quarter: 20 October 2015
Fourth quarter and Year-end report: February 2016
Annual Report 2015: March 2016

Production: ASSA ABLOY in cooperation with Hallvarsson & Halvarsson.
Photo: Peter Hoelstad/Molly & Co, Kristian Älegård, Getty Images, and ASSA ABLOY’s image bank etc.
Printing: Göteborgstryckeriet in March 2015.

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
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 and a continuing process of
rationalization and synergies across the Group «

Johan Molin, President and CEO