ASSA ABLOY Annual Report 2015

FY2015 Annual Report · ASSA ABLOY

Loading PDF…

Annual Report
2015

The global leader in
door opening solutions

Contents

Report on operations
ASSA ABLOY in brief
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

Sustainability report
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
Internal control – financial reporting
Remuneration guidelines for senior
management

2
8
10
22
30
36

40
42
44
46
48
52

62
65
70
74
76
78

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

81
82
83
84
85
86
87
88
90
92
116
117
118
119
120
121

122
125

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

Datawatch focuses on mobile access control
in commercial buildings

CUSTOMER: Datawatch is an integrated supplier of access control sys-

SOLUTION: In collaboration with HID Global, Datawatch fitted out a

tems with products installed in over 3,000 office buildings worldwide.
The company offers solutions for new construction and renovation, and
replacement and upgrade of existing security systems in commercial
properties.

CHALLENGE: Datawatch remotely monitors over 60,000 doors,

guaranteeing the security of everyone passing through them. The com-
pany helps property owners, property managers and tenants protect
employees, residents and visitors. To date it has issued over one million
code carriers and the number is constantly increasing as more and more
global leading companies and organizations become customers.
Datawatch is working actively on the development of new, innovative
solutions and services to constantly expand its offering and differentiate
itself from its competitors.

showroom at 555 12th Street N.W. in downtown Washington D.C.,
where prospective tenants were given an opportunity to look more
closely at the concept of mobile access control and other advanced
technical solutions. As a result of this successful initiative, Datawatch
chose to purchase 15,000 mobile ID cards and over 1,000 iCLASS SE
readers. Today the company uses mobile access control from HID
Global for access to both common spaces and individual workspaces in
nearly 20 commercial buildings in the U.S. Datawatch is installing
iCLASS SE readers in all new buildings, so that property owners and
property managers can enable tenants to open doors with smartphones
and/or keycards.

ASSA ABLOY in brief

ASSA ABLOY is the global leader in door opening solutions and a market

leader in most of Europe, North America, China and Oceania. The Group

has sales of SEK 68 billion and 46,000 employees.

Customers in the institutional, commercial and residential market

Complete
range and
broad base

ASSA ABLOY has a complete range of door opening
products, solutions and services for the institutional,
commercial and consumer markets. With the world’s
largest installed base, a very large part of sales is to the
stable aftermarket.

ASSA ABLOY’S DEVELOPMENT 1994–2015

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.

Innovations
and sustain-
ability

ASSA ABLOY has global product leadership through innovation and
product development. Electromechanical products and entrance auto-
mation have increased from 27 percent of sales to over 50 percent in
ten years. Economic resource utilization and cost-efficiency provide cus-
tomers with added value and contribute to a more sustainable society.

Digital future

ASSA ABLOY is currently creating future digital and mobile security
solutions on its own technology platforms, such as Seos. This plat-
form provides customers with an ecosystem in which digital identities
can open doors, desktop readers, computers and printers, and give
access to many other functions at workplaces and in the home.
Simple, flexible access under high security and control is enabled by
a smartphone, an ID card or fingerprint recognition.

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 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.

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’S DEVELOPMENT 1994–2015

Financials in brief
2015

Sales increased by 20 percent to SEK 68,099 M (56,843).

Earnings per share after full dilution increased to SEK 6.93 (5.79).

Operating income amounted to SEK 11,079 M (9,257).

Operating cash flow amounted to SEK 9,952 M (8,238).

Investments in product development continued at an accelerated

rate and a number of new products were launched.

Share of
Group sales by region
2015

EUROPE
AFRICA
NORTH AMERICA
SOUTH AMERICA
ASIA
OCEANIA

37%
1%
39%
2%
17%
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, %
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.
4 Key data has been restated due to the 3:1 share split in 2015.

2013

48,481
2
4
–2
7,9231
16.31
7,3811
6,803
17.1

2014

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

2015

68,099
4
3
13
11,079
16.3
10,382
9,952
17.8

2013
4.951,4
25.944
1.904
1,110,7764

2014
5.794
32.504
2.174
1,110,7764

2015

6.93
37.43

2.653

1,110,776

Change

20%

19%
21%

Change

20%
15%
22%

ASSA ABLOY’S DEVELOPMENT 1994–2015

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

2015 Expansion in Brazil through the acquisition
of Papaiz and Udinese. The acquisition of the
U.S. company Quantum Secure strengthens the
offering in identity and access management.

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

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 journey we have grown from a
traditional lock company into the global leader
in door opening solutions. ASSA ABLOY is again
ranked on Forbes’ list of the world’s 100 most
innovative companies.

SALES AND OPERATING INCOME (EBIT)

Sales, SEK M

EBIT, SEK M

Sales

Operating income (EBIT)

70,000

60,000

50,000

40,000

30,000

20,000

10,000

1
96

1
97

1
98

1
99

1
00

1
01

1
02

1
03

2
06

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

14,000

12,000

10,000

8,000

6,000

4,000

2,000

2
11

2
13

2,3

ASSA ABLOY ANNUAL REPORT 2015

THE YEAR IN BRIEF 1

Statement by the President and CEO

Technological leadership
strengthens our long-term
profitable growth

2015 was once again a record year for ASSA ABLOY. Sales increased by 20 percent to SEK
68,099 M, while organic growth was 4 percent. Operating income increased by 20 per-
cent to SEK 11,079 M. Our strategies are functioning well in a global market with uneven
and relatively weak growth. It is clear that we are strengthening our customer offering
and gaining market shares, especially thanks to our focus in recent years on innovation,
product development, sustainability, and emerging markets. We have gained leadership
in the accelerating technology shift to electronics, digitization and mobile. This means
that we are well positioned for continued long-term profitable growth.

2015 was a challenging year with divided demand
growth on global markets. Flaring political and social
crises, record low interest rates and continuing depen-
dence on economic stimulation, China’s slowdown, and
the problems of commodity economies created uncer-
tainty regarding economic development and inhibited
willingness to invest.

Against this backdrop, ASSA ABLOY demonstrates its

stable value-creating capacity firmly established in a
handful of long-term, global development trends:
• The global economy continues to grow, and safety

and security needs are steadily increasing.

• Urbanization is accelerating and leading to over one
billion people migrating to cities in the coming years.
For the Group, this means increased demand for new
housing, workplaces and stores.

• Environmental concern and reduced resource con-
sumption direct a focus on energy-efficient homes,
where locks, doors and door opening solutions have a
key role to play. One-third of all public buildings
worldwide are expected to be climate-smart in 2016.

• The digitization wave is creating enormous potential
for smart security, connected door opening solutions,
and access management and control in homes and
workplaces.

These trends drive demand and provide ASSA ABLOY
with opportunities for good underlying, long-term
growth. Our three main strategies of market presence,
product leadership and cost-efficiency have shown over
time a good capacity to identify the areas we should
focus on for profitable growth. Today emerging markets,
innovation and product development with a focus on
electronics, and increasing sustainability performance in
the use of products and solutions provide the best
growth opportunities. With good cost control and con-
stant streamlining of all Group processes, we work in an
efficient way to increase profitability.

I would like to comment briefly on the performance of

our divisions during the year before going into our cur-
rent strategic priorities.

THE GROUP

DEVELOPMENT OF KEY FIGURES

SALES AND OPERATING INCOME

INCOME BEFORE TAX AND OPERATING CASH FLOW

Sales
SEK M

70,000

60,000

50,000

40,000

30,000

20,000

10,000

Operating income
SEK M

14,000

12,000

10,000

8,000

6,000

4,000

2,000

Sales
Operating income1

1 Excluding items affecting

comparability in 2011 and 2013.

SEK M

12,000

10,000

8,000

6,000

4,000

2,000

Income before tax1
Operating cash flow2

1 Excluding items affecting

comparability in 2011 and 2013.
2 Excluding restructuring payments.

STATEMENT BY THE PRESIDENT AND CEO

ASSA ABLOY ANNUAL REPORT 2015

THE DIVISIONS

“ASSA ABLOY is the leading force
in the development of digital and
mobile security solutions.”

EMEA division. Economic and demand growth in Europe
has been uneven and subdued for several years, with a
weaker market in southern Europe than northern Europe.
A slow improvement was noted in 2014, which con-
tinued in 2015, generating good underlying growth for
EMEA division. Organic growth increased to 4 percent
(3), which means that the division gained market shares
and grew faster than the total market. Growth was strong
in Scandinavia, Finland and eastern Europe, good in Africa
and Israel, and stable in the UK and central Europe. Spain
returned to growth, while sales in Italy and France
decreased slightly. Acquired growth made a 4 percent (5)
contribution.

Americas division. The division continued its strong per-
formance during the year and organic growth increased
to 7 percent (4). Demand was strong in the North Ameri-
can residential and commercial markets for both tradi-
tional and electromechanical products. Interest in digital
door opening solutions and mobility is growing very
strongly. The door segment continued its stable trend,
while high security products were slightly weaker due to
continued budget restrictions for institutional custom-
ers. Mexico and several other emerging markets in South
America showed good demand, while the important
Brazilian market was weak as a result of falling oil and
commodity prices. Acquired growth was 2 percent (10).

Asia Pacific division. The division is the market leader in
Asia, which has been the main growth engine in the
global economy for over a decade, especially due to high
growth in China. The demand picture changed consider-
ably in 2015. The Chinese economy slowed further, while
demand continued to grow at a high level in most other
economies in the region. It was particularly strong in

South Korea, Southeast Asia and New Zealand. Organic
growth decreased to –3 percent (1), which is explained
by the slowdown in China. Acquired growth was 9
percent (6).

Global Technologies division. The Group’s global divi-
sion for identity and access management experienced
high sales growth, mainly due to the exchange rate
effects of a strong USD. Demand was stable with 7 per-
cent (1) organic growth, despite continued weak
demand in the public sector as a result of budget restric-
tions. The division is centrally placed in the technology
shift to electronics and experienced strongly increased
demand for digital and mobile solutions. Global Tech-
nologies is leading the technological development with
a significant focus on innovation and product develop-
ment, resulting in a very high share of new products
every year. The focus on emerging markets led to a con-
tinued strong increase in South America, Asia and Africa,
with the exception of China and commodity-dependent
countries. Hospitality continued to grow strongly with
good profitability thanks to a broad range of new innova-
tive products. Acquired growth was 2 percent (4).

Entrance Systems division. The Group’s division for
entrance automation continued its good growth with
organic growth of 5 percent (4). Growth was strong in
American operations, both in the residential and the com-
mercial segments. European demand strengthened in
2015 following several years of weak demand, and indus-
trial doors showed good growth. Automatic doors and
components returned to positive growth. The negative
development on the European residential market turned
to slight growth. The Asian market remained strong, with
the exception of the decline in China. The innovation and
product development rate was high, with products
launched in the past three years accounting for over
35 percent of sales. Acquired growth was 1 percent (17).

DEVELOPMENT OF EARNINGS PER SHARE1,2

SEK

Earnings per share has
increased by 2,100 percent
since 1996.

1 Excluding items affecting

comparability.

2 Earnings per share has been restated
due to the 3:1 share split in 2015.

ASSA ABLOY ANNUAL REPORT 2015

STATEMENT BY THE PRESIDENT AND CEO 3

TECHNOLOGICAL
GENERATION SHIFT

Statement by the President and CEO

ASSA ABLOY has a stable foundation thanks to having the
world’s largest base of lock and door installations. This
provides a significant, growing aftermarket, which
accounts for two-thirds of our total sales. The commer-
cial and institutional segments, with higher profitability
and driving demands for advanced technological solu-
tions, account for 75 percent of sales. The Group is the
industry’s only truly global player, with sales worldwide
and a turnover equivalent to the combined turnover of
its four closest competitors. This provides breadth,
stability and risk diversification, as well as resources for
innovation and leadership in the technological revolu-
tion now taking place in our industry.

There is no doubt that digitization and mobile com-
munications technology are now revolutionizing how we
interact with technology to enter and exit buildings, how
we identify ourselves to gain access to physical spaces,
work places and public buildings. It is about major
changes at work, at home and in places where we shop
and socialize. It concerns the security of people, organi-
zations and society. This is ASSA ABLOY’s business.

Our basic technology has two perpetual components

for security. We can never get away from the fact that
physical security is often about being able to open and
close doors, i.e. a lock with a mechanical bolt. Neither can
we ever get away from the fact that those with the right
to open and close doors have to identify themselves with
a key that fits the lock. But today identifying yourself and
that you have access rights is increasingly digitized. Iden-
tification and the ‘key’ may be on a smart card or smart-
phone and can be sent over long distances. And this is the

heart of the technological revolution in our industry, with
new applications exploding in scope.

For several years ASSA ABLOY has been the leading
force in the development of digital and mobile security
solutions. One measure is that sales of electromechanical
products have risen from SEK 3 billion in 2000 to SEK
35 billion in 2015, accounting for over half of sales.
Mechanical products have reduced their share of sales
from 70 percent in 2006 to just under one-third today.
The new technological solutions not only drive cus-
tomer demand, they also largely affect how we operate
our business, how we interact with customers, how we
innovate and develop products, and how we streamline
operations. One overall conclusion is that we have to
continue investing in a unique offering through differen-
tiation to increase our long-term value creation.

In order to strengthen product leadership we have
developed our innovation capacity into being the best in
the industry, especially with regard to the increasing
demand for ‘green’ solutions. In the area of cost-effi-
ciency, the new technologies provide huge opportunities
in robotization and Seamless Flow. We must exploit the
economies of scale and synergies from being the largest
supplier in the world and continue working on our struc-
ture. In short, we should do more with less; it is both
profit able and sustainable. I would like to comment on
this in more detail in an update of our strategies.

STRENGTHENING
MARKET PRESENCE

Growth in sales shows that we are strengthening our
market presence. Over the past nine years this strategy
has been dominated by the focus on emerging markets.
These markets have increased their share of sales from 10
percent in 2006 to 26 percent in 2015. The major global
growth engine, China, may be perceived to have prob-
lems, but we are convinced that the country still has a
long growth journey ahead, and we therefore intend to
continue growing our market presence in the country.
Our growth focus also continues in the rest of Asia,
including India, as well as in Africa where we are now
expanding distribution. We are talking about an annual
growth rate in our emerging markets of over 10 percent
in recent years. Growth in several major commodity-
producing countries, such as Brazil, is negative. We are
countering this with flexible adjustments and increased
cost-efficiency. The breadth of our market presence is a
strength in balancing the Group’s risks. Over the past few
years we have experienced very good growth in our
largest market, the U.S., and a reasonable recovery this
year in Europe, which is good for our important business
in maintenance and upgrades of locks and installations.

Brand consolidation has been prioritized for a number

of years, with the aim of moving from a large number of

local and regional brands to a more coherent offering
under the ASSA ABLOY brand. A major step was taken
during the year when VingCard was transferred to ASSA
ABLOY Hospitality. Confidence in the brand is invaluable
and confirms the added value provided to our customers.
Digitization and mobile technology strengthen our
long-established strategy that it should be easy for the
customer to do business with us. This is basically about
constantly moving resources closer to the customer.
We have a very positive trend in the number of customer-
facing staff, with increases of more than 20 percent in
many sales units. We are driven by a vision of being able
to deliver 24/7, year in and year out, to all our customers
everywhere. Automated flows, e-commerce and digital
customer meetings improve and streamline operations
so that we need fewer employees in offices and can
instead have more in the value-creating work of offering
advice and solutions, which make customers more effi-
cient. We can charge slightly more and the customer
receives more value.

Security is increasingly becoming an integrated
concept of total solutions for buildings and customers,
with new smart, electronic solutions in more complex
systems. Our focus on specification with increased

STATEMENT BY THE PRESIDENT AND CEO

ASSA ABLOY ANNUAL REPORT 2015

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

digitization is central. The number of specifiers con-
tinued to rise during the year to over 500, with sharp
increases in emerging markets. Specifiers act as advisers
in an environment of rapid technical and regulatory
changes. We offer customers complete 3D drawings
where they can specify their exact requirements, test and
try out solutions, products and design, with cost esti-
mates for both new construction and aftermarket. We
shorten lead times and deliver even more differentiated
solutions. This consultancy role drives demand and
strengthens our grip on the end-customer market.

Interest in smart homes is strong in the private resi-

dential market. Digital keys are increasing strongly.

Conversion will take time, as it generally takes place
when someone moves into a new home. The potential is
enormous, as electronic locks currently account for a
very small percentage of residential locks. Today we are
already leaders and are developing competitive solutions
with our partners.

Finally, we are strengthening market presence through
selective and complementary acquisitions. We acquired
16 companies during the year, which contributed
SEK 2,500 M in sales or 4 percent. Acquisitions are part of
our strategy, and we often have the best synergy effects
to offer, and a well-functioning model for integration.

PRODUCT
LEADERSHIP

Product leadership is intimately associated with market
presence. Innovation and product development drive,
broaden and deepen demand towards our target of 5
percent organic growth per year. Over the past ten years
ASSA ABLOY has therefore invested heavily in faster and
more efficient common processes, with the goal of
doubling the innovation rate and radically reducing
costs. The target is that products launched in the past
three years should account for at least 25 percent of
sales. Today this target has been achieved, with a share
of 31 percent at Group level.

Investments in product development have increased

by 90 percent over the past five years, with a sharp
increase in the number of development engineers with
electronics expertise at our product development and
competence centers, in close cooperation with custom-
ers and partners. An important focus is Group-wide
development platforms for products and solutions. One
such platform is Seos, a complete ecosystem for the use

of digital keys on smartphones and other mobile devices.
Another is wireless Aperio technology, which enables
cost-efficient connection of many doors in an existing
access control system. Platforms are also increasingly
important in factory production of physical lock
products.

Digitization and mobility are strong drivers for prod-
uct development and software is a central component.
ASSA ABLOY is developing a range of standardized and
open software combined with hardware, the physical
lock solution, providing the functions customers want.
Selling functionality, software, licenses and virtual keys
opens up a large aftermarket with shorter life cycles in
pace with rapid technology and demand developments.
Digitizing the home, with entry and exit control and
other mobile and remote security, increases interest in
management and control of home security. We often
work in partnership with other digital home suppliers,
such as Google Nest and AT&T, on Yale lock solutions that

ASSA ABLOY ANNUAL REPORT 2015

STATEMENT BY THE PRESIDENT AND CEO 5

Statement by the President and CEO

combine remote control of the temperature in the home
and the door with entry codes for family, friends and
visitors, and facilities for real-time control, all in one
cloud-based control system.

Apart from the security provided by the lock, new digi-

tal technology is about secure identification, one of the
Group’s strongest technology areas. Today identification
through keycards and codes is most common, but our
development also includes biometric authentication,
such as fingerprint or iris recognition and sensors for
gesture recognition.

Our intelligent doors are part of this trend. Electronics

and sensors enable these smart doors to recognize an
individual’s identity and open at various speeds depend-
ing on whether the individual is young, old or disabled or
pushing a baby carriage. Our intelligent door systems can
also count entries and exits and send an alert when too
many people are in the premises. Environmental sensors
enable the systems to detect cold and warm air flows and
temperature fluctuations, increasing energy savings.

Sustainability is one of the most important commer-

cial drivers in the industry and is integrated into our
product development from the concept stage to materi-
als recycling. The basis is estimates of life cycle costs, cli-
mate impact, materials consumption and transportation
solutions. Customer demand is strong for climate-smart
security solutions ranging from intelligent, ‘green’ doors
to total systems solutions for buildings with a particular
focus on energy consumption control. We now work
regularly on EPDs (Environmental Product Declarations)
for our products and solutions and are developing entire
eco-product ranges, with large materials and operational
savings. The share of certified ‘green buildings’ is growing
rapidly worldwide and these will account for around 55
percent of new commercial construction in the U.S. in
2016. Today this share has increased to 20 percent in
China. This provides significant growth potential for
ASSA ABLOY.

INCREASED COST-
EFFICIENCY

The strategy to increase cost-efficiency is, in short, to
radically reduce break-even costs through increased effi-
ciency in all production and process stages. This delivers
good results, which have contributed to stable margin
growth in line with the EBIT margin target of 16–17
percent over a business cycle, despite constant margin
dilution from our many acquisitions.

Our programs for rationalization of the production
structure in particular are a framework for cost-efficiency
initiatives. In short, they are the driver for retaining our
assembly plants close to customers in high-cost coun-
tries, relocating component manufacture to low-cost
countries, and increasing the share of component sourc-
ing. In view of our acquisition activity with around one
acquisition per month, this is a constantly ongoing task.
Between 2006 and year-end 2015, the Group closed
73 factories, converted 84 plants to assembly and closed

41 office units. The programs have resulted in a staff
reduction of 10,750. Resources and costs have conse-
quently not only been transferred to a low-cost environ-
ment with more efficient and more sustainable produc-
tion processes, but also from production to product
development and marketing close to the customer.

Increased sourcing is a key process. This has been funda-
mentally reformed since 2005, with professional purchas-
ing teams with category responsibility, which manage sup-
plier relations by means of long-term agreements. They
integrate suppliers into our product development, drive
standardization and develop suppliers towards increas-
ingly sustainable operations based on our Code of Conduct
and environmental certification. This process has been
rapid. The number of suppliers has been reduced by 26
percent the last five years, and we can utilize the remaining
suppliers with their lower prices and higher quality.

STATEMENT BY THE PRESIDENT AND CEO

ASSA ABLOY ANNUAL REPORT 2015

And much remains to be done. In our European plants,
we have a large number of production platforms for
more specific customer products. The next step is to rad-
ically reduce this number to a few basic platforms with
machinery that produces standardized components and
does not need frequent reconfiguration. With intelligent
software platforms that gather large clusters of function-
alities and customer needs, known as a modular software
framework, we can move towards specially designed cus-
tomer offerings. These efficiencies include a major focus
on robotization. Americas division, for example, has
tripled its number of robots since 2013, generating
significant cost savings.

Our Lean projects are running smoothly and increas-
ing in number. VA/VE analyses to avoid materials waste
are a major success, contributing to large savings since
2007. The number of components can often be reduced
by 20 to 40 percent in new designs, with a substantial
improvement in sustainability.

Seamless Flow activities provide another major poten-
tial for cost reductions. 43 percent of our personnel costs
relate to indirect support functions, which are entirely

necessary for successful operations. But we can, on the
other hand, reduce costs by automating these processes.
This is taking place at a high rate and with large invest-
ments particularly in IT, which replace older systems for
product data, ordering and invoicing, purchasing, inven-
tory and logistics, wages, and e-commerce. This not only
accelerates the processes, but also improves quality and
makes them less prone to failure. Indirect production
costs and overhead costs are falling. We have chosen to
utilize the resulting savings to increase investments in
product development and sales.

We are now developing Seamless Flow from an

emphasis on cost reductions to becoming increasingly a
revenue generator as well. This is about e-business, creat-
ing convenient online relationships that enhance added
value and facilitate being an ASSA ABLOY customer. In
addition to being able to see and order products online,
customers can produce drawings and specifications with
our support, receive fast technical support in an interac-
tive dialogue with our specialists, and track orders, logis-
tics and invoicing status in a deep and broad common
web presence.

“We are well positioned for continued
long-term profitable growth.”

OUTLOOK

My judgment is that the global economic trend remains
weak. Although America is showing a positive trend,
Europe and many of the Emerging Markets are stagnat-
ing. However, our strategy of expanding in the Emerging
Markets remains unchanged, since they are expected to
achieve very good economic growth long term. We are
also continuing our investments in new products,
especially in the growth area of electromechanics.

The Group’s strategy initiatives are based on pro-
found, long-term trends in the global economy, which
have proved durable over a very long period. These basi-
cally concern people’s increasing need for safety and
security as prosperity rises and urbanization continues,
as well as the technological development towards
increasingly digital and mobile security. In this light,
I usually maintain very briefly that this is a good industry
to be in. We also have a good culture for developing
our company in the face of future challenges. I should

therefore like to conclude by expressing my sincere
thanks to all our employees whose major daily efforts
ensure that ASSA ABLOY continues to be the most
innovative and cost-efficient supplier of door opening
solutions.

Stockholm, 5 February 2016

Johan Molin
President and CEO

INCREASE IN SALES 1994–2015

INCREASE IN OPERATING INCOME 1994–2015

+1,800 % +7,000 %

ASSA ABLOY ANNUAL REPORT 2015

STATEMENT BY THE PRESIDENT AND CEO 7

Value creation strategy

Vision

• To be the global leading, most successful and innovative

supplier of total door opening solutions.

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

• To be an attractive company for our employees.

VALUE CREATION STRATEGY

ASSA ABLOY ANNUAL REPORT 2015

Strategy and targets

Long-term and as an average over a business cycle

10 %

annual growth through a com bination

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
assembly close to
the customer and
production in low-
cost countries.

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 ANNUAL REPORT 2015

VALUE CREATION STRATEGY 9

Value creation strategy #1
A world-leading market presence is achieved by increasing customer value
and expanding into new markets and segments 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.

Market presence

#1Global leader

in door opening solutions

×526 percent of sales

are on emerging markets,
a fivefold increase in nine years

51Electromechanical solutions

account for 51 percent of sales

Market presence

Increased market presence for
profitable growth

ASSA ABLOY’s market presence is driven by a basic need for safety and security. This need
is satisfied by various types of door opening solutions. In pace with increasing prosperity,
urbanization and technological development, this need increases at least at the same
rate as GDP in mature markets and even more rapidly in emerging markets. Strategies to
increase market presence focus on strengthening the master brand, creating customer
value through segmentation, advice and close customer relations, increasing presence in
distribution, expanding in emerging markets and in new technologies organically and
through acquisitions.

Strong global drivers for growth

Need for increased
security
Security follows a very old demand trend
– the better off people are, and the more
assets they have, the more their require-
ments increase for locks and doors to
protect their property and family. Global
security demand will continue to grow
faster than the global economy. The
growing middle class in the cities is a key
factor and is forecast to double to 2 bil-
lion by 2030.

Urbanization
In an increasingly global economy, cities
are the major dynamic growth factor.
Cities are where the new service jobs are
created and where young people migrate
for a better future. Estimates suggest that
another billion people will be city dwell-
ers by 2025, which means that 4.8 billion
people or 60 percent of the global popu-
lation will live in cities.

Technological
development
The main driving technological trend is
digitization, i.e. IT’s huge advances in
electronic transfer of date, image and
voice via computers and mobile devices.
Demand is increasing sharply for new
digital and mobile security technology
to access buildings, open doors, access
equipment such as computers, verify
rights such as citizenship and driving
licenses, and identify educational and
professional competence.

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2015

Working
and
shopping

75%

Institutional and
commercial market
– share of sales

Market segmentation

Three basic needs create demand for
ASSA ABLOY’s solutions:

Institutional and commercial market – complex,
demanding projects
Growth and prosperity are increasingly concentrated to
the cities, where the growing service economy results in
increased consumption demand. The number of new and
renovated buildings for education, healthcare, public
administration and office jobs, as well as shopping malls,
stores and warehouses is forecast to increase very sharply
in the 600 largest cities by 2025. This customer segment
is ASSA ABLOY’s largest, most demanding and dynamic. It
accounts for around 75 percent of sales and has a higher
profitability potential. Procurement is in the form of large,
complex projects. Demand is strong for total electrome-
chanical and advanced door opening and access control
systems in which digital and mobile solutions are growing
substantially. ASSA ABLOY’s common sales force has con-
tact with many stakeholders in the value chain to develop
optimal solutions for customers’ multifaceted needs.
Distribution and installation are largely handled by
installers, system integrators and locksmiths.

Living

25%

Private customers
and residential market
– share of sales

Consumer market – replacement and upgrade with
advice and installation
Housing construction is increasing sharply in the cities in
emerging markets. But the main business in the consumer
segment is maintenance and upgrade, due to the Group’s
very large installed base of residential locks. Demand is
growing strongly for electromechanical products, driven
by the home automation trend in which ASSA ABLOY sup-
plies security solutions for entering and exiting private
homes. ASSA ABLOY is spearheading this trend in partner-
ship with other suppliers, and the home-owner receives
advice and installation assistance from ASSA ABLOY and its
distribution partners. The Group also cooperates with
door and window manufacturers and specialist distribu-
tion channels such as DIY stores and locksmiths.

After-
market

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 aftermarket,
which is more stable than new construction. The after-
market consists of renovations, refurbishments, exten-
sions, replacements and upgrades, with good growth
due to the shorter life cycle of digital and mobile door
opening and access control technologies. ASSA ABLOY’s
software platforms for flexible solutions enable custom-
ers to constantly upgrade their security with more and
new functions, licenses and subscriptions as technology
and customers’ security needs develop.

Small and medium-sized customers generally have a
considerable need for professional advice and installa-
tion. ASSA ABLOY has a complete product and service
offering, and is actively working to train distributors and
to develop more standardized solutions for small and
medium-sized businesses, such as stores and offices.

STABILITY IN THE AFTERMARKET

 Aftermarket, 67%
 New construction, 33%

ASSA ABLOY ANNUAL REPORT 2015

MARKET PRESENCE 13

Market presence

Market strategies

Strengthening ASSA ABLOY’s world-leading market presence through constantly increasing
customer relevance is a 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 mainly
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 cus-
tomer relationships through competence and specification, increasing market share with
distributors, expanding in new markets and product segments, and acquiring companies.

Increasing growth by segmentation and
specification
Over the past seven years ASSA ABLOY has made a sig-
nificant global strategic shift to an increasingly market-
oriented organization, in close collaboration with archi-
tects, security consultants, major end-users and distribu-
tors. The main growth potential is found in existing
market channels, partly driven by an increased share of
distributors’ sales, and in an increased service level and
integration with customers through retail channels.

One important initiative is the focus on increased cus-

tomer relevance through market segmentation and an
increased share of distributors’ market share. Sales teams
focus on different customer segments to gain the indus-
try’s best understanding of customer needs, build rela-
tionships and generate demand, thereby becoming the
end-user’s door opening solutions expert. ASSA ABLOY
supports customers and their consultants with advanced
digital tools for 3D modeling and BIM (Building Informa-
tion Modeling), which simplify planning processes and
strengthen customer relationships. Segmentation aims
at total door opening solutions customized to the doors’
applications. It handles security and convenience
aspects, sustainability, special local requirements for

compliance with standards and regulations, and the
need for integration into new or existing security systems
and IT networks.

This initiative has resulted in a significant transfer of
resources towards the customer and an increase in cus-
tomer-facing staff with a demand-generating responsi-
bility. In the EMEA division, the number of customer-fac-
ing staff has increased with 22 percent in five years, while
the number of non-customer-facing staff has decreased
correspondingly. In ASSA ABLOY Door Security Solutions,
the leading sales organization for the U.S. and Canada,
the share of customer-facing staff has increased from 35
percent in 2004 to nearly 60 percent. The share is also
increased in the other divisions. This is an ongoing trend.

Acquisitions
Acquisitions are an important part of the strategy to
increase market presence. The ambition is 5 percent
acquired growth per year over a business cycle. Since
2006 the Group has made over 140 acquisitions, with a
focus on expanding in emerging markets, complement-
ing existing operations, and increasing technological
breadth and depth. 2015 saw 16 acquisitions, which
increased Group sales by SEK 2,500 M or 4 percent.

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.

ASSA ABLOY secures India’s largest and busiest
railway station and lifestyle center

CUSTOMER: Seawoods-Darave is located in Mumbai and is India’s largest and busiest
railway station. The building also houses an exclusive lifestyle center, with high-end stores,
offices and parking space.

CHALLENGE: Seawoods is a multifaceted project comprising a
modern railway station, offices, stores, restaurants, parking space
etc. A total of 6,000 door locks were supplied within a very tight
time frame. Apart from the huge scale of the building, the chal-
lenges for ASSA ABLOY India were supplying products for a number
of different applications. In addition, a large number of compo-
nents and hardware for glazed doors were required.

SOLUTION: A team was formed comprising representatives from
ASSA ABLOY India, the distributor and ASSA ABLOY’s regional office
in South Asia. To create an optimal customer experience and pro-
vide a cost-efficient solution, ASSA ABLOY India chose to offer
products from several different Group companies, including fire-
rated lockcases, electromechanical locks, fire-resistant door seals
and moldings, and door dampers and locks.

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2015

70%

70 percent of Group sales are under the
ASSA ABLOY brand or a combination of the
master brand and local brands.

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 considerable value in its 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 differ-
ent brands.

ASSA ABLOY is the global master brand and is often
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 under
the ASSA ABLOY brand or a combination of the master
brand and local brands.

market, Mul-T-Lock for locksmiths, and ABLOY in high-
security locks. These brands account for around 18 per-
cent of Group sales.

The Group also has non-endorsed product brands,
such as Entrematic, Flexiforce and JPM. These brands are
known for their leading competence in specialty prod-
ucts and service or being a market channel justifying
their own brand strategy. They account for around 12
percent of sales.

In order to compete effectively on a global market,
the sales force operates as an integrated organization
and represents the ASSA ABLOY master brand. The sales
representatives create solutions for the customer using
various products manufactured under established local
brands. Consequently, customers can be offered total
door opening solutions, while buying well-known local
brands. A specialist brand organization has the task of
strengthening brand and design development, with a
focus on the ASSA ABLOY master brand. It is intended
to systematize product design, brand identity and IP
protection.

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 issu-
ance and identification technology, Yale in the residential

During the year hospitality operations were united
under the overall ASSA ABLOY Hospitality brand, while
the former VingCard Elsafe brand was converted into a
product line under the ASSA ABLOY brand.

ASSA ABLOY ANNUAL REPORT 2015

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 26 percent in nine 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 for door opening solutions
between countries is significant due to different cli-
mates, development level, regulations and standards.
As the most global player with a local presence on all
major markets, this gives ASSA ABLOY competitive
advantages. The same applies to the globalization trend,
which is driving development towards a more similar
security approach among multinationals seeking smart
and cost-efficient corporate solutions.

The mature markets in North America, Europe and
Australia account for three-quarters of ASSA ABLOY’s
sales, with demand growth around or just above GDP
growth. Demand is now shifting increasingly towards
electromechanical technology, with very rapid growth in
higher value digital and mobile solutions. The mature
markets’ share of the Group’s total sales will decrease in
favor of emerging markets. Annual sales growth in Asia,
Latin America and Africa has been between 10 and 30
percent for several years.

Demand for mechanical locks is higher in these con-
tinents than in mature markets, but the rapid spread of
technology and the increase in prosperity result in very
high growth figures for electromechanical solutions. The
major global shift towards more electromechanical
products is mainly in the commercial segment. However,
sharply increased demand for digital and mobile security
solutions has also been seen in the consumer market
over the past two years.

The very large Chinese market remains an important
expansion area for the Group although the growth rate
was negative during 2015. As a result of organic growth
and more than ten acquisitions, ASSA ABLOY’s sales in
China have increased from SEK 457 M in 2006 to SEK

6,471 M. Today the Group is China’s largest manufacturer
and supplier of lock solutions. The profitable aftermarket
for maintenance and upgrades already accounts for
around one-third of sales.

Africa has high growth and considerable potential.
The Group is concentrating its market presence to the
40 largest cities, which account for 90 percent of the
continent’s GDP. Sales in Latin America have increased
over 60 percent in five years to SEK 2,500 M. Eastern
Europe is also an interesting market in the longer term.
The Group has a large share of its production in the
region, and sales have more than doubled to SEK 2,626 M
since 2006.

Fragmented competition – continued
consolidation
The global door opening solutions market remains frag-
mented, with a large number of smaller regional and
local businesses, particularly in emerging markets and
Europe. Consolidation has been in progress for the past
20 years, with ASSA ABLOY as the driving force. It is still
quite common for companies in Europe, for example, to
be family owned and have a strong position in their
respective domestic markets. They are often well estab-
lished and have strong ties with local distributors. In
emerging markets, established lock standards and
brands are less common and markets are even more frag-
mented, such as in Asia where the largest manufacturers
have a relatively low market share.

ASSA ABLOY is easily the global market leader and

considerably larger than its closest competitor, the
German-Swiss group Dorma-Kaba. Other important
competitors with operations in ASSA ABLOY’s segments
are: Stanley Security (USA), Allegion (USA), and Hörmann
(Germany).

SALES BY PRODUCT GROUP

Mechanical locks, lock
systems and fittings, 29%

Entrance automation, 26%

Electromechanical and
electronic locks, 25%

Security doors and
hardware, 20%

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2015

Growth in Group sales
by region 2015

NORTH AMERICA

+8%

EUROPE

+6%

SOUTH AMERICA

+26%

AFRICA

Geographical expansion is mainly achieved through
acquisitions of leading local companies with well-
known brands, in order to build a strong platform on
emerging markets in Asia, eastern Europe, the Middle

East, Africa and South America. Emerging markets
have increased their share of Group sales from
10 percent nine years ago to 26 percent in 2015.

SALES BY REGION

SALES ON EMERGING MARKETS1

ASIA

+9%

OCEANIA

+7%

Europe, 37%

Africa, 1%

North America, 39%

South America, 2%

Asia, 17%

Oceania, 4%

SEK M

20,000

15,000

10,000

5,000

1 Emerging markets are Africa, Asia,

the Middle East, South America and
eastern Europe.

ASSA ABLOY ANNUAL REPORT 2015

MARKET PRESENCE 17

OceanienAsienSydamerikaNordamerikaAfrikaEuropaMarket presence

Distribution

Distribution is an important part of ASSA ABLOY’s value creation. 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 due to its well-developed
cooperation with distribution players thanks to its specialist advisers, the specifiers. The
aim is to increase knowledge and demand by offering competence and digital tools as
early as possible in the planning, specification and design of door opening solutions.

Value creation in distribution
ASSA ABLOY is increasingly becoming a supplier of inte-
grated concepts for total door environments. This takes
place in close collaboration with customers and their
advisers in distribution, creating good customer rela-
tions, market demand and entry barriers for competitors.
Distributors also play a key role in providing service and
support after installation.

The distributor’s role varies between different
customer segments. In the commercial segment,

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

Distribution channels for the security market

ASSA ABLOY creates considerable value for customers in the
distribution process. The Group’s advisers, the specifiers, pro-
vide specialist advice on security solutions. Architects, building
and security consultants can use ASSA ABLOY’s BIM technol-
ogy to specify and test solutions in 3D on computer screen for
3D models of buildings and door openings, and order products
online.

ASSA ABLOY
representative Distributor

ASSA ABLOY

DISTRIBUTORS

DISTRIBUTION takes place through many different players depend-
ing on customer segment and stage in the supply chain: security
systems integrators, locksmiths, 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 2015

Specification – advice and digital tools
Rapid technological development and the growing num-
ber of requirements and standards, especially in the area
of sustainability, are constantly increasing complexity for
construction companies 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 dis-
tributors. A central role in marketing is therefore played
by the Group’s specifiers, who have increased sharply
over the past few years and continue to increase rapidly,
especially in emerging markets.

Specification teams work as specialist advisers to cus-
tomers, helping them specify products and select total,
well-functioning and economic security solutions. They
also collaborate with other key groups early in the order
chain, such as building consultants, architects, security
consultants and building standards agencies, to intro-
duce new, innovative security solutions and to create
demand with their business-driving competence.

The Group is spearheading the industry trend for product
configurations and 3D modeling (BIM), which facilitates
the work of architects and building consultants. BIM
makes it possible to create digital models of buildings
into which ASSA ABLOY products can be dropped in 3D.
A door design can then be checked and tested on the
computer screen, and ordered online. Distributors have
constant access to the Group’s advice.

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 hard-
ware in their products before delivery to customers.
ASSA ABLOY also shares competence with locksmiths, a
key distributor of mechanical and electromechanical
security products in many markets. Locksmiths buy
direct from ASSA ABLOY or through wholesalers and pro-
vide advice, delivery, installation and service. Some lock-
smiths have an increased focus on electronics, while IT
integrators are increasingly offering physical security
solutions.

More advanced electronic and digital security solutions mainly reach the end-user
through security installers and specialist distributors. These products and solutions are
also sold through systems integrators, who often offer total solutions for the installation
of perimeter protection, access control and computer security.

ASSA ABLOY
representative

SPECIFICATION involves configuration, checking and testing proposed
solutions. ASSA ASBLOY provides support in the form of specialist advice
and smart tools for digital drawings and 3D models.

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 con-
sultants, government agencies
responsible for security stand-
ards, and other stakeholders.

On the basis of ASSA ABLOY’s advice and close collaboration with customers, architects
and security consultants, door and window manufacturers can install lockcases, hard-
ware and other fittings in their products before delivery to customers.

ASSA ABLOY ANNUAL REPORT 2015

MARKET PRESENCE 19

Market presence

Electromechanics: digital and mobile next stage

The global market for door opening solutions is undergoing a technology shift from
mechanical to electromechanical and electronic products. Electromechanical products
have increased from 29 percent of Group sales in 2005 to 51 percent in 2015. Demand
for mechanical products continues to increase, but is falling as a share of total sales. The
Group is now leading development in a third technology phase of growth for digital and
mobile security solutions. Entrance automation is also growing very rapidly and the
Group 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

29%

53%

SEK 28
billion

18%

2005

26%

29%

SEK 68 billion

25%

20%

2015

Security doors
Security doors are a segment in which ASSA ABLOY has
expanded strongly through acquisitions into a leader on
a number of markets, including China. The Group has a
complete global range of products and services for most
environments with exceptional 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 remains 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 entrance solutions, rapid product develop-
ment and a comprehensive service concept.

Electromechanical products
Increased demand for electromechanical products is a
strong trend, with customers looking for total security
solutions and convenient door environments. In emerg-
ing markets, more and more people are skipping the tra-
ditional 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.

Digitization and mobility
Advances in IT are taking electromechanics into a new
phase. Demand is increasing very strongly for digital and
mobile solutions to create secure and convenient access
to buildings, verify authorization and identify individuals.
The market is expanding and business opportunities are
increasing as technological development leads to shorter
and shorter life cycles, more frequent upgrade needs and
more value per product. ASSA ABLOY is spearheading this
trend with an increasingly advanced service offering,
which results in larger recurring revenue streams based
on long-term supply and service collaborations, cloud
services, licenses and subscription agreements.

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2015

Ultramodern access control
in new Red Cross office

CUSTOMER: In collaboration with the architect Francisco Daroca Bruño,

the Spanish Red Cross in Córdoba wanted to create a new office building,
with a human-centered design, to reflect the organization’s humanitarian
work.

CHALLENGE: The main challenge was to provide the highest possible
security level for a large number of users. The Red Cross wanted to replace
all the mechanical keys, enable security managers to grant access
remotely, and manage several facilities from the same place. At the same
time, they wanted high user security, and to manage the operation’s
various users, including 3,000 volunteers, 100 employees, visitors and
emergency service staff.

SOLUTION: ASSA ABLOY’s wireless access system SMARTair™ satisfies
the Red Cross most important requirement: an effective system that can
be configured and upgraded and satisfies all the users’ needs. The doors
are now opened by programmable smart cards, eliminating the risk of lost
keys. A single system gives property managers control over who enters
and exits the building and when.

The wireless system enables security staff to monitor the building’s
security status in real time. Events can be simply tracked, and the system
can easily be expanded should the Red Cross want to integrate more
facilities in the future.

The aesthetic factor was also decisive for the Red Cross choice. Glazed
doors blend well into the open and transparent building. ASSA ABLOY also
supplied panic hardware, door closers and sliding doors.

ASSA ABLOY supplies hi-tech fire doors
for China’s highest building

SOLUTION: ASSA ABLOY Tianming put together a

special project team with experts in areas such as
product design, quality control and security. The goal
was to create a good understanding of the custom-
er’s needs, by means of data analyses and a survey of
the characteristics of each individual door. In the
end, around 100 different door types were installed,
with some of the largest doors leading to further
production and installation challenges. Apart from
being fireproof, the doors also needed effective
sound and heat insulation, and a high security level.
Another requirement was a means of rapid evacua-
tion in case of an emergency.

The Shanghai Tower, which is specially designed to
withstand strong winds, was fitted with nearly 6,000
hi-tech fire doors.

CUSTOMER: Shanghai’s latest landmark, the

Shanghai Tower, is the tallest skyscraper in China. The
632 meter high building with a twisted form has 127
floors and an area of 576,000 square meters. From
above, the roof is reminiscent of a guitar plectrum.
A wind tunnel test showed that the building’s
design reduces wind loads by 24 percent. This is an
important factor in Shanghai, which is often hit by
typhoons.

CHALLENGE: Nearly 6,000 fire doors were supplied
for the Shanghai Tower. It was a complicated project
– in view of both the building’s scale and the need for
a large number of different types of hardware for
doors in various parts of the building (e.g. data
center, electrical plant room, risers, corridors and
offices). The project required a number of suppliers
with advanced manufacturing facilities and
technologies.

ASSA ABLOY ANNUAL REPORT 2015

MARKET PRESENCE 21

Value creation strategy #2
Product leadership is achieved through innovation and continuous
product development to enhance customer value and quality, and
reduce product costs. Customer benefits are developed in close
cooperation with end-users in a constant process of many small
steps. The objective is to meet or exceed customer expectations.

Product leadership

No.1The most innovative

supplier of total door
opening solutions

+22%

Electromechanical products and
entrance automation have increased
from 29 percent to 51 percent
of total sales in ten years

31%

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

Product leadership

Technological leadership in
digital and mobile world

A constant flow of new, innovative and sustainable products to the market is the single
most important driver for achieving ASSA ABLOY’s target of 5 percent organic growth.
The Group’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. Products launched in the past three years now account for
over 30 percent of sales, compared with 15 percent ten years ago, as a result of significant
efforts.

Product leadership

Today ASSA ABLOY is well established as the global prod-
uct leader in mechanical, electromechanical and elec-
tronic locks and door opening solutions. The Group is
also leading development in the next major technologi-
cal stage towards the digital and mobile world’s solutions
comprising intelligent, networked and connected prod-
ucts. R&D investment has increased 230 percent since
2005, reaching a new record level of SEK 1,932 M in 2015,
equivalent to 3 percent of sales. The Group-wide struc-
tured innovation process with common platforms,
Shared Technologies and development centers in all
divisions is driven by the ambition of doubling the
innovation rate.

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 2005 these have increased from
29 percent to 51 percent of ASSA ABLOY’s sales, equiva-
lent to SEK 27 billion in growth. Mechanical products
continue to increase, but electromechanical products
are growing considerably faster.

More electromechanical products also mean an

increase in the sales value per door, as well as in the recur-
ring revenue from service and upgrades. The share of
installed doors fitted with some form of electromechani-
cal solution is estimated at around 5 percent and is fore-

cast to reach 20 percent or more in the future, represent-
ing a strongly growing market for upgrades and new sales.
Another important driver for product development is

the sharply rising demand for sustainable solutions.
Investments in sustainable buildings are increasing
worldwide, with requirements for energy savings, lower
materials consumption, and renewable or recycled
materials becoming increasingly important. Demand for
Environmental Product Declarations (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 con-
cept stage to recycling of worn-out products. Specifica-
tions for the development of new products and cus-
tomer solutions may be based on life cycle analyses and a
reduction in energy consumption in buildings, as well as
concrete savings in materials consumption, packaging
and transport solutions. ASSA ABLOY can standardize
materials, reduce the number of components, constantly
improve quality, and considerably reduce the costs of
each new product by developing common technology
platforms and modular systems.

The strategy for product leadership is based on four points:

Developing and exploiting
the advantages of a Group-
wide, structured innovation
process.

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

Developing and using
common technology
platforms and common
technologies.

Continuing to expand
the number of R&D com-
petence centers close to
customers.

PRODUCT LEADERSHIP

ASSA ABLOY ANNUAL REPORT 2015

CHANGE IN PRODUCT MIX

2005
SEK 28 billion

Mechanical products, 53%
Electromechanical products, 29%
Security doors, 18%

2015
SEK 68 billion

Mechanical products, 29%
Entrance automation, 26%
Electromechanical products, 25%
Security doors, 20%

Since 2005 electromechani-
cal products, including
entrance automation, have
increased from 29 percent to
51 percent of Group sales.

Future security solutions

With digital and mobile technology, ASSA ABLOY is spearheading development in third
generation door opening solutions. Mechanical products remain the basis of the Group’s
offering. Electromechanical technologies in locks, doors and industrial doors have grown
very strongly for over ten years and have multiplied the market. The next technology
stage is intelligent, networked and connected products. Solutions controlled by in-house
developed software and cloud-based systems solutions provide new customer value and
further growth opportunities.

Legend

The total door opening solution is ASSA ABLOY’s
strength, due to the Group’s versatile technologies and
broad ranges comprising everything from traditional
products to hi-tech solutions with which a variety of
door environments can be built, constantly developed
and customized. Development takes place in stages:
• from a good base product,
• to a smart product, which can be remotely controlled,
• to a system of products with several security functions

Central to future access control systems is the capacity to
create digital identities, which are represented in
mechanical systems by holding a key that fits a lock. The
cell phone and wearables are rapidly becoming people’s
main identity carriers. ASSA ABLOY has a broad offering
in secure digital and mobile identity and access manage-
ment, with various layers of security and control. It is
based on Seos, which forms the basis for an ecosystem of
mobile services and products.

in one building,

Legend

In a world of the Internet of Things and digital homes,

• to a complete, intelligent ecosystem, which coordi-

nates multidimensional security solutions for whole
complexes of buildings, with user identification and
preventive and acute signaling of security risks.

Legend

The capacity to develop total digital and mobile door
opening solutions gives ASSA ABLOY significant competi-
tive advantages. Demand for the new technologies is
growing rapidly in all segments in new buildings, as well
as in supplementing and upgrading old installations.

Improved function and more value from operational
cost savings create increased value for both the customer
and ASSA ABLOY. Rapid technological development leads
to shorter life cycles with more frequent additions,
replacements and upgrades. The trend towards com-
plete multifunctional and complex systems is creating
new business opportunities.

As ASSA ABLOY’s product portfolio contains more
electronics and software, the share of service content in
the Group’s offering, such as upgrades and licenses,
increases. The solutions tie the customer closer and
create a recurring revenue stream.

where people and appliances in the home and equip-
ment at work are connected, ASSA ABLOY’s security com-
petence, products, solutions and Seos platform are a
strongly growing integrated part. The Group works in
close partnership with a number of suppliers and
launched groundbreaking collaborations with AT&T and
Google Nest in the area of home automation in 2015.
Several new segment-specific solutions were launched,
such as Accentra for apartment blocks and new applica-
tions for the CLIQ system.

Modular systems
In order to spearhead this rapid technological develop-
ment, ASSA ABLOY has developed processes and meth-
ods based on a modular approach and Lean principles in
the innovation process. A modular design provides
opportunities for reusing a design, drawings and models,
and substituting parts of a product or solution without
needing to redevelop the whole. For a group with ASSA
ABLOY’s broad product portfolio, it is especially impor-
tant to benefit from synergies in the development pro-
cess even between products that have little in common
at first sight.

Next evolutionary stage

Higher value per product
Increased replacement rate
New business opportunities
Increase in recurring revenues

Higher value per product
Increased replacement rate

Intelligent connected products
and cloud-based systems

Electromechanical and electronic products

Mechanical products

ASSA ABLOY ANNUAL REPORT 2015

Today mechanical and electromechanical
door opening solutions are predominant
worldwide. But development is now
entering a third technology phase, the
digital and connected phase. This means
that the necessary basic function of a
mechanical lock cylinder, door and
entrance environment can be digitally
controlled for more effective and conve-
nient function, and lower operating costs
in large multifunctional systems. Shorter
life cycles with more frequent additions
of new technology solutions create busi-
ness opportunities for ASSA ABLOY.

PRODUCT LEADERSHIP 25

Product leadership

Innovation management
– for efficient innovation

A prerequisite for ASSA ABLOY’s product leadership and sharply rising innovation rate is
the focus on an increasingly effective Group-wide innovation process. It is driven by the
Group target that products launched in the past three years should account for at least
25 percent of sales, which has already been achieved. Guiding principles are insight into
customer needs, product management based on a long-term plan, active management
of product portfolios, and a cost-efficient innovation process.

Value creating products
Each new product and product solution should create as
much customer value as possible through improved
function and cost savings in the form of more efficient
designs, better materials and component choices, and
improved processes. All new projects aim to solve an
identified customer need and are based on insight into
underlying customer needs and requirements.

Customer insight
ASSA ABLOY works systematically to gain a deep under-
standing of customers and their expressed but also their
long-term, non-expressed needs. Broad monitoring and
collection of market data and surveys of different cus-
tomer segments are 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 knowledge is used for both generating product
concepts and planning for the future.

Sustainability
Sustainability performance is a prerequisite for success-
ful product development. ASSA ABLOY’s products play an
important role in customers’ energy efficiencies, since
the building’s various openings can account for up to 20
percent of energy consumption. Today, around half of all
U.S. buildings already have an energy rating, which

INVESTMENTS IN RESEARCH AND DEVELOPMENT

SEK M

2,000

1,500

1,000

500

affects the prices developers and landlords can charge
tenants. The goal is not only to focus on functions that
increase energy efficiency on entry and exit and tempera-
ture control, but also to reduce energy consumption in
the operation of doors and industrial doors.

Design and design language
In markets with competent competition and an increas-
ing number of professional customers, the importance of
smart, attractive and functional design is vital for differ-
entiation and a distinctive image. The Group has estab-
lished a unit for development of industrial design and a
common design language. ASSA ABLOY has a long, suc-
cessful history of acquisitions and integration of people,
products and brands. A common identity strengthens
integration and facilitates matters for customers.
A Group-wide design center is the next step in the

Management

PRODUCT MANAGEMENT

PRE-PRODUCT INNOVATION (PPI)

CUSTOMER NEEDS

Organization and knowledge

INNOVATION CULTURE AND PRINCIPLES

PRODUCT LEADERSHIP

ASSA ABLOY ANNUAL REPORT 2015

SALES OF PRODUCTS
LAUNCHED IN PAST
THREE YEARS

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.

Product management
Product management is a critical component in the
Group’s innovation system. It ensures that each product
group has a vision-based long-term plan founded on
market insight, technology development, customer
value and each product’s strengths. These plans form the
basis for the portfolio balancing that must then take
place across all product groups within each unit. It aims
for a balanced mix of initiatives to be implemented,
based on the resources available. The projects are
planned and run on Lean principles, with cross-functional
participation and visual management. All innovation
operations are run 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.

ASSA ABLOY conducts three types of innovation proj-

ect: pre-product innovation, new product innovation
and continuous product innovation. All project types are
run on Lean principles, focusing on results. An important
part of the process is a modular approach, which pro-
vides an opportunity to reuse a design and substitute
parts of a product or solution without needing to
redevelop the whole.

Shared Technologies, the Group’s common development
unit, plays a central role in the innovation process and
develops new, global, common product platforms
together with the divisions. This initiative has been very
successful and contributed to a rapid increase in the
number of development engineers. Work began with
well-known ASSA ABLOY technologies such as CLIQ, Hi-O
and Aperio. Since then improvements and new functions
have constantly been added, with a large number of hi-
tech modular blocks that create whole ecosystems of
customer services. Shared Technologies is based in Swe-
den, with operations in Krakow, Poland and in Gurgaon,
India, providing opportunities for 24/7 service and better
global support.

Product Data Management
The Group is continuously investing in the innovation
process to increase effectiveness, such as its investment
in a Product Data Management System. This links up a
Group system of databases, mechanical and electronic
CAD tools, and information software, and allows smooth
communication with the customer’s business systems
and other design and product development systems. In
order to guarantee high IT security in product develop-
ment and for products and product platforms, ASSA
ABLOY has recently created a Software and Security
Center for the Group, which develops methodology and
processes, establishes standards, provides training and
conducts tests.

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 imple-
menting them in the right way to
optimize the use of both human
and financial resources.

ASSA ABLOY ANNUAL REPORT 2015

PRODUCT LEADERSHIP 27

PRODUCT MANAGEMENT

CUSTOMER NEEDS

Organization and knowledge

Product leadership

Product platforms

CLIQ®

Seos®

Aperio®

Hi-O™

CLIQ® is a secure locking
system with advanced micro-
electronics in programmable
keys and cylinders.

The system offers a large number
of combinations of mechanical
and electronic products, which
satisfy various requirements for
secure, flexible access control.
Most types of locks can be fitted
with CLIQ technology, which
together with various software
programs provides the global
market with customized, flexible
access control solutions.

Each key can be programmed
and updated individually in the
wireless system, to give access to
specific areas at specific times on
specific days. This creates maxi-
mum flexibility and makes it pos-
sible to constantly tailor access
rights. The programmable CLIQ
keys are battery operated.

Intuitive software makes it easy

to manage access rights, activate
or block keys, and create sched-
ules of access rights anywhere and
at any time.

ASSA ABLOY can also help com-

panies store data securely.

Seos® is a groundbreaking
identification technology,
which represents a new
approach to user experience.
Seos solutions allow the
customer to use various
devices, from smart cards to
cell phones, for secure access
to applications with the best
security and integrity
protection on the market.

Seos’ applications range from
building access control, computer
login and cashless payments to
IoT (Internet of Things) applica-
tions, time and attendance report-
ing, and secure printing.

This dynamic, standards-based
technology is already well tested
on the market and offers a variety
of options for use. Seos enables
customers to secure more appli-
cations than ever using every pos-
sible combination of cell phones,
smart cards, tablets, wearables,
bank cards, key fobs, inlays and
other smart devices.

Seos is supplied by ASSA ABLOY

through the Group’s own solu-
tions on various markets. In addi-
tion, the technology is available
on license in products from other
manufacturers, to accelerate
broader use.

Aperio® is a technology
developed as a complement to
existing electronic access
control systems. It is a simple,
neat way for end-users to
improve the security and
control of their premises.

Hi-O (Highly intelligent
Opening) is a concept that
simplifies installation, service
and maintenance of connected
doors thanks to advanced
technology and the plug-and-
play principle.

Central to Aperio is a wireless
communications protocol, which
functions at short distances and
can connect an online access
control system to an Aperio-
compatible mechanical lock.

An unlimited number of exist-
ing or new doors can be fitted with
Aperio. It is much more cost-effi-
cient than installing hard-wired
access control in each door.

Aperio can easily be integrated
with most units and systems, irre-
spective of manufacturer, as the
technology has been developed
around an open standard.

Adding more doors using
Aperio technology allows you to
extend your access control system
and improve the security of your
premises. The products are easy to
install and contribute to more
effective management and moni-
toring of the whole system. More-
over, they provide a further secu-
rity level between wired doors and
mechanical cylinders.

If all the doors in the system are
connected online, you can update
access rights in real time, resulting
in a high security level. The fact
that you can track events and man-
age time zones further increases
control options. Aperio technol-
ogy may be used to advantage in
a system together with wired
doors, and is also tailored to future
security requirements by AES
encryption.

Hi-O is a standardized technology
for control and security of door
environments. The technology
enables interconnectivity, that is,
communication between all the
components included in a door
opening solution. These compo-
nents speak the same language,
regardless of who manufactured
the system. This contributes not
only to higher security, but also
facilitates the management and
control of the doors.

Since intelligence has been
embedded in each unit, Hi-O tech-
nology enables rapid, flexible
information on the door’s opera-
tional status, allowing planned
service and preventive mainte-
nance to be performed in good
time.

As a result, the components can
be replaced before they fail, elimi-
nating the need for expensive
repairs and creating a more secure
environment.

Installation is moreover simple
and cost-efficient, thanks to plug-
and-play. When the new device is
connected, it automatically
searches for other network com-
ponents and starts sharing data,
facilitating updating and expan-
sion of the system.

Hi-O uses a CAN network for
data communication so that con-
nected devices can share and
exchange encrypted information.

PRODUCT LEADERSHIP

ASSA ABLOY ANNUAL REPORT 2015

ENTR is a new, eco-friendly, smart lock solution providing
a simple, secure way of locking and unlocking new or old
doors without using physical keys.

The lock solution makes it easy for the user to control

access to their home or office by means of a connected
device, such as a smartphone or tablet, or using a per-
sonal code, fingerprint reader or remote control.

ASSA ABLOY’s Chinese subsidiary Unilock has devel-
oped a total solution for locker management. The
patented key and the solution function exactly like a
mechanical lock, eliminating the risk of lost keys. The
network lock can be connected to over 8,000 locks in a
network group, and the number of locks in a network
group can be simply doubled or trebled.

ASSA ABLOY Hospitality’s Mobile Access App is an
off-the-shelf solution, ready to install and use. The App
allows hotels to simply offer mobile access control, elimi-
nating the need for complex integration or third-party
solutions.

ASSA ABLOY Entrance Systems’ spectacular three- and
four-winged all-glass revolving doors with unique LED
lighting in the ceiling are the crown jewels in the com-
pany’s entrance products, providing a hi-tech master-
piece for each building.

The new ActivID Tap Authentication solution for Micro-
soft enables users to tap their contactless smart card to
laptops, tablets, phones and other NFC-enabled devices
for easy and convenient access to Office365 and other
cloud apps and web-based services. The solution uses
Seos’ prize-winning card technology, enabling organiza-
tions to implement a consistent ‘tap’ experience when
employees access doors and cloud-based apps.

In 2015 a partnership was launched with the U.S. com-
pany Nest for Yale’s Linus lock. Linus uses a new commu-
nications protocol, Thread, which functions with other
products in Nest’s eco system. It is a
secure, keyless lock, devel-
oped by Nest and Yale for
Nest homes. Linus allows
the user to remotely con-
trol, lock or unlock the
door using the Nest app
on their cell phone. It is
also possible to create and
manage family accounts
and passwords so that
family members and
guests can easily come
and go, while the user
receives an alert when
someone returns home.

ASSA ABLOY ANNUAL REPORT 2015

PRODUCT LEADERSHIP 29

Value creation strategy #3
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 out-
sourcing. Production combines final assembly close to the customer
with the transfer of standard production to low-cost countries.

Cost-eff iciency

$Price management for

price leadership

-26%

26 percent reduction
in number of suppliers
since 2006

+Restructuring program

providing significant results

Cost-eff iciency

Cost-efficiency

Successful Group programs to
increase cost-efficiency

ASSA ABLOY is striving to radically reduce the breakeven point through a number of
Group programs to increase cost-efficiency. These recurring programs are fundamental
for rationalization of the production structure. The latest program will end in mid-2016
with significant cost reductions. Work continued successfully on professional sourcing,
Lean production methods, major investments in product development for more efficient
and sustainable production and products, and Seamless Flow, i.e. streamlining and auto-
mating administrative flows. Cost reduction efforts make significant contributions to
achieving the operating margin target of 16–17 percent and to the Group being a price
leader and contributing to sustainable development.

Production structure

The most important long-term change in the Group’s
organization is the switch from manufacture of standard
components to assembly and increased sourcing. Pro-
ductivity is increasing considerably with the moderniza-
tion of plant, machinery and flows in factories, making
major contributions to reducing environmental impact.

Since 2006 ASSA ABLOY has consistently imple-
mented multi-year programs to retain only product
assembly in plants close to customers in mature markets.
The more strategic components, such as cylinders, door
closers and some electromechanical products, are con-
centrated to the Group’s own production plants in low-
cost countries, while components are increasingly
sourced from production partners. As a result, the num-
ber of employees in low-cost countries has doubled since
2006 to over 20,000, and the share has increased from
36 percent in 2006 to 45 percent in 2015.

The programs may be seen as ongoing activities,
although they are basically structural, due to the Group’s
acquisition strategy of around one acquisition per
month. A significant part of the synergy effects on acqui-
sition are the restructuring of manufacturing and mod-
ernization of production, efficiencies in the organization,
and a switch to the Group’s suppliers.

ASSA ABLOY has well-established knowledge of and
methods for restructuring, which integrates new acquisi-
tions and adapts the production structure to market
changes. Cost savings have been significant since 2006.
73 production units have been closed, 84 converted into
assembly plants, and 41 office units closed. The majority
of the remaining production units in high-cost countries
have switched to mainly final assembly and customiza-
tion to achieve short lead times and a high service level.
As a result of these changes, 10,750 employees have left
the Group.

PLANTS IN LOW-COST COUNTRIES

COST-EFFICIENCY

ASSA ABLOY ANNUAL REPORT 2015

Professional sourcing

ASSA ABLOY’s professional sourcing should ensure maximum quality at minimum cost
and is a prerequisite for increasingly efficient operations. Direct material sourcing has
increased substantially over the past ten years from SEK 8 billion to over SEK 25 billion.
The ambition is to have an increasingly limited number of large, high-quality suppliers,
mainly in low-cost countries, as strategic partners. These should be a natural part of the
production flow and also collaborate in product development. Collaboration is based
on the Group’s Code of Conduct, as well as constant development of quality and sustain-
ability initiatives.

Professional sourcing is growing in importance as ASSA
ABLOY switches from its own production to assembly
and customization close to the customer, and becomes a
more market-oriented problem solver. The Group is striv-
ing to reduce the number of suppliers, who are to
become strategic partners who increasingly take part in
the development process and grow into suppliers of
more than just components in close collaboration. ASSA
ABLOY contributes competence transfer and its produc-
tion and quality expertise.

The aim is to achieve a gradual concentration to fewer,
more competent suppliers. During the last five years, the
number of suppliers has been reduced by 26 percent to
around 8,000 worldwide, with a substantial majority in
low-cost countries. The target is to halve this number in
the next few years.

The Group’s purchasing organization has been
strongly professionalized over the past ten years.
Suppliers are categorized and segmented according to
the strategic needs identified by the Group. The divisions

now have specialist purchasing managers for each com-
ponent category, who manage different component cat-
egories and their suppliers depending on their strategic
value. Value analyses and comparative costing, with clear
identification of cost distribution, are increasingly impor-
tant methods for professional, fact-based sourcing. The
Group has trained over 200 employees in should-cost
methods, which provide the knowledge to conduct cost
reduction negotiations.

Supplier collaboration is based on ASSA ABLOY’s Code
of Conduct. Compliance with the Code often results in a
long-term improvement in suppliers’ sustainability
efforts, with regard to the physical environment, employ-
ees’ working environment and conditions, and conduct
in other sustainability-related issues. In case of non-
compliance, collaboration is terminated with the sup-
plier. Monitoring takes place through audit programs,
which include over 2,000 suppliers in Latin America, Asia,
Africa and eastern Europe.

NUMBER OF SUPPLIERS

SHARE OF TOTAL PUCHASES IN LOW-COST COUNTRIES

Number

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
suppliers by 26 percent over the past five years.

Raw materials, components and finished goods from low-cost
countries accounted for 52 percent of the Group’s total purchases
in 2015.

ASSA ABLOY ANNUAL REPORT 2015

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 provides increased
added value for customers using fewer resources due to reduced materials consumption
and on-demand production. Value Analysis and Value Engineering (VA/VE) involves in-
depth analyses of products and production processes to identify cost savings in existing
and new products. The focus on Seamless Flow is intensifying to streamline and automate
all the Group’s administrative flows.

ASSA ABLOY focuses on constantly streamlining all key
processes to enhance customer value. Lean methods are
central in achieving on-demand flow manufacturing, in
which testing and packing have been integrated into the
flows. Production becomes transparent, with better
material cost control, improved decision-making proce-
dures, shorter development times, and increased collab-
oration with the marketing and sales organization. Today
Lean projects are being conducted in all of the Group
units and the number is increasing each year.

Value Analysis (VA) is a structured process for optimiz-

ing 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. In recent years, more
than 3,500 employees have received training in these
methods. These include an in-depth analysis of the prod-
uct’s design, components and production methods,
which systematically reduces the cost and enhances cus-
tomer value with improved quality. Cost savings may
amount to 20–40 percent for individual products. Since
the methodology was introduced in 2007, the Group has
made cost savings of SEK 1.2 billion through VA/VE, and
nearly 1,000 different projects have been implemented.
Over 200 projects were implemented in 2015.

Seamless Flow – from costs to customer value
Around 43 percent of ASSA ABLOY’s payroll expenses are associated with administrative information flows and
support functions for R&D, production and sales. Streamlining these flows using digital technology and automa-
tion, known as Seamless Flow, has been a main activity for the Group for the past four years. The principal aim is
to reallocate indirect personnel costs in order to invest instead in innovation and marketing to increase value
creation for the customer.

Seamless Flow is a prioritized activity across
the Group and originates in efforts to reduce
administrative costs by means of digital tech-
nology, while increasing customer value and
strengthening customer relationships. This
trend is sometimes called E-business, that is,
making it easier to be an ASSA ABLOY customer
and receive increased added value in the rela-
tionship thanks to a broad and deep common
web presence and new services, such as con-
figuring and ordering products online, and
receiving technical support on the cell phone.
(See also section in Market presence).

Seamless Flow’s objective is to use digital
technology to standardize information flows

and processes, and to increase the degree of
automation in order to achieve even higher
quality in real time. Examples include a switch
to digital product information tailored to
mobile-connected customers, automated pro-
duction planning based on order inflow, manu-
facturing using intelligent machinery and
robots, a global process and a system to pro-
duce, maintain and share R&D information.
Order management, invoices and payments,
revenue and cost recording, and more
advanced bookkeeping will be automated.

Fundamental to successful Seamless Flow is
the Group’s long-term program to consolidate
the number of IT systems into one coordinated

global infrastructure of servers, IT networks,
systems and data centers, as well as the
Group’s 25,000 PCs, telephony systems,
mobile networks, e-mail functions and
intranets. Moreover, over 100 business sys-
tems, HR systems and digital business applica-
tions are affected. The implementation of
Seamless flow and optimization of the IT infra-
structure will enable more efficient coordina-
tion of an increasing number of support func-
tions. By extension, this means that the Group’s
resources are moved up the value chain closer
to the customer to enhance customer value.

COST-EFFICIENCY

ASSA ABLOY ANNUAL REPORT 2015

Museum with unique security and aesthetic requirements

The Whitney Museum of American Art in New York
required solutions that satisfy the art museum’s
unique requirements, while offering maximum secu-
rity without compromising the elegant interior.

CUSTOMER: The building was designed by the
architect Renzo Piano and comprises over 4,500
square meters exhibition space indoors and 1,200
square meters outdoors, including terraces with a
view of the High Line park. This highly regarded art
museum, whose premises were reopened in May
2015, is centrally located in the Meatpacking District
in Lower Manhattan.

CHALLENGE: Owing to the museum’s unique
security and aesthetic requirements, it was impor-
tant ASSA ABLOY could offer solutions that satisfy a
number of different specific requirements, such as
the means to make door openings larger when art-
works are to be moved between different parts of the
building.

SOLUTION: ASSA ABLOY took into account the
unique requirements for each of the building’s 450
door openings. Traditional swing or glazed doors
were used in some corridors, while special solutions
were required in others, with several adjacent doors
to obtain an extra-wide opening, when artworks are
to be moved.

SUPPLIERS & PARTNERS

SOURCING

In addition, the project included a number of unique
hardware solutions tailored to function with special
or glazed doors.

Another requirement was doors with different
security levels. In many cases the doors were fitted
with electronic lock products to maintain security, in
both galleries and staff areas. Sargent’s patented key
system with several different authorization levels
provides an extra security dimension.

ASSA ABLOY consistently chose aesthetically attrac-
tive hardware. A designer handle from Sargent was,
for example, chosen for its ability to blend into the
building’s design. It is an attractive, uniform, secure
solution, which can be used for everything from elec-
tronic locks and mortise locks to access control
products.

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.

ASSA ABLOY ANNUAL REPORT 2015

COST-EFFICIENCY 35

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

Profitable growth

1,800%

Sales growth
since 1994

7,000%

Increase in operating income
since 1994

9,900%

Increase in earnings per share
since 1994

Profitable growth

Growth and profitability

Over 20 years of rapid growth and
increased profitability

Over the past ten years, ASSA ABLOY has grown into the largest global supplier of door
opening solutions. Simple, clear and consistent strategies have driven rapid growth,
with good, increasing profitability and financial stability. Market presence has been
strengthened by global, broad and deep establishment in fast-growing markets.
Significant investments in product development have resulted in technological leadership
in both mechanical and electromechanical products and solutions. With cost-efficiency
and sustainability programs based on economic resource utilization across the whole
value chain, the Group has delivered long-term increasing profits, which have created
significant value for shareholders and other stakeholders.

In 2005, ASSA ABLOY completed its first ten-year devel-
opment phase, when the company transformed itself
from a regional lock company into the leading global
player. With new management and a new strategy pack-
age, a new journey began in 2006, which is still in prog-
ress today. The focus is long-term value creation
expressed in two overall targets: 10 percent annual sales
growth and a 16–17 percent operating margin over a
business cycle. Target fulfilment is good, while the oper-
ating margin has remained fairly stable above the 16 per-
cent floor except for the crisis years of 2009 and 2010.
Since the 2009–2010 crisis organic growth has been a
strong 21 percent.

in 2005. Sales of electromechanical products have risen
from SEK 8 M to SEK 35 billion. This focus has been wholly
necessary for building long-term growth and competitive-
ness in pace with customer demand for new technology.
The third dimension is the breakthrough in the mar-
kets for entrance automation and industrial doors. As a
result of several major acquisitions in automatic entrance
solutions for industry, warehouses, garages, and entrance
automation, ASSA ABLOY has created a new division,
Entrance Systems. This has grown very rapidly into the
Group’s largest division with annual sales of SEK 17,957
M and a 26 percent share of Group sales. The growth rate
has been very strong at nearly 650 percent since 2005.

Market presence and growth
Underlying the good growth rate of 140 percent since
2005 is an important repositioning of the Group’s market
presence in three dimensions. The first is the strong focus
on emerging markets, which now account for 26 percent
of total sales, compared with 10 percent ten years ago.
A strategic priority has been being the leading supplier in
countries where billions of people are leaving poverty in
the countryside and joining the middle class in fast-
growing cities.

The second dimension has been becoming a market
leader in the switch to electromechanical locks and lock
solutions. Today electromechanical products account for
51 percent of Group sales and mechanical locks for 29
percent, compared with 29 and 53 percent respectively

Product leadership and innovation
The Group’s good organic growth rate would not have
been possible without the strategy of sharply increasing
investments in innovation and product development.
The target is 5 percent organic growth. The ambition has
been to double the innovation rate so that products
launched in the past three years account for 25 percent
of the Group’s total sales. This target has also been
achieved with a good margin and today the figure is
31 percent.

One of the most important drivers is a rapid switch in

customer demand to electromechanical products and
increasingly sustainable and energy-saving products and
solutions. The launch rate for digital and mobile solu-
tions is very high, with ASSA ABLOY supplying total

Strategy

Market presence

Product leadership

Cost-efficiency

Target

Growth and profitability

GROWTH AND PROFITABILITY

ASSA ABLOY ANNUAL REPORT 2015

in-house developed ecosystems and software
for secure identity and access management to
owners of large eco-rated complexes of build-
ings and homes.

Cost-efficiency
Cost and efficiency improvements aim to radi-
cally reduce the breakeven point and also go
hand in hand with sustainability ambitions.
Projects are coordinated and structured, with a
number of main themes.

ASSA ABLOY has fundamentally changed the

production structure over the past ten years
through several programs to concentrate
assembly close to major customer markets and
to relocate component production to low-cost
countries. At year-end 2015, 73 production
plants had been closed, 84 converted into
assembly plants, and 41 offices closed. Overall,
the number of staff has been reduced by
10,750.

At the same time, sourcing has increased sub-
stantially and been concentrated to fewer,
larger and better suppliers. Their number has
been reduced by one-third since 2008. Pur-
chasing processes have been professionalized
and suppliers are integrated into the Group’s
product development and sustainability pro-
grams. Their production is standardized and
includes whole sub-systems. It is managed by
category managers and long-term agreements,
and quality controlled through certification.
Modernization and streamlining of the Group’s
whole production structure have resulted in
significant cost savings and very large environ-
mental contributions in recent years.

Lean programs are conducted in all units,
with professional teams and ongoing projects
to streamline processes. VA/VE methods in
product development have sharply reduced
materials consumption and constantly raise
new product performance in the form of

customer value and environmental value.
Savings over the past nine years total around
SEK 1.2 billion. A major investment is also being
made in Seamless Flow, i.e. more efficient pro-
cesses for information flows, which affect for
around 43 percent of personnel costs. Major
investments are being made in new IT systems
to largely automate administrative processes.

Acquisitions
Acquisitions are a strategic activity for
strengthening geographical market coverage,
complementing the product range and adding
new technologies in expansive areas. Since
2005 ASSA ABLOY has acquired more than 140
companies, achieving its ambition of 5 percent
annual acquired growth. In 2015 the Group
made 16 acquisitions, which are expected to
contribute around SEK 2,500 M to annual sales.

ACQUISITION STRATEGY
AND PROCESS

STRATEGY

EVALUATION

TRANSACTION

INTEGRATION

ASSA ABLOY’S DEVELOPMENT AND ACQUISITIONS 2010–2015

2011– Global leader in entrance
automation
Acquisition of Crawford Entrance
Solutions and FlexiForce, which
strengthen the customer offering
in industrial doors, docking solu-
tions 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 (USA),
a manufacturer of perimeter pro-
tection and gates for industrial
and high-security purposes, and
the fire and security door manu-
facturer Mercor SA (Poland).
ASSA ABLOY also signs an agree-
ment to acquire Amarr, the third
largest player in the North
American sectional door market.
Other acquisitions: Xinmao and
Huasheng (China).

2012 – Strengthened range in
Entrance Systems
The acquisition of Albany Door
Systems, a global leader in high-
performance doors for industrial
use, is completed. ASSA ABLOY
also acquires 4Front (USA), a
leader in docking systems, Securi-
style Group Holdings Limited and
Traka (UK), Frameworks Manufac-
turing (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.

2014 – 20 years as innovative
global leader
Acquisition of ENOX (India); Jiawei
(India), one of the leading suppli-
ers of security locks in China;
IdenTrust (USA), a leading supplier
of digital authentication solutions;
Lumidigm (USA), a leading manu-
facturer 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, pad-
locks and steel doors in Chile.
Agreement to acquire Digi Elec-
tronic Lock, the leading digital
door lock manufacturer in China.

2015 – Expansion in Brazil
ASSA ABLOY expands in Brazil
through the acquisition of Papaiz
and Udinese. Acquisition of Quan-
tum Secure (USA), the leading
provider of solutions to help
enterprises manage identities and
meet compliance requirements in
highly-regulated industries;
Nergeco, a leader in high-perfor-
mance doors in France; CEDES
(Switzerland), a leading company
in sensor technology to the door
and elevator industry; Prometal
(UAE), a leading supplier of steel
and security doors in the Middle
East; and IAI Industrial Systems
(Netherlands), a specialist in
secure printing solutions.
Other acquisitions: Teamware,
the market leader in locks and
hardware in Malaysia; L-Door
(Belgium), a market leader in
sectional doors; and the lock
specialist Flexim (Finland).

SALES AND OPERATING INCOME (EBIT)

Sales, SEK M

EBIT, SEK M

Sales

70,000

60,000

50,000

40,000

30,000

20,000

10,000

1
96

1
97

1
98

1
99

1
00

1
01

1
02

1
03

2
06

2,3

14,000

12,000

10,000

8,000

6,000

4,000

2,000

2
11

2
13

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 2015

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 electro-
mechanical locks, digi-
tal door locks, cylinders
and security doors
adapted to the local
market’s standards and
security requirements.

EMEA

Americas

Share of
sales

Share of
operating income

Share of
sales

Share of
operating income

24%

23%

29%

emea

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

Americas

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

Global
divisions

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

Global Technologies

Share of
sales

Share of
operating income

13%

14%

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

26%

ASSA ABLOY is represented on both mature and
emerging markets worldwide. Emerging markets
have increased their share of Group sales from
10 percent nine years ago to 26 percent in 2015.

Americas

Asia Pacific

Share of
sales

Share of
operating income

14%

13%

Asia

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

Entrance Systems

Share of
sales

Share of
operating income

26%

21%

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

EMEA

Strong growth for
electromechanical solutions

Demand continued to grow in 2015 but at an uneven rate. Growth was strong in northern
and eastern Europe, relatively weak in the UK and Germany, and good in Africa and the Mid-
dle East. Spain returned to positive growth, while sales in Italy and France declined some-
what. Demand for electromechanical locks and solutions grew very strongly in all customer
segments, especially the residential segment. The same was true of demand for sustainable
products. For several years the division has been investing in product development, with a
focus on electromechanical and electronic products, and new products accounted for 28
percent of sales. Intensive work on consolidation and efficiency programs contributed to a
better result, despite a slightly lower operating margin due to negative exchange rate effects.

Report on the year
• Sales: SEK 16,524 M (14,753) with 4 percent organic

growth.

• Operating income (EBIT): SEK 2,620 M (2,432).
• Operating margin: 15.9 percent (16.5).

Market development
The divided demand picture continued in 2015, with
good organic growth overall for EMEA. The long-term
strategic focus on emerging markets generated positive
results during the year, with high growth. These markets
increased their share of total sales to 20 percent (19).
Strong demand for electromechanical locks, which
increased by around 10 percent, was also evident during
the year. Demand was particularly strong in the residen-
tial segment, where concepts such as home automation,
smart homes and digital door locks are increasingly in
demand, indicating a fast-growing future market for Yale
in particular.

Another strong demand trend is customer interest in

sustainability performance. This is mainly driven by
energy efficiency with lower consumption and energy
savings to reduce costs. Other drivers are the 2010 EU
Energy Performance of Buildings Directive, which has
now been incorporated into national legislation, and
demand for green-rated buildings. EMEA has a very
strong range of products with high sustainability perfor-
mance and had over 40 EPDs (Environmental Product
Declarations) at year-end. The demand trend in recent
years from component sales and towards an increasing
number of major projects for total door opening solu-
tions continued.

Market presence
The division is undergoing a major shift towards an
increased market and customer focus, with the support
of digital technology. An increasing number of flows, pro-
cesses and operations are being rationalized through
modern digital technologies and tools, known as
Seamless Flow, reducing the staff requirement in various
support functions in favor of customer-facing staff. This

category has increased from around 1,400 to over
1,700 over the past five years, while sales support has
fallen from over 1,600 to around 1,300. 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 con-
sultancy content and advanced product technology
strengthen the trend towards an increased the share in
large projects requiring advanced door opening solu-
tions in sectors such as offices, hospitals, schools and
universities. The division now has over 200 consultants
in these areas and delivered over 12,000 projects
during 2015.

Contacts with key partners, such as architects and
security experts, are continuously strengthened. The
launch of an upgraded specification process and a BIM-
enabled tool (Building Information Modelling) has been
successful and means that ASSA ABLOY can support its
partners in a faster, digital and more effective way. The
division’s investments in increased market presence in
emerging markets continued to generate positive results
during the year. Employees in emerging markets now
account for 34 percent of staff and will continue to
increase. This investment is both broad and deep, with
increased local presence through Group companies,
acquisitions and showrooms close to customers. New
customized product technologies are being launched,
and the share of project sales is increasing strongly, as
well as specification activities and staff, and trade fair par-
ticipation. For example, Africa now has nearly 50 show-
rooms, with the number expected to increase to 80 by
2019. EMEA has a presence in 40 of the 50 largest cities,
which account for 90 percent of Africa’s GDP.

EMEA’s leading residential and consumer product
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 con-
tinued and were delivered to global and European tele-
coms operators, hospitals and government agencies.
Deliveries included software for electronic door opening

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2015

solutions and identification systems based on
ASSA ABLOY technologies such as Aperio and
CLIQ Remote.

The year saw the acquisition of MSL, a mar-
ket-leading Swiss manufacturer of high-quality
mechanical and electromechanical locks.
Other acquisitions included Flexim, Finland’s
largest locksmith with nine regional offices,
and Prometal (UAE), the second largest manu-
facturer in the Middle East of steel and wooden
security and fire-rated doors.

Product leadership
Investments to increase the flow of new prod-
ucts continued at a high rate. Products
launched in the past three years accounted for
28 percent of the division’s sales, which is more
than a twofold increase in five years. Over 200
new products are in the pipeline for the coming
years. The high product development rate
mainly meets the sharply increasing demand
for electromechanical products and indicates a
continuing strong increase in the coming years.
The division’s High Impact products (HIP)

continued to be successful. The aim is to
develop products that can be sold in large
volumes in all EMEA’s market areas.

Product development, with 400 engineers,

is increasingly evolving towards a modular
approach. Ten years ago the division had 25 dif-
ferent cylinder platforms. Today, it has a small
number of base platforms with integrated

parts, patents and functions developed by the
Group’s Product Council and EMEA’s develop-
ment centers, creating added value for the
customer.

Cost-efficiency
EMEA has a European background of high frag-
mentation in terms of products, behaviors,
laws, regulations and standards. The Group has
been the major consolidating force in the mar-
ket through its many company acquisitions.
This legacy entails continuous work on struc-
tural change. Over the past ten years, the num-
ber of plants has been reduced from 75 to 38
through restructuring, outsourcing, relocation
to low-cost countries, Lean methods and auto-
mation. The productivity gains are enormous.
One example is the Rychnov plant in the Czech
Republic, where the number of cylinders pro-
duced per employee per year has increased
from 3,000 to 16,500 in the last ten years.
Component production has been relocated to
low-cost countries, and modern flexible plants
customize final assembly close to customers.
At the same time the share of direct mate-

rial sourcing has increased sharply and has
been concentrated to fewer partnership-
oriented suppliers. The number of suppliers
has been reduced from 5,300 to 3,100 in ten
years. The division now has seven category
managers at central level responsible for sourc-
ing direct materials such as steel, copper and

electronics, as well as services such as trans-
portation, communications, and care and
maintenance of plants and offices. The cen-
trally coordinated share of direct material
sourcing reached 80 percent during the year,
while 20 percent was managed at regional or
local level. The share of sourcing in low-cost
countries has exceeded the short-term target
of 40 percent and will continue to increase in
the coming years. Pricing and payment terms
have improved considerably. Supply manage-
ment and product development aim for major
cost savings through a sustainable approach to
materials consumption, energy consumption,
logistics and packaging, where VA/VE methods
in innovation processes generate positive
results.

A long-term prioritized project is the
automation of administrative flows, known
internally as Seamless Flow. A prerequisite is a
common Enterprise Resource Planning (ERP)
system. Due to many years of acquisitions, the
division is now conducting a project to replace
around 60 local and company-specific ERP
systems with a single system in a structured,
standardized manner. During the year, EMEA
achieved a 25 percent share of total sales in
the common system. Integration of the
division’s entire Product Data Management
system is in progress, as well as order flow and
e-commerce.

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 2015: Prometal (UAE), MSL (Switzerland) and
Flexim (Finland).

KEY FIGURES

SEK M

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

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

Cash flow
Cash flow1
Average number of employees

1 Excluding restructuring payments.

SALES AND OPERATING INCOME

SALES BY PRODUCT GROUP

2014

2015

Change

14,753
3
2,432
16.5

12,299
7,247
21.0

16,524
4
2,620
15.9

12,916
7,857
20.4

2,288
10,678

2,622
10,886

12%

5%
8%

15%
2%

Sales
SEK M

17,000

16,000

15,000

14,000

13,000

12,000

Operating income
SEK M

3,000

2,800

2,600

2,400

2,200

2,000

Sales
Operating income1

Mekaniska lås, låssystem
och tillbehör, 55%

Elektromekaniska
och elektroniska, 29%

Säkerhetsdörrar
och beslag, 16%

1 Excluding items affecting

comparability in 2011 and 2013.

Mechanical locks, lock
systems and fittings, 55%

Electromechanical and
electronic locks, 29%

Security doors and
hardware, 16%

ASSA ABLOY ANNUAL REPORT 2015

ASSA ABLOY’S DIVISIONS 43

Säkerhetsdörrar och beslagElekromekaniska och elektroniskaMekaniska lås, låssystem och tillbehörAmericas

Strong sales growth
generated good earnings trend

Sales continued to increase at a good rate in 2015, with 7 percent organic growth.
Demand in the U.S. improved in all major business segments. Sales of electromechanical
products rose, with the division’s wireless products enjoying success following several
years of substantial investments in product development. Growth was also positive in
Latin American countries, with the exception of recession-hit Brazil. Continuing effi-
ciency initiatives contributed to an increase in operating income and an improvement
in operating margin.

Report on the year
• Sales: SEK 15,665 M (12,156) with 7 percent organic

growth.

• Operating income (EBIT): SEK 3,363 M (2,613).
• Operating margin: 21.5 percent (21.5).

Market development
The division’s largest market, the U.S., continued to show
positive growth. Despite a market slowdown in the com-
mercial segment, the division continued to grow in this
key area. The institutional market began to recover after
several years of stagnation. These two segments account
for over three-quarters of the division’s sales. The resi-
dential market showed good growth for the fifth consec-
utive year. Growth was weak in Canada and negative in
Brazil, as a result of low oil and other commodity prices.
The Mexican market began to recover after several years
of residential crisis, with a strong improvement for the
division. Sales growth was also good in other South
American markets during the year.

Demand continues to grow rapidly for advanced elec-

tronic solutions for smart homes, and for institutional
and commercial customers looking for efficient, energy-
saving total door opening solutions with high sustain-
ability performance. Sales of digital door locks are
increasing rapidly in both North America and South
America. The trend towards wireless and mobile lock
solutions and increased sustainability through energy
savings is a fast-growing area and an important feature of
future demand growth. The division has a very competitive
offering of new products and certifications due to its
high innovation rate.

Market presence
For several years the main strategy for increasing market
presence has been to expand in emerging markets,
strengthen customer relationships through segmenta-
tion of solutions and specifications, build a stronger
brand identity, and focus on innovation and product
development to satisfy the increasingly strong demand
for electronic products and solutions, as well as products
with higher sustainability performance.

Today the division is already the leader or one of the lead-
ers on all major Latin American markets and continues its
penetration through acquisitions and product leader-
ship. Demand is advanced in several respects, with con-
siderable interest in electromechanical products with
high annual growth. The division’s specifiers and special-
ist teams play a key role in enhancing customer value.
They collaborate with leading architectural firms, inte-
grators and end-customers. They provide training and
introduce new products and solutions in their role as the
end-customer’s door opening solutions expert. ASSA
ABLOY has continuously developed new advanced BIM
(Building Information Modeling) solutions for architects,
which provide support for building design, product spec-
ifications and sustainability information. As a result of
Seamless Flow, an increasing share of customer relation-
ships take place through digital, interconnected flows for
drawings, configurations, orders and invoicing. More
than 30 percent of orders are placed electronically. In the
U.S., the share of customer-facing staff has doubled in ten
years and these now account for 60 percent of marketing
and sales staff. Additional training, including online pro-
grams, has contributed to increased growth and market
presence.

Demand for digital locks and door opening solutions is

growing very rapidly, especially in the residential market
where a number of players are active in the smart homes
segment. The Yale brand’s positioning, with a number of
innovative, wireless, digital lock products, is a major suc-
cess, with fast-accelerating sales over the past two years.
The year saw the launch of a partnership with Nest for
Yale’s Linus lock. Linus uses a new communications pro-
tocol, Thread, together with Nest products and other
products in Nest’s ecosystem. It enables the user to
remotely monitor, unlock and lock doors using the Nest
app on their smartphone.

The division has the industry’s broadest offering for

‘green’ buildings, which are estimated to account for
55 percent of the construction market in 2016, up from
2 percent ten years ago. This share continues to increase.
ASSA ABLOY has GreenCircle certification for seven of its
factories for waste management and a reduction in

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2015

carbon dioxide, energy and water consump-
tion. With 92 declarations, the division has the
largest number of Environmental Product
Declarations and Health Product Declarations
in the market.

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 prod-
uct development by 140 percent since 2008,
with products launched in the past three years
accounting for 24 percent of total sales in
2015. Today, 177 new products are in the
pipeline.

The flow of products with high sustainability

performance has been particularly strong in
recent years, as a whole new generation of
products has been launched. These cover a
broad spectrum of doors and locks, which help
to manage and control building energy con-
sumption from heating and cooling and air
leakage through doors. Many of these door
opening products and solutions also offer low
emission levels, recycled materials and trans-
parent product information.

ASSA ABLOY’s Securitron brand has received
GreenCircle certification for its EcoPower solu-
tion, which achieves energy savings of over 99
percent compared with conventional power
supply technology. The same is true of Sargent
and Corbin Russwin’s EcoFlex mortise locks,
which achieve 96 percent energy savings com-
pared with traditional solenoid mortise locks.
If these GreenCircle certified products are
combined with each other, the energy saving is
99 percent.

Cost-efficiency
The U.S. market is relatively well consolidated
compared with other markets. However,
Americas division has conducted several
important restructuring programs over a num-
ber of years to rationalize the production struc-
ture. Component production has been relo-
cated to low-cost countries, while customized
final assembly takes place close to the cus-
tomer in pace with demand meeting complex
code demands. At the same time the number
of plants has been reduced from 52 to 32 in ten
years. The number of employees in direct pro-
duction has almost halved from 8,000 to below
4,500. Today 75 percent of materials are

sourced by category management profession-
als. 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.

Efficiency programs continued in 2015, with

investments in a new generation of manufac-
turing robots. The installation of 66 new units
sharply increased the total to 178 at year-end
2015, generating significant labor cost savings.
A large number of products have been updated
and processes simplified using VA/VE methods.
The division has a long tradition of Lean
methods, which are also used to streamline
administrative processes. During the year,
484 Kaizen meetings were held with staff. Lean
methods and VA/VE generated cost savings of
over USD 7 M.

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
segments account for 85 percent of sales, while the private
residential 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, Odis, Papaiz, Phillips,
SARGENT and La Fonte.

Acquisitions 2015: Papaiz, Vault and Udinese (Brazil).

KEY FIGURES

SEK M

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

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

Cash flow
Cash flow1
Average number of employees

1 Excluding restructuring payments.

SALES AND OPERATING INCOME

SALES BY PRODUCT GROUP

2014

2015

Change

12,156
4
2,613
21.5

12,909
9,000
23.1

15,665
7
3,363
21.5

13,908
9,903
24.1

2,637
7,193

3,217
7,957

29%

8%
10%

22%
11%

Sales
SEK M

16,000

14,000

12,000

10,000

8,000

6,000

Operating income
SEK M

3,500

3,000

2,500

2,000

1,500

1,000

Sales
Operating income1

Mekaniska lås, låssystem
och tillbehör, 40%

Elektromekaniska
och elektroniska, 15%

Säkerhetsdörrar
och beslag, 45%

1 Excluding items affecting

comparability in 2011 and 2013.

Mechanical locks, lock
systems and fittings, 40%

Electromechanical and
electronic locks, 15%

Security doors and
hardware, 45%

ASSA ABLOY ANNUAL REPORT 2015

ASSA ABLOY’S DIVISIONS 45

Säkerhetsdörrar och beslagElekromekaniska och elektroniskaMekaniska lås, låssystem och tillbehörAsia Pacific

Good earnings despite weak
development in China

Sales increased 22 percent despite a decline in organic growth to –3 percent, due to
continued weak development in China during the year. Growth was good or very good
in Southeast Asia, India, South Korea, Australia and New Zealand. Market presence con-
tinued to strengthen as a result of major investments in start-ups and distribution, as well
as new products and launches. Costs are being adjusted to the lower demand in China
through rationalizations and efficiency programs.

Report on the year:
• Sales: SEK 10,171 M (8,336) with –3 percent organic

growth.

• Operating income (EBIT): SEK 1,436 M (1,187).
• Operating margin: 14.1 percent (14.2).

Market development
The strong slowdown in the Chinese market in late 2014
continued in 2015. An oversupply of new buildings is put-
ting pressure on the construction market in both the com-
mercial and residential segments, with few signs of
improvements in the coming year. The Group’s leading
position was strengthened by the largest ever order for fire
doors for the country’s leading internet service provider.

Most of the negative impact from the Chinese market
was offset by continued strong demand in Southeast Asia
and India. The advanced South Korean market showed
good growth mainly in the residential segment, which
leads the world in its share of installed digital door locks,
with strong demand for digital technology. During the
year the Group received its largest ever project order for
7,400 digital door installations. The Group companies
King and iRevo continued their strong export growth in
door closers and digital door locks respectively to both
the U.S. and Europe. The relatively new breakthrough in
India generated very high growth figures, especially for
new products. Last year’s Indian acquisition, Enox, has
also strongly increased sales.

The fast-growing markets in the rest of Southeast Asia,
including Vietnam, Indonesia and Thailand, showed very
high sales growth, except for Malaysia which was hit by a
political and economic crisis. The new market of Pakistan
performed well. The mature markets of Australia and
New Zealand also performed well, particularly in the
residential segment.

Demand across the whole region is becoming increas-

ingly advanced, with large demand for digital locks and
solutions and sustainable-rated door opening solutions
to reduce energy and materials consumption.

Market presence
Market presence in China has grown very strongly since
2006. A combination of rapid organic growth and ten

acquisitions has increased the number of employees
from 3,800 to just over 12,000. However, this is a reduc-
tion from 14,800 in the peak year of 2011, due to auto-
mation and outsourcing efficiencies. China accounts for
around 50 percent of the division’s total sales. ASSA
ABLOY is the market leader with the broadest product
offering and is present in all major growth centers in the
country in tough competition with many thousands of
small and medium-sized local and regional competitors.
This leading position is strengthened by a long-term
focus on product development for both the local market
and export. With over ten years’ presence and a fast-
growing installed base, the profitable aftermarket for
upgrade and replacement is expected to increase in
importance.

The clear slowdown in demand and more stringent
regulation and quality requirements have caused down-
ward pressure on prices and consolidation. In the long
term this benefits the market leader ASSA ABLOY. One
example is government requirements for recertification
of nearly 1,000 factories in the fire door industry, as
well as fire-rated locks, in accordance with the China
Compulsory Certification standard. Over one-third of fire
door companies failed to comply with the requirements
for Class A doors. ASSA ABLOY was the first company to
have its certificate renewed.

The Group is also spearheading the strong trend in
China towards increased sustainability, with tougher reg-
ulations and public programs for more ‘green’ buildings.
The same is true of the expanding market for advanced
electromechanical solutions. Thanks to the acquisition of
Digi in 2014, ASSA ABLOY is the country’s largest manu-
facturer of digital door locks. Market share continues to
strengthen, particularly as a result of increased demand
from major developers for advanced total solutions.
The Indian economy is growing faster than the
Chinese economy, as is the need for security, as pros-
perity rises and urbanization continues at a high rate.
ASSA ABLOY is developing its market position with the
goal of being the market leader in all regions and seg-
ments. The strategy of being the leading supplier in both
high- and low-cost segments with a differentiated prod-
uct offering is successful, and sales increased by around

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2015

35 percent during 2015 The division is invest-
ing heavily across the whole region to increase
the number of employees in project specifi-
cation. Offering architects and developers
advanced door opening solutions that satisfy
the customer’s specific requirements
strengthens the customer relationship and
raises the bar for competitors.

Acquisition activities were somewhat cau-
tious during the year, mainly in the light of high
price expectations among sellers. April 2015
saw the acquisition of the Malaysian market
leader Teamware, with its relatively broad
product portfolio and good distribution chan-
nels. The company has sales of around SEK
240 M and 120 employees. This acquisition
complements ASSA ABLOY’s already strong
position in Malaysia and also offers interesting
synergies, such as in the fire door segment.

Product leadership
The division has clear product leadership in the
region driven by the Group’s strategies for
innovation and product development, a large,
young tech-savvy consumer generation, its
own large R&D investments, and established
production and brands with an electronic and
digital profile. Sales of digital door locks are
increasing by double digit figures each year in

the region, and these products account for
around 80 percent of installed locks in the
residential segment in South Korea.

Prioritized investments in innovation and
product development over the past few years
have increased the share of products launched
in the past three years to 37 percent of sales,
compared with the Group target of 25 percent.
The volume of digital products exported
mainly from China and South Korea continues
to grow. Investments in product development
remain at a high level in the light of the fast-
growing demand in the region. Currently there
are 15 development centers, and the number
of development engineers increased further in
2015 to 320. During the year the businesses in
Australia and New Zealand developed a new
R&D center in China.

A significant development focus is on

increased sustainability, with sustainablerated
products and solutions attracting strong cus-
tomer interest in, for example, China, Australia
and New Zealand. The Group has started using
water foaming as a raising agent in the security
door production process, eliminating freon,
while materials savings are increasing sharply.
A broad eco-range is gradually being launched,
with a sharp increase in the number of Environ-
mental Product Declarations.

Cost-efficiency
The division’s Chinese production plants,
which employ 9,500 people, account for a
large share of the Group’s production and
employees. The strong slowdown in the
Chinese economy, together with increased
outsourcing and raised productivity, has con-
tributed to a gradual reduction in the number
of staff, which has declined by 27 percent over
the past three years. The division has contin-
ued to streamline the production structure in
accordance with the ongoing Group program
for factory consolidation, production out-
sourcing, and increased sourcing. The pur-
chasing organization has been reorganized to
achieve an even stronger focus on category
sourcing at division level.

Significant investments are being made in
connection with Seamless Flow projects, i.e.
streamlining administrative information flows.
New ERP systems were implemented on sched-
ule in nine business units, which is expected to
lead to increasing efficiencies in the coming
years. The division’s Lean projects have been
very successful, resulting in a 40 percent
increase in savings on the previous year.
Continued efficiency savings are necessary as
the cost level in the region, especially wages,
is increasing relatively rapidly.

FACTS ON ASIA PACIFIC
Offering: Mechanical and electromechanical locks, digital door
locks, high-security doors, 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 per-
cent. The Asian countries are emerging markets without estab-
lished 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 produce for Group

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

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

Acquisitions 2015: Teamware (Malaysia).

KEY FIGURES

SEK M

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

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

Cash flow
Cash flow1
Average number of employees

1 Excluding restructuring payments.

SALES AND OPERATING INCOME

SALES BY PRODUCT GROUP

2014

2015

Change

8,336
1
1,187
14.2

9,810
7,931
14.2

10,171
–3
1,436
14.1

11,689
7,690
12.6

931
13,439

1,235
13,651

22%

21%

19%
–3%

33%
2%

Sales
SEK M

12,000

10,000

8,000

6,000

4,000

2,000

Operating income
SEK M

1,500

1,300

1,100

900

700

500

Sales
Operating income1

Mekaniska lås, låssystem
och tillbehör, 44%

Elektromekaniska
och elektroniska, 15%

Säkerhetsdörrar
och beslag, 41%

1 Excluding items affecting

comparability in 2011 and 2013.

Mechanical locks, lock
systems and fittings, 44%

Electromechanical and
electronic locks, 15%

Security doors and
hardware, 41%

ASSA ABLOY ANNUAL REPORT 2015

ASSA ABLOY’S DIVISIONS 47

Säkerhetsdörrar och beslagElekromekaniska och elektroniskaMekaniska lås, låssystem och tillbehörGlobal Technologies

Innovations drive
market leadership

The division’s sales increased by 26 percent due to strong growth in identification tech-
nology, Quantum Secure and Hospitality, and good growth in other areas except Govern-
ment ID and biometrics, which were negatively impacted by budget restrictions and
postponed projects. The division received its largest ever order for the next generation of
U.S. Green Cards. The launch of new products continued at a very high level, with several
awards for innovative strength. A major organizational change was decided on to further
delegate responsibility and increase customer focus in a rapidly changing market. Oper-
ating income increased by 20 percent despite a slight reduction in operating margin.

Report on the year
• Sales: 9,100 SEK M (7,207) with 7 percent organic

growth.

• Operating income (EBIT): SEK 1,647 M (1,368),

a 20 percent increase.

• Operating margin (EBIT): 18.1 percent (19.0).

Global Technologies division consists of HID Global and
ASSA ABLOY Hospitality.

HID GLOBAL

Market development
The underlying global demand for the division’s products
remains strong, with constantly growing security needs
and upgrades to modern electronic and mobile technol-
ogy, where the private and commercial sectors lead the
way. Demand from the important institutional segment
remains weak in several markets, with postponed invest-
ments in several markets as a result of budget restrictions
and weaker economic development in oil- and commod-
ity-producing countries. But a rapid technology shift is in
progress even in these countries, especially with regard
to various forms of identification.

North America performed strongly, particularly in the

commercial segment. Institutional demand remained
restrained, but HID Global received its largest ever order
for a new national Green Card in the U.S., with advanced
digital technology and new functions. Asian markets con-
tinued to grow strongly in most segments. Demand was
also good in Latin America.

Europe experienced a weak start to the year, but
demand gradually improved to stable over the year. The
trend in recent years for weaker demand in southern
Europe and stronger demand in northern Europe con-
tinued. Several large projects in the Middle East and
Africa were postponed due to weaker finances following
the fall in the oil price, while eastern Europe continued to
grow at a good rate, with the exception of Russia.

Market presence
Global Technologies is the global market leader in prod-
ucts and solutions for secure identification and physical
and logical access control. Demand is growing rapidly
and HID Global’s market strategy has prioritized emerg-
ing markets and market leadership in the communica-
tions technology shift to electronics, digitization and
mobility. HID Global is moving from being solely a com-
ponent supplier to offering integrated solutions and total
systems with a large software and consultancy content.
HID Global seeks broad and deep presence in large
market segments with good growth. Identification of
authorized personnel and physical access control are a
common need for all workplaces. The corporate, banking
and financial sectors are market segments with high
security requirements with regard to unauthorized data
access. These requirements are growing rapidly in the
transition to online and mobile transactions and
increased compliance requirements.

Healthcare and the education sector are two other
very large growing market areas with large people flows,
high security requirements for physical access, integrity
and speed in critical information flows. States, govern-
ments and government agencies take great responsibil-
ity for their citizens’ security by issuing passports,
national ID documents, driving licenses and other entry
documents for large population groups.

Global Technologies is rapidly developing its own mar-
ket presence to meet, provide service to and support cus-
tomers in a broad network of digital channels. HID Global
is increasingly focusing on broad partnership programs,
which enable the development, design and testing of
products and solutions online, in interaction with cus-
tomers, suppliers and development partners. The division
is building common knowledge and competence and
creating long-term relationships of trust with customers
through digital archives, blogs and communities.

The acquisition of the U.S. company Quantum Secure
at the start of the year made an important contribution

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2015

to market presence. This software company develops
advanced identity management systems for employees,
visitors, customers and suppliers in businesses across
multiple sites.

Product leadership
HID Global has a very high investment rate in new prod-
ucts and solutions in the light of rapid technical develop-
ments in the shift to electronic and digital solutions on
mobile devices. Products launched in the past three
years account for 40 percent of sales, compared with the
Group average of 30 percent. This is due to the fact that
HID Global’s products and solutions with their increased
software content are updated more frequently and have
an ever-shorter life in the very innovative stage that the
technological revolution has now reached.

Development takes place at various Centers of Excel-

lence with category responsibility in three continents
and with intensive collaboration with other parts of the
Group. Working with open standards is a key principle,
which facilitates the development of new solutions for
upgrades of many different systems and adaptation to
new technology and new applications.

HID Global is the market leader in fast-growing mobile

technology for identity and access management. The
hub is the Group’s Seos technology, which is the world’s
first commercial ecosystem for digital identities on vari-
ous platforms. Seos is under dynamic development and
the technology is now being further developed to
achieve an ever-increasing distribution by offering
licenses to external developers for smart mobile devices,
such as phones, tablets and wearables.

The year saw the launch of a new card printer in the
Fargo range, with higher resolution and a lower print cost
and environmental impact. In addition, a new long-range
reader based on UHF technology was launched. New
solutions were also presented for e-passports and a con-
cept for stronger mobile identities that enables, for
example, driving licenses and ID cards on smartphones.
A brand new portfolio of solutions is being launched in
logical access control, in collaboration with Microsoft,
among others, to achieve faster, simpler and more con-
venient login to mobile devices. The focus on physical
access control was strengthened to achieve faster expan-
sion of mobile access.

Cost-efficiency
HID Global’s implementation of the Group’s three-year
restructuring program for consolidation of production
plants is in line with budget and slightly ahead of sched-

ule. The closure of five production and distribution plants
was completed during the year. All American production
is now concentrated in a newly built plant in Austin,
Texas, where headquarters were also relocated from
Irvine, California. HID Global now has principally three
factories in various parts of the world: one in the U.S., one
in the EU (Irish Republic) and one in Asia (Malaysia).

Seamless Flow programs continue at a high rate and
major progress was made during the year in automated
flows in sourcing and in Lean automation in the division’s
factories. The program for automated order flows accel-
erated at the end of the year and is expected to generate
good results in 2016.

Sustainability initiatives continue to yield positive
results, with lower energy, water and materials consump-
tions as well as efficiencies, simplifications and savings
due to Lean programs. The new headquarters, which
opened in 2014, has received LEED Platinum Certification
and several awards from local organizations and satisfied
customers for the building’s high sustainability standard
in 2015.

ASSA ABLOY HOSPITALITY

Report on the year
ASSA ABLOY Hospitality’s sales remained strong in 2015,
with an improvement in operating income and a high
operating margin. Several years of good growth in global
market demand continued with the exception of China.
This changed the traditional growth picture, with the
result that mature markets grew more rapidly than emerg-
ing markets globally. But growth remained good in large
parts of Asia and in Latin America. The North American
market continued to show good growth, while Europe, the
Middle East and Africa showed more moderate growth.
The rate of increase in the new construction market
slowed somewhat, with a lower growth rate in the num-
ber of construction starts and new hotel rooms. Demand
for renovations and upgrades remained high, as a result
of strongly increased investments in advanced electro-
mechanical technology.

Market presence
ASSA ABLOY Hospitality’s market presence has gradually
strengthened since the Group began its electromechani-
cal technology shift in 2006, with the launch of RFID-
based lock systems. The transition to new technology has
been considerably faster than forecast. During the year,
ASSA ABLOY Hospitality began its next global technology
shift, with the launch of Mobile Access.

ASSA ABLOY ANNUAL REPORT 2015

ASSA ABLOY’S DIVISIONS 49

Global Technologies

Mobile Access has been an overwhelming success. Last
year’s breakthrough contract with Starwood Hotels &
Resorts Worldwide, Inc. was followed by orders for
mobile lock solutions in the region of over 100,000
rooms. ASSA ABLOY Hospitality currently has orders from
and is conducting concrete discussions with most of the
world’s leading hotel groups.

During the year ASSA ABLOY Hospitality took the final
step in uniting operations under the overall ASSA ABLOY
brand. The well-reputed VingCard and Elsafe brands
remain as product brands.

Product leadership
The Group’s common product development is a decisive
factor in the ongoing technology shift, and the business
unit’s investments in innovation and product develop-
ment continue at a high level. Significant coordinated
efforts for the development, delivery and implementa-
tion of mobile solutions are now taking place jointly with
customers. The advanced mobile technology is installed
in the form of an integrated solution, including training
of the customer’s IT staff. This special collaboration
process simplifies use and integration of ASSA ABLOY
Hospitality’s mobile solutions into the customer’s exist-
ing systems. The system is certified and tested to ensure
flawless use.

Cost-efficiency
The multi-year restructuring program for production has
now been implemented, and ASSA ABLOY Hospitality has
no component production in high-cost countries. The
business unit is working on a broad program to automate
and constantly fine-tune the production process. The
structured Lean process comprises a large number of
projects with significant savings every year. For several
years material costs have been falling by 3–4 percent per
year, due to a more professional sourcing organization
and the Group’s program to reduce and concentrate the
number of suppliers to the most competitive.

The year saw a significant reduction in the number of

warehouses in Europe, with the goal of concentrating
operations to three strategic global central warehouses.
This activity will continue during 2016 in North and
South America, Asia and the Pacific region.

FACTS ON GLOBAL TECHNOLOGIES
Offering: HID Global is a global leader in secure identity
solutions, primarily in identity and access management, and
in contactless identification technology solutions. Customers
comprise companies, healthcare, education, financial, govern-
ment and state institutions.
ASSA ABLOY Hospitality manufactures and sells electronic
lock systems, safes, energy management systems and minibars
for hotels and cruise ships under the VingCard and Elsafe prod-
uct brands. It is the world’s best-known brands for lock systems
and in-room safes, with products installed in over seven million
hotel rooms in more than 42,000 hotels worldwide.

Markets: Customers are mainly in the institutional and
commercial sectors worldwide.

Brands: HID Global and ASSA ABLOY.

Acquisitions 2015: Quantum Secure (USA) and IAI Industrial
Systems (Netherlands).

KEY FIGURES

SEK M

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

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

Cash flow
Cash flow1
Average number of employees

1 Excluding restructuring payments.

SALES AND OPERATING INCOME

SALES BY PRODUCT GROUP

2014

2015

Change

7,207
1
1,368
19.0

8,239
5,984
19.6

1,282
3,331

9,100
7
1,647
18.1

9,815
7,437
18.8

1,557
3,583

26%

20%

19%
24%

21%
8%

Sales
SEK M

10,000

8,000

6,000

4,000

2,000

Operating income
SEK M

1,700

1,500

1,300

1,100

900

700

Sales
Operating income1

Passerkontroll, 45%

Identifieringsteknik, 32%

Hotellås, 23%

Access control, 45%

Identification technology, 32%

Hotel locks, 23%

1 Excluding items affecting

comparability in 2011 and 2013.

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2015

HotellåsIdentifieringPasserkontrollCruise ship focuses on innovation, security
and convenience

ASSA ABLOY Hospitality has supplied a solution with innovative
RFID wristbands, which provide an optimal user experience for
passengers on board the cruise ship MS Anthem of the Seas.

challenge was to find a secure, smart solution that enhances the
user experience of both passengers and crew.

CUSTOMER: Royal Caribbean’s Anthem of the Seas is the
world’s third largest cruise ship and known for its exclusive hi-
tech standards. The vessel has 2,090 cabins in various sizes and
price ranges.

CHALLENGE: Royal Caribbean needed to replace its existing
keycards with a more innovative solution, to live up to its vision
of being a modern, luxury and hi-tech cruise ship and stand out
as an attractive option for the younger customer segment. The

SOLUTION: ASSA ABLOY Hospitality collaborated with Royal
Caribbean to develop a modern, smart solution that can be used
by passengers all over the vessel to pay for food and drink, enter
their cabin, and go ashore and on board again at ports of call.

RFID components are now found all over the vessel, fulfilling

a number of different functions. RFID locks with encryption
technology have been installed, for example, in all cabin doors,
and wristbands with embedded RFID technology give users
access to all RFID functions on the vessel.

Aperio from ASSA ABLOY protects
HafenCity University Hamburg

CUSTOMER: The HafenCity University Hamburg (HCU) offers courses and research in areas such

as architecture, civil engineering, geomatics and urban planning. The new, spectacular university
building is located in Grasbrook harbor on the south bank of the River Elbe, one of Hamburg’s most
important regeneration areas. The university has around 2,400 students and 460 employees.
Students and staff were previously dispersed across five different sites in the city, but are now
located in the new 14,000 square meter building.

CHALLENGE: The explicit requirement during the planning phase was to install a modern, flexible
access control system for staff and students at HCU. The building has two foyers on different levels,
a media center and library, a cafeteria, lecture theatres, laboratories, seminar and workshop rooms,
offices for working and research teams, study and group rooms, and premises for exhibitions and
other events.

SOLUTION: HCU chose to install an innovative electronic access control system from SIEMENS to
provide better control and reduce administrative costs. Aperio components are an essential part of
this system, which comprises around 500 electronic offline cylinders. In combination with online
readers and online doors, more doors can be fitted with Aperio offline cylinders, and all access
rights are saved on RFID cards through online access control systems. For security reasons, it is
possible to alter the validity of keycards.

This means that the IT department at HCU has better control, can simply manage organizational
changes in real time and only needs to monitor a single security system. Moreover, users only need
a single locking medium for increased security and user- friendliness. Another advantage of Aperio
cylinders is that the system can be expanded gradually as need arises. The flexible system can be
simply adapted to the demands made on the building.

ASSA ABLOY ANNUAL REPORT 2015

ASSA ABLOY’S DIVISIONS 51

Entrance Systems

Increased market presence
and cost-efficiency
strengthened margin

The positive organic growth in 2014 continued in 2015, with strong growth in North America
and the Pacific area across all segments. The European market also grew at a good rate, with
southern Europe returning to growth. Eastern Europe and other emerging markets remained
successful resulting from several years of significant market investments. The Chinese market
performed weakly with a decline in sales. The product development rate remained at a very
high level, with products launched in the past three years accounting for 35 percent of sales.
Following several years of acquisition-driven growth, the division focused on consolidation
and efficiencies, which led to good results and an improved operating margin.

Report on the year
• Sales: SEK 17,957 M (15,409) with 5 percent organic

growth.

• Operating income (EBIT): SEK 2,436 M (2,054).
• Operating margin: 13.6 percent (13.3).

Market development
Development in 2015 was in many respects similar to
that in 2014. The U.S. market performed strongly, with
good sales growth in the residential, commercial, indus-
trial and institutional markets. Customers’ investments
increased, with new construction, upgrades and increas-
ing demand for automatic, industrial and high-perfor-
mance doors, and logistics solutions.

In Europe, the slow increase in demand in industrial

segments from a low level continued. The negative
growth in the residential market turned weakly positive.
Sales increased at a good rate in northern Europe.
Southern Europe saw a small upturn in demand from a
low level following several years of stagnation. The
decline in the Chinese market strengthened during the
year resulting in a decline in sales, while the rest of Asia
and Oceania continued to experience strong growth.

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

by the comprehensive service offering, with its high,
steady sales over time. Several new service concepts have
been launched over the past two years based on long-
term agreements, e-maintenance, preventive service
and modernizations, even for competitor products.
Customer response has been very positive and service
sales increased the growth rate during the year.

Market presence
With sales of SEK 17,957 M, sales companies in 35 coun-
tries and distribution in a further 90 countries, Entrance
Systems is the global market leader in entrance automa-
tion. Growth has more than trebled since 2010, mainly

through a combination of organic growth and acquisitions
in mature markets. The total market is estimated at EUR
20 billion, providing significant future growth potential.
The consolidating growth in mature markets is com-
plemented by a growth strategy in emerging markets,
mainly through organic growth. During the year sales in
emerging markets increased to 12 percent of sales, due
to very strong growth in the Middle East, Africa and
Southeast Asia. The target is 25 percent. The focus on
emerging markets is currently being strengthened
through investments in focused product development
for regional and local markets, with increased R&D
resources in China and eastern Europe. In addition, local
assembly plants are planned to increase competitiveness
in some of the most important emerging regions.

Entrance Systems has a complete product and service
offering and three distribution channels: the direct chan-
nel targeting the end-customer, the component channel,
and the indirect channel targeting distributors. In the
direct channel, total solutions under the ASSA ABLOY
brand are marketed to major customer segments such as
retail, healthcare, manufacturing, distribution, logistics
and mining. The division has increasingly close collabora-
tion with architects and technical consultants who drive
demand.

Several new concepts for the important service busi-
ness were established during the year. These are mainly
aimed at upgrading and modernizing existing equipment
to optimize performance and energy efficiency. Some
100 different modernization kits have been launched so
that service engineers have tools to act as advisers and
salesmen. The year also saw the launch of e-maintenance,
an online tool for service customers enabling them to
monitor the function and use of their entrance solutions.
The response has been strong with sales of several thou-
sand units and a large number of customers on long-
term contracts.

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2015

Component and hardware sales are combined
under the FlexiForce brand. The components
are mainly for overhead sectional doors in the
industrial, commercial and residential seg-
ments, which are sold through distributors and
installers. The product range is comprehensive.
The third channel, indirect sales, targets

local distributors and installers under the
Entrematic brand. Sales are very widespread in
both Europe and North America, where distrib-
utors often purchase equipment from manu-
facturers and market solutions under their own
name. Entrematic has a complete offering of
sectional doors, loading dock solutions, high-
performance doors and entrance automation.
Following the acquisition of Amarr and 4Front
(USA) in 2013 and 2012, the division now has a
very effective offering for the important U.S.
market. Marketing activities focus on product
and customer segmentation, combined with
marketing of Entrematic’s integrated offering,
to enhance customer value.

Acquisitions constitute an important part of

growth. The year saw five new acquisitions,
including Nergeco and CEDES. The French
company Nergeco is successful in high-
performance doors, giving the division a strong

position on the French market. The Swiss com-
pany CEDES is a leader in sensor technology to
the elevator and door industry.

Product leadership
The new product development organization
established in recent years has substantially
streamlined and increased the rate of new
product development. The launch rate was
very high during the year, with products
launched in the past three years accounting for
35 percent of sales. During the year the division
launched several new products including slid-
ing, swing, revolving, overhead sectional and
high-performance doors, as well as gate auto-
mation on newly developed product plat-
forms, with focus on enhanced customer value
and energy-efficient solutions. These platforms
provide great flexibility for differentiating the
product range using modular solutions, with
increased functionality and at a faster rate. Sig-
nificant efficiency gains arise when complexity
is considerably reduced. The division’s innova-
tion competence will be further strengthened
and spread through the establishment of R&D
capacity in eastern Europe and China.

Cost-efficiency
The division has acquired 35 factories in six
years, with the result that cost-efficiency initia-
tives have focused on consolidation of the pro-
duction structure. Component production is
being relocated from high-cost countries to
low-cost countries, where production is con-
centrated in a small number of large factories.
Customized final assembly close to the cus-
tomer takes place in high-cost countries to
achieve more flexible and efficient regional dis-
tribution. Cost-efficiency initiatives are coordi-
nated, with a concentration of sourcing to
fewer and fewer suppliers managed by a pro-
fessional purchasing organization. The applica-
tion of Lean and Seamless Flow processes is
spreading and deepening. The number of Lean
projects has risen from 12 projects in 2012 to
142 in 2015, making strong increasing contri-
butions to cost savings, as are VA/VE methods
in product development in close cooperation
with the production organization. Sustain-
ability initiatives continued to reduce raw
materials and energy consumption.

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, docking
solutions and hangar doors.

Markets: Entrance Systems is a global leader with sales world-
wide. It has sales companies in 35 countries and distributors 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 mainly targets large and medium-sized
distributors under the Entrematic brand. The third channel,
FlexiForce, sells components and hardware for overhead sec-
tional doors in the industrial and residential segments.

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

Acquisitions 2015: Nergeco (France), L-Door (Belgium), and
CEDES (Switzerland).

KEY FIGURES

SEK M

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

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

Cash flow
Cash flow1
Average number of employees

1 Excluding restructuring payments.

SALES AND OPERATING INCOME

SALES BY PRODUCT GROUP

2014

2015

Change

15,409
4
2,054
13.3

16,245
9,615
13.1

17,957
5
2,436
13.6

16,030
9,891
14.9

2,007
9,420

2,637
9,686

17%

19%

–1%
3%

31%
3%

Sales
SEK M

20,000

16,000

12,000

8,000

4,000

Operating income
SEK M

Produkter, 72%

Service, 28%

2,500

2,000

1,500

1,000

500

Sales
Operating income1

1 Excluding items affecting

comparability in 2011 and 2013.

Products, 72%

Service, 28%

ASSA ABLOY ANNUAL REPORT 2015

ASSA ABLOY’S DIVISIONS 53

ServiceProdukterSustainable development

Key steps towards more
sustainable development

ASSA ABLOY’s sustainability initiatives are an integrated part of the Group’s strategies for
growth and profitability and a key factor in market competition, product development
and cost-efficiency. The five-year sustainability program was completed in 2015 with
good target fulfilment. A new five-year program through 2020 was launched with raised
ambitions and targets. The reporting systems were modernized for faster and more
detailed monitoring, while supplier audits were made more stringent.

Higher sustainability performance is a strong commer-
cial driver for ASSA ABLOY. Customers are increasingly
asking for products and solutions that reduce resource
consumption, costs and environmental impact. The
same forces drive the Group’s own efforts to achieve
competitive market presence, leadership in innovation
and product development, and cost-efficiency. Sustain-
ability initiatives support the Group’s overall objectives.

Sustainability control
ASSA ABLOY’s sustainability control is based on the Group-
wide Code of Conduct, with its principles in business
ethics, human rights, employee rights, environment, and
health and safety, consumer interests, and social responsi-
bility. The Code applies to the Group’s employees, suppli-
ers and external stakeholders. It is a necessary support in
the decentralized organization in which important deci-
sions are made close to the local market’s customers.

The Code is based on international guidelines and
conventions and is available in 23 languages. All employ-
ees undertake to comply with the Code and it is a com-
pulsory part of the induction of new employees. A new
employee shall receive training in the Code within three
months and this training is repeated every three years.
Whistle-blowing procedures are in place to enable all
employees to report suspected infringements. Reported
cases are investigated by a special committee headed by
the Group’s HR director. The procedure is described in
the Code of Conduct and on the Group’s intranet.

Suppliers are informed of the Code of Conduct and
direct material suppliers in low-cost countries undertake
in writing to comply with it in their collaboration with
the Group. ASSA ABLOY monitors compliance through
internal audits and supplier audits. Action is taken in case
of non-compliance. In 2015, the Group began work on
drawing up a separate Code of Conduct for suppliers and
other external stakeholders.

A Group-wide anti-corruption program has been in
place since 2011, with a policy and a number of activities
that are implemented continuously, including risk analy-
sis, employee training and internal control. In 2015, the
focus continued to be on implementation of a due dili-
gence process for third parties, such as distributors, who
act on behalf of ASSA ABLOY on markets where there is
perceived to be a higher risk of corruption.

Responsibility, reporting and information
The Group’s Board of Directors has the overall responsibil-
ity, while the Executive Team is responsible for operational
management of relevant sustainability activities in accor-
dance with the Group’s strategies. The divisions and Group
companies are responsible for conducting relevant activi-
ties, compliance with the Code of Conduct and other
policies, and correct reporting back to headquarters.

Appointed staff at divisional and company level ensure

that the Group’s sustainability guidelines, tools and
knowledge are available and that programs are imple-
mented. HR functions at Group and divisional level moni-
tor the management of social and business ethical issues.
In 2015, ASSA ABLOY modernized the reporting sys-
tem implemented in 2013. Reporting now takes place
quarterly, strengthening the quality and continuity of the
information flow and facilitating monitoring, control and
knowledge transfer.

The Group’s reporting complies with GRI’s G4 Sustain-

ability Reporting Guidelines as from 2015. During the
year the divisions worked on justifying and describing the
relevant reporting areas and the processes for managing
and reporting improvement activities.

The reporting system follows the Group’s economic
structure and includes 338 company units with at least
ten employees. It is linked to a Group-wide database for
sustainability data, which also collects good practice
from Group companies and enables benchmarking for
comparisons of units with similar operations. This data-
base is an important knowledge bank for everyone
working with sustainability issues across the Group.

REPORTING UNITS

Number

350

300

250

200

150

100

The number of reporting units in
the Group has increased to 338
(331).

SUSTAINABLE DEVELOPMENT

ASSA ABLOY ANNUAL REPORT 2015

A target-based activity
An important driver in this activity is the Group’s Sustain-
ability Council comprising representatives of the Execu-
tive Team, management and divisional officers, with
meetings four times per year. The Council reviews out-
comes and activities and shares experiences of imple-
mented projects.

The Group’s five-year sustainability program for the
period 2010–2015 was completed during the year. This
program was successful and the majority of targets were
achieved. During the autumn, it was decided to launch a
new five-year program through 2020 with new and more
ambitious targets. (See table below.)

ASSA ABLOY’s customer offering
Demand for products and solutions with a sustainability
profile is increasing. Customers increasingly want sus-
tainable 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 bet-
ter indoor environment and higher security, and reduce
total operating costs account for an increasing share of
Group sales.

Market forces are supported by increased use of various
certifications for sustainable construction, especially
Environmental Product Declarations (EPD). Being able to
provide EPDs is becoming increasingly important in large
procurements in the U.S. and Europe, and this trend is
spreading to more markets. ASSA ABLOY has now devel-
oped EPDs for all strategic product groups. At year-end
2015, the Group had developed 250 EPDs.

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. The Group-wide development process takes
account of relevant sustainability parameters through-
out the development process.

Product life cycle assessments and value analysis/value

engineering provide ASSA ABLOY with knowledge that
enables modification and development of products, with
more efficient use of materials and reduced power con-
sumption. Lower energy consumption is becoming
increasingly relevant as digital and electromechanical
products and solutions are growing as a share of the
Group’s business.

Material KPI
Area

Environmental KPI

Number of entities covered by ISO 14001
certificates and other certifiable management
systems

Intensity of Greenhouse gas emissions related
to energy consumption (tons/SEK M)7
Energy intensity (MWh/SEK M)7
Water intensity (m3/SEK M)7
Hazardous waste intensity (kg/SEK M)

Consumption of chlorinated organic solvents
(PER and TRI) (tons)

Non-hazardous waste intensity (kg/SEK M)*

Portion of renewable energy*

Consumption of other types of organic
solvents (tons)*

Intensity of Greenhouse gas emissions related to
chemicals in industrial processes (tons/SEK M)

Social KPI

Injury rate (number of injuries per million
hours worked)7
Injury lost day rate (number of lost days related
to injuries per million hours worked)7
Portion of spend in low-cost countries
represented by sustainability audited suppliers

Number of sustainability audits of suppliers in
low-cost countries

Gender equality8
Portion of females on management positions

2010

2011

2012

2013

2014

20151

Change
2010–2015

Target
2010–2015

Target
2020

100

101

111

15.4

39.3

148.8

293.8

32.3

764

12,5%

671

N/A

14.8

36.9

138.8

186.0

21.6

853

10,0%

804

N/A

12.9

36.3

148.5

181.4

20.1

872

8,7%

933

9.4

11.9

33.8

129.6

130.9

14.4

814

6,9%

949

9.0

10.3

31.7

119.1

125,7

1.7

990

7,8%

10,5

119

9.6

27.6

98.6

129.6

0.4

909

9.1%

+502

–38%

–30%

–34%

–56%

–99%

+19%

–3.4 p.p.

6,8

6.3

N/A

–17%

–15%

1,033

1,068

+397

7.6

9.2

9.1

7.5

6.4

157.3

182.4

187.4

168.2

135.7

134.4

80%3

3763
Level 2: 0 %
Level 3: 16 %
Level 4: 18 %
Level 5: 24 %
Level 2–5: N/A

90%4

4934
0 %
15 %
19 %
26 %
24%

90%4

7954
18 %
16 %
18 %
23 %
22%

89%5

8855
27 %
12 %
21 %
24 %
23%

90%5

90%5,6

+10%

8125
27%
16%
20%
23%
22%

8905
27%
17%
16%
25%
23%

+514

+27%
+1%
–2%
+1%
N/A

125

–20%

–85%

–20%

20%

–50%

–85%

–20%

–25%

90%5

115•
–10%•
–15%•
–15%•
–15%•
–75%•

N/A

–15%•
–15%•
>90%•

N/A

30%

Target achieved

• Yes
• No

1 For comparable units 2014.
2 The development is a combination of an increased number of
certified entities and recently acquired companies with ISO
14001 certification.

3 Countries covered: China, Macau, Hong Kong and Taiwan
4 Countries covered: China, Macau, Hong Kong, Taiwan, India,

Malaysia, Vietnam, Thailand and Philippines.

5 Countries covered: All low-cost countries.

6 Including newly acquired companies’ suppliers the share was 85%.
7 The historical numbers have been adjusted with proforma data

for the years 2010–2013.

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

* New KPI’s from 2015.

ASSA ABLOY ANNUAL REPORT 2015

SUSTAINABLE DEVELOPMENT 55

���

Sustainable development

Product life cycle assessments form the basis of all prod-
uct development and provide knowledge of where the
largest environmental impact occurs. The assessment
provides an important basis for decisions on prioritizing
resources. ASSA ABLOY can reduce its total environmen-
tal impact and costs through a reduced and efficient use
of water, chemicals, energy and materials in the produc-
tion process. The product development process uses an
in-house developed compass showing seven sustainabil-
ity dimensions, facilitating a comparison of performance
with other relevant products.

l i n g

Cost

E
S
U
E
R

e
s
u
e
R

i
v

ale

nts

Energy in u s e

a
l

Water
REDUCE

During the year a Group-wide checklist was developed
with a list of undesirable materials that should be
avoided in product development. Moreover, initiatives to
reduce the amount of packaging materials for different
forms of delivery are important. OEM customers, for
example, can have their products delivered on pallets
without individual packaging of each product. This con-
tributes to lower resource consumption across the
whole supply chain.

Development of supplier relations
ASSA ABLOY is working systematically with its suppliers
to improve sustainability performance across the supply
chain. Evaluation and improvement of the supplier base
is a continuous process. Supplier selection is based on
standardized criteria for both quality and sustainability.
Good supplier control and working in accordance with

jointly agreed action plans result in increased product
quality and more efficient and sustainable processes.
Suppliers are required to comply with the Group’s
Code of Conduct. Quality and sustainability audits are
conducted before new suppliers are approved. Suppliers
deemed to be in a risk category are prioritized for audit.

The audit is constantly being upgraded and is based on

the Group’s 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
requirements is requested to make necessary improve-
ments in accordance with an action plan. The contract is
terminated unless this plan is complied with.

In 2015 ASSA ABLOY conducted 890 (812) sustain-
ability audits. At year-end, 1,362 (1,053) active suppliers
had satisfied the minimum requirements for quality and
relevant sustainability issues. Seven (43) suppliers were
blacklisted. Of purchases in low-cost countries, 90 per-
cent were from sustainability-audited suppliers.

An external audit began at the end of the year to check

the quality of the company’s own supplier audits. An
external party is to conduct 60 audits of suppliers pre-
viously audited by the Group. This audit will help improve
the company’s internal audit functions and enable cali-
bration of the Group’s audit results with comparisons to
achieve improvements and knowledge development.

Supplier selection process
The process has three stages:
• Supplier self-assessment: the supplier assesses its abil-
ity 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: a complement to the

standard audit.

The supplier is evaluated and graded using a color coding
system. Green means the supplier is approved, but
should regularly undergo a follow-up audit after 36
months. Yellow, orange and purple mean that the sup-
plier is underperforming to various extents and needs to

SUSTAINABILITY AUDITS OF SUPPLIERS IN LOW-COST
COUNTRIES

SHARE OF TOTAL PURCHASES IN LOW-COST COUNTRIES

Number

1,000

800

600

400

200

In 2015, ASSA ABLOY conducted
890 (812) sustainability audits.

In 2015, the share of the Group’s total
pur chases of raw materials, compo-
nents and finished goods from low-
cost countries increased to 52 per-
cent.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY ANNUAL REPORT 2015

�
�
�
�
�
�
�
�
�
�
�

improve within 12 months. Improvement is
verified by an on-site follow-up audit. Red
means the supplier is not approved and needs
to improve within six months. This also means
that no new business can be done with ASSA
ABLOY while the supplier is red.

A red, yellow, orange or purple rating can be
upgraded, if the supplier improves in line with
an action plan. If no action is taken within the
agreed time, the supplier is immediately
classed as red, preventing the supplier from
doing new business with ASSA ABLOY.

Sustainability audit results override quality
audit results with respect to non-compliance.
This means that a supplier rejected for poor
management of relevant sustainability issues is
either stopped immediately or put on hold
pending approval once the deficiencies have
been actioned.

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 database. Suppliers are listed,

graded and monitored in the supplier data-
base. Audit reports on both quality and rele-
vant 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.

Project with focus on low life cycle costs and healthy materials

Nya Karolinska Solna (NKS), Stockholm has con-
tracted ASSA ABLOY Entrance Systems to supply
automatic doors with high energy efficiency and a
long life thanks to an optimally designed service
program.

CHALLENGE: The ultramodern Nya Karolinska
Solna University Hospital is one of Europe’s largest
construction projects. Energy efficiency plays an
important role in this project, and the hospital is
making high demands on the products and mate-
rials used in the building. PVC, for example, is a
material that must be avoided at all costs. The
whole life cycle has been taken into account when

selecting products, and all suppliers have to satisfy
the requirements to be approved.

SOLUTION: Good service was a basic require-
ment in supplying automatic entrance solutions
for the hospital. Moreover, the doors had to be
made of healthy materials. Thanks to an optimally
designed service program, ASSA ABLOY Entrance
Systems was able to offer products with high
energy efficiency and strong reliability and
endurance.

efficient characteristics, thereby ensuring con-
tinuous, secure operation of NKS. Collaboration
with ASSA ABLOY Entrance Systems also results in
a lower life cycle cost, as the products last longer if
they are regularly serviced. ASSA ABLOY Entrance
Systems carries out preventive maintenance at
regular intervals throughout the life of the prod-
ucts, which means that parts are replaced before
they fail. Upgrades are also available so that NKS
does not need to replace the whole product when
new functions become available.

RESULT: It is important that service is carried out

in the right way to maintain the doors’ energy-

ASSA ABLOY ANNUAL REPORT 2015

SUSTAINABLE DEVELOPMENT 57

Sustainable development

More efficient production
Energy and carbon emissions
During the period 2010–2015, the Group’s energy inten-
sity was reduced by 29 percent, exceeding the target of a
15 percent reduction. The same applies to greenhouse
gas emissions related to energy consumption, where the
target was a 10 percent reduction. Structural rationaliza-
tion programs have concentrated manufacturing to
more efficient units with high capacity utilization, more
effective working practices and processes, and higher
quality. Automation and measures for smarter flows have
been central for achieving more efficient production.
More efficient control of temperature, light, ventilation
and energy-intensive manufacturing processes has gen-
erated major savings in many Group companies. Cooper-
ation with innovation, product design and product
development has led to use of materials and processes
with less environmental impact.

Water consumption
During the period 2010–2015, water intensity was
reduced by 33 percent, compared with the target of
15 percent.

Efforts to increase water use efficiency have largely

been concentrated to plants with surface treatment
processes, which account for most of the Group’s water
consumption. Over the past few years many of the
Group’s plants have implemented technical improve-
ments in which purification and reuse of water in the pro-
duction process have considerably reduced consump-
tion. Acquisitions in China in recent years have involved
water-intensive processes, and the Group is now working
hard to find alternatives.

Waste management and hazardous chemicals
The Group has focused on reducing the use of freon and
chlorinated organic solvents, and both chemical groups
are to be phased out. The use of chlorinated organic sol-
vents has been substantially reduced over several years.
The last plant that used them replaced them with eco-
friendly technology in 2015. The main consumption of
freon is in China. In 2015, the first plant in China was con-
verted to eco-friendly technology, and remaining pro-
cesses in China will be phased out in 2016. Overall, the
amount of environmentally hazardous waste has been
reduced by more than the 15 percent target.

The Group applies the Reduce, Reuse, Recycle principle.
This means that ASSA ABLOY works systematically to
reduce the amount of materials in products, select opti-
mal materials, develop products that can be upgraded
rather than replaced and enable recycling of both pro-
duction waste and the finished products at the end of
their life cycle. Monitoring of waste from various types of
materials has been refined to better monitor and reduce
the amount of waste.

Occupational health and safety
Since 2010, the Group has achieved a clear improvement
in terms of creating safer workplaces, albeit not fully in
line with the target of a 15 percent reduction in the injury
rate and days lost due to accidents. One explanation is
that newly acquired companies with heavier manufac-
turing have a negative impact on the result.

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. Work is inten-
sifying to create a good safety culture with increased
reporting, preventive measures, safety inspections and
training. The Group has begun a project to look at health
in a broader perspective, including health issues such as
work-life balance and stress.

ENERGY USE

GWh

800

700

600

500

400

300

200

100

2015 represents development for
comparable units from 2014.

USE OF CHLORINATED ORGANIC SOLVENTS (PER AND TRI)

INJURIES PER MILLION HOURS WORKED

Tons

2015 represents development for
comparable units from 2014.

Number

2015 represents development for
comparable units from 2014.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY ANNUAL REPORT 2015

More effective powder coating reduces energy
consumption by 35 percent

have been reduced by 70 percent since the system was installed
three months ago. Amalgamation of the three pretreatment
processes has resulted in less waste water, which in turn leads to
lower costs and higher safety.

ASSA ABLOY New Zealand supplies customized solutions to the
OEM market within tight time frames. Powder coating is a key
part of the production process, and it is important to be able to
offer a flexible variation in quantities and colors without com-
promising the high quality requirements.

CHALLENGE: Previously, the plant had three different powder

coating lines with separate processes for pretreatment and
drying, resulting in high waste water and energy costs. The
challenge was to reduce powder coating costs without com-
promising on either throughput time or quality.

SOLUTION: Following an extensive review of the plant’s work

flows, a single powder coating line was created. Energy con-
sumption has been reduced thanks to advanced technology in
the form of a more efficient gas burner and a monitoring system
that reduces the gas supply when the plant is not in operation.
The new powder coating line, which can handle two colors
simultaneously, has common processes for pretreatment and
drying, leading to increased safety and less chemical waste.

The new pretreatment process has a built-in water supply
system, in which all waste water is filtered, cleaned and neutral-
ized. As a result, only empty chemicals containers need to be
sent to landfill. This system has been in operation since August
2015. As from Q2 2016, the plant will also start utilizing heat
from the production process, which will then be reused in the
plant’s hot water system.

RESULT: Energy consumption has been reduced by 35 per-
cent, and chemical waste costs from the pretreatment process

The new spray tank used in the
pretreatment process.

Water recycling in glass production

Metalind increased product quality and reduced water con-
sumption thanks to extra filtration that makes it possible to use
the same water in up to 80 production cycles.

CHALLENGE: Previously, Metalind used ordinary tap water to
rinse fire-resistant glass during the production process. An open
system was used, with clean water taken from the municipal
water mains network and waste water released into the sewer-
age system. Moreover, the water’s chemical composition was a
problem, as it contained unacceptably high levels of iron and
chloride content. This entailed an imminent risk of customer
complaints due to optical defects in the glass.

SOLUTION: The solution was to install a water recycling
system. Extra clean water is now purchased in IBC containers,
added to the system and used during production. The main
change is that the plant now has a closed water system. When
the production process is finished, the water is filtered and then
reused. The same water can be used up to 80 times without a
deterioration in quality.

RESULT: Water consumption has been reduced appreciably,
helping Metalind to meet one of its the sustainability targets for
2015. However, the main advantage is that product quality is
much improved. Another important advantage is that customer
complaints have fallen considerably since the new glass cleaning
method was introduced. Moreover, the production plant is no
longer dependent on the municipal water supply system and is
not affected in case of a water shortage.

ASSA ABLOY ANNUAL REPORT 2015

SUSTAINABLE DEVELOPMENT 59

Sustainable development

Employees generate
our success

ASSA ABLOY should be an attractive company to work for. The Group has great con-
fidence it its employees, with basic values of transparency, valuing results and perfor-
mance, taking responsibility and learning from mistakes. The guiding organizational
principle is delegation. 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.
Each employee has responsibility for their professional development and career.

Career and common goals
Motivated, competent employees are key prerequisites
for an innovative and profitable company. A basic prin-
ciple of ASSA ABLOY’s recruitment policy is to give prior-
ity to internal candidates provided they have equal quali-
fications to external applicants. All job vacancies are
advertised on the Group’s global intranet to encourage
and facilitate internal mobility. Recruitment takes place
locally in the majority of cases.

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
Starting from the basic values of results and performance
and the Group’s gender diversity policy, ASSA ABLOY is
working to achieve a better gender balance at all levels in
the organization.

To promote continuing development, increased

In 2011 the Group set a target of 30 percent women in

mobility and network building outside their career track,
the Group offers its employees a number of different pro-
grams to broaden and deepen competence. The ‘Live My
Life’ program allows employees to swap jobs for a day
with colleagues at other levels, in different functions and
in different organizations. A service manager, for exam-
ple, can work in customer service or a service engineer
can swap jobs with a colleague in service planning.
Another program, ‘In My Shoes’, allows employees with
similar responsibility and function to spend a week with a
colleague in another organization, region or country to
gain new insights and build networks.

Providing employees with a good knowledge of the
company and an understanding of how their own efforts
contribute to the overall goals increases their motivation
and commitment. In order to create a consensus on
ASSA ABLOY’s business and how the goals are to be
achieved, all employees undergo an interactive training

management positions at levels 2 to 5 by 2020. In 2015
the share was 23 percent. The trend in the share of
women at management level is monitored quarterly.
Managers are expected to secure diversity, to prioritize
the underrepresented gender in the recruitment process
in the case of equal qualifications, provided local legisla-
tion is complied with, and to have at least one person
from the underrepresented gender among the final can-
didates. ASSA ABLOY is striving for diversity at all levels in
the organization. The Group has 24 different nationalities
in the senior management structure, including employ-
ees reporting to the CEO and divisional management
teams. The 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. The Group’s global
presence, values and delegation of responsibility are con-
sistent with an active diversity policy.

WOMEN AT DIFFERENT LEVELS OF THE ORGANIZATION

NATIONALITIES – ASSA ABLOY’S MANAGEMENT TEAMS

Share of women, %

Level

2011 20121 20131

2014

2015

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

0
15
19
26
24
35

18
16
18
23
22
35

27
12
19
24
22
31

27
16
17
24
22
31

27
17
16
25
23
31

1 The definition of management positions was revised in 2014. 2012 and 2013

have been restated for comparability with 2014.

Europe excl. Sweden, 40.1%

North America, 20.7%

Sweden, 17.4%

Asia, 12.0%

Pacific, 4.3%

Africa and Middle East, 3.3%

South America, 2.2%

South America

Africa ME

Pacific

Asia

Sweden

North America

Europe

SUSTAINABLE DEVELOPMENT

ASSA ABLOY ANNUAL REPORT 2015

Growing with care
ASSA ABLOY is an acquisition-intensive group, and it is
important to monitor how new units are operating in rela-
tion to the Group’s Code of Conduct, principles and inter-
national guidelines. Two social audits are therefore con-
ducted each year by an external party. These audits include
working conditions, human rights, work environment,
workplace culture and skills development. Where war-
ranted the audits lead to improvement measures. In 2015
external audits were conducted in Brazil and Poland.

ASSA ABLOY’s employee survey
ASSA ABLOY conducts a major employee survey every
two years, and plans were made in 2015 for a new
employee survey in 2016. In a decentralized organiza-
tion, it is an effective tool for obtaining information on
employees’ opinion of the Group. Areas covered by the
survey include: employees’ views on their work situation,
how they perceive ASSA ABLOY as an employer, how they
experience health and safety in their workplace, whether
they consider they have equal opportunities, and
whether development opportunities have been imple-
mented. The response rate for 2014 was 89 percent. The
survey showed a better result for several questions, com-
pared with 2012. The results are broken down into over
300 units and form the basis for concrete action plans
with relevance for employees.

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 man-
agers the opportunity to take part in one of its two senior
management development programs: ASSA ABLOY MMT
and ASSA ABLOY IMD Boosting Market Leadership
Program.

MMT is intended to provide participants with an
increased knowledge of all areas of ASSA ABLOY’s opera-
tions, develop their internal 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 presence,
product leadership and cost-efficiency. This is of

particular importance for ASSA ABLOY, which acquires
several companies each year.

In 2005 ASSA ABLOY began collaboration with the
world-leading Swiss business school IMD in Lausanne.
Since then over 400 of ASSA ABLOY’s senior managers
from 30 countries have taken part in IMD programs. 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 focus on problem solv-
ing, implementation and activities based on an analysis
of various case studies.

During the year EMEA division’s successful Graduate
Program was broadened to include APAC division, and
similar programs are planned in Entrance Systems divi-
sion in 2016. The program includes 20 to 30 young grad-
uates who want to develop a management or specialist
role for a year. They work on various projects, which are
sandwiched with supervision and training. This program
is an example of how good divisional initiatives can be
rolled out across the Group.

Employee development
Annual performance reviews are important for monitor-
ing and planning employee development. They provide a
platform for professional development with ongoing
feedback on performance. ASSA ABLOY considers that a
well-functioning internal labor market and rotation
across geographical borders and disciplines are a key
component for employee development. They also con-
tribute to knowledge, experience and values being
shared across the Group.

External dialogue on sustainability
ASSA ABLOY conducts an active dialogue with the com-
pany’s most important stakeholder groups: shareholders,
investors, analysts, customers, suppliers, employees,
local communities, NGOs and the media. ASSA ABLOY’s
policy of openness means that it listens to these stake-
holders and takes on board relevant views.

Since 2005 ASSA ABLOY has held an annual round-

table discussion with investors on ASSA ABLOY’s
manage ment of relevant sustainability issues. This is a
welcome and valuable forum for an open discussion.
In 2015 requests received included health and safety
incident reporting.

AVERAGE NUMBER OF EMPLOYEES

AVERAGE NUMBER OF EMPLOYEES BY REGION

Women
Men

Number

50,000

40,000

30,000

20,000

10,000

Europe, 16,233

North America, 11,388

Central and South America, 1,385

Africa, 536

Asia, 15,400

Oceania, 1,052

Pacific

Asia

Africa

Central and South America

North America

Europe

ASSA ABLOY ANNUAL REPORT 2015

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

Internal control – financial reporting

Remuneration guidelines for senior management

Sales and income

Consolidated income statement and
Statement of comprehensive income

Comments by division

Results by division

Financial position

Consolidated balance sheet

Cash flow

Consolidated cash flow statement

Changes in consolidated equity

Parent company financial statements

Notes

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 Property, plant and equipment

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 Cash flow

32 Employees

33 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

100

102

103

104

105

107

108

109

111

116

117

118

119

120

121

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2015

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 through 31 December 2015.
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 68,099 M (56,843), with
organic growth of 4 percent (3) and acquired growth of
3 percent (9). The exchange rate impact on sales was 13 per-
cent (5).

Operating income (EBIT) increased by 20 percent to SEK
11,079 M (9,257), equivalent to an operating margin of 16.3
percent (16.3). Net financial items were SEK –697 M (–559).
Income before tax totaled SEK 10,382 M (8,698).

Operating cash flow increased by 21 percent to SEK 9,952
M (8,238). Earnings per share after full dilution increased by
20 percent till SEK 6.93 (5.79).

Restructuring
A number of activities were implemented in 2015 within the
framework of the already existing programs for the purpose
of generating further efficiencies and savings. The programs
launched during the period 2006–2012 have been com-
pleted. The most recently launched program from 2013 is
still active and is estimated to be largely implemented by
year-end 2016.

At year-end 2015, 10,750 employees had left the Group,
of which 1,336 employees during the year, as a result of the
changes in the production structure since the programs
began in 2006. A total of 73 plant closures have been
implemented, of which nine closures during the year. A large
number of plants in high-cost countries have switched from
production to final assembly. A total of 41 offices have also
been closed during the equivalent period, of which five
closures during the year.

The Group’s production is increasingly concentrated in its
own plants in China, central and eastern Europe and to exter-
nal suppliers in low-cost countries.

Payments related to the restructuring programs totaled

SEK 375 M (453) for the full year. At year-end 2015, the
remaining provisions for restructuring measures amounted
to SEK 551 M (941).

Acquisitions and divestments
On 25 March 2015, 100 percent of the share capital was
acquired in Quantum Secure (USA), the leading supplier of
solutions to help enterprises manage identities and meet
compliance requirements in highly regulated industries. The
acquisition reinforces the strategy of being the global leader
in secure identity solutions. Quantum Secure is headquar-
tered in San Jose, California.

On 22 June 2015, the Prometal Group was acquired, a lead-
ing supplier of steel and wooden security doors in the Mid-
dle East. Prometal constitutes another important step in the
strategy of increasing market presence in the Middle East.
The company is 100 percent consolidated. Prometal is head-
quartered in Dubai, UAE.

On 15 July 2015, 100 percent of the share capital was
acquired in Teamware, the market leader in locks and hard-
ware in the Malaysian market. The acquisition is an import-
ant step into the large, fast-growing Malaysian market and
forms part of the strategy of increasing market presence in
emerging markets. Teamware is headquartered in Kuala
Lumpur, Malaysia.

On 28 August 2015, 100 percent of the share capital was
acquired in Flexim, a leading Finnish locksmith and security
systems provider. The acquisition gives ASSA ABLOY a foot-
ing in the locksmith and access control channels in the
Nordic markets and adds competence in the Finnish market.
On 30 December 2015, 100 percent of the share capital

was acquired in the Brazilian companies Papaiz, a leading
lock company, and Udinese, a leading manufacturer of slid-
ing door and window hardware. These acquisitions consider-
ably increase market presence on the important Brazilian
market. The companies are headquartered in Salvador and
Sao Paolo respectively.

Other acquisitions during the year included Nergeco
(France) and L-Door (Belgium), which strengthen the lead-
ing position in entrance automation, and IAI (Netherlands),
which complements ASSA ABLOY’s offering in secure iden-
tity solutions.

A total of 16 businesses, including minor acquisitions,
were consolidated during the year. The total purchase price
of these acquisitions was SEK 3,844 M on a debt-free basis,
and acquisition analyses indicate that goodwill and other
intangible assets with an indefinite useful life amounted to
SEK 3,098 M. In addition to these new acquisitions, comple-
mentary acquisitions of non-controlling interests totaled
SEK 990 M during the year.

In December 2015, ASSA ABLOY signed an agreement to

acquire the Swiss company CEDES, a leading supplier of
sensor technology to the door and elevator industry. The
acquisition forms part of the strategy of providing more
intelligence in entrance automation to create new innova-
tive, integrated customer solutions.

ASSA ABLOY ANNUAL REPORT 2015

REPORT OF THE BOARD OF DIRECTORS 63

Report of the Board of Directors

Research and development
ASSA ABLOY’s expenditure on research and development
during the year totaled SEK 1,932 M (1,545), equivalent to
2.8 percent (2.7) 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.

sion will be appealed to the Administrative Court of Appeal.
The total tax exposure amounts to just over SEK 800 M.

The Finnish Tax Administration has decided not to allow

tax deductions for interest expenses in the Finnish opera-
tions for the years 2008–2012. The decision will be appealed
to a higher court. The total tax exposure amounts to around
SEK 750 M.

ASSA ABLOY’s assessment is that the decisions will not

have an impact on the Group’s earnings.

Sustainable development
ASSA ABLOY’s operations in Sweden carry on licensable and
notifiable activities under the Swedish Environmental Code
in Entrance Systems division in Gothenburg.

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

Most units outside Sweden carry on licensable activities

and hold equivalent licenses under local legislation.

ASSA ABLOY’s units worldwide are working systematically
and purposefully to reduce their environmental impact. This
applies to units on both mature and emerging markets, and
to both existing and newly acquired companies.

The 2015 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.

Tax matters
The Administrative Court in Sweden has decided not to
allow tax deductions for interest expenses relating to one of
the Group’s subsidiaries for the years 2008–2012 on the
grounds that the deductions were misallocated. The deci-

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 for
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 2015

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 stra-
tegic, operational and financial risks. Strategic risks refer to
changes in the business environment with potentially signifi-
cant effects on ASSA ABLOY’s operations and business objec-
tives. Operational risks comprise risks directly attributable 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.

Organization
ASSA ABLOY’s Board of Directors has overall responsibility
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 levels.

Responsibility
ASSA ABLOY’s Board of Directors has overall responsibility
for the Group’s strategic direction in close consultation with
the Executive Team. Divisions and business units have overall
responsibility for management of operational risks, in accor-
dance with the Group’s decentralized approach to organiza-
tion, responsibility and authority. In the case of financial
risks, allocation of responsibilities and control of the Group’s
financing activities are regulated in a financial policy
adopted by the Board of Directors. Group Treasury then has
the main responsibility for financial risks within the frame-
work established in the financial policy, with the exception of
credit risks relating to operational business activities, which
are managed locally at company level and monitored at divi-
sion level.

Review
Strategic risks, such as competitors, brand positioning and so
on, are regularly reviewed at ASSA ABLOY AB’s board meet-
ings. The Group’s operational risk management is continu-
ously monitored by the Executive Team through divisional
reporting and divisional board meetings. For further infor-
mation on monitoring and management of operational risks,
see page 67.

ASSA ABLOY’s Group Treasury monitors 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 man-
ages most financial transactions as well as financial risks with
a Group-wide focus.

ASSA ABLOY ANNUAL REPORT 2015

REPORT OF THE BOARD OF DIRECTORS 65

Report of the Board of Directors

Significant risks and risk management

ASSA ABLOY’s risks

STRATEGIC RISKS

OPERATIONAL RISKS

FINANCIAL RISKS

Changes in the business environment with
potentially significant effects on opera-
tions and business objectives.

Risks directly attributable to business oper-
ations with a potential impact on financial
position and performance.

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

• Legal risks
• Environmental risks
• Tax risks
• Acquisition of new businesses
• Restructuring measures
• Price fluctuation and availability

of raw materials

• Credit losses
• Insurance risks
• Risks relating to internal control

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

• Financing risk
• Currency risk
• Interest rate risk
• Credit risk
• Risks associated with pension

obligations

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.

Brand positioning
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.

Country-specific risks etc.
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-spe-
cific risks, including political decisions and comprehensive
changes in the regulatory framework.

Customer behavior
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
relationships with them, are subject to continuous local
review.

Competitors
As regards competitors, risk analyses are carried out both
centrally and locally.

Reputational risk
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 environ-
mental considerations.

Operational risks
Operational risks comprise risks directly attributable to busi-
ness operations, with a potential impact on the Group’s
financial position and performance. They include legal and
environmental risks, tax risks, acquisition of new businesses,
restructuring measures, availability and price fluctuations of
raw materials, and customer dependence. Risks relating to
compliance with laws and regulations and to internal control
and financial reporting are also included in this category.
The table on page 67 describes in more detail the man-

agement of these risks.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2015

ASSA ABLOY’s operational risks and risk management

Operational risks

Risk management

Comments

Legal risks

The Group continuously monitors anticipated and
implemented changes in legislation in the coun-
tries in which it operates. Ongoing and potential
disputes and other legal matters are reported regu-
larly to the Group’s central legal function.

Policies and guidelines on compliance with current
competition, export control and anti-corruption
legislation have been implemented.

At year-end 2015, there are considered to be no
outstanding legal disputes that may lead to sig-
nificant costs for the Group.

Environmental risks

Ongoing and potential environmental risks are reg-
ularly monitored in the operations. External exper-
tise is brought in for environmental assessments
when necessary.

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

Tax risks

Ongoing and potential tax cases are regularly
reported to the Group’s central tax function.

Acquisition of new businesses

Acquisitions are carried out by a number of people
with considerable acquisition experience and with
the support of, for example, legal and financial con-
sultants.

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

At year-end 2015, there are considered to be no
ongoing tax cases with a significant impact on
the Group’s earnings. Two tax cases in Sweden
and Finland will be appealed to a higher court.
For further information see the Report of the
Board of Directors.

The Group’s acquisitions in 2015 are reported
in the Report of the Board of Directors and in
Note 30, Business combinations.

Restructuring measures

The restructuring programs
mainly entail some production
units changing direction princi-
pally to final assembly, while cer-
tain units are closed.

The restructuring programs are carried on as a
series of projects with stipulated activities and
schedules. The various projects in the respective
restructuring program are systematically moni-
tored on a regular basis. At year-end 2015, only the
most recently launched program from 2013 was
active.

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

Price fluctuations and
availability of raw materials

Credit losses

Insurance risks

Risks relating to internal
control

Raw materials are purchased and handled primarily
at division and business unit level. Regional com-
mittees coordinate these activities with the help of
senior coordinators for selected material compo-
nents.

Trade receivables are spread across a large number
of customers in many markets. No individual cus-
tomer in the Group accounts for more than 1 per-
cent of sales.

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 organization is considered to be relatively
transparent, with a clear allocation of responsibili-
ties. A well-established Controller organization at
both division and Group level monitors financial
reporting quality.

Instructions about the allocation of responsibilities,
authorization and procedures for ordering, sourc-
ing and plant management are laid down in an
internal control manual. Compliance is evaluated
annually for all operating companies, combined
with an action plan for concrete improvements.

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

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

Receivables from each customer are relatively
small in relation to total trade receivables. The
risk of significant credit losses for the Group is
considered to be limited, but has increased
somewhat in pace with the Group’s increased
share of operations in emerging markets.

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

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

Further information on risk management relat-
ing to financial reporting can be found in the
Report of the Board of Directors, section on
Corporate governance. See also the section
‘Basis of preparation’ in Note 1.

ASSA ABLOY ANNUAL REPORT 2015

REPORT OF THE BOARD OF DIRECTORS 67

Report of the Board of Directors

Significant risks and risk management

Financial risks
The Group’s financial risks mainly comprise financing risk,
currency risk, interest rate risk, credit risk, and risks associ-
ated with the Group’s pension obligations. A large number of
financial instruments are used to manage these risks.
Accounting principles, risk management and risk exposure
are described in more detail in Notes 1 and 33, as well as
Note 24, Post-employment employee benefits.

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 fluctuations. These
fluctuations affect Group earnings when the income state-
ments of foreign subsidiaries are translated to Swedish kro-
nor (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 transaction expo-
sure, i.e. the relative values of exports and imports of goods,
is expected to increase over time due to rationalization of
production and sourcing. In accordance with financial policy,
the Group only hedged a very limited part of current cur-
rency flows in 2015. As a result, exchange rate fluctuations
had a direct impact on business operations.

Exchange rate fluctuations also affect the Group’s
debt-equity ratio and equity. The difference between the
assets and liabilities of foreign subsidiaries in the respective
foreign currency is affected by exchange rate fluctuations
and causes a translation difference, which affects the Group’s
comprehensive income. A general weakening of the Swedish
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 22,269 M (22,327) at year-end 2015. Debt was mainly
denominated in 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, vari-
ous interest rate derivatives are used to adjust interest rate
sensitivity.

Credit risk
Credit risk arises in ordinary business activities and as a result
of financial transactions. Trade receivables are spread across
a large number of customers, which reduces the credit risk.
Credit risks relating 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 2015, ASSA ABLOY had obligations for pensions
and other post-employment benefits of SEK 7,421 M (7,049).
The Group manages pension assets valued at SEK 4,660 M
(4,103). Provisions in the balance sheet for defined benefit
and defined contribution plans and post-employment medi-
cal benefits totaled SEK 2,761 M (2,946). 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 assumptions made. Significant remea-
surement of obligations and plan assets is recognized on a
current basis in the balance sheet and in other comprehen-
sive income. The assumptions made include discount rates
and anticipated inflation and salary increases.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2015

Tower 185 relies on
SMARTair access control
from ASSA ABLOY

CUSTOMER: The ensemble of Tower 185 comprises a high-rise

office building with 51 floors and a base building with a horse-
shoe-shaped floor plan. It is the fourth tallest high-rise building in
Germany and one of the first high-rises in Europe that has been issued
Gold LEED Certification from the U.S. Green Building Council. The
building has also received a Gold Certificate from the German Sus-
tainable Building Council (DGNB). With numerous innovative
approaches, Tower 185 spares valuable natural resources and thus
the environment. For instance, more than 2.3 million liters of drinking
water are saved each year by using rainwater, and with an intelligent
energy concept, current specifications of energy savings regulations
are undercut by more than 20 percent.

CHALLENGE: According to the original plans, the entire building
would be equipped with a mechanical locking system. However, with
the repeated loss of keys and the associated expense, the facility man-
agement decided to install a more flexible and user-friendly solution.

SOLUTION: A SMARTair electronic access control solution was

chosen. In this system, access permissions at the door are updated via
user cards. These authorizations can be adjusted with time schedules
that are automatically read by the event memory. The access control
management is simple, visual and easy to operate. SMARTair is also
cost-efficient in its daily operation. Instead of a permanent connection
to the main network, individual components are powered by standard
batteries. This reduces operating and maintenance costs for the doors
to a minimum. The intelligent technology provides notification when it
is time for battery replacement. SMARTair is easy to install and does not
require any wiring. Lost keys are also no longer a problem, because the
access rights of lost cards can be revoked within a matter of seconds.

Critical infrastructure requires locks for all seasons

CUSTOMER: Founded as a private gas company in the 1800s, Industrielle
Werke Basel (IWB) is now an independent utility owned by the city and canton
of Basel. It employs over 750 people and supplies around 190,000 customers
in Basel and north-western Switzerland with electricity, district heating, biogas
and natural gas, energy services, telecommunications and safe drinking water.

CHALLENGE: As critical infrastructure for one of Switzerland’s most econom-
ically dynamic regions, IWB needed a proven locking system that would equip
it to face 21st-century security challenges. Industrielle Werke Basel needed a
security system flexible enough to work across geographically distributed sites
of diverse types, from water plants to electricity stations and a system that
could withstand extremes of climate, including solar radiation, freezing tem-
peratures, and heavy rain.

SOLUTION: For IWB, the answer was CLIQ from ASSA ABLOY. CLIQ is an intel-
ligent mechatronic locking system that combines the best of mechanical secu-
rity and electronic access control. Users are issued with a single, programma-
ble key that enables them to open just the locks for which the key has authori-
zation. Power for communication between key and cylinder comes from a
standard battery in each key, so technicians servicing the system don’t need to
start up each cylinder to replace a battery. Furthermore, installing CLIQ-cylin-
ders requires no wiring – a big advantage when securing remote or outdoor
openings. Precision mechanics inside every of the 4,500 cylinders installed also
guarantee durability for years to come.

ASSA ABLOY ANNUAL REPORT 2015

REPORT OF THE BOARD OF DIRECTORS 69

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 internal rules
and regulations.

This Corporate Governance Report has been prepared 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’s objective is that its activities should gener-

ate 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.

Shareholders
At year-end, ASSA ABLOY had 22,232 shareholders
(17,720). The principal shareholders are Investment
AB Latour (9.5 percent of the share capital and 29.5 percent
of the votes) and Melker Schörling AB (3.9 percent of the
share capital and 11.4 percent of the votes). Foreign share-
holders accounted for around 64 percent (65) of the share
capital and around 44 percent (44) of the votes. The ten largest
shareholders accounted for around 38 percent (35) of the
share capital and 58 percent (56) 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 agree-
ments between shareholders in ASSA ABLOY.

Corporate governance structure

7
7
8

General Meeting

Board of Directors

CEO

Executive Team

Divisions

Shareholders

3
9

5
6

Nomination Committee

Auditor

Remuneration Committee

Audit Committee

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 2015

Share capital and voting rights
At the Annual General Meeting in May 2015, it was resolved to
increase the number of shares in the company by dividing
each share, irrespective of series, into three shares of the same
series (stock split 3:1). ASSA ABLOY’s share capital amounted
at year-end to SEK 370,858,778 distributed among 57,525,969
Series A shares and 1,055,050,365 Series B shares. The total
number of votes was 1,630,310,055. Each Series A share car-
ries ten votes and each Series B share one vote. All shares have
a par value of around SEK 0.33 and give share holders equal
rights to the company’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 repurchase
and transfer ASSA ABLOY shares. The aim has, among other
things, been to secure the company’s undertakings in connec-
tion with its long-term incentive programs (LTI). The 2015
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 1,800,000 (1,800,000)1 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 around SEK 0.33. The purchase consideration amounted to
SEK 103 M (103). No shares were repurchased in 2015.

Share and dividend policy
ASSA ABLOY’s Series B share is listed on the Nasdaq Stockholm
Large Cap list. At year-end, ASSA ABLOY’s market capitalization
amounted to SEK 197,718 M. The Board of Directors’ objective
is that, in the long term, the dividend should be equivalent to
33–50 percent of income after standard tax, but always taking
into account ASSA ABLOY’s long-term financing requirements.

General Meeting
Shareholders’ rights to decide on the affairs of
ASSA ABLOY are exercised at the General Meeting.
Shareholders who are registered in the share register on the
record date and have duly notified their intent 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 submit a matter for consideration at the General Meet-
ing can send such request 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: dividend; 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; and
determination of remuneration guidelines for senior manage-
ment and fees for the Board of Directors and auditors. An Extra-
ordinary General Meeting may be held if the Board of Directors
considers this necessary or if ASSA ABLOY’s auditors or share-
holders holding at least 10 percent of the shares so request.

2015 Annual General Meeting
The Annual General Meeting in May 2015 was attended by
shareholders representing 56.1 percent of the share capital
and 70.1 percent of the votes.

At the Annual General Meeting, Lars Renström, Carl Douglas,
Birgitta Klasén, Eva Lindqvist, Johan Molin, Jan Svensson and
Ulrik Svensson were re-elected as members of the Board of
Directors. Eva Karlsson was elected a new member of the
Board of Directors. Further, Lars Renström was re-elected as
Chairman of the Board of Directors, and Carl Douglas as Vice
Chairman. After 14 years as a board member, Sven-Christer
Nilsson chose to leave the Board of Directors at the Annual
General Meeting.

The 2015 Annual General Meeting approved a dividend
of SEK 6.50 per share, in accordance with the proposal of the
Board of Directors and the CEO. In addition, the Annual General
Meeting passed resolutions on fees payable to the Board of
Directors, remuneration guidelines for senior management,
authorization of the Board of Directors regarding repurchase
and transfers of own Series B shares, implementation of a long-
term incentive program for senior management and other key
staff in the Group (LTI 2015), a stock split (3:1), and amend-
ment of the Articles of Association to adjust the limits for the
number of shares, as well as appointing members of the Nomi-
nation Committee prior to the 2016 Annual General Meeting.

Nomination Committee
The Nomination Committee prior to the 2016
Annual General Meeting comprises Carl Douglas

(Investment AB Latour), Mikael Ekdahl (Melker Schörling AB),
Liselott Ledin (Alecta), Marianne Nilsson (Swedbank Robur
fonder) and Anders Oscarsson (AMF and AMF fonder). On
4 November 2015, it was announced that Carl Douglas had
replaced Gustaf Douglas as Investment AB Latour’s represen-
tative on the Nomination Committee.

Carl Douglas is Chairman of the Nomination Committee.
Carl Douglas is also Vice Chairman of ASSA ABLOY’s Board of
Directors. The Nomination Committee thus deviates from the
Swedish Code of Corporate Governance in that the Vice Chair-
man of the Board of Directors is Chairman of the Nomination
Committee. The reason for this deviation is that the Nomina-
tion Committee considers it important to have the represen-
tative from the largest shareholder as Chairman of the Nomi-
nation Committee.

If a shareholder represented by one of the members of the
Nomination Committee ceases to be among the major share-
holders in ASSA ABLOY, the Committee has the right to
appoint another representative of one of the major sharehold-
ers 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
2016 Annual General Meeting.

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 appoint-
ment of the Nomination Committee prior to the Annual
General Meeting, and fees and associated matters.

Prior to the 2016 Annual General Meeting, the Nomination

Committee makes 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 is part of the basis for this assess-
ment. 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.

1 Adjusted for stock split (3:1).

ASSA ABLOY ANNUAL REPORT 2015

REPORT OF THE BOARD OF DIRECTORS 71

Report of the Board of Directors

Corporate governance

The Nomination Committee’s proposals for the 2016 Annual
General Meeting are published at the latest in conjunction
with the formal notification of the Annual General Meeting,
which is expected to be issued around 23 March 2016.

Board of Directors
In accordance with the Swedish Companies Act, the
Board of Directors is responsible for the organization

and administration of the Group and for ensuring satisfactory
control of bookkeeping, asset management and other finan-
cial circumstances. The Board of Directors decides on the
Group’s overall objectives, strategies, significant policies,
acquisitions and divestments as well as investments of major
importance. 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. The Board of
Directors approves the Annual Report and Interim Reports,
proposes a dividend and remuneration guidelines for senior
management to the Annual General Meeting, and makes deci-
sions concerning the Group’s financial structure.
The Board of Directors’ other duties include:

• continuously evaluating the company’s operational man-

agement, including the work of the CEO,

• ensuring that appropriate systems are in place for monitor-
ing and control of the company’s operations and the risks
associated with the company’s operations,

• ensuring that external information provided by the com-

pany is transparent, accurate, relevant and reliable,

• ensuring that there is satisfactory control of the company’s
compliance with laws and other regulations relevant to the
company’s operations, and its compliance with internal
guidelines, and

• establishing appropriate guidelines to govern the compa-
ny’s conduct in society with the aim of ensuring long-term
value-creating capability.

The Board of Directors’ rules of procedure, including instruc-
tions relating to the allocation of work between the Board of
Directors and the CEO as well as financial reporting and inter-
nal control, are updated and adopted at least once a year.

In addition to leading the work of the Board of Directors,
the Chairman should continuously monitor the Group’s oper-
ations and development through contact with the CEO. The
Chairman should consult the CEO on strategic issues and rep-
resent the company in matters concerning the ownership
structure. The Chairman should also, when necessary, take

part in particularly important external discussions and, in con-
sultation with the CEO, in other matters of particular signifi-
cance. 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 meetings

and one statutory meeting per year. A scheduled meeting is
always held in connection with the company’s publication of
its Year-end Report and Interim Reports. At least once a year
the Board of Directors visits one of the Group’s businesses,
combined with a board meeting. In addition, extraordinary
board meetings are held when necessary. All meetings follow
an approved agenda. Prior to each meeting, a draft agenda,
including documentation, is distributed to all members 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 Directors 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 Directors 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 Gen-
eral Meeting for the period until the end of the next Annual
General Meeting and shall, according to the Articles of Associ-
ation, comprise a minimum of six and a maximum of ten mem-
bers elected by the Meeting. Two of the members are
appointed by the employee organizations in accordance with
Swedish law. The employee organizations also appoint two
deputies. The Board of Directors currently consists of eight
elected members and two employee representatives. With
the exception of the CEO, none of the board members are
members of the Executive Team. The CEO has no significant
shareholdings or partnerships in companies with significant
business relationships with ASSA ABLOY.

Board of Directors’ work in 2015
During the year the Board of Directors held ten meetings
(six scheduled meetings, one statutory meeting and three extra-
ordinary meetings). At the scheduled board meetings, the CEO
reported on the Group’s performance and financial position,
including the outlook for the coming quarters. Acquisitions
and divestments were also discussed to the extent they arose.
More important matters dealt with by the Board of Direc-

tors during the year comprised a number of acquisitions,

SUMMARY OF BOARD
OF DIRECTORS’ WORK
AND COMMITTEE
MEETINGS IN 2015

Scheduled board meeting
Year-end results
Proposed distribution of earnings
Approval Annual Report
Final audit report
Proposals to Annual General Meeting
Evaluation Board of Directors
Evaluation Executive Team
Acquisitions

Scheduled board meeting
Interim Report Q1
Acquisitions

January

February

March

April

May

June

Remuneration committee
meeting

Audit committee meeting

Extraordinary board
meeting
Notice Annual General
Meeting

Audit committee meeting

At the scheduled board meetings the CEO also reported on the Group’s performance
and financial position, including the outlook for the coming quarters.

Statutory board meeting
Appointment committee members
Adoption Board of Directors’ rules of procedure
Signatory powers

Extraordinary board meeting
Adoption record date stock split (3:1)

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2015

including Quantum Secure, Flexim, Papaiz, Udinese, CEDES
and Nergeco. During the year, the Board of Directors con-
ducted in-depth reviews of the Group’s operations in Ameri-
cas division and APAC division, and visited EMEA division’s and
Entrance Systems division’s operations in Gothenburg, Swe-
den. The Board of Directors’ work is summarized in the time-
line on pages 72–73.

An evaluation of the Board of Directors’ work is conducted
annually in the form of a web-based survey, which each board
member responds to individually. A summary of the results is
reported to the Board of Directors at the board meeting in
February. Board members who wish can access the complete
results of the evaluation. The Secretary to the Board of Direc-
tors presents the complete results of the evaluation to the
Nomination Committee.

Remuneration Committee
The Remuneration Committee comprises Lars
Renström (Chairman), Jan Svensson and Ulrik

Svensson. Ulrik Svensson replaced Sven-Christer Nilsson as
a member of the Remuneration Committee at the statutory
board meeting.

The Remuneration Committee has the task of drawing 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 guidelines prior
to the 2016 Annual General Meeting is set out on page 79.

The Remuneration Committee also prepares, negotiates
and evaluates matters regarding salaries, bonus, pension, sev-
erance pay and incentive programs for the CEO and other
senior executives.

The Committee held one meeting in 2015. Its work
included 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
2016. Committee meetings are minuted and a verbal report is
given at board meetings.

Audit Committee
The Audit Committee comprises Ulrik Svensson
(Chairman), Birgitta Klasén and Jan Svensson.

The duties of the Audit Committee include continuous
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 evaluating the audit
assignment and informing the Board of Directors 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 2015, which
were attended by committee members, the company’s audi-
tor and representatives of senior management. More import-
ant matters dealt with by the Audit Committee during the year
included internal control, financial statements and valuation
matters, tax matters, insurance and risk management matters,
IT security, and legal risk areas. Committee meetings are min-
uted and a verbal report is given at board meetings.

Remuneration of the Board of Directors
The Annual General Meeting passes a resolution on the remu-
neration to be paid to board members. The 2015 Annual Gen-
eral Meeting passed a resolution on board fees totaling SEK
5,100,000 (excluding remuneration for committee work) to
be allocated between the members as follows: SEK 1,850,000
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 remu-
neration for committee work, the Chairman of the Audit Com-
mittee is to receive SEK 250,000, the Chairman of the Remu-
neration Committee SEK 100,000, members of the Audit
Committee (except the Chairman) SEK 125,000 each, and
members of the Remuneration Committee (except the Chair-
man) SEK 50,000 each.

The Chairman and other board members have no pension
benefits or severance pay agreements. The CEO and employee
representatives do not receive board fees. For further informa-
tion on the remuneration of board members in 2015, see
Note 32.

Attendance, Board of Directors and Committees

Name

Board of
Directors

Audit
Committee

Remuneration
Committee

1/1

4/4

10/10
Lars Renström
10/10
Carl Douglas
7/7
Eva Karlsson
9/10
Birgitta Klasén
10/10
Eva Lindqvist
10/10
Johan Molin
2/3
Sven-Christer Nilsson
10/10
Jan Svensson
9/10
Ulrik Svensson
7/7
Bert Arleros
10/10
Mats Persson
The maximum number of meetings varies due to appointment and resignation
in 2015.

4/4
4/4

1/1
1/1
0/0

Scheduled board
meeting
Interim Report Q2

Scheduled board
meeting
Presentation Americas
Acquisitions

Scheduled board meeting
and visit to operations
Visit EMEA and
Entrances Systems
Strategy

Scheduled board meeting
Interim Report Q3
Presentation APAC
Acquisitions
Strategy

July

August

September

October

November

December

Audit committee meeting

Extraordinary board
meeting
Acquisitions

ASSA ABLOY ANNUAL REPORT 2015

REPORT OF THE BOARD OF DIRECTORS 73

Report of the Board of Directors – Corporate governance

Board of Directors

Board members elected by the 2015 Annual General Meeting

Lars Renström

Carl Douglas

Eva Karlsson

Birgitta Klasén

Eva Lindqvist

Johan Molin

Lars Renström
Chairman.
Board member since 2008.
Born 1951.
Master of Science in Engineering and Master of Science in
Business and Economics.
President and CEO of Alfa Laval AB since 2004.1 President and
CEO of Seco Tools AB 2000–2004. President and Head of
Division of Atlas Copco Rock Drilling Tools 1997–2000.
Pre viously a number of senior positions at ABB and Ericsson.
Other appointments: Board member of Alfa Laval AB and
Tetra Laval Group.
Shareholdings (including related parties and through
companies): 30,000 Series B shares.

Carl Douglas
Vice Chairman.
Board member since 2004.
Born 1965.
BA (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.
Shareholdings (including related parties and through
companies): 41,595,729 Series A shares and 63,900,000
Series B shares through Investment AB Latour.

Eva Karlsson
Board member since 2015.
Born 1966.
Master of Science in Engineering.
President and CEO of Armatec AB since 2014. CEO of SKF
Sverige AB and Global Manufacturing Manager 2011–2013,
Director of Industrial Marketing & Product Development
Industrial Market AB SKF 2005–2010, various positions in the
SKF Group mainly in Manufacturing Management.
Other appointments: Board member of Bräcke diakoni.
Shareholdings (including related parties and through
companies): –

Birgitta Klasén
Board member since 2008.
Born 1949.
Master of Science in Engineering.
Independent IT consultant (Senior IT Advisor). 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 and previously CIO
at Telia. Various positions at IBM 1976–1994.
Other appointments: Board member of Acando AB,
Avanza AB and IFS AB.
Shareholdings (including related parties and through
companies): 21,000 Series B shares.

Eva Lindqvist
Board member since 2008.
Born 1958.
Master of Science in Engineering and Master of Science in
Business and Economics.
Senior Vice President of Mobile Business at TeliaSonera AB
2006–2007. Previously several senior positions at Telia-
Sonera AB, including President and Head of Business
Operation International Carrier, and various positions 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): 7,650 Series B shares.

Johan Molin
Board member since 2006.
Born 1959.
Master of Science in Business and Economics.
President and CEO of ASSA ABLOY AB since 2005. CEO of
Nilfisk-Advance 2001–2005. Various positions mainly in
Finance and Marketing, later divisional head in the Atlas
Copco Group 1983–2001.
Other appointments: Chairman of Sandvik AB.
Shareholdings (including related parties and through
companies): 1,830,537 Series B shares.

1 Lars Renström will retire as President and CEO of Alfa Laval AB

on 29 February 2016.

Shareholdings as at 31 December 2015. This information is updated regularly at
www.assaabloy.com.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2015

Board members appointed by employee organizations

Jan Svensson

Ulrik Svensson

Bert Arleros

Mats Persson

Rune Hjälm

Bjarne Johansson

Jan Svensson
Board member since 2012.
Born 1956.
Degree in Mechanical Engineering and Master of Science in
Business and Economics.
President and CEO of Investment AB Latour since 2003.
Previously CEO of AB Sigfrid Stenberg 1986–2002.
Other appointments: Chairman of AB Fagerhult, Nederman
Holding AB, Oxeon AB and Tomra Systems ASA. Board mem-
ber of Loomis AB, Investment AB Latour and Troax Group AB.
Shareholdings (including related parties and through
companies): 6,000 Series B shares.

Ulrik Svensson
Board member since 2008.
Born 1961.
Master of Science in Business and Economics.
CEO of Melker Schörling AB since 2006. CFO of Swiss Interna-
tional Airlines Ltd. 2003–2006. CFO of Esselte AB 2000–2003,
and Controller/CFO of the Stenbeck Group’s foreign tele-
coms 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): 9,000 Series B shares.

Bert Arleros
Board member since 2015.
Born 1954.
Employee representative, IF Metall
Shareholdings (including related parties
and through companies): –

Mats Persson
Board member since 1994.
Born 1955.
Employee representative, IF Metall.
Shareholdings (including related parties
and through companies): –

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

Bjarne Johansson
Deputy board member since 2015.
Born 1966.
Employee representative, IF Metall.
Shareholdings (including related parties
and through companies): –

Independence of the Board of Directors

Name

Position

Lars Renström
Carl Douglas
Eva Karlsson
Birgitta Klasén
Eva Lindqvist
Johan Molin
Jan Svensson
Ulrik Svensson

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

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

Independent
of the company and
its management

Independent
of the company’s
major shareholders

Yes
Yes
Yes
Yes
Yes
No
Yes
Yes

Yes
No
Yes
Yes
Yes
–
No
No

The Board of Directors’ composition and shareholdings

Name

Position

Elected

Lars Renström
Carl Douglas
Eva Karlsson
Birgitta Klasén
Eva Lindqvist
Johan Molin
Jan Svensson
Ulrik Svensson
Bert Arleros
Mats Persson
Rune Hjälm
Bjarne Johansson

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

2008
2004
2015
2008
2008
2006
2012
2008
2015
1994
2005
2015

Born

1951
1965
1966
1949
1958
1959
1956
1961
1954
1955
1964
1966

Remuneration
Committee

Audit
Committee

Series A shares1

Series B shares1

Chairman
–
–
–
–
–
Member
Member
–
–
–
–

–
–
–
Member
–
–
Member
Chairman
–
–
–
–

–
41,595,729
–
–
–
–
–
–
–
–
–
–

30,000
63,900,000
–
21,000
7,650
1,830,537
6,000
9,000
–
–
–
–

1 Including related parties and through companies. Shareholdings as at 31 December 2015. This information is updated regularly at www.assaabloy.com.

ASSA ABLOY ANNUAL REPORT 2015

REPORT OF THE BOARD OF DIRECTORS 75

Report of the Board of Directors – Corporate governance

Executive Team

Johan Molin

Carolina Dybeck Happe

Magnus Kagevik

Thanasis Molokotos

Johan Molin
President and CEO since 2005 and
Head of Global Technologies division
since 2007.
Born 1959.
Master of Science in Business and
Economics.
Previous positions: CEO of Nilfisk-
Advance 2001–2005. Various positions
mainly in Finance and Marketing, later
divisional head in the Atlas Copco
Group 1983–2001.
Other appointments: Chairman of
Sandvik AB.
Shareholdings (including related
parties and through companies):
1,830,537 Series B shares.

Carolina Dybeck Happe
Executive Vice President and Chief
Financial Officer (CFO) since 2012.
Born 1972.
Master of Science in Business and
Economics.
Previous positions: CFO of Trelleborg
AB 2011–2012. Previously various posi-
tions in the ASSA ABLOY Group, includ-
ing CFO of ASSA ABLOY EMEA 2007–
2011 and ASSA ABLOY Central Europe
2002–2006.
Shareholdings: 23,400 Series B shares.

Magnus Kagevik
Executive Vice President and Head of
Asia Pacific division since 2014.
Born 1967.
Master of Science in Mechanical
Engineering.
Previous positions: Various positions in
the ASSA ABLOY Group, including Head
of East Europe EMEA 2011–2014 and
Vice President Operations EMEA 2007–
2011. Previously various positions in
Whirlpool Corporation.
Shareholdings: 38,199 Series B shares.

Thanasis Molokotos
Executive Vice President and Head of
Americas division since 2004.
Born 1958.
Master of Science in Engineering.
Previous positions: President of ASSA
ABLOY Architectural Hardware 2001–
2004. Previously various positions and
later President of Sargent Manufactur-
ing 1993–2001.
Shareholdings: 99,198 Series B shares.

Organization
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 pages 76–77.

Divisions – decentralized organization
ASSA ABLOY’s operations are decentralized. Oper-
ations are organizationally divided into five divi-

sions: EMEA, Americas, Asia Pacific, Global Technologies and
Entrance Systems. The fundamental principle is that the divi-
sions should be responsible, as far as possible, for business
operations, while various functions at ASSA ABLOY’s head-
quarters are responsible for coordination, monitoring, poli-
cies 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 max-
imum transparency, to facilitate financial and operational
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.

Policies and guidelines
Significant policies and guidelines in the Group concern
financial control, communication issues, insider trading
issues, the Group’s brands, environmental issues, business
ethics and export control. ASSA ABLOY’s financial policy and
accounting manual provide the framework for financial con-
trol and monitoring. The Group’s communication policy
aims to ensure that essential information is provided at the
right time and in compliance with applicable rules and regu-
lations. ASSA ABLOY has adopted an insider trading policy to
complement applicable Swedish insider trading legislation.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2015

Tim Shea

Ulf Södergren

Juan Vargues

Stefan Widing

Tzachi Wiesenfeld

Tim Shea
Executive Vice President since 2006
and Head of Global Technologies
business unit ASSA ABLOY
Hospitality since 2004.
Born 1959.
Bachelor of Science in Mechanical
Engineering, MBA.
Previous positions: Executive Vice
President USA, Service Operations,
Schindler Elevator Company 2002–
2003. Previously President of Millar
Elevator Service Company 1998–
2001 and prior to that various posi-
tions in Schindler Elevator Company.
Shareholdings: 49,482 Series B
shares.

Ulf Södergren
Executive Vice President and Chief
Technology Officer (CTO) since 2006.
Born 1953.
Master of Science in Engineering and
Master of Science in Business and
Economics.

Previous positions: Various positions
in the ASSA ABLOY Group, including
Regional Manager of ASSA ABLOY
Scandinavia 2003–2006 and COO
and Senior Vice President ASSA
ABLOY 2000–2003. Previously
various senior positions in Electrolux
1984–2000.
Shareholdings: 87,544 Series B
shares.

Juan Vargues
Executive Vice President and
Head of Entrance Systems division
since 2006.
Born 1959.
Degree in Mechanical Engineering,
MBA.
Previous positions: Various positions
in the Besam Group, including Presi-
dent and CEO of Besam 2004–2005,
Executive Vice President and Head
of Besam EMEA 1998–2003, and CEO
of Besam Ibérica 1992–1997.

Previously various positions in the
SKF Group 1982–1991.
Shareholdings: 187,422 Series B
shares.

Stefan Widing
Executive Vice President and Head
of Global Technologies business unit
HID Global since 2015.
Born 1977.
Master of Science in Applied Physics
and Electrical Engineering and Bache-
lor of Social Science in Business
Administration.
Previous positions: Various positions
in the ASSA ABLOY Group, including
Director of Product Management
and General Manager of Shared
Technologies Unit 2006–2015. Pre-
viously various positions in the Saab
Group 2001–2006.
Shareholdings: 1,647 Series B
shares.

Tzachi Wiesenfeld
Executive Vice President and Head
of EMEA division since 2006.
Born 1958.
Bachelor of Science in Industrial
Engineering, MBA.
Previous positions: Various positions
in the ASSA ABLOY Group, including
Market Region Manager and
Managing Director ASSA ABLOY UK
2004–2006, and President and CEO
of Mul-T-Lock Ltd. 2000–2003.
Previously various senior posts in
Mul-T-Lock 1990–2000.
Shareholdings: 23,274 Series B
shares.

Shareholdings as at 31 December 2015.
This information is updated regularly at
www.assaabloy.com.

This policy applies to all persons reported to the Swedish
Financial Supervisory Authority as holding an insider position
in ASSA ABLOY AB (including subsidiaries) as well as certain
other categories of employees. Brand guidelines aim to pro-
tect and develop the major assets that the Group’s brands rep-
resent.

ASSA ABLOY has adopted a Code of Conduct that applies to
the whole Group. The Code, which is based on a set of interna-
tionally accepted conventions, defines the values and guide-
lines that should apply within the Group with regard to the
environment, health and safety, business ethics, working con-
ditions, human rights and social responsibility. Application of
the Code of Conduct in the Group’s different units is moni-
tored regularly to ensure compliance and relevance. ASSA
ABLOY has also adopted an anti-corruption policy and an
export control policy that apply to the whole Group.

Auditor
At the 2015 Annual General Meeting, Pricewater-
houseCoopers (PwC) was re-appointed as the

company’s external auditor up to the end of the 2016 Annual

General Meeting. In connection with the 2015 Annual General
Meeting, PwC notified that the authorized public accountant
Bo Karlsson would remain the auditor in charge. In addition to
ASSA ABLOY, Bo Karlsson, born 1966, is responsible for audit-
ing SKF, Scania and Investment AB Latour.

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 administration 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 observations and rec-
ommendations concerning the Group audit for the year.

The external audit is conducted in accordance with Interna-
tional Standards in Auditing (ISA), which has been good audit-
ing 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 carried out in the Group in the past three
financial years, see Note 3 and the Annual Report for 2014, Note 3.

ASSA ABLOY ANNUAL REPORT 2015

REPORT OF THE BOARD OF DIRECTORS 77

Report of the Board of Directors – Corporate governance

Internal control – financial reporting

ASSA ABLOY’s internal control process for financial reporting
is designed to provide reasonable assurance of reliable finan-
cial reporting, which is in compliance with generally
accepted accounting principles, applicable laws and regula-
tions, and other requirements for listed companies. The pro-
cess is inspired by the internal control framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).

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 the Board of Directors’ rules of procedure and
instructions to the CEO, the Code of Conduct, financial pol-
icy, and an annual financial evaluation plan. Regular meet-
ings are held with the Audit Committee. The Group has an
internal audit function whose primary objective is ensuring
reliable financial reporting. ASSA ABLOY’s effective decen-
tralized organizational structure makes a substantial contri-
bution to a good control environment.

All units in the Group apply uniform accounting and

reporting instructions. Internal control guidelines have been
established and are reviewed annually for all operating com-
panies. These Group-wide guidelines have a relatively broad
scope and concern various processes such as ordering,
sourcing, financial statements, plant management, compli-
ance with various policies, legal matters, and HR matters.
The Code of Conduct was previously reviewed and
updated, and compliance 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 levels plays a significant role in ensuring
reliable financial information. It is responsible for complete,
accurate and timely financial reporting.

A global financial internal audit function has been estab-
lished and carries out annual financial evaluations in accor-
dance with the plan annually adopted by the Audit Commit-
tee. The results of the financial evaluations are submitted to
the Audit Committee and the auditors. Group-wide internal
control guidelines are reviewed annually.

Information and communication
Reporting and accounting manuals as well as other financial
reporting guidelines are available to all employees con-
cerned on the Group’s intranet. A regular review and analysis
of financial outcomes is carried out at both business unit and
division levels and as part of the Board of Directors’ estab-
lished operating structure. The Group also has established
procedures for external communication of financial informa-
tion, 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 business
planning process and monthly and quarterly forecasts.

The Group-wide internal control guidelines are reviewed

during the year in all operating companies through self-
assessment and in some cases a second opinion from exter-
nal auditors. An action plan was implemented during the
year to further improve basic processes with an impact on
the company’s financial position. Each company shall imple-
ment improvement measures in various areas and processes
such as ordering, sourcing, financial statements and policy
compliance.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2015

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 2015 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 remuneration practice and
practice in the home country of each member of the Execu-
tive 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 32.

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 have the opportunity to receive
variable cash remuneration, based on the outcome in rela-
tion to financial targets and, when applicable, individual tar-
gets. This remuneration should be equivalent to a maximum
of 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 of Directors for the perfor-

mance of the company’s earnings per share in 2016. This
remuneration model also includes the right, when purchas-
ing shares under certain conditions, to receive free matching
shares from the company. This remuneration should, if the
share price is unchanged, 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 employment
benefits. If one of the other members of the Executive Team
is given notice, the company is liable to pay a maximum 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
particular reasons for doing so in an individual case.

ASSA ABLOY ANNUAL REPORT 2015

REPORT OF THE BOARD OF DIRECTORS 79

Consolidated financial statements

Sales and income

• Net sales increased by 20 percent to SEK 68,099 M (56,843). Organic growth was 4 percent (3),

while acquired growth was 3 percent (9).

• Operating income (EBIT) increased by 20 percent to SEK 11,079 M (9,257), equivalent to an

operating margin of 16.3 percent (16.3).

• Earnings per share after full dilution increased by 20 percent to SEK 6.93 (5.79).

Sales
The Group’s sales totaled SEK 68,099 M (56,843). Exchange
rate effects had a positive impact on sales of SEK 6,544 M
(2,138).

Change in sales

Organic growth
Acquired growth
Exchange rate effects
Total

2014

2015

3
9
5
17

4
3
13
20

The total change in sales for 2015 was 20 percent (17).
Organic growth was 4 percent (3) and acquired units made a
positive contribution of 3 percent (9).

Sales by product group
Mechanical locks, lock systems and fittings accounted for
29 percent (30) of total sales. Electromechanical and elec-
tronic locks rose to 51 percent (50) of sales, of which
entrance automation accounted for 26 percentage points
(27). Security doors and hardware accounted for 20 percent
(20) of sales.

Cost structure
Total wage costs, including social security expenses and pen-
sion expenses, amounted to SEK 18,995 M (16,026), equiva-
lent to 28 percent (28) of sales. The average number of
employees was 45,994 (44,269).

The Group’s material costs amounted to SEK 25,128 M

(20,763), equivalent to 37 percent (37) of sales.

Other purchasing costs totaled SEK 11,588 M (9,866),

equivalent to 17 percent (17) of sales.

Depreciation and amortization of non-current assets
amounted to SEK 1,433 M (1,163), equivalent to 2 percent
(2) of sales.

Operating income
Operating income (EBIT) increased by 20 percent to
SEK 11,079 M (9,257), due to efficiency savings and con-
tinued growth in operations. The operating margin was 16.3
percent (16.3). Positive exchange rate effects in operating
income amounted to SEK 881 M (349).

Operating income before depreciation and amortization
(EBITDA) totaled SEK 12,512 M (10,419). The corresponding
margin was 18.4 percent (18.3).

Items affecting comparability
No items affecting comparability were included in operating
income neither for 2015 nor 2014.

Income before tax
Income before tax totaled SEK 10,382 M (8,698). The posi-
tive exchange rate effect amounted to SEK 796 M (326). Net
financial items increased to SEK –697 M (–559), mainly due
to exchange rate effects. The profit margin, defined as
income before tax in relation to sales, was 15.2 percent
(15.3).

The parent company’s income before tax was SEK 3,142 M

(5,553). The reduction in income compared with the pre-
vious year is mainly due to a reduction in dividends received
from subsidiaries.

Tax
The Group’s tax expense totaled SEK 2,689 M (2,261),
equivalent to an effective tax rate of 26 percent (26).

Earnings per share
Earnings per share after full dilution amounted to SEK 6.93
(5.79), an increase of 20 percent.

SALES AND OPERATING INCOME

SEK M

70,000

60,000

50,000

40,000

30,000

20,000

10,000

SEK M

14,000

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 2015

Consolidated financial statements

Consolidated income statement and
Statement of comprehensive income

Note

4
5
6–9, 24, 32

10
9, 11, 24

13
13

Note

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

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

Earnings per share1
before dilution, SEK
after dilution, 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
1 Earnings per share has been recalculated for all historical periods reflecting the stock split (3:1) in 2015.

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
0

5.79
5.79

2014

6,436

–695
152
–543

105
–3
–374
3,810
3,539

9,433

9,432
0

2015

68,099
41,704
26,395

–10,441
–3,066
–1,932
–10
134
11,079

22
–719
10,382

–2,689
7,693

7,693
0

6.93
6.93

2015

7,693

150
–33
117

–28
8
89
75
143

7,953

7,953
0

SALES BY PRODUCT GROUP, 2015

EARNINGS PER SHARE AFTER TAX AND DILUTION

Mekaniska lås, låssystem
Mechanical locks, lock systems
och tillbehör, 29% (30)
and fittings, 29% (30)
Entréautomatik, 26% (27)
Entrance automation,
Elektromekaniska och
26% (27)
elektroniska lås, 25% (23)
Electromechanical and
Säkerhetsdörrar och
electronic locks, 25% (23)
beslag, 20% (20)
Security doors and hardware,
20% (20)

SEK

Earnings per share after
Vinst per aktie efter
skatt och utspädning1
tax and dilution1, 2

1 Excluding items affecting

comparability 2011 and 2013.

2 Earnings per share has been
recalculated for all historical
periods reflecting the stock
split (3:1) in 2015.

ASSA ABLOY ANNUAL REPORT 2015

CONSOLIDATED FINANCIAL STATEMENTS 81

Consolidated financial statements

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 and Pacific) division manu-
facture 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 16,524 M (14,753), with organic growth of
4 percent (3). Acquired units contributed 4 percent (5) to
sales. Operating income amounted to SEK 2,620 M (2,432),
with an operating margin (EBIT) of 15.9 percent (16.5). Return
on capital employed was 20.4 percent (21.0 ). Ope r ating cash
flow before interest paid was SEK 2,622 M (2,288).

Growth in Europe remained good but was unevenly dis-
tributed across the different regions. Demand for electro-
mechanical solutions increased very strongly during the year.
A continuing focus on innovation and new products,
strengthened market presence on emerging markets and
continuous efficiencies contributed to EMEA’s continued
good operating margin.

Americas
Sales totaled SEK 15,665 M (12,156), with organic growth of
7 percent (4). Acquired units contributed 2 percent (10) to
sales. Operating income amounted to SEK 3,363 M (2,613),
with an operating margin (EBIT) of 21.5 percent (21.5). Return
on capital employed was 24.1 percent (23.1). Operating cash
flow before interest paid was SEK 3,217 M (2,637).

Demand remained strong during the year in the import-
ant commercial and institutional customer segments in the
USA. Growth remained good as a result of continued invest-
ments in innovation and product development in the major-
ity of product lines, including digital door opening solutions.
Profitability remained good due to strong growth in key cus-
tomer segments and continuous rationalizations.

Asia Pacific
Sales totaled SEK 10,171 M (8,336), with organic growth of
–3 percent (1). Acquired units contributed 9 percent (6) to
sales. Operating income amounted to SEK 1,436 M (1,187),
with an operating margin (EBIT) of 14.1 percent (14.2). Return
on capital employed was 12.6 percent (14.2). Ope rating cash
flow before interest paid was SEK 1,235 M (931).

Growth remained weak in China during the year, while
growth was good or very good in Southeast Asia, India, South
Korea, Australia and New Zealand. Operating margin and
cash flow were maintained at a good level due to rationaliza-
tions and increased efficiency, for example, in the Chinese
operations.

Global Technologies
Sales totaled SEK 9,100 M (7,207), with organic growth of
7 percent (1). Acquired units contributed 2 percent (4) to
sales. Operating income amounted to SEK 1,647 M (1,368),
with an operating margin (EBIT) of 18.1 percent (19.0). Return
on capital employed was 18.8 percent (19.6). Ope rating cash
flow before interest paid was SEK 1,557 M (1,282).

HID Global’s sales were good in identification technology
and secure identity solutions, while Government ID and Bio-
metrics showed negative growth. Growth remained strong
for ASSA ABLOY Hospitality on the majority of markets,
driven by wireless locks and Mobile Access. Operating mar-
gin and return on capital employed remained at a good level.

Entrance Systems
Sales totaled SEK 17,957 M (15,409), with organic growth of
5 percent (4). Acquired units contributed 1 percent (17) to
sales. Operating income amounted to SEK 2,436 M (2,054),
with an operating margin (EBIT) of 13.6 percent (13.3). Return
on capital employed was 14.9 percent (13.1). Ope rating cash
flow before interest paid was SEK 2,637 M (2,007).

Growth remained strong on the North American market

during the year. In Europe, growth was good in northern
Europe but more subdued in southern Europe. The decline in
the Chinese market strengthened during the year resulting
in a fall in sales. New service concepts were launched during
the year and experienced a very positive customer response.
Sales, operating income and operating cash flow increased
substantially compared with the previous year.

Other
The costs of Group-wide functions, such as corporate man-
agement, accounting and finance, supply management and
Group-wide product development, totaled SEK 422 M (398).
Elimination of sales between the Group’s segments is
included in ‘Other’.

EXTERNAL SALES, 2015

Legend
EMEA, 24% (25)
Legend
Americas, 23% (21)
Legend
Asia Pacific, 14% (14)
Legend
Global Technologies, 13% (13)
Legend
Entrance Systems, 26% (27)

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2015

Consolidated financial statements

Results by division

EMEA1

Americas2

Asia Pacific3

Global
Technologies4

Entrance
Systems

Other

Total

SEK M

Sales, external
Sales, internal

Sales

2014

2015

2014

2015

14,519 16,220 12,096 15,588
76

233

304

2014

7,755
581

2015

9,401
770

2014

7,147
59

2015

2014

2015

2014

2015

2014

2015

9,031 15,325 17,858

0
0
98 –1,0176 –1,3176

56,843 68,099
–

–

14,753 16,524 12,156 15,665

8,336 10,171

7,207

9,100 15,409 17,957 –1,017 –1,317 56,843 68,099

Organic growth
Share of earnings in associates

3%
–

4%
–

7%
–

1%
23

–3%
16

1%
–

7%
–

4%
109

5%
118

–
–

3%
132

4%
134

Operating income (EBIT)
Operating margin (EBIT)
Net financial items
Tax on income
Net income

Capital employed
– of which goodwill
– of which other intangible assets and

property, plant and equipment
– of which investments in associates
Return on capital employed

Operating income (EBIT)
Depreciation and amortization
Investments in property, plant and equip-
ment and intangible assets
Sales of property, plant and equipment
and intangible assets
Change in working capital
Cash flow 5

Non-cash items
Interest paid and received
Operating cash flow5

2,432
16.5%

2,620
15.9%

2,613
21.5%

3,363
21.5%

1,187
14.2%

1,436
14.1%

1,368
19.0%

1,647
18.1%

2,054
13.3%

2,436
13.6%

–398
–

–422
–

9,257 11,079
16.3%
16.3%
–697
–559
–2,689
–2,261
7,693
6,436

12,299 12,916 12,909 13,908
9,903

7,857

9,000

7,247

3,051
9
21.0%

2,432
351

3,210
8
20.4%

2,620
398

2,982
–
23.1%

2,613
237

3,184
0
24.1%

3,363
300

9,810 11,689
7,690
7,931

3,137
414
14.2%

1,187
183

3,908
452
12.6%

1,436
268

8,239
5,984

1,711
–
19.6%

1,368
182

9,815 16,245 16,030 –1,077
–
7,437

9,615

9,891

–509
–

58,425 63,848
39,778 42,777

2,300
–
18.8%

1,647
232

4,021
1,438
13.1%

2,054
212

3,939
1,450
14.9%

2,436
231

87
–
–

–398
–2

107
–
–

–422
4

14,990 16,649
1,910
17.8%

1,861
16.9%

9,257 11,079
1,433
1,163

–444

–555

–247

–346

–280

–251

–205

–219

–153

–161

–12

–24

–1,341

–1,555

47
–98
2,288

206
–47
2,622

4
31
2,637

21
–120
3,217

6
–164
931

13
–231
1,235

1
–63
1,282

8
–110
1,557

12
–118
2,007

67
63
2,637

1
109
–302

–150
–457

–
–57
–499

–269
–548

314
69
–502
–303
8,845 10,770

–150
–457
8,238

–269
–548
9,952

Average number of employees

10,678 10,886

7,193

7,957 13,439 13,651

3,331

3,583

9,420

9,686

208

231

44,269 45,994

1 Europe, Middle East and Africa.
2 North and South America.
3 Asia and Pacific

4 ASSA ABLOY Hospitality and HID Global.
5 Excluding restructuring payments.
6 Of which eliminations SEK –1,317 M (–1,017).

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, 20151

AVERAGE NUMBER OF EMPLOYEES, 2015

Legend
EMEA, 23% (25)
Legend
Americas, 29% (27)
Legend
Asia Pacific, 13% (13)
Legend
Global Technologies, 14% (14)
Legend
Entrance Systems, 21% (21)

1 “Other” is not included in the calcu-
lation. See section Comments by
division for what is included in
“Other”.

Legend
EMEA, 24% (24)
Legend
Americas, 17% (16)
Legend
Asia Pacific, 30% (31)
Legend
Global Technologies, 8% (8)
Legend
Entrance Systems, 21% (21)

ASSA ABLOY ANNUAL REPORT 2015

CONSOLIDATED FINANCIAL STATEMENTS 83

Consolidated financial statements

Financial position

• Capital employed amounted to SEK 63,848 M (58,425).

• Return on capital employed remained high at 17.8 percent (16.9).

• The net debt/equity ratio was 0.54 (0.62).

SEK M

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

interests

2014

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

2015

63,848
42,777
22,269
41,579

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 63,848 M
(58,425). The return on capital employed excluding items
affecting comparability was 17.8 percent (16.9).

Intangible assets amounted to SEK 51,863 M (47,056).
The increase is mainly due to the effects of completed acqui-
sitions. During the year, goodwill and other intangible assets
with an indefinite useful life have arisen to a preliminary
value of SEK 3,002 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 intangible
assets with an indefinite useful life.

Property, plant and equipment amounted to SEK 7,562 M

(7,712 ). Capital expenditure on property, plant and equip-
ment and intangible assets, less sales of property, plant and
equipment and intangible assets, totaled SEK 1,241 M
(1,271). Depreciation and amortization amounted to SEK
1,433M (1,163).

Trade receivables amounted to SEK 11,775 M (10,595)
and inventories totaled SEK 8,348 M (7,845). The average
collection period for trade receivables was 56 days (53).
Material throughput time was 90 days (91). The Group is
making systematic efforts to increase capital efficiency.

Net debt
Net debt amounted to SEK 22,269 M (22,327), of which pen-
sion commitments and other post-employment benefits
accounted for SEK 2,761 M (2,946).

Net debt was increased by acquisitions, exchange rate
effects and the dividend to shareholders during the year,
while it was reduced by a continued strong positive operat-
ing cash flow. Over the whole period net debt changed mar-
ginally although it fluctuated during the year.

External financing
The Group’s long-term loan financing mainly consists of a
Private Placement Program in the USA totaling USD 542 M
(618), a GMTN program of SEK 7,886 M (7,339), a loan from
the European Investment Bank of EUR 92 M (110), and a loan
from the Nordic Investment Bank of EUR 110 M (110).
During the year, a total of four issues were made under the
GMTN program for a total amount of SEK 1,862 M. During
the year a couple of small local bilateral bank loans of SEK
229 M were raised in countries with currency restrictions.
Other changes in long-term loans are mainly due to some of
the originally long-term loans now having less than 1 year to
maturity. A total of SEK 2,092 M was raised in new long-term
loans, while SEK 2,425 M in originally long-term loans
matured during the year.

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 1,240 M (1,287) 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 interest coverage ratio, defined as
income before tax plus net interest, divided by net interest,
was 16.7 (17.4). Fixed interest terms increased during the
year, with an average term of 26 months (17) at year-end.

Cash and cash equivalents amounted to SEK 501 M (667)

and are invested in banks with high credit ratings.

Some of the Group’s main financing agreements contain

a customary Change of Control clause. This clause means
that lenders have the right in certain circumstances to
demand the renegotiation of conditions or to terminate the
agreements should control of the company change.

Equity
The Group’s equity totaled SEK 41,579 M (36,098) at year-
end. The return on equity was 19.8 percent (19.8). The
equity ratio was 48.2 percent (45.1). The debt/equity ratio,
defined as net debt divided by equity, was 0.54 (0.62).

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
Net debt/equity
Net debt/equity

1.0

0.8

0.6

0.4

0.2

0.0

SEK M

70,000

60,000

50,000

40,000

30,000

20,000

10,000

Capital employed
Capital employed
Return on capital employed1
Return on capital employed1

1 Excluding items affecting

comparability 2011 and 2013.

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2015

Consolidated financial statements

Consolidated balance sheet

SEK M

ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
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
Equity attributable to the Parent company’s shareholders
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

2014

2015

14
15
17
19
18

20
21

33
33
33

33
18
24
25

33
33

25
26
27

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

51,863
7,562
1,910
77
1,434
62,847

8,348
11,775
416
1,139
970
148
34
501
23,330
86,177

371
9,675
2,642
28,888
41,575
4
41,579

15,568
2,031
2,761
1,717
2,089
24,166

4,574
80
6,553
1,145
607
2,847
4,626
20,432
86,177

ASSA ABLOY ANNUAL REPORT 2015

CONSOLIDATED FINANCIAL STATEMENTS 85

Consolidated financial statements

Cash flow

• Operating cash flow remained strong and amounted to SEK 9,952 M (8,238).

• Net capital expenditure totaled SEK 1,241 M (1,271).

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

2014

6,679
453
–1,271
2,376
8,238

2015

8,572
375
–1,241
2,247
9,952

Investments in subsidiaries
The total purchase price of investments in subsidiaries
amounted to SEK 3,835 M (4,627), of which the cash flow
effect was SEK 3,171 M ( –2,454). Acquired cash and cash
equivalents totaled SEK 155 M (204).

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

2014

19,595
–8,238
453
2,376
2,454
2,110

695
2,880
22,327

2015

22,327
–9,952
375
2,247
4,161
2,407

–150
855
22,269

Operating cash flow

SEK M

Operating income (EBIT)
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.

2014

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

2015

11,079
1,433
–1,241
–502
–548
–269
9,952

0.95

0.96

The Group’s operating cash flow amounted to SEK 9,952 M
(8,238), equivalent to 96 percent (95) of income before tax
excluding restructuring costs.

Net capital expenditure
Net capital expenditure on intangible assets and property,
plant and equipment totaled SEK 1,241 M (1,271), equiva-
lent to 87 percent (109) of amortization and depreciation
on intangible assets and property, plant and equipment. The
lower net capital expenditure compared with the previous
year is mainly due to the Group receiving a purchase consid-
eration of SEK 176 M relating to a property sale completed in
a previous year.

Change in working capital

SEK M

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

2014

–261
–695
582
71
–303

2015

–147
–713
549
–189
–502

The material throughput time was 90 days (91) at year-end.
Capital tied up in working capital increased somewhat
during the year, which had an impact on cash flow of SEK
–502 M (–303) overall.

INCOME BEFORE TAX AND OPERATING CASH FLOW

CAPITAL EXPENDITURE

SEK M

12,000

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
Amortization and 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

0.0

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2015

Consolidated financial statements

Consolidated cash flow statement

SEK M

OPERATING ACTIVITIES
Operating income
Depreciation and amortization
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 property, plant and equipment and intangible assets
Sales of property, plant and equipment 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
30

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

2015

11,079
1,433
–375
–269
11,869

–574
25
–2,247
9,073

–502
8,572

–1,555
314
–3,171
–1
–
0
–4,412

–2,407
2,092
–2,425
–990
–121
–484
–4,335
–175

667
–175
9
501

ASSA ABLOY ANNUAL REPORT 2015

CONSOLIDATED FINANCIAL STATEMENTS 87

Consolidated financial statements

Changes in consolidated equity

MSEK

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

Opening balance 1 January 2015
Net income
Other comprehensive income
Total comprehensive income
Dividend for 2014
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 2015

Parent company’s shareholders

Share
capital

371

Other
contributed
capital

9,675

Reserves

–1,041

3,539
3,539

Note

371

9,675

2,498

371

9,675

2,498

144
144

371

9,675

2,642

Retained
earnings

Non-
controlling
interest

19,808
6,436
–543
5,894
–2,110
–38

–2,149
–

–2,149
23,553

23,553
7,693
117
7,810
–2,407
–82

–2,489
15

–2,474
28,888

0
0
0
0
–
–

–
2

2
2

2
0
0
0
–
–

–
1

1
4

Total

28,813
6,436
2,996
9,433
–2,110
–38

–2,149
2

–2,147
36,098

36,098
7,693
260
7,953
–2,407
–82

–2,489
17

–2,472
41,579

EQUITY PER SHARE AFTER DILUTION AND
RETURN ON EQUITY AFTER TAX

DIVIDEND

SEK

Eget kapital per aktie
efter utspädning, SEK

Equity per share after
dilution, SEK2
Avkastning på eget
Return on equity after tax, %
kapital efter skatt, %

SEK

Utdelning per aktie
Dividend per share2
Earnings per share after tax
and dilution1, 2

Vinst per aktie efter
skatt och utspädning1

1 Excluding items affecting com-
parability 2011 and 2013.
2 Comparatives has been recalculated
for all historical periods reflecting
the stock split (3:1) in 2015.

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2015

ASSA ABLOY lives up to
Living Building Challenge
for Brock Environmental
Center

CUSTOMER: The Chesapeake Bay Foundation’s (CBF)
Brock Environmental Center in Virginia Beach, Virginia, is
one of the first buildings designed to meet the standards
of the Living Building Challenge (LBC), a certification that
surpasses LEED qualifications. LBC is a holistic approach to
building that requires all project stakeholders to consider
the life cycle impact of design, construction and operation
of the structure. ASSA ABLOY’s products were chosen for
their adherence to the stringent LBC guidelines, most notably
that products offer transparency in how they are sourced
and manufactured.

CHALLENGE: Adhering to LBC standards requires building
materials companies to provide product declarations, from
the recycled content to where they originated, as well as
complete supply chain information. The building has
approximately 1,000 different products, each of which
needed this documentation.

SOLUTION: Because of ASSA ABLOY’s focus on sustainabil-
ity, we were able to speak a common language to communi-
cate with the team, and the architect gave preference to
their products because of the company’s shared commit-
ment to the product declarations.

In addition to locks, hinges and kick plates, the architect
selected Curries hollow metal doors and frames because of
the extra insulation they provide, and Pemko weather strip-
ping which prevents transfer of heat, a key consideration
given the building’s waterfront site.

Security, Aesthetics and Lean Construction Combine
in University Medical Center Project

CUSTOMER: The new 446-bed University Medical

Center (UMC), New Orleans is one of the largest
hospital campuses of its kind in the country and the
only Level One trauma center in southeast Louisiana.
Aesthetically designed to be at the forefront of
healthcare delivery and patient care, UMC New
Orleans will also play a vital role in training future
generations of healthcare professionals. UMC is the

replacement for the Medical Center of Louisiana,
New Orleans, which closed after sustaining damage
during Hurricane Katrina in 2005.

CHALLENGE: Security is always the most critical
component for any medical facility, but UMC also
wanted to ensure that its solutions were aestheti-
cally pleasing to fit with its image as a high-tech,

modern center at the forefront of innovation in train-
ing and patient care. Additionally, the medical cen-
ter’s location in downtown New Orleans presented a
major hurdle for product delivery during construc-
tion.

SOLUTION: When ASSA ABLOY initially scoped the
project, we worked with the team to provide specifi-
cations that ensured that the most effective prod-
ucts were offered. Overall, the massive project
entailed 6,000 openings comprising hardware, doors
and frames, accessory hardware, power operators
and EAC/EM products.

One solution that was especially appealing
because of its premiere access control capabilities
and aesthetics was the Harmony Integrated Wiegand
Lock (IWP). ASSA ABLOY provided 500 of these lock-
sets to the medical center. The Harmony access con-
trol lock includes the reader within the lock escutch-
eon thus integrating the reader and lock together for
a more aesthetic look.

Additionally, ASSA ABLOY developed an innova-
tive solution to fulfill the challenge of the lean man-
date and stringent scheduling requirements by ship-
ping the doors ready to be hung, rather than ship-
ping boxes of components. This also allowed them to
test each lock prior to shipping.

ASSA ABLOY ANNUAL REPORT 2015

CONSOLIDATED FINANCIAL STATEMENTS 89

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
Property, plant and equipment
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, 32

10
9, 11

2014

–1,129
–658
3,085
1,298

5,265
–1,649
4,914

639
–352
5,201

2014

5,201

374
5,575

2015

–1,312
–729
3,392
1,351

1,691
–849
2,193

949
–416
2,725

2015

2,725

273
2,998

Note

2014

2015

14
15
16
19

29
28

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

657
5
32,855
1,621
35,138

9,371
11
28
0
9,410
44,548

371
275
8,905
–

787
10,215
20,553

–
–

8,153
8,153

1,224
77
14,141
108
4
288
15,842
44,548

–
11,249

PARENT COMPANY FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2015

Cash flow statement
– Parent company

Change in equity
– 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

SEK M

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

Opening balance 1 January 2015
Net income
Hedge accounting
Total comprehensive income
Dividend for 2014
Stock purchase plans
Total transactions with parent company’s
shareholders
Closing balance 31 December 2015

Note

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

Restricted equity

Non-restricted equity

Share
capital

Revalu ation
reserve

Statutory
reserve

Fair value
reserve

371

275

8,905

101

Share
premium
reserve

787

Retained
earnings

6,926
5,201

–374
–374

371

275

8,905

–273

787

371

275

8,905

–273

787

273
273

371

275

8,905

–

787

5,201
–2,110
–38

–2,149
9,979

9,979
2,725

2,725
–2,407
–82

–2,489
10,215

2015

1,351
442
1,793

–262
1,583
–391
2,723

–2,435
288

–41
–109
–1
–151

–2,407
4,434
–2,164
–137
0

0
0
0

Total

17,365
5,201
–374
4,828
–2,110
–38

–2,149
20,044

20,044
2,725
273
2,998
–2,407
–82

–2,489
20,553

ASSA ABLOY ANNUAL REPORT 2015

PARENT COMPANY FINANCIAL STATEMENTS 91

Notes

Note 1 Significant accounting and
valuation principles

The Group
ASSA ABLOY applies International Financial Reporting
Standards (IFRS) as endorsed by the European Union (EU),
the Swedish Annual Accounts Act and 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 2015 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.
The total amount in tables and statements might not
always summarize as there are rounding differences. The aim
is to have each line item corresponding to the source and it
might therefore be rounding differences in the total.

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 liabili-
ties in acquisitions, in impairment testing of goodwill and
other assets, in determining actuarial assumptions for calcu-
lating 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 in-
tangible assets with indefinite useful life are of material
importance to the consolidated financial statements. The
Group tests carrying amounts for impairment on an annual
basis. The recoverable amounts of cash generating units are
determined by calculating their values in use. The calcula-
tions 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
importance for the consolidated financial statements. For
information 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
2015 had a significant impact on the consolidated financial
statements.

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
• IFRS 16 Leases

Of the above new standards, IFRS 9 and IFRS 15 is to be
applied from the financial year beginning 1 January 2018,
while IFRS 16 takes effect on 1 January 2018. Earlier applica-
tion is allowed for all standards. IFRS 9 is not considered to
have a significant impact on the consolidated financial state-
ments. The Group has not yet evaluated the effects of the
implementation of IFRS 15 and IFRS 16.

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 liabili-
ties 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 resulting
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 inter-
ests. Non-controlling interests’ share in subsidiaries’ equity
is recognized separately in consolidated equity. Transactions
with non-controlling interests are recognized as transac-
tions with the Group’s shareholders in equity.

NOTES

ASSA ABLOY ANNUAL REPORT 2015

Note 1 cont.

Associates
Associates are defined as companies which are not subsidiar-
ies but in which the Group has a significant (but not a con-
trolling) 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 hold-
ings. 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 divi-
sions 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 compre-
hensive income. Receivables and liabilities are measured at
the year-end rate.

In translating the accounts of foreign subsidiaries pre-

pared 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 differ-
ences 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

2014

2015

2014

2015

ARS
Argentina
AUD
Australia
BRL
Brazil
CAD
Canada
CHF
Switzerland
CLP
Chile
CNY
China
Colombia
COP
Czech Republic CZK
DKK
Denmark
EUR
Euro zone

0.85
6.19
2.94
6.24
7.51
0.012
1.12

0.91
6.31
2.57
6.58
8.70
0.013
1.34
0.0034 0.0031
0.34
1.25
9.35

0.33
1.22
9.12

0.92
6.39
2.90
6.73
7.92
0.013
1.26

0.65
6.09
2.16
6.04
8.43
0.012
1.29
0.0033 0.0026
0.34
1.23
9.14

0.34
1.28
9.53

Country

Currency

2014

2015

2014

2015

Average rate

Closing rate

United Kingdom GBP
HKD
Hong Kong
HUF
Hungary
ILS
Israel
INR
India
KES
Kenya
KRW
South Korea
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

11.34
0.89
0.030
1.92
0.11
0.078

12.84
1.08
0.030
2.16
0.13
0.086
0.0066 0.0074
0.53
2.17
1.04
5.89
2.23
2.10
0.14
6.12
0.25
3.11
8.41
0.66

0.52
2.10
1.09
5.69
2.18
2.06
0.18
5.43
0.21
3.16
6.90
0.64

12.16
1.01
0.030
2.00
0.123
0.086

12.39
1.08
0.029
2.15
0.126
0.082
0.0071 0.0071
0.48
1.95
0.96
5.72
2.16
2.02
0.11
5.91
0.23
2.87
8.36
0.54

0.53
2.24
1.05
6.12
2.22
2.13
0.14
5.91
0.24
3.38
7.83
0.67

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 rec-
ognized 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 cus-
tomer’s premises, revenue is recognized when installation
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. Expenditure
on the further development of existing products is expensed
as incurred.

ASSA ABLOY ANNUAL REPORT 2015

NOTES 93

Note 1 cont.

Notes

Borrowing costs
Borrowing costs are interest expenses and other expenses
directly related to borrowing. Borrowing costs directly
attributable to the acquisition, construction or production
of a qualifying asset (an asset that necessarily takes a sub-
stantial 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 rec-
ognized to the extent that it is probable that the allowance
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. Identifiable

acquisition-related intellectual property rights are initially
recognized at fair value at the acquisition date and subse-
quently at cost less accumulated amortization and impair-
ment 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.

Property, plant and equipment
Property, plant and equipment are recognized at cost less
accumulated depreciation and impairment losses. Cost in-
cludes expenditure 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 property, plant and equipment is rec-
ognized 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 recoverable
amount, which is the higher of the asset’s fair value, less sell-
ing 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
arising from deliveries between Group companies. Work in

NOTES

ASSA ABLOY ANNUAL REPORT 2015

Note 1 cont.

progress and finished goods include both direct costs
incurred and a fair allocation of indirect production costs.

Trade receivables
Trade receivables are recognized initially at fair value and
subsequently measured at amortized cost using the effective
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
effective interest method.

Financial liabilities
Financial liabilities include deferred considerations, loan
liabilities, 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

calculated when the loan was raised. Accordingly, surplus val-
ues and negative surplus values as well a direct issue expenses
are allocated over the term of the loan. Non-current loan lia-
bilities 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 sub-
sequently 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 pur-
chase or sell the asset. Transaction costs are initially included
in fair value for all financial instruments, except for those rec-
ognized at fair value through profit and loss where the trans-
action 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 various measurement techniques to deter-
mine fair value. These include use of available information on
current arm’s length transactions, comparison with equiva-
lent assets and analysis of discounted cash flows. The Group
assesses at each reporting date whether there is any objec-
tive evidence that a financial 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 rec-
ognizing profit or loss depends on whether the derivative
instrument is designated as a hedging instrument, and if so,
the nature of the hedged item. For derivatives not desig-
nated as hedging instruments, changes in value are recog-
nized 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 docu-
ments the relationship between the hedging instrument and
hedged items, as well as its risk management strategy for the
hedge. The Group also documents its assessment, both on
inception and on a regular basis, of whether the derivative
instruments used in hedge transactions are effective in offset-
ting 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 33, ‘Financial risk management and

ASSA ABLOY ANNUAL REPORT 2015

NOTES 95

Notes

Note 1 cont.

financial instruments’. Derivatives at fair value, with a matu-
rity of more than 12 months, are classified as non-current
interest-bearing liabilities or receivables. Other derivatives
are classified as current interest-bearing liabilities and
investments respectively.

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 rec-
ognized 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
recognized 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 dis-
counted 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 dis-
count rate, future inflation and salary increases. Obligations
are valued on the reporting date at their discounted value.
For funded plans, obligations are reduced by the fair value of
the plan assets. 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 pen-
sion 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 differ-
ence 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
The Group has equity-based remuneration plans in the form
of ASSA ABLOY’s long-term incentive program presented for
the first time at the 2010 Annual General Meeting. 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 con-
ditions 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) during the period. The program requires
that the employee continues to invest in the long-term
incentive program and that the latter remains employed in
the ASSA ABLOY Group.

Fair value is based on the share price on the allotment
date; a reduction in fair value relating to the anticipated divi-
dend has not been made as the participants are compen-
sated for this. The employees pay a price equivalent to the
share price on the investment date. The vesting terms are
not stock market based and affect the number of shares that
ASSA ABLOY will give to the employee when matching. If an
employee stops investing in the program, all remaining per-
sonnel costs are immediately recognized in the income
statement. Personnel costs for shares relating to the perfor-
mance-based program are calculated on each accounting
date based on an assessment of the probability of the perfor-
mance 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 match-
ing 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 rec-
ognized as a provision for social security contributions.

The long-term incentive programs are essentially equity

settled and an amount equivalent to the personnel cost is
recognized against retained earnings in equity. In the income

NOTES

ASSA ABLOY ANNUAL REPORT 2015

Note 1 cont.

statement, the personnel cost is allocated to the respective
function.

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 dilution
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 reduction 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 fran-
chise 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.

Group contributions
The Parent company recognizes Group contributions in
accordance with RFR 2. Group contributions received and
paid are recognized under appropriations in the income
statement. The tax effect of Group contributions is recog-
nized 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 2015

NOTES 97

Notes

Note 2 Sales

Customer sales by country

Group

SEK M

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

2014

17,589
5,151
3,233
3,164
2,621
2,768
2,005
1,798
1,546
1,520
1,096
1,127
941
874
978
705
547
707
559
576
394
442
524
387
257
406
253
297
157
218
206
244
130
255
166
193
122
184
163
138
122
126
123
107
101
52
80
78
65
42
52
50
1,204
56,843

2015

23,039
6,471
3,579
3,261
3,019
2,886
2,238
2,010
1,606
1,541
1,429
1,317
1,070
1,054
1,043
874
775
718
629
582
556
526
518
509
482
442
341
335
315
257
240
235
224
216
210
193
181
170
166
164
145
141
139
134
126
114
95
90
78
75
73
66
1,401
68,099

Sales by continent

MSEK

Europe
North America
Central and South America
Africa
Asia
Pacific
Total

Group

2014

23,242
20,468
1,150
783
8,980
2,220
56,843

2015

25,443
26,331
1,524
846
11,484
2,470
68,099

Sales by product group

SEK M

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

Group

2014

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

2015

19,516
17,992
17,143
13,448
68,099

Note 3 Auditors’ fees

SEK M

Audit assignment
PwC
Other

Audit-related services in
addition to audit assignment
PwC

Tax advice
PwC
Other

Other services
PwC
Other
Total

Group

Parent company

2014

2015

2014

2015

36
11

11
2

20
1
82

43
12

13
2

14
1
86

3
–

–

3
–

8
–
14

5
–

–

1
0

1
1
8

Note 4 Other operating income and expenses
Group

SEK M

Rental income
Business-related taxes
Transaction expenses from acquisitions
Exchange rate differences
Anticipated Bad debt losses
Revaluated Earnout
Other, net
Total

2014

9
–31
–33
19
–
71
65
100

2015

7
–38
–80
–27
–193
284
37
–10

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

2014

2015

102
23
5
2
0
132

107
16
10
–
1
134

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 2015.

NOTES

ASSA ABLOY ANNUAL REPORT 2015

Note 6 Operating leases

Note 11 Financial expenses

SEK M

2014

2015

2014

2015

SEK M

2014

2015

2014

2015

Group

Parent company

Group

Parent company

Lease payments during
the year
Total

Nominal value of agreed
future lease payments:
Due for payment in:
(2015) 2016
(2016) 2017
(2017) 2018
(2018) 2019
(2019) 2020
(2020) 2021 or later
Total

725
725

891
891

641
510
403
267
185
194
2,201

714
621
446
321
218
245
2,565

15
15

14
14
15
15
15
15
88

12
12

16
16
17
17
18
18
103

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
single substantial operating leases since the lease agree-
ments are spread over a large number of subsidiaries.

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 32)
Direct material costs
Depreciation and amortization
(Note 8, 14, 15)
Other purchase expenses
Total

Group

2014

16,026
20,763

1,163
9,866
47,818

2015

18,995
25,128

1,433
11,588
57,144

Note 8 Depreciation and amortization

SEK M

Intangible assets
Machinery
Equipment
Buildings
Land improvements
Total

Group

Parent company

2014

288
445
237
187
6
1,163

2015

2014

2015

404
529
274
219

6
1,433

435
–
1
–
–
436

441
–
1
–
–
442

Note 9 Exchange differences in the income statement
Parent company

Group

SEK M

2014

2015

2014

2015

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

–27

9
29

5
–22

5
31

–6

–245
–251

Note 10 Financial income

SEK M

2014

2015

2014

2015

Group

Parent company

Earnings from investments
in subsidiaries
Earnings from investments
in associates
Intra-Group interest income
Other financial income
External interest income and
similar items
Total

–

–
–
8

19
28

–

–
–
5

17
22

5,130

1,538

36
98
–

45
109
–

0
5,265

0
1,691

Intra-Group interest
expenses
Interest expenses, other
liabilities1
Interest expenses,
interest rate swaps
Interest expenses, foreign
exchange forwards
Exchange rate differences
on financial instruments
Fair value adjustments on
shares and interests
Other financial expenses
Total

–

–319

–233

–517

–590

–155

–134

–42

–127

–

–
–46
–587

–
47
–719

–1,150
–30
–1,649

–

–245

–207
–29
–849

1 Of which 164 (–212) is fair value adjustments on derivatives, non-hedge

accounting, for the Group.

Note 12 Tax on income

Group

Parent company

SEK M

2014

2015

2014

2015

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

–2,008
68
–
–322

–2,489
114
–4
–309
–2,261 –2,689

–344
–
–7
–
–352

–463
37
9
–
–416

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

Group

Parent company

Percent

2014

2015

2014

2015

Swedish rate of tax on
income
Effect of foreign tax rates
Non-taxable income/non-
deductible expenses, net
Utilized loss carry-forward not
recognized in prior period
Other
Effective tax rate in income
statement

22
8

–3

–1
0

22
8

–1

–1
–2

22
–

–16

–
–

22
–

–9

–
–

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)

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)

Group

2014

2015

6,436

7,693

1,110,776 1,110,776

5.79

6.93

Group

2014

2015

6,436
6,436

7,693
7,693

1,110,776 1,110,776

5.79

6.93

Earnings per share has been recalculated for all historical periods reflecting the
stock split (3:1) in 2015.

ASSA ABLOY ANNUAL REPORT 2015

NOTES 99

Notes

Note 14 Intangible assets

Group

Parent company

2015, 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

39,842
–
2,485
–
–
511
42,838

–63
–
–
–
3
–61
42,777

5,497
0
518
–
92
94
6,201

–33
–
–62
–3
–1
–98
6,103

Other
intangible
assets

4,238
365
787
44
350
61
5,847

–2,424
–47
57
–402
–48
–2,864
2,983

Total

49,577
365
3,790
44
442
667
54,886

–2,520
–47
–5
–404
–46
–3,022
51,863

Intangible
assets

3,125
37
–
–
–
–
3,161

–2,063
–
–
–441
–
–2,504
657

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

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 6,060 M (5,419) 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.

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

Amortization and impairment of intangible assets are

budget period.

mainly recognized as cost of goods sold in the income
statement.

• 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 mar-
gin based on previous results and expectations of future
market development. A growth rate of 3 percent (3) has
been used for all CGUs to extrapolate cash flows beyond the
budget period. This growth rate is considered to be a con-
servative estimate. Further, an average discount rate in local
currency after tax has been used in the calculations. The
difference 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.

100

NOTES

ASSA ABLOY ANNUAL REPORT 2015

Note 14 cont.

2015
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:

2015, SEK M

Goodwill
Intangible assets with indefinite
useful life
Total

EMEA

7,857

213
8,070

Americas

Asia Pacific

Global
Technologies

9,903

741
10,644

7,690

1,825
9,515

7,437

572
8,009

Entrance
Systems

9,891

2,708
12,599

Total

42,777

6,060
48,837

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

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

2015
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 recov-
erable amount would be 13 percent lower (EMEA 13 percent,
Americas 13 percent, Asia Pacific 11 percent, Global Technolo-
gies 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 percent, the total
recoverable amount would be 14 percent lower (EMEA 14
percent, Americas 14 percent, Asia Pacific 12 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.

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

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 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).
These calculations are hypothetical and should not be
viewed as an indication that these factors are any more or less
likely to change. The sensitivity analysis should therefore be
interpreted with caution.

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

ASSA ABLOY ANNUAL REPORT 2015

NOTES 101

Notes

Note 15 Property, plant and equipment

2015, 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

5,210
43
61
–77
67
22

1,210
3
31
–119
–
–19

8,039
232
101
–133
330
9

2,833
228
35
–22
125
–31

903
684
1
–6
–970
24

18,195
1,190
229
–357
–448
5

5,326

1,106

8,578

3,168

636

18,814

–2,286
46
6
–219
3
9

–2,441
2,885

–211
83
–6
–6
–
5

–135
971

–5,877
65
–7
–529
–2
2

–6,348
2,230

–2,110
22
1
–274
4
30

–2,327
841

–
–
–
–
–
–

–
636

–10,484
216
–6
–1,029
5
46

–11,252
7,562

19
4
–
–
–
–

–17
–
–
–1
–
–

–18
5

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

102

NOTES

ASSA ABLOY ANNUAL REPORT 2015

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 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

2015 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
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
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
661
100
981
100
100
100
100
901
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
5
192
6,036
145
1
189
4,257
538
376
1,086
771
2,228
1,964
0
47
109
3,077
293
901
184
2,237
0
0
17
242
762
142
303
72
5,093
0
25
974
0
82
309
32,855

Carrying
amount,
SEK M

1,430
452
14
8
5
1
1,910

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 2015. For the period January to June, the company’s revenue
totaled SEK 1,391 M (1,227) and income after tax was SEK 65 M (76). The company’s assets totaled SEK 2,736 M (2,482) and
total liabilities amounted to SEK 850 M (831).

Group

2014 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

Number of
shares

Share of
equity, %

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

39
46
50
40
40

Carrying
amount,
SEK M

1,419
414
14
8
5
1
1,861

ASSA ABLOY ANNUAL REPORT 2015

NOTES 103

Notes

Note 18 Deferred tax

SEK M

Deferred tax assets
Property, plant and equipment
and intangible assets
Pensions
Tax losses and other tax credits
Other deferred tax assets
Deferred tax assets

Deferred tax liabilities
Property, plant and equipment
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

2014

2015

236
536
297
486
1,555

1,411
51
1,462
93

262
67
–322

152
–66
93

203
514
356
361
1,434

1,566
465
2,031
–597

93
–365
–309

–33
17
–597

The Group has tax loss carry forwards and other tax credits of
SEK 1,626 M (1,554) for which deferred tax assets have not
been recognized, as it is uncertain whether they can be off-
set against taxable income in future taxation.

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

2014

2,534
3,266
1,533
457
466
311
297
1,731
10,595

2014

541
19
–105
–31
132
63
620

2015

2,669
3,644
2,060
493
509
287
305
1,808
11,775

2015

620
54
–89
–37
212
–2
758

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, revaluation reserve, statutory reserve and the fair
value reserve. The statutory reserve contains premiums
(amounts received from share issues that exceed the nomi-
nal 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 19 Other financial assets
Group

Parent company

Note 23 Share capital, number of shares and

SEK M

2014

2015

Investments in associates
Other shares and interests
Interest-bearing non-
current receivables
Other non-current receivables
Total

–
5

28
43
76

–
11

30
36
77

2014

1,620
–

–
–
1,620

2015

1,621
–

–
–
1,621

Note 20 Inventories

SEK M

Materials and supplies
Work in progress
Finished goods
Advances paid
Total

Group

2014

2,266
1,767
3,453
359
7,845

2015

2,430
1,723
3,874
320
8,348

Impairment of inventories amounted to SEK 139 M (172).

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

2014

11,215
–620
10,595

2015

12,532
–758
11,775

7,675

8,308

2,475
596
470
3,540

–81
–109
–430
–620
10,595

2,982
660
582
4,224

–78
–121
–558
–758
11,775

dividend per share

Number of shares (thousands)

Series A

Series B

Total

Share
capital,
SEK K

Opening balance at
1 January 2014
Closing balance at
31 December 2014

Number of votes,
thousands
Opening balance at
1 January 2015
Stock split
Closing balance at
31 December 2015

Number of votes,
thousands

19,175

351,684

370,859 370,859

19,175

351,684

370,859 370,859

191,753

351,684

543,437

19,175
38,350

351,684
703,368

370,859 370,859
741,718

57,525 1,055,052 1,112,576 370,859

575,259 1,055,052 1,630,311

All shares have a par value of around SEK 0.33 (1) 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 1,110,776
(1,110,776) during the year. None of the Group’s outstand-
ing long-term incentive programs are expected to result in
significant dilution in the future.

The total number of treasury shares as at 31 December
2015 amounted to 1,800,000. No shares have been repur-
chased during the year.

The number of shares increased due to the stock split

(3:1) in 2015.

Dividend per share
The dividend paid during the financial year totaled
SEK 2,407 M (2,110), equivalent to SEK 2.17 (1.90) per share.
A dividend for 2015 of SEK 2.65 per share, a total of SEK 2,944
M, will be proposed at the Annual General Meeting on
Wednesday, 27 April 2016.

104

NOTES

ASSA ABLOY ANNUAL REPORT 2015

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 allocation accord-
ing to the nature of the local pension obligation, 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 depreciation

of an individual investment should not have any material
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 2015, shares accounted for 45 per-
cent (46) and fixed income securities for 34 percent (34) of
plan assets, while other assets accounted for 22 percent
(20). The actual return on plan assets in 2015 was SEK 40 M
(384).

Amounts recognized in the income statement

Pension costs, SEK M

2014

2015

Defined contribution pension plans
Defined benefit pension plans
Post-employment medical benefit plans
Total

of which, included in:
Operating income
Net financial items

428
86
24
538

455
84

479
164
31
674

577
96

Amounts recognized in the balance sheet

Pension provisions, SEK M

Provisions for defined benefit pension plans
Provisions for post-employment medical
benefits
Provisions for defined contribution
pension plans
Total

2014

2,311

2015

2,163

554

582

81
2,946

16
2,761

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 10, this is a defined
benefit plan that covers many employers. For the 2015 finan-
cial year, the company has not had access to information
making it possible to report this plan as a defined benefit
plan. Pension plans in accordance with ITP secured through
insurance with Alecta are therefore reported as defined con-
tribution plans. The year’s pension contributions that are
contracted to Alecta total SEK 27 M (27), of which SEK 11 M
(10) relates to the Parent company. Pension contributions
are expected to remain largely unchanged in 2016.

Alecta’s surplus can be distributed to policyholders and/

or the insured. As at 31 December 2015, Alecta’s surplus
expressed as the collective consolidation level amounted
preliminarily to 153 percent (144 percent as at 30 Decem-
ber 2014). 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 actuar-
ial 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

Specification of defined
benefits, SEK M

Present value of funded
obligations

United Kingdom

Germany

USA

Other countries

Total

2014

2015

2014

2015

2014

2015

2014

2015

2014

2015

2,689

2,617

142

1,976

1,998

469

980

5,275

5,684

Fair value of plan assets
Net value of funded plans

–2,351
339

–2,370
247

–24
118

–23
67

–1,453
522

–1,577
421

–275
194

–690
290

–4,103
1,172

–4,660
1,024

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

688

643

–

464

496

1,152

1,138

–

549

339

247

805

709

1,071

–
339

–
247

–
805

–
709

–
1,071

578

999

–
999

554

582

662

790

2,877

2,745

68
730

16
806

68
2,946

16
2,761

ASSA ABLOY ANNUAL REPORT 2015

NOTES 105

Notes

Note 24 cont.

Movement in obligations

2015, SEK M

Opening balance at 1 January 2015

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 2015

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

Contributions and payments:
Employer contributions
Employee contributions
Payments
Total payments
Closing balance at 31 December 2014

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

Post-employ-
ment medical
benefits

Defined
benefit
pension plans

554

6,427

Plan assets

–4,103

–
–

7
–
–
23
31

–
–
–10
–
–10
36
26

–
0
–28
–28
582

148
347

98
–8
–
233
324

–
–38
–207
–16
–261
127
–134

–
12
–302
–290
6,823

–123
–301

–
–
–
–160
–160

121
–
–
–
121
–133
–12

–203
–17
258
39
–4,660

Post-employ-
ment medical
benefits

Defined
benefit
pension plans

389

4,992

Plan assets

–3,425

–
–

5
–
–
19
24

–
–
80
–
80
88
168

–
0
–27
–27
554

0
63

59
0
–194
220
85

–
134
719
–10
843
674
1,517

–
0
–231
–231
6,427

–
–55

–
–
157
–156
1

–228
–
–
–
–228
–515
–743

–59
0
178
119
–4,103

2014

1,901
599
605
188
281
24
280
226
4,103

Total

2,877

25
47

106
–8
–
96
194

121
–38
–217
–16
–150
30
–120

–203
–4
–72
–279
2,745

Total

1,956

0
8

64
0
–38
84
110

–228
134
799
–10
695
247
942

–59
0
–81
–139
2,877

2015

2,077
659
689
228
314
32
93
568
4,660

106

NOTES

ASSA ABLOY ANNUAL REPORT 2015

Note 24 cont.

Key actuarial assumptions

United Kingdom

Germany

USA

Key actuarial assumptions (weighted average), %

2014

2015

2014

2015

2014

2015

Discount rate
Expected annual salary increases
Expected annual pension increases
Expected annual medical benefit increases
Expected annual inflation

3.5
n/a
2.0
n/a
2.0

3.8
n/a
1.9
n/a
2.0

1.8
2.3
1.8
n/a
1.8

2.2
2.8
1.3
n/a
1.3

4.0
n/a
2.0
7.2
3.0

4.4
n/a
2.0
6.9
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 percentage 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 2014
Provisions for the year
Reversal of non-utilized
amounts
Payments
Utilized during the year,
without cash flow impact
Exchange rate differences
Closing balance at
31 December 2014

SEK M

Opening balance at
1 January 2015
Provisions for the year
Acquisitions of subsidiaries
Reversal of non-utilized
amounts
Payments
Utilized during the year,
without cash flow impact
Exchange rate differences
Closing balance at
31 December 2015

Balance sheet breakdown:

Other non-current provisions
Other current provisions
Total

Restruc-
turing
reserve

1,369
–

–
–453

–40
65

Group

Other

Total

1,860
224

–37
–53

–
18

3,229
224

–37
–507

–40
83

941

2,012

2,952

Group

Restruc-
turing
reserve

Other

Total

941
–
–

–
–375

–12
–3

2,012
262
88

–123
–458

–
–7

2,952
262
88

–123
–832

–12
–10

551

1,773

2,324

Group

2014

2,428
525
2,952

2015

1,717
607
2,324

The restructuring reserve relates mainly to the ongoing
restructuring program launched in 2013. The closing
balance is expected to be chiefly utilized in the next two
years and mainly relates to severance payments. The
non-current part of the restructuring reserve totaled SEK
44 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 %

–15.1
13.4

–1.0 %

15.0
–11.2

Group

2014

2015

545
88
528

61
1,313
526
3,060

567
92
562

58
952
615
2,847

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

2014

2015

2014

2015

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

2,255
753
303
102
868
4,282

2,335
678
345
108
1,161
4,626

162
–
–
53
36
251

200
–
–
61
27
288

Note 28 Contingent liabilities
Group

Parent company

SEK M

2014

2015

2014

2015

Guarantees
Guarantees on behalf of
subsidiaries
Total

–
99

100

–

–
100

9,789 11,249
9,789 11,249

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

2014

2015

<1 year
>1<2 years
>2<5 years
>5 years
Total

50
16
28
5
99

31
5
42
22
100

Note 29 Assets pledged against liabilities to

credit institutions

Group

Parent company

SEK M

2014

2015

2014

2015

Real estate mortgages
Other mortgages
Total

19
87
106

18
63
81

–
–
–

ASSA ABLOY ANNUAL REPORT 2015

NOTES 107

Notes

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
acquisitions in prior years
Total

Acquired assets and liabilities
at fair value
Intangible assets
Property, plant and equipment
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

2014

2015

2,478

2,690

2,191

1,155

–42
4,627

–10
3,835

156
289
–4
–11
266
324
204
–2
71
0
–47
–627
619

4,013

2,478

1,305
229
43
1
385
673
155
–3
–409
–25
–109
–895
1,350

–

2,485

2,690

–204

–155

180

635

2,454

3,171

1,097
173
156

908
51
30

The table above includes fair value adjustments of acquired
net assets from acquisitions made in previous years.

Acquisition analyses have been prepared for all acquisi-

tions in 2015. The net sales of acquired units for 2015
totaled SEK 2,586 M (2,373) and net income amounted to
SEK 85 M (306). Acquisition-related costs for 2015 totaled
SEK 80 M (33) and have been reported as other operating
expenses in the income statement.

See below for an account of some acquisitions completed

in 2015 and 2014. No single acquisition is significant in
terms of size and separate acquisition details are therefore
not provided.

2015
Quantum Secure
On 25 March 2015 the Group acquired 100 per cent of the
share capital of Quantum Secure, the leading provider of
solutions to help enterprises manage identities and meet
compliance requirements in highly-regulated industries.

The acquisition reinforces the strategy of being the world

leader in secure identity solutions. Quantum Secure takes
ASSA ABLOY one step further in being able to provide the
customers with an end to end identity management system.
The company is headquartered in San Jose, California.

Intangible assets in the form of brand, customer relation-
ship and technology have been disclosed. Residual goodwill
is mainly attributable to synergies and other intangible
assets that do not fulfill the criteria for separate reporting.

Other acquisitions
Other notable acquisitions during the year comprised Pro-
metal (United Arab Emirates), Teamware (Malaysia), Flexim
(Finland) and Papaiz and Udineze (Brazil).

2014
Lumidigm
On 10 February 2014, 100 percent of Lumidigm (USA) was
acquired, a leading player in the fast-growing biometric seg-
ment. 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 out-
standing 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
current offering within the rapidly growing digital door
locks segment. Digi Electronic Lock is headquartered in
Guangzhou, southern China.

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 chan-

nel for door manufacturers and gives important comple-
mentary access to the growing replacement market for secu-
rity locks and cylinders in China. Jiawei constitutes another
important step in the strategy to grow market presence in
China and other emerging markets. Jiawei is headquartered
in Jinhua, Zhejiang province, eastern China.

Other acquisitions
Other notable acquisitions during the year comprised the
Brazilian companies Metalika and Silvana, ENOX (India) and
Huasheng and Xinmao (China).

Note 31 Cash flow

SEK M

Adjustments for non-cash items
Profit on sales of non-current assets
Change in pension provision
Share of earnings in associates
Dividend from associates
Remeasurement of earn out provisions
related to acquisitions
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

Group

2014

2015

–40
63
–132
41

–71
–11
–150

–261
–695
582

71
–303

–38
98
–134
52

–284
37
–269

–147
–713
549

–189
–502

108

NOTES

ASSA ABLOY ANNUAL REPORT 2015

Notes

Note 32 Employees

Salaries, wages, other remuneration and social security costs

SEK M

Salaries, wages and other remuneration
Social security costs
– of which pensions
Total

Group

2014

12,544
3,483
428
16,026

2015

14,805
4,190
577
18,995

Fees to Board members in 2015 (including committee work), SEK thousand

Name and post

Lars Renström, Chairman
Carl Douglas, Vice Chairman
Eva Karlsson, Member
Birgitta Klasén, Member
Eva Lindqvist, Member
Johan Molin, President and CEO
Ulrik Svensson, Member
Jan Svensson, Member
Employee representatives (4)
Total

Board

1,850
750
500
500
500
–
500
500
–
5,100

Remuneration
Committee

Audit
Committee

100
–
–
–
–
–
50
50
–
200

–
–
–
125
–
–
250
125
–
500

Parent company

2014

2015

158
86
24
244

179
117
29
296

Total

1,950
750
500
625
500
–
800
675
–
5,800

Total fees to Board members amounted to SEK 5.55 M in 2014.

Remuneration and other benefits of the Executive Team in 2015, 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

15,586
48,790
64,377

11,546
16,224
27,770

7,763
13,608
21,371

115
4,049
4,164

6,547
8,779
15,326

Stock-related

Total remuneration and other benefits of the Executive Team amounted to SEK 120 M in 2014.

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 55 M (51),
excluding pension costs and social security costs. Pension
costs amounted to SEK 9 M (8). Pension obligations for
several senior executives are secured through pledged
endowment insurances.

Long-term incentive programs1
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 to 2015 Annual General Meetings, it was

decided to implement further long-term incentive
programs for senior executives and other key staff in the
Group. The new long-term incentive programs, named LTI
2011 to LTI 2015 have been drawn up with similar terms to
LTI 2010.

For each Series B share acquired by the CEO within the
framework of LTI 2013, LTI 2014 and LTI 2015, the company
awards one matching stock option and four performance-
based stock options. For each Series B share acquired by
other members of the Executive Team, the company awards
one matching stock option and three performance-based
stock options. For other participants, the company awards
one matching stock option and one performance-based
stock option. In accordance with the terms of the incentive
programs, employees have acquired a total of 483,276
shares in ASSA ABLOY AB, of which 122,265 shares were
acquired in 2015 within the framework of LTI 2015.

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
2016, 2017 and 2018 for the respective program is pub-
lished, and has retained the shares acquired within the
framework of the long-term incentive programs. Each
performance-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
determined by the Board of Directors for the performance
of the com pany’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 2015 total 351,081. The total number of out-
standing matching and performance-based stock options
for LTI 2013, LTI 2014 and LTI 2015 amounted to 1,256,016
on the reporting date of 31 December 2015.

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 2015 of 28 May 2015 was SEK 169.50.
The fair value of ASSA ABLOY’s Series B share on the allot-
ment date for LTI 2014 of 21 May 2014 was SEK 112.86. The
equivalent value on the allotment date for LTI 2013 of 21
May 2013 was SEK 90.78.

The total cost of the Group’s long-term incentive programs

excluding social security costs amounted to SEK 39 M (37) in

NOTES 109

1 Number of shares and fair values

have been recalculated for all histor-
ical periods reflecting the stock split
in 2015.

ASSA ABLOY ANNUAL REPORT 2015

Note 32 cont.

2015. In April 2015 a redemption of LTI 2012 took place and
703,782 shares (658,050) at a total market value of SEK 121 M
(75) were transferred to the participants of the program. Parts
of the redemption of LTI 2012 were settled through endow-
ment insurances. The payment for the transferred shares was
recognized 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 2015,

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
Sweden
France
Germany
United Kingdom
Mexico
Czech Republic
Finland
Netherlands
Canada
Romania
Brazil
Malaysia
Norway
Australia
South Korea
Poland
Spain
Italy
Belgium
Denmark
South Africa
India
Switzerland
Chile
Israel
New Zealand
Colombia
Austria
Ireland
Hong Kong
Other
Total

Sweden
Total

Total

12,596
8,662
2,039
2,060
1,589
1,594
1,353
1,352
937
1,027
856
845
429
654
714
758
703
514
563
553
455
447
378
180
320
175
337
321
225
195
180
148
1,110
44,269

Total

161
161

Group

2014

of which
women

of which
men

5,138
2,370
500
638
477
526
437
559
312
193
185
310
117
371
137
210
223
107
134
140
110
114
161
16
88
55
104
90
51
38
61
60
214
14,244

7,458
6,293
1,539
1,422
1,113
1,068
917
793
625
834
671
535
312
283
577
548
480
407
429
413
345
333
217
164
232
120
233
230
174
157
119
88
896
30,025

Total

12,591
9,202
2,065
1,971
1,612
1,571
1,360
1,315
1,147
1,029
826
793
792
756
750
748
681
561
534
515
501
454
398
379
378
352
308
304
213
190
180
143
1,374
45,994

Parent company

2015

of which
women

of which
men

5,085
2,563
495
614
467
515
417
540
368
155
193
304
205
339
145
237
231
115
124
131
106
117
168
33
102
96
95
102
49
36
60
61
253
14,520

7,506
6,639
1,570
1,357
1,145
1,055
943
775
779
875
633
489
588
417
605
511
450
446
410
383
394
337
230
346
276
256
214
202
164
154
120
82
1,121
31,473

2014

of which
women

of which
men

36
36

125
125

2015

of which
women

of which
men

47
47

133
133

2015

of which
women

of which
men

3
1
1
4

5
8
2
13

Total

180
180

Total

8
9
3
17

Gender distribution of Board of Directors and Executive Team

Board of Directors1
Executive Team
– of which Parent company’s Executive Team
Total

1 Excluding employee representatives.

2014

of which
women

of which
men

2
1
1
3

6
8
2
14

Total

8
9
3
17

110

NOTES

ASSA ABLOY ANNUAL REPORT 2015

Notes

Note 33 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 manage-
ment 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.

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 trans actions are conducted by Treasury. Treasury
achieves sig nificant economies of scale when negotiating
borrowing agreements, using interest rate derivatives and
managing currency flows.

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
position as at 31 December.

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

2014

–28

–174
–667
2,946
15,362

4,887
22,327
36,098
0.62

2015

–30

–182
–501
2,761
15,568

4,653
22,269
41,579
0.54

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 capital to shareholders, issuing new shares or

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

<1 year

–279
–2,500
–997

–1,286
–9,176
–14,240

31 December 2014

31 December 2015

>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

<1 year

–249
–2,213
–1,325

–1,240
–8,649
–13,675

>1<2
years

–464
–2,455
–

–
–26
–2,944

>2<5
years

–1,500
–6,073
–

–
–567
–8,141

>5 years

–1,130
–5,168
–

–
–29
–6,327

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

841

–

683

–

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

31
8,659
–952
11,775
–6,553
–33

8,229
–685
7,510

–
48
–966
–
–
–3,862

–
–
–3,862

–
631
–684
–
–
–8,194

–8,229
–
–16,422

–
90
–39
–
–
–6,276

–
–
–6,276

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.

ASSA ABLOY ANNUAL REPORT 2015

NOTES 111

Note 33 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
Multi–Currency RCF
Bank loan EIB
Bank loan NIB

Global MTN Program

Amount,
SEK M

418
418
1,020
209
585
418
834
626
8,228
838
502
502
17,056

1,214
32,868

1,230

631
8,362

5,000
518
1,976
17,717
50,585

Other long-term loans
Total long-term loans/facilities

Global MTN Program

US Private Placement 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

Apr 2017
May 2017
Dec 2018
Aug 2019
May 2020
Aug 2022
Aug 2022
Aug 2024
Jun 2020
Jul 20182
Dec 2019
Dec 2021
May 2017
Sep 2017
Mar 2018
Jun 2018
Sep 2018
Oct 2018
Jan 2019
Aug 2019
Sep 2019
Feb 2020
Sep 2020
Nov 2020
Dec 2020
Feb 2021
Oct 2021
Mar 2022
Nov 2023
Feb 2025
Mar 2025
Feb 2027
Apr 2030

Jun 2016
Jun 2016
Aug 2016
Nov 2016
Nov 2016
Dec 2016

Carrying
amount,
SEK M

Currency

Amount
2014

Amount
2015

Of which Parent
company, SEK M

USD
USD
USD
USD
USD
USD
USD
USD
EUR
EUR
EUR
EUR
SEK
CHF
EUR
SEK
USD
EUR
USD
USD
USD
EUR
EUR
EUR
EUR
USD
EUR
EUR
USD
EUR
EUR
EUR
EUR

NOK
NOK
SEK
EUR
EUR
USD
USD
EUR
SEK

50
50
122
25
70
50
100
75
900
110
55
55
500
100
50
500
10
30

50
20
50

35
30
50
15
50
25

30
30

250
100
250
30
40
76
25
41
700

50
50
122
25
70
50
100
75
900
92
55
55
500
100
50
500
10
30
10
50
20
50
70
35
30
50
15
50
25
50
30
30
70

250
100
250
30
40
76
50
68
200

418
418
1,020
209
585
4451
834
626

838
502
502
500
843
457
500
84
274
84
418
167
457
638
3411
2901
418
137
457
2231
456
3071
274
633
1,214
15,568

2441
96
250
274
366
631
418
622
200
518
955
4,573
20,141

–501

–34

–30
–68
2,761
22,269

500
843
457
500
84
274
84
418
167
457
638

273
418
137
457

456
274
274
633
811
8,153

238
96
250
274
366

1,224
9,377

9,377

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 Outlook

Long-term

Standard & Poor’s
Moody’s

A2
P2

Stable
Stable

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 pay-
ment obligations as a result of inadequate liquidity or difficul-
ties in obtaining external financing. ASSA ABLOY manages
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 policy, the avail-
able 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.

112

NOTES

ASSA ABLOY ANNUAL REPORT 2015

Note 33 cont.

Notes

Maturity profile
The table ‘Maturity profile’ on page 111 shows the maturities
for ASSA ABLOY’s financial instruments, including confirmed
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
in line with an extension option in the original agreement.
Originally this facility matured in June 2019, but has now
extended to June 2020. This credit facility was wholly unuti-
lized 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.

time to maturity for the Group’s interest-bearing liabilities,
excluding the pension provision, was 46 months (46).

Some of the Group’s main financing agreements contain

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

Interest-bearing liabilities
The Group’s long-term loan financing mainly consists of a
Private Placement Program in the USA totaling USD 618 M,
of which USD 542 M (618) is long-term, a GMTN program of
SEK 9,111 M (8,857), of which SEK 7,886 M (7,339) is long-
term, a loan from the European Investment Bank of EUR 92 M
(110), and a loan from the Nordic Investment Bank of EUR
110 M (110). During the year, four new issues were made
under the GMTN program for a total amount of around SEK
1,862 M. The size of the GMTN program was increased from
EUR 1,500 to EUR 2,000. During the year a couple of small
local bilateral bank loans of SEK 229 M were raised in coun-
tries with currency restrictions. 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 strenghtening of the USD against SEK. In total
SEK 2,092 M was raised in new long term loans while SEK
2,425 M of originally long term loans were repaid during
the year.

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 1,240 M (1,287) 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). At year-end the average

Cash and cash equivalents and other interest-bearing
receivables
Short-term interest-bearing investments totaled SEK 34 M
(14) at year-end. In addition, ASSA ABLOY has non-current
interest-bearing receivables of SEK 30 M (28) and financial
derivatives with a positive market value of SEK 148 M (159)
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-bear-
ing 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 equiva-
lents was 1 day (1) at year-end 2015.

The Parent company’s cash and cash equivalents are held

in a sub-account to the Group account.

SEK M

2014

2015

2014

2015

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

638

404

29
667

159
868

97
501

148
713

–

–
–

–

–
–

–

–
–

–

–
–

Net debt by currency

SEK M

USD
EUR
CNY
AUD
NOK
KRW
PLN
CZK
CHF
DKK
SEK
Other
Total

31 December 2014

31 December 2015

Net debt excluding
currency swaps

Net debt including
currency swaps

Net debt excluding
currency swaps

Net debt including
currency swaps

8,117
8,998
–302
21
462
233
44
12
824
21
3,282
614
22,327

12,009
6,099
395
682
506
233
387
367
–73
258
1,171
293
22,327

8,036
9,993
74
1
407
369
24
21
986
31
1,731
596
22,269

11,620
5,807
1,975
557
510
369
329
314
199
197
147
244
22,269

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
45 day (1) at year-end 2015. A downward change in the yield
curve of one percentage point would reduce the Group’s
interest income by around SEK 1 M (0) and consolidated
equity by SEK 1 M (0).

ASSA ABLOY ANNUAL REPORT 2015

NOTES 113

Note 33 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 pol-
icy stipulates that the average fixed interest term should nor-
mally be 24 months. At year-end, the average fixed interest
term on gross debt, excluding pension liabilities, was around
26 months (17). An upward change in the yield curve of one
percentage point would increase the Group’s interest
expense by around SEK 97 M (110) and reduce consolidated
equity by SEK 72 M (81).

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

Transaction exposure
Currency risk in the form of transaction exposure, or exports
and imports of goods respectively, is relatively limited in the
Group, even though it can be significant for individual busi-
ness units. The main principle is to allow currency fluctua-
tions to have an impact on the business as quickly as
possible. As a result of this strategy, current currency flows
are not normally hedged.

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

Currency exposure

Currency, SEK M

AUD
CAD
CNY
DKK
EUR
GBP
RON
SEK
USD

2014

135
411
–1,058
249
1,321
82
–260
–1,538
224

2015

53
531
–1,123
276
1,590
190
–299
–1,952
293

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
variables constant.

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

Currency, SEK M

2014

2015

AUD
CHF
CNY
EUR
GBP
HKD
KRW
NOK
USD

36
13
77
147
20
39
14
10
341

37
22
95
139
28
55
17
14
460

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 con-
ditions, gearing per currency should generally aim to be the
same as for the Group as a whole to limit the impact of fluc-
tuations 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 113 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 subsidiaries to
repay the Group’s loans. This is primarily achieved through
cash pools put in place by Treasury. Around 88 percent (88) of
the Group’s sales were settled through cash pools in 2015.
However, the Group can in the short term invest surplus cash
in banks to match borrowing and cash flow.

Derivative instruments are allocated between banks
based on risk levels defined in the financial policy, in order to
limit counterparty risk. Treasury only enters into derivative
contracts with banks that have a good credit rating.

ISDA agreements (full netting of transactions in case of
counterparty default) have been entered into with respect
to interest rate and currency derivatives. The table on page
115 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 cus-
tomer accounts for more than 1 percent of the Group’s sales.
The concentration of credit risk associated with trade receiv-
ables 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 company level
and monitored at division level.

Commodity risk
The Group is exposed to price risks relating to purchases of
certain commodities (primarily metals) used in production.
Forward contracts are not used to hedge commodity
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 115 show
the fair values of outstanding instruments at year-end, based
on available fair values, and are the same as the carrying
amounts in the balance sheet. The nominal value is equiva-
lent to the gross value of the contracts.

For accounting purposes, financial instruments are classi-
fied into measurement categories in accordance with IAS 39.
The table ‘Financial instruments’ on page 115 provides an
overview of financial assets and liabilities, measurement
category, and carrying amount and fair value per item.

114

NOTES

ASSA ABLOY ANNUAL REPORT 2015

Notes

Note 33 cont.

Disclosures of offsetting of financial assets and liabilities

2014

Amounts
netted
in the
balance
sheet

Net
amounts
in the
balance
sheet

Amount
covered by
netting
agree-
ment but
not offset

2015

Amounts
netted
in the
balance
sheet

Net
amounts
in the
balance
sheet

Amount
covered by
netting
agree-
ment but
not offset

Net
amount

Gross
amount

–
–

159
251

104
104

55
147

148
80

–
–

148
80

38
38

110
42

SEK M

Financial assets
Financial liabilities

Gross
amount

159
251

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 2014

31 December 2015

Positive fair
value

Negative
fair value

Nominal
value

Positive fair
value

Negative
fair value

Nominal
value

23
136
–
159

–117
–35
–99
–251

6,571
3,817
1,045
11,433

26
122
–
148

–31
–25
–24
–80

7,389
2,883
507
10,779

1 For interest rate swaps, only one leg is included in nominal value.

Financial instruments: carrying amounts and fair values by measurement category

2014

2015

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

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

11
1,910
11,775
121
27
34
501

1,606
13,962
15,568

244
4,330
25
55
6,553
2,640

11
1,910
11,775
121
27
34
501

1,606
14,157
15,763

244
4,330
25
55
6,553
2,640

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

2014

2015

Carrying
amounts

Quoted
prices

Observ-
able data

Non-
observ-
able data

Carrying
amounts

Quoted
prices

Observ-
able data

Non-
observ-
able data

159

251
3,239

–

–
–

159

251
–

–

148

–
3,239

80
2,640

–

–
–

148

–

80
–

–
2,640

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.

ASSA ABLOY ANNUAL REPORT 2015

NOTES 115

Comments on five years in summary

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, resulting 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 affecting comparability
increased 13 percent.

2012
Organic growth was 2 percent, despite the continued weak
market conditions globally. The share of sales on emerging
markets continued to increase to over 25 percent of total
sales. The major investments in product development in
recent years have been fruitful. This can be seen from the
share of products launched in the past three years, which
has increased considerably and currently accounts for
around 25 percent of total sales.

Operating income excluding items affecting comparabil-

ity increased by 13 percent during the year and operating
cash flow remained very strong. Earnings per share after full
dilution, excluding items affecting comparability, increased
by 13 percent, compared with 2011.

A total of 13 acquisitions were completed during the year,
which mainly strengthened the position in entrance automa-
tion 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 comparabil-
ity, 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 during the year,
which mainly strengthened the position in entrance auto-
mation 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. Integration
of acquisitions made and continued efficiencies contributed
to maintaining good earning capacity.

Operating income, excluding items affecting com-

parability, 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.

2015
ASSA ABLOY’s good performance continued during the year
despite challenging market conditions and relatively weak
underlying growth worldwide. The Group’s growth
remained strong during the year, with total sales growth of
7 per cent excluding exchange rate effects. The global mar-
ket showed a divided picture with strong demand in the
USA and much of Asia, while growth in Europe was more
unevenly distributed. Emerging markets showed a slow-
down, particularly China.

The focus in recent years on product development, inno-
vation and sustainability yielded positive results during the
year. ASSA ABLOY has established leadership in the ongoing
industry shift from mechanical solutions to electronics, digi-
tization and mobile. Growth remained strong for electro-
mechanical products and entrance automation, whose share
of sales exceeded 50 percent. Integration of acquisitions,
efficiencies and rationalizations strengthened the Group’s
flexibility and financial strength.

Operating income increased by 20 percent compared
with 2014, and cash flow remained very strong. Earnings per
share after full dilution increased by 20 percent.

A total of 16 acquisitions were consolidated during the
year, which strengthened the market position in important
emerging markets such as Brazil, and complemented the
customer offering in key areas for the Group such as
entrance automation and secure identity solutions.

116

COMMENTS ON FIVE YEARS IN SUMMARY

ASSA ABLOY ANNUAL REPORT 2015

Five years in summary

Amounts in SEK M unless stated otherwise

2011

2012

2013

2014

2015

Sales and income
Sales
Organic growth, %
Acquired growth, %
Operating income before depreciation/amortization (EBITDA)1
Depreciation and amortization
Operating income (EBIT)1
Income before tax (EBT)4
Net income4

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 employed4
– of which goodwill
– of which other intangible assets and property,

plant and equipment

– of which investments in associates
Assets and liabilities of disposal group classified as held for sale
Net debt4
Non-controlling interest
Shareholders' equity, excluding non-controlling interest4

Data per share, SEK5
Earnings per share after tax and before dilution4
Earnings per share after tax and dilution (EPS)1, 4
Shareholders' equity per share after dilution4
Dividend per share
Price of Series B share at year-end

Key ratios
Operating margin (EBITDA), %1
Operating margin (EBIT), %1
Profit margin (EBT), %4
Return on capital employed, %4
Return on capital employed excluding items affecting
comparability, %4
Return on shareholders' equity, %4
Equity ratio, %4
Net debt/equity ratio, times4
Interest coverage ratio, times4
Interest on convertible debentures net after tax
Number of shares, thousands5
Number of shares after dilution, thousands5
Weighted average number of shares after dilution, thousands5
Average number of employees

41,786
4
17
7,646
–1,022
6,624
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

3.48
4.10
21.85
1.50
57.53

18.3
15.9
10.9
13.6

46,619
2
9
8,536
–1,034
7,501
6,784
5,172

5,990
–4,738
–1,564
–312
7,044

41,422
28,932

11,093
1,519
385
15,805
183
25,819

4.66
4.66
23.29
1.70
80.97

18.3
16.1
14.6
18.1

48,481
2
4
8,917
–993
7,923
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

4.30
4.95
25.94
1.90
113.27

18.4
16.3
13.2
14.9

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

5.79
5.79
32.50
2.17
138.27

18.3
16.3
15.3
16.9

68,099
4
3
12,512
–1,433
11,079
10,382
7,693

8,572
–4,412
–4,335
–175
9,952

63,848
42,777

16,649
1,910
–
22,269
4
41,575

6.93
6.93
37.43
2.652
178.00

18.4
16.3
15.2
17.8

17.4
16.7
42.9
0.60
8.8
10.5
1,104,750
1,113,639
1,117,881
41,070

18.1
20.9
43.2
0.61
11.1
3.9
1,112,576
1,112,576
1,108,776
42,762

17.1
17.5
43.8
0.68
13.5
–
1,112,576
1,112,576
1,110,776
42,556

16.9
19.8
45.1
0.62
17.4
–
1,112,576
1,112,576
1,110,776
44,269

17.8
19.8
48.2
0.54
16.7
–
1,112,576
1,112,576
1,110,776
45,994

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.
5 Comparatives has been recalculated for all historical periods reflecting the stock split (3:1) in 2015.

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

comparability 2011 and 2013.

ASSA ABLOY ANNUAL REPORT 2015

FIVE YEARS IN SUMMARY 117

Quarterly information

THE GROUP IN SUMMARY
Amounts in SEK M unless stated otherwise

Q 1
2014

Q 2
2014

Q 3
2014

Q 4
2014

Full
year
2014

Q 1
2015

Q 2
2015

Q 3
2015

Q 4
2015

Full
year
2015

Sales
Organic growth
Gross income
Gross income/ Sales
Operating income before
depreciation (EBITDA)
Operating margin (EBITDA)
Depreciation and amortization
Operating income (EBIT)
Operating margin (EBIT)
Net financial items
Income before tax (EBT)
Profit margin (EBT)
Tax on income
Net income

Net income attributable to:
Parent company shareholders
Non-controlling interests

OPERATING CASH FLOW

Operating income (EBIT)
Depreciation and amortization
Net capital expenditure
Change in working capital
Interest paid and received
Non-cash items
Operating cashflow1
Operating cash flow / Income before tax

CHANGE IN NET DEBT

Net debt at beginning 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 including
derivatives
Total

12,305 13,964 14,727 15,847 56,843 15,252 17,082 17,465 18,301 68,099
4%
7,046 26,395
38.8%
38.5%

3%
6,074 21,922
38.6%
38.3%

4%
5,689
38.6%

2%
5,368
38.4%

4%
4,791
38.9%

5%
5,969
39.1%

3%
6,758
38.7%

4%
6,623
38.8%

2,135
17.3%
–278
1,857
15.1%
–148
1,709
13.9%
–444
1,264

2,504
17.9%
–285
2,219
15.9%
–146
2,073
14.8%
–539
1,534

2,791
19.0%
–292
2,499
17.0%
–136
2,364
16.0%
–614
1,749

2,990 10,419
18.3%
18.9%
–1,163
–309
9,257
2,681
16.3%
16.9%
–559
–129
8,698
2,552
15.3%
16.1%
–2,261
–664
6,436
1,889

2,659
17.4%
–331
2,329
15.3%
–145
2,184
14.3%
–568
1,616

3,117
18.2%
–374
2,742
16.1%
–191
2,551
14.9%
–663
1,888

3,330
19.1%
–360
2,970
17.0%
–174
2,796
16.0%
–727
2,069

3,406 12,512
18.4%
18.6%
–368
–1,433
3,038 11,079
16.3%
16.6%
–187
–697
2,851 10,382
15.2%
15.6%
–2,689
–731
7,693
2,120

1,264
0

1,534
0

1,749
0

1,889
0

6,436
0

1,616
0

1,888
0

2,069
0

2,120
0

7,693
0

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

Q 1
2015

Q 2
2015

Q 3
2015

Q 4
2015

Full
year
2015

2,329
331
–344
–1,722
–71
–2
520
0.24

2,742
374
–327
–526
–200
–74
1,991
0.78

2,970
360
–344
–115
–84
28
2,816
1.01

3,038 11,079
1,433
–1,241
–502
–548
–269
9,952
0.96

368
–227
1,861
–195
–221
4,625
1.62

Q 1
2015

Q 2
2015

Q 3
2015

Q 4
2015

Full
year
2015

19,595 21,375 23,072 22,348 19,595 22,327 25,184 26,579 25,131 22,327
–9,952
375
2,247
4,161
2,407

–3,469
119
525
1,213
–

–2,816
80
217
688
–

–1,963
140
409
180
2,110

–1,991
60
371
1,536
2,407

–8,238
453
2,376
2,454
2,110

–2,249
107
437
109
–

–4,625
145
948
959
–

–557
87
1,005
952
–

–520
90
711
978
–

97
195

71
750

–150
855
21,375 23,072 22,348 22,327 22,327 25,184 26,579 25,131 22,269 22,269
0.54

206
1,392

455
1,136

695
2,880

–274
–713

–152
–136

70
313

73
799

0.62

0.72

0.63

0.70

0.76

0.64

0.68

0.54

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

Q 1
2015

–31

–263
–515
3,260

Q 2
2015

–29

–217
–646
2,984

Q 3
2015

–32

–265
–648
2,954

Q 4
2015

–30

–182
–501
2,761

14,627 14,209 14,272 15,362

16,497 16,495 17,453 15,568

5,311

4,887
21,375 23,072 22,348 22,327

6,762

7,415

6,235

4,653
25,184 26,579 25,131 22,269

5,669

7,992

118

QUARTERLY INFORMATION

ASSA ABLOY ANNUAL REPORT 2015

CAPITAL EMPLOYED AND FINANCING

Capital employed
– of which goodwill
– of which other intangible assets and

property, plant and equipment
– of which investments in associates
Net debt
Non-controlling interests
Equity attributable to Parent
company’s shareholders

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

Q 1
2015

Q 2
2015

Q 3
2015

Q 4
2015

64,699
43,092

64,689
41,818

65,070
42,404

63,848
42,777

1,696

12,941 13,383 14,055 14,990
1,861
21,375 23,072 22,348 22,327
2

1,805

1,790

16,324
1,890
25,184
2

16,512
1,901
26,579
4

16,693
1,934
25,131
4

16,649
1,910
22,269
4

29,766 30,210 33,010 36,096

39,513

38,105

39,935

41,575

DATA PER SHARE, SEK

Earnings per share after tax and before
dilution2
Earnings per share after tax and dilution2
Shareholders' equity per share after
dilution2

Q 1
2014

Q 2
2014

Q 3
2014

Q 4
2014

Full
year
2014

Q 1
2015

Q 2
2015

Q 3
2015

Q 4
2015

1.14
1.14

1.38
1.38

1.57
1.57

1.70
1.70

5.79
5.79

1.45
1.45

1.70
1.70

1.86
1.86

1.91
1.91

Full
year
2015

6.93
6.93

26.80

27.20

29.72

32.50

35.57

34.31

35.95

37.43

NUMBER OF SHARES2

Number of shares before dilution,
millions
Weighted average number of shares
after dilution, millions

Q 1 2014

Q 2
2014

Q 3
2014

Q 4
2014

Full
year
2014

Q 1
2015

Q 2
2015

Q 3
2015

Q 4
2015

Full
year
2015

1,112.6 1,112.6 1,112.6 1,112.6 1,112.6

1,112.6

1,110.8 1,110.8 1,110.8 1,110.8 1,110.8

1,110.8

1 Items affecting comparability consist of restructuring costs.
2 Comparatives have been recalculated for all historical periods reflecting the stock split (3:1) in 2015.

Definitions of key ratios

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

Equity ratio
Shareholders’ equity as a percentage of total assets.

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.

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.

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.

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.

Net debt
Interest-bearing liabilities less interest-bearing assets.

Shareholders’ equity per share after dilution
Equity excluding non-controlling interests divided by number
of shares after any potential dilution.

Capital employed
Total assets less interest-bearing assets and non-interest-bear-
ing liabilities including deferred tax liability.

ASSA ABLOY ANNUAL REPORT 2015

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 7,490 M
Net income for the year: SEK 2,725 M
TOTAL: SEK 11,002 M

The Board of Directors and the President and CEO propose that a dividend of SEK 2.65 per share, a total of SEK 2,944 M,
be distributed to shareholders and that the remainder, SEK 8,058 M, be carried forward to the new financial year.
The dividend amount is calculated on the number of outstanding shares as per 5 February 2016.

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 1,800,000 treasury shares as at 5 February 2016.

Friday, 29 April 2016 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 Wednesday, 4 May 2016.

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, 5 February 2016

Lars Renström
Chairman of the Board

Carl Douglas
Vice Chairman of the Board

Eva Karlsson
Board member

Johan Molin
President and CEO

Birgitta Klasén
Board member

Jan Svensson
Board member

Eva Lindqvist
Board member

Ulrik Svensson
Board member

Bert Arleros
Board member
Employee representative

Mats Persson
Board member
Employee representative

Our audit report was issued on 5 February 2016

PricewaterhouseCoopers AB

Bo Karlsson
Authorized Public Accountant
Auditor in charge

Linda Corneliusson
Authorized Public Accountant

120

PROPOSED DISTRIBUTION OF EARNINGS

ASSA ABLOY ANNUAL REPORT 2015

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 2015. 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 Managing Director are
responsible for the preparation and fair presentation of these
annual accounts and consolidated accounts in accordance
with International Financial Reporting Standards, as adopted
by the EU, and the Annual Accounts Act, and for such internal
control as the Board of Directors and the Managing Director
determine is necessary to enable the preparation of annual
accounts and consolidated accounts that are free from
material misstatement, whether due to fraud or error.

Auditor’s responsibility
Our responsibility is to express an opinion on these annual
accounts and consolidated accounts based on our audit. We
conducted our audit in accordance with International Stan-
dards on Auditing and generally accepted auditing standards
in Sweden. Those standards require that we comply with
ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the annual
accounts and consolidated accounts are free from material
misstatement.

An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the annual
accounts and consolidated accounts. The procedures
selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the
annual accounts and consolidated accounts, whether due to
fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the company’s prepa-
ration and fair presentation of the annual accounts and con-
solidated accounts in order to design audit procedures that
are appropriate in the circumstances, but not for the pur-
pose of expressing an opinion on the effectiveness of the
company’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the
reason ableness 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 con-
solidated accounts.

We believe that the audit evidence we have obtained is
sufficient 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 2015 and of its financial perfor-
mance and its cash flows for the year then ended in accor-
dance with the Annual Accounts Act. The consolidated
accounts have been prepared in accordance with the Annual
Accounts Act and present fairly, in all material respects, the
financial position of the Group as of 31 December 2015 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 corporate
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 2015.

Responsibilities of the Board of Directors and the President
and CEO
The Board of Directors is responsible for the proposal for
appropriations of the company’s profit or loss, and the Board
of Directors and the President and CEO are responsible for
administration under the Companies Act.

Auditor’s responsibility
Our responsibility is to express an opinion with reasonable
assurance on the proposed appropriations of the company’s
profit or loss and on the administration based on our audit.
We conducted the audit in accordance with generally
accepted auditing standards in Sweden.

As a basis for our opinion on the Board of Directors’ pro-

posed appropriations of the company’s profit or loss, we
examined the Board of Directors’ reasoned statement and
a selection of supporting evidence in order to be able to
assess whether the proposal is in accordance with the
Companies Act.

As a basis for our opinion concerning discharge from lia-

bility, in addition to our audit of the annual accounts and
consolidated accounts, we examined significant decisions,
actions taken and circumstances of the company in order to
determine whether any member of the Board of Directors or
the President and CEO is liable to the company. We also
examined whether any member of the Board of Directors or
the President and CEO has, in any other way, acted in contra-
vention of the Companies Act, the Annual Accounts Act or
the Articles of Association.

We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinions.

Opinions
We recommend to the annual meeting of shareholders that
the profit be appropriated in accordance with the proposal
in the statutory administration report and that the members
of the Board of Directors and the President and CEO be dis-
charged from liability for the financial year.

Stockholm, 5 February 2016

PricewaterhouseCoopers AB

Bo Karlsson
Authorized Public Accountant
Auditor in charge

Linda Corneliusson
Authorized Public Accountant

ASSA ABLOY ANNUAL REPORT 2015

AUDITOR’S REPORT 121

The ASSA ABLOY share

Share price trend
In 2015 Nasdaq Stockholm rose and OMX Stockholm closed
with an increase of 7 percent. ASSA ABLOY’s series B-shares
rose 29 percent. This was the eighth consecutive year that
the ASSA ABLOY share outperformed the index.

The share price rose from the 2014 closing price of SEK
138.27 (adjusted for split 3:1) to the 2015 closing price of
SEK 178.00. The highest closing price of SEK 186.40 was
recorded on 2 December 2015 and the lowest of SEK 135.50
was recorded on 7 January 2015.

At year-end, market capitalization amounted to SEK

197,718 M (153,832), calculated on both Series A and Series
B shares.

Listing and trading1)
ASSA ABLOY’s Series B share has been listed on Nasdaq
Stockholm, Large Cap since 8 November 1994 under the
code ASSA-B.ST.

Total turnover of the Series B share on all markets

amounted to 1,911 million shares (1,789) in 2015,

equivalent to a turnover rate of 172 percent (161). Turnover
of the Series B share on Nasdaq Stockholm amounted to
585 million shares (588), equivalent to a turnover rate of
52 percent (56). The average turnover rate was 72 percent
(66) on Nasdaq Stockholm, and to 70 percent (67) 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 2015 the ASSA ABLOY share was traded on more than

10 different markets, with trading on Nasdaq Stockholm
accounting for only around 31 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 2006–20151

DIVIDEND PER SHARE 2006–2015

SEK

250

200

150

100

No. of shares traded, thousands

500,000

400,000

300,000

200,000

100,000

SEK

3.0

2.5

2.0

1.5

1.0

0.5

0.0

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

ASSA ABLOY B
ASSA ABLOY B, total return

SIX Return Index

OMX Stockholm

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

2015 proposed dividend

SHARE PRICE AND TURNOVER 20151

MARKETS FOR THE SHARE1

SEK

200

180

160

140

120

100

No. of shares traded, thousands

500,000

400,000

300,000

200,000

100,000

ASSA ABLOY B

OMX Stockholm

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

No. of shares trades, millions

3,000

2,500

2,000

1,500

1,000

500

BATS Chi-X
Stockholm
London
Boat

Turquoise
Burgundy
Others

1 Comparatives have been recalculated for all historical periods reflecting the stock
split (3:1) in 2015.

122

THE ASSA ABLOY SHARE

ASSA ABLOY ANNUAL REPORT 2015

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, millions 6

2006
2.662
1.08
2.2
64.0
49.67
50.33
36.33
13.04
1,128.1

2007

3.00
1.20
2.8
40.5
43.25
54.67
41.67
15.58
1,142.1

2008
3.072
1.20
4.1
52.3
29.50
42.00
23.25
18.64
1,142.1

2009
3.072
1.20
2.6
47.8
45.93
47.50
23.83
18.25
1,118.8

2010

3.63
1.33
2.1
37.0
63.17
66.40
42.20
19.55
1,118.2

2011
4.102
1.50
2.6
36.6
57.53
64.97
44.50
21.85
1,113.6

2012

4.66
1.70
2.1
36.8
80.97
81.60
57.23
23.29
1,112.6

2013
4.952
1.90
1.7
38.4
113.27
114.07
79.33
25.94
1,112.6

2014

5.79
2.17
1.6
37.4
138.27
139.17
105.63
32.50
1,112.6

2015

6.93
2.653
1.5
38.2
178.00
189.00
135.00
37.43
1,112.6

1 Adjustments made for new issues and stock split (3:1) in 2015.
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.

Ownership structure
The number of shareholders at year-end was 22,232
(17,720) and the ten largest shareholders accounted for
around 38 percent (35) of the share capital and 58 percent
(56) of the votes. Shareholders with more than 50,000

shares, a total of 550 shareholders, accounted for 97 percent
(95) of the share capital and 98 percent (97) of the votes.

Investors outside Sweden accounted for around 64 percent

(65) of the share capital and around 44 percent (44) 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 2015.

Shareholders

Series A shares

Series B shares

of shares Share capital1, %

Votes1, %

Total number

Latour
Melker Schörling AB
Capital Group Companies Inc
BlackRock, Inc.
Swedbank Robur Fonder
Norges Bank
Alecta Pensionsförsäkring
Handelsbanken Fonder
AMF Försäkring & Fonder
Standard Life Fonder & Försäkring
Other shareholders
Total number

41,595,729
15,930,240

57,525,969

63,900,000
26,882,608
65,120,395
55,660,998
43,894,375
30,300,915
26,670,000
23,405,636
16,985,896
11,410,144
690,819,398
1,055,050,365

105,495,729
42,812,848
65,120,395
55,660,998
43,894,375
30,300,915
26,670,000
23,405,636
16,985,896
11,410,144
690,819,398
1,112,576,334

9.50
3.85
5.86
5.01
3.95
2.73
2.40
2.11
1.53
1.03
62.03
100.00

29.47
11.43
4.00
3.42
2.70
1.86
1.64
1.44
1.04
0.70
42.31
100.00

1 Based on the number of outstanding shares and votes of 1,110,776,334 and 1,628,510,055 respectively, excluding shares held by ASSA ABLOY.
Source: Modular Finance AB and Euroclear Sweden AB.

OWNERSHIP STRUCTURE (SHARE CAPITAL)

OWNERSHIP STRUCTURE (VOTES)

Latour, 9.5%
Legend

Capital Group Companies
Legend
Inc., 5.9%
Legend

BlackRock, Inc., 5.0%

Legend

Swedbank Robur fonder, 4.0%

Legend

Melker Schörling AB, 3.9%

Legend

Norges Bank, 2.7%

Alecta Pensionsförsäkring, 2.4%

Handelsbanken Fonder, 2.1%

AMF Försäkring & Fonder, 1.5%

Standard Life Fonder &
Försäkring, 1.0%

Other shareholders, 62.0%

Latour, 29.5%

Legend

Melker Schörling AB, 11.4%

Capital Group companies
Legend
Inc., 4.0%
Legend

BlackRock, Inc., 3.4%

Legend

Swedbank Robur Fonder, 2.7%

Legend

Norges Bank, 1.9%

Alecta Pensionsförsäkring, 1.6%

Handelsbanken Fonder, 1.4%

AMF Försäkring & Fonder, 1.0%

Standard Life Fonder &
Försäkring, 0.7%

Other shareholders, 42.4 %

Share capital and voting rights
At the Annual General Meeting in May 2015, it was resolved to
increase the number of shares in the company by dividing
each share, irrespective of series, into three shares of the same
series (stock split 3:1). At 31 December 2015, the share capital
amounted to SEK 370,858,778 at year-end, distributed among
a total of 1,112,576,334 shares, comprising 57,525,969 Series
A shares and 1,055,050,365 Series B shares. All shares have a
par value of around SEK 0.33 and give shareholders equal
rights to the company’s assets and earnings. The total number
of votes amounts to 1,630,310,055. 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 2015 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 maxi-
mum 10 percent of the total number of shares in the company.

ASSA ABLOY ANNUAL REPORT 2015

THE ASSA ABLOY SHARE 123

The ASSA ABLOY share

ASSA ABLOY holds a total of 1,800,000 (1,800,000, adjusted
for stock split) 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 around 0.33. The purchase
consideration amounted to SEK 103 M.

The Board of Directors and the President and CEO propose
that the dividend to shareholders be raised by 22 percent to
SEK 2.65 per share (2.17, adjusted for stock split) for the
2015 financial year, equivalent to a dividend yield on the
Series B share of 1.5 percent (1.6).

No shares were repurchased in 2015.

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.

In 2015 the total return on the ASSA ABLOY share, defined

as market price movement plus reinvested dividends, was
31 percent, compared with the total return SIX Return Index,
which was up 10 percent. Over the ten-year period 2006–
2015, the total return on the share was 438 percent, com-
pared with a 142 percent rise in the SIX Return Index and a
67 percent rise in OMX Stockholm.

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
2015

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
Split 3:1

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
57,525,969

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
1,055,050,365

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
370,858,778

* SEK 1 per share before split in 2015 – number of shares at the end of the period and around SEK 0.33 per share after split in 2015. Number of shares at the end of the

period 1,112,576,334 (including repurchase of own shares).

Analysts who cover ASSA ABLOY

Company

ABG Sundal Collier
Bank of America ML
Barclays
Berenberg
Carnegie
Credit Suisse
Danske Bank
Deutsche Bank
DNB
Exane BNP Paribas
Goldman Sachs
Handelsbanken
HSBC
Imperial Capital
Jefferies
J.P. Morgan
KeplerCheuvreux
Liberum Capital
Morgan Stanley
Nomura
Nordea
Oddo Securities
Pareto Securities
Redburn Partners
Royal Bank of Canada
SEB Enskilda Securities
Société Général
Swedbank
UBS

Name

Telephone

Anders Idborg
Mark Troman
Lars Brorson
Rizk Maidi
Johan Wettergren
Andre Kukhnin
Oscar Stjerngren
Andreas Koski
Johan Sjöberg
Sebastian Gruter
Daniela Costa
Peder Frölén
Michael Hagmann
Jeff Kessler
Peter Reilly
Andreas Willi
Markus Almerud
Ryan Gregory
Ben Maslen
Felix Wienen
Fredrik Agardh
Delphine Brault
David Jacobsson
James Moore
Matthew Spurr
Anders Trapp
Alasdair Leslie
Anders Roslund
Guillermo Peigneux-Lojo

+46 8 566 296 74
+44 207 996 4194
+44 203 134 1156
+44 203 207 78 06
+46 8 588 687 43
+44 207 888 0350
+46 8 568 806 06
+44 207 545 6580
+46 8 473 48 31
+44 207 039 9527
+44 207 774 8354
+46 8 701 12 51
+44 207 991 2405
+1 212 351 9701
+44 207 029 8632
+44 207 134 4569
+46 8 723 51 63
+44 203 100 2071
+44 207 425 3837
+44 207 102 5758
+46 8 534 917 20
+33 144 518 325
+46 8 402 52 72
+44 207 000 2135
+44 207 029 0787
+46 8 522 297 57
+44 207 762 4952
+46 8 585 900 93
+46 8 453 73 08

anders.idborg@abgsc.com
mark.troman@baml.com
lars.brorson@barclays.com
rizk.maidi@berenberg.com
johan.wettergren@carnegie.se
andre.kukhnin@credit-suisse.com
osst@danskebank.com
andreas.koski@db.com
johan.sjoberg@dnb.se
sebastien.gruter@exanebnpparibas.com
daniela.costa@gs.com
pefr15@handelsbanken.se
michael.hagmann@hsbcib.com
Jkessler@imperialcapital@com
peter.reilly@jefferies.com
andreas.p.willi@jpmorgan.com
malmerud@keplercheuvreux.com
Ryan.Gregory@liberum.com
benjamin.maslen@morganstanley.com
felix.wienen@nomura.com
fredrik.agardh@nordea.com
dbrault@oddo.fr
djc@paretosec.com
james.moore@redburn.com
matthew.spurr@rbccm.com
anders.trapp@seb.se
alasdair.leslie@sgcib.com
anders.roslund@swedbank.se
guillermo.peigneux-lojo@ubs.com

124

THE ASSA ABLOY SHARE

ASSA ABLOY ANNUAL REPORT 2015

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 15.30 on Wednesday, 27 April 2016. Share-
holders wishing to attend the Annual General Meeting should:
• Be recorded in the share register kept by Euroclear

Nomination Committe
The Nomination Committee has the task of preparing resolu-
tions 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, and fees and associated matters.

Sweden AB by Thursday, 21 April 2016.

• Notify ASSA ABLOY AB of their intent to attend no later

than Thursday, 21 April 2016.

Registration in the share register
In addition of giving notice 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.
Such registration must be effected by Thursday, 21 April 2016,
and shareholders should contact their bank or nominee well
in advance of this date.

The Nomination Committee prior to the 2016 Annual
General Meeting comprises Carl Douglas (Investment AB
Latour), Mikael Ekdahl (Melker Schörling AB), Liselott Ledin
(Alecta), Marianne Nilsson (Swedbank Robur fonder) and
Anders Oscarsson (AMF and AMF fonder). Carl Douglas is
Chairman of the Nomination Committee.

Dividend
Friday, 29 April 2016 has been proposed as the record date
for dividend. If the Annual General Meeting approves the
proposal, dividend is expected to be distributed by Euroclear
Sweden AB on Wednesday, 4 May 2016.

Notice of attendance
• Website
• Address

www.assaabloy.com
ASSA ABLOY AB, Annual General Meeting
Box 7842, SE-103 98 Stockholm, Sweden

Further information
Hedvig Wennerholm
Telephone: +46 (0)8 506 485 51
hedvig.wennerholm@assaabloy.com

• Telephone +46 (0)8 506 485 14

The notice of attendance should state:
• Name
• Personal or corporate identity number
• Address and daytime telephone number
• Number of shares
• Any assistants attending

If participation is by proxy, the proxy should be submitted in
connection with the notice of attendance and the proxy
must be presented in original at the latest at the Annual
General Meeting. Proxy forms are available at: www.
assaabloy.com.

Reports can be ordered from
ASSA ABLOY AB
• Website www.assaabloy.com
• Telephone +46 (0)8 506 485 00
+46 (0)8 506 485 85
• Fax
ASSA ABLOY AB
• Post
Box 70340
SE-107 23 Stockholm
Sweden

Financial reporting
First quarter: 27 April 2016
Second quarter: 19 July 2016
Third quarter: 21 October 2016
Fourth quarter and Year-end report: February 2017
Annual Report 2016: March 2017

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 2016.

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 70340
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