ASSA ABLOY Annual Report 2017

FY2017 Annual Report · ASSA ABLOY

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Annual Report
2017

The global leader in
door opening solutions

“ More and more homes are being equipped with smart
door locks for improved safety, security and convenience”

Contents

Report on operations
ASSA ABLOY in brief
Statement by the President and CEO
Value creation strategy
Goals and outcomes
Value-creating model
Market presence
Product leadership
Cost-efficiency
Profitable growth

Divisions
ASSA ABLOY 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

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 statement of cash flows
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

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107

Innovation
and product
development
drive growth

P2
Value creation
strategy

The Group’s overall strategic direction is to
spearhead the trend toward 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.

Developments in
the divisions 2017

Most divisions showed continued good
organic growth with a strong development
for electromechanical solutions.

P28

Sustainable
development

ASSA ABLOY’s sustainability initiatives
continued to make good progress in 2017,
with advances in line with the five-year
sustainability plan.

Report of the
Board of Directors,
corporate governance
and financial
statements

P36

P39

ASSA ABLOY in brief

WHO ARE WE?

SEK 76
billion

47,500
employees

ASSA ABLOY is the global leader in door opening solutions with
sales of SEK 76 billion and 47,500 employees. The strategies for

profitable growth are market presence, product leadership and
cost-efficiency.

WHAT DO WE DO?

ASSA ABLOY is the global leader in door opening solutions and
offers mechanical and electromechanical locks, digital door locks,
security doors, entrance automation, hotel security and secure

identity solutions, primarily in identity and access management,
as well as a number of other related products and services.

ASSA ABLOY’s BRANDS

ASSA ABLOY has considerable value in
its well-known brands, several of which
have been acquired through the Group’s
many acquisitions. ASSA ABLOY is the
global master brand. It is often com-
bined with individual brands well estab-
lished in local knowledge, regulations
and security standards. The Group thus
increases the visibility of the
ASSA ABLOY master brand, which unites
the Group’s sales departments and rep-
resents innovation, leading technology
and total door opening solutions.

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

FOR WHOM?

Institutional and commercial
customers

Residential market

Aftermarket

ASSA ABLOY covers all needs for door opening solutions and service
for institutional and commercial customers, as well as for the residen-

tial market. The Group has the largest installed base of products in the
world, with a large share of sales in the stable aftermarket.

WHERE ARE WE?

OUR DIVISIONS

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

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

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

Share of Group sales
by region 2017

SALES BY DIVISION

OPERATING INCOME BY DIVISION

EUROPE

NORTH AMERICA 40%
SOUTH AMERICA 3%
38%
14%
4%
1%

OCEANIA

AFRICA

ASIA

(40)

(3)

(38)

(15)

(3)

(1)

ASSA ABLOY has leading positions in most
of Europe, North and South America, Asia
and Oceania.

Legend

EMEA, 23% (23)

Americas, 23% (24)

Asia Pacific, 11% (12)

Global Technologies, 14% (13)

Entrance Systems, 29% (28)

EMEA, 24% (23)

Americas, 30% (31)

Asia Pacific, 7% (7)

Global Technologies, 15% (15)

Entrance Systems, 24% (24)

Read more about ASSA ABLOY’s security solutions on the last pages

The master brand is complemented by global brands, which are all
leaders in their respective market segments, some examples are: Yale
in the residential market, HID in access control, secure card issuance

and identification technology, and ABLOY in high security locks. The
Group also has product brands that are not associated with ASSA
ABLOY, such as Entrematic in entrance automation.

STRATEGY

Market presence

Product leadership

Cost-efficiency

Growth and profitability

FINANCIALS IN BRIEF 2017

Sales increased 7 percent during the year to SEK 76,137
million (71,293) driven by continued strong growth for
electro mechanical products.

Continued good earnings and strong cash flow achieved
during the year. Operating margin excluding items
affecting comparability was 16.2 percent (15.8).

16 acquisitions were completed during the year, con-
tributing to net acquired growth of 2 percent for the year.

Investments in product development continued at a high
pace and a number of new products were launched.

Key figures

Sales, SEK M
of which: Organic growth, %
of which: Acquired growth, net total, %
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, %

2016

71,293
2
3
0
11,2541
15.81
10,5491
10,467
16.5

2017

76,137
4
2
1
12,341
16.2
11,673
10,929
16.6

Change

10%

11%
4%

Data per share

2016

2017

Change

Earnings per share after tax and dilution
(EPS), SEK/share
Equity per share diluted, SEK/share
Dividend, SEK/share
Weighted average number of shares,
diluted, thousands

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

7,091
42.51
3.00

7.77
45.60
3,303

10%
7%
10%

1,110,776

SALES AND OPERATING INCOME (EBIT)

Sales

Operating income (EBIT)

Sales, SEK M

80,000

65,000

50,000

35,000

20,000

EBIT, SEK M

15,000

12,500

10,000

7,500

5,000

1, 2

1 Excluding items affecting comparability.
2 Reclassification has been made.

EARNINGS PER SHARE 1

SALES ON EMERGING MARKETS

SEK

2
08

1 Earnings per share has

been restated due to the
3:1 share split in 2015.
2 Excluding items affecting

comparability.

SEK M

20,000

15,000

10,000

5,000

ASSA ABLOY ANNUAL REPORT 2017

THE YEAR IN BRIEF 1

Statement by the President and CEO

Innovation and product
development drive growth

2017 was once again a good year for ASSA ABLOY. Sales increased and totaled SEK 76,137 million.
Organic growth increased to 4 percent, with continued strong growth for our electromechanical
solutions. We strengthened our market leadership, partly because of rapid innovation in electro-
mechanical, digital and sustainable door opening solutions, and partly through the acquisition of
16 companies. Operating income increased 10 percent to SEK 12,341 million, supported by higher
sales and good cost control. Operating margin improved to 16.2 percent, in line with our target.

Global demand for door opening solutions strengthened
in 2017 and once again the mature markets grew at a
higher pace than the emerging markets. We saw con-
tinued good organic sales growth in all of our divisions,
except in APAC, where China once again had negative
growth.

ASSA ABLOY’s sales growth in 2017 was 7 percent,

including 4 percent organic, 2 percent net through
acquisitions and divestments and 1 percent from cur-
rency fluctuations. Underlying the increase in organic
growth is the growing demand for electromechanical
and digital door opening solutions. This technology shift
affects not only the advanced mature markets, but
increasingly also many emerging markets. ASSA ABLOY is
the leader in this technology shift, thanks to the many
years we have focused on innovation, product develop-
ment and complementary acquisitions.

Our operating income for 2017 increased by 10 per-
cent to SEK 12,341 million. The operating margin of 16.2
percent is in line with the target of 16–17 per cent on
average over a business cycle. Good profitability requires
a good cost-efficiency. Our restructuring program con-
tinued to deliver according to plan, as did the Group-
wide programs for more efficient processes at every
stage from purchasing, across production and adminis-
tration to sales.

A review of the divisions in 2017 presents the following
picture:

Division EMEA, with 23 percent of the Group’s total
sales, increased organic growth to 4 percent. Growth was
strong in Finland and the UK, as well as in Eastern and
Southern Europe, and good in Scandinavia, France, Israel
and Africa. Germany and the Benelux countries had
growth, while the Middle East remained negative. Demand
has grown following the major investments in innovation
and product development within digital door opening
solutions in recent years, especially for the Group’s Yale
brand and its smart door locks for the residential market.
Acquisitions contributed with 3 percent growth. Three
acquisitions were carried out during the year.

The Americas division, with a 23-percent share of the
Group’s total sales, experienced organic growth of 4 per-
cent, a slight weakening after several years of high growth.
The positive trend continued in Canada and in most Latin
American countries. Brazil had slightly negative growth. In
the US, demand grew in both the commercial and the
residential segments at a somewhat slower pace after
several years of high activity. Demand from the public sec-
tor continued its recovery from last year. ASSA ABLOY’s
Yale brand successfully strengthened its position as sup-
plier of smart door locks on the division's markets. Two
acquisitions were made during the year, including August
Home, a leading provider of smart door locks in the US.
Acquisitions contributed 1 percent to growth.

DEVELOPMENT OF KEY FIGURES

SALES AND OPERATING INCOME

INCOME BEFORE TAX AND OPERATING CASH FLOW

Sales
SEK M

80,000

65,000

50,000

35,000

20,000

Sales
Operating income1

Operating income
SEK M

15,000

12,500

10,000

7,500

1 Excluding items affecting

5,000

comparability 2013 and 2016.

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 2013 and 2016.
² Excluding restructuring payments.

STATEMENT BY THE PRESIDENT AND CEO

ASSA ABLOY ANNUAL REPORT 2017

“We are world leaders in the development of technologies
for identification and authentication.

23%

The EMEA division accounts for
23% of the Group’s total sales.

23%

The Americas division accounts
for 23% of the Group’s total sales.

11%

The Asia Pacific division accounts
for 11% of the Group’s total sales.

14%

Global Technologies accounts for
14% of the Group’s total sales.

29%

Entrance Systems accounts for
29% of the Group’s total sales.

The Asia Pacific division, which accounts for 11 percent
of the Group’s total sales, had organic sales growth of 0
percent, still affected by weak sales in parts of China.
However, sales were strong in Japan, Southeast Asia and
South Korea. Australia and New Zealand had good
growth. In India, marketing efforts were expanded and
sales increased sharply. Major streamlining measures,
which reduced the number of employees in China by 29
percent over five years, have adapted Chinese operations
to lower demand and the errors we discovered in China
last year have led to improved and increased control. The
division made one acquisition in India that contributed 0
percent to growth.

Global Technologies, which accounted for 14 percent

of the Group’s total sales, is the Group’s global division
for secure identity solutions, primarily in identity and
access management, as well as for lock systems for hotels
and cruise ships, areas in which the division is a leading
supplier. The organic growth rate continued to be high at
7 percent. Growth was strong in access management,
printer products and national ID programs, with good
growth in identification technology. The trend in Logical
access was negative. In Hospitality, demand remained
strong for high-end systems with both hardware and
software that allow guests to use their mobile phones to
check in, as well as integration with other mobile applica-
tions from global hotel chains. The division made five
acquisitions and one divestment. Growth from acquisi-
tions was 0 percent, net.

Entrance Systems, which accounted for 29 percent of

the Group’s total sales, is the Group’s division for com-
plete entrance automation solutions. The division grew
organically by 4 percent and 6 percent from acquisitions.
Growth was strong in North America, Asia and Oceania,
good in Europe, but negative in South America. Sales of
entrance automation and high-performance doors had
strong growth. Increased e-commerce continued to lead
to higher sales of solutions in the transportation and

DEVELOPMENT OF EARNINGS PER SHARE 1

Earnings per share has
increased by almost
158 percent since 2007.

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

2 Excluding items affecting

comparability.

SEK

08
2

logistics sector. Sales of industrial doors were good and
the service offering continued to show good results. The
division made five acquisitions during the year.

In summary, 2017 was a rather typical ASSA ABLOY

year, with good growth and profitability in most
businesses.

Positive growth trends
Let me begin with the growth trends. I usually say that
the lock and door business is a good industry to be in. We
have four strong global trends driving demand for the
foreseeable future.

Safety, security and convenience. Demand for secu-

rity, safety and convenience is steadily growing as the
world economy grows and prosperity increases.

Urbanization. More people are looking for work and
housing in cities, which entails high construction activity
and growing demand for safety and security, especially in
emerging markets. Calculations suggest that another bil-
lion people will move to cities over the next ten years.

Digitization. Demand for electromechanical, digital,

mobile and connected door opening solutions is con-
tinuously increasing both in new construction and the
aftermarket. These solutions are replaced and upgraded
more often and also have a higher content of service and
software, which benefits ASSA ABLOY.

Sustainability. Sustainable and climate-smart solu-
tions are becoming increasingly important for customers
who want to reduce operating costs and achieve energy
and sustainability targets. Laws, regulations and stand-
ards and an increasingly environmentally aware public
are driving demand. Sustainability has been integrated in
all Group processes for many years.

Growth trends affect the industry both individually

and together. Our door opening solutions include a
growing share of smart solutions for safety, security and
convenience. Our expertise in access and keys in the form
of digital codes, mobile phones and other identification
technologies provides great added value for individuals,
companies and institutions.

Our solutions simplify life for individuals, enabling
them to use mobile solutions to control, manage and
monitor their homes. They can take advantage of the
convenience of e-commerce and receive secure and
monitored in home deliveries. New possibilities for
secure initiatives are available to care for the sick and
elderly in their homes with solutions to ensure that care
is provided by trusted staff with proper identification.
Service companies can also ensure that care providers
easily have access to their care recipients’ homes and
they can also monitor staff to ensure they were in the
right place at the right time.

Our system solutions for access to buildings, work-
places and computers provide not only safe entry and

ASSA ABLOY ANNUAL REPORT 2017

STATEMENT BY THE PRESIDENT AND CEO 3

Statement by the President and CEO

exit to businesses and institutions, but also significant
efficiency measures in other areas. Such areas include
energy consumption, environmental impact and service
needs, information about people’s movements in the
building for smarter people flows, and better use of
spaces and surfaces. In addition, critical operating infor-
mation can be quickly and securely accessed via comput-
ers and mobile phones.

ASSA ABLOY leads the development of smart digital
solutions thanks to our long-term investment in innova-
tion and product development. Electromechanical prod-
ucts, entrance automation, digital and mobile solutions
account for more than half of Group sales today. We see
that they have a shorter life due to more frequent replace-
ments and upgrades, and we are also seeing more recur-
ring revenue from these solutions. I firmly believe that the
growth rate will continue to be strong in these areas.

Continuity in strategies
In 2006 the Group revised its strategy and established
three areas in which to achieve growth and profitability.
This strategy has served us well over the years. The three
areas are: Market presence, Product leadership and
Cost-efficiency.

Market presence
ASSA ABLOY’s strategies for an increased market pres-
ence are based on ever-increasing customer relevance.
The cornerstones are effective marketing and customer
segmentation, specification, emerging markets, strong
brands and acquisitions.

Increased customer focus through market segmenta-
tion is an important component of the marketing strat-
egy. We work very closely with participants in the distri-
bution sector with advice and provide digital tools for
drawings and specifications. The number of specifiers in
the Group continues to sharply increase, especially in the
emerging markets, with over 10-percent growth in pro-
jects requiring specifications.

In an effort to get even closer to our end customers,
we are making substantial investments in Commercial
Excellence processes. We strive to maintain direct dia-
logue with our customers, users and clients, where we
can better present the value of our solutions. By digitiz-
ing and automating the administrative aspects of the
sales process we are able to allocate more resources to
marketing and sales, and we are constantly striving to
improve our service to customers.

Our brand strategy prioritizes the ASSA ABLOY Group
brand for a more cohesive offer. We are gradually reduc-
ing the number of local brands. The Yale brand is the
global leader in smart door locks and solutions for the
residential market.

Another essential component of the market presence

strategy is acquisitions. Through our global operations
and our wide product range we can often offer the best
synergies with a proven model for integration.

Product leadership
ASSA ABLOY is a product-driven company where innova-
tion and product development are central to our target
of 5 percent organic growth per year. Over the past dec-
ade we have greatly increased our investments in
research and development and they now amount to 3
percent of sales. In 2017, new products (products that
have been on the market for less than three years)
accounted for 28 percent of sales. The target is 25 per-
cent over a business cycle.

Innovation work is based on a common structured
process with a modular approach involving customers
and partners at our 114 development and competence
centers around the world. The number of development
engineers is constantly increasing, and in 2017 we had
more than 2,000 employees engaged in product devel-
opment.

The main driver for innovation and product develop-
ment is the rapid growth of digital and mobile technolo-
gies. This is the driving factor behind the Group-wide
development platforms for products and solutions. Such
initiatives include Seos, a complete ecosystem for digital
keys and smart mobile devices and Aperio, a wireless
solution to efficiently connect many locks and doors in a
building complex. The Group develops standardized and
open software combined with physical lock solutions,
providing increased customer benefit with custom fea-
tures. This creates a large aftermarket of licenses, virtual
keys and services with updates and maintenance of
installations and systems with shorter life cycles and
recurring revenue with good profit potential.

Smart door opening solutions is yet another digital
and mobile technology that is undergoing rapid develop-
ment. More and more homes are being equipped with
smart door locks for improved safety, security and con-
venience in the home. Here we develop leading solutions
that are also compatible with other vendors’ smart home
products and solutions.

The mature markets account for about three quarters

We are world leaders in the development of technolo-

of ASSA ABLOY's total sales. For several years the Group
has focused on increasing its market presence in emerg-
ing markets. We have strong confidence in the potential
for future growth in the emerging markets and continue
to invest strategically for both organic and acquired
growth. They account for 23 percent of our total sales, up
from 13 percent in 2007. The business logic is simple: 80
percent of the world's population lives in the emerging
markets. The growth rate in demand is trending much
higher than in the mature markets and as our base gets
larger, our aftermarket business is becoming increasingly
profitable.

gies for identification and authentication, how people
prove their identity and right to access. This aspect is not
limited to physical access to buildings, but also includes
“logical access” to computers and other connected
devices with virtual identification through cloud services.
We develop systems for secure transactions, ID docu-
ments and national passport systems, where ASSA ABLOY
provides complete components such as cards, card
r eaders printers and equipment for physical production
of identification documents. Another increasingly impor-
tant driver for product development is a higher demand
for sustainable solutions. Sustainability is integrated into

STATEMENT BY THE PRESIDENT AND CEO

ASSA ABLOY ANNUAL REPORT 2017

ASSA ABLOY’s Executive Team.
Sitting from the left: Carolina
Dybeck Happe, Chief Financial
Officer, and Johan Molin,
President and CEO.
Standing from the left: Thanasis
Molokotos, Head of Americas
divison, Anders Maltesen, Head
of Asia Pacific division, Juan
Varges*, Head of Entrance
Systems division, Christophe Sut,
Head of the ASSA ABLOY
Hospitality business unit, Stefan
Widing, Head of the HID Global
business unit, Ulf Södergren,
Chief Technology Officer. Tzachi
Wiesenfeld, Head of EMEA
division.

* Juan Varges left the Executive
Team on December 31, 2017
and was replaced by Mogens
Jensen on January 1, 2018.

our entire product development process from concept
stage to materials recycling. We develop entire product
ranges of sustainable products that help reduce environ-
mental impact and save energy, while using less
resources in the production of these products. All
strategic product groups have environmental product
declarations.

Cost-efficiency
The strategy to increase cost-efficiency involves radically
reducing costs through increased efficiency in all parts of
the value chain. Basic activities include the recurrent
multiannual programs to move and concentrate produc-
tion of key components to factories in low-cost coun-
tries, increase the proportion of component purchasing
and complete final assembly of products in factories
close to customers. Since this initiative began in 2006,
the Group has closed 77 plants, converted 126 plants to
assembly and reduced staff by 13,564 people. The sixth
program is underway and is progressing according to
plan, with the goal of closing 10 plants and 40 offices
over three years.

Purchases are increasing and we aim to have fewer and

larger high-quality suppliers, mainly in low-cost coun-
tries, who are being integrated more and more into our
value chain. Over the past five years, the number of sup-
pliers has been reduced by 28 percent to around 6,900
worldwide. The goal is to continue to reduce the number
of suppliers.

We have been applying Lean methods and VA/VE
analysis for a long time to save resources and simplify
material flows. Our long-term Seamless flow initiative
has great potential. The aim is to standardize all adminis-
trative flows and processes through digitization and
automation, thereby reducing costs. This broad program
includes digitization and automation of everything we
do in our entire value chain from sourcing, innovation
and production to distribution and sales. Seamless flow
allows us to shift resources to marketing, sales and main-
tenance in order to increase customer value.

Thank you for twelve fantastic years
After twelve years as president, if I were to briefly reflect
on ASSA ABLOY, it is perhaps the strategy and the con-
tinuous value creation that it has contributed to that is
the Group's hallmark: stable good growth with good
profitability for over a decade in a world periodically
affected by crises and political uncertainty. We have the
strength to grow with good profitability even in difficult
times, thanks to our large installed base and aftermarket,
which provide a good buffer. Sales have increased 174
percent over these twelve years. This figure is surpassed
by the increase in operating income at 203 percent and
earnings per share, which increased by 235 percent. We
also have a strong cash flow and a strong balance sheet,
which assures our ability to move freely in the future.

I have decided to step down and turn over the reins to

a new energy source in 2018. It has been an amazing
journey together with all of ASSA ABLOY’s talented
employees. With pride and humility, I would like to thank
you all for your amazing work that has made us the
superior world leader in door opening solutions. I am
convinced that the journey of profitable growth will
continue well into the future.

Finally, I would like to say thank you and wish all of

ASSA ABLOY’s employees and my successor, Nico
Delvaux, a continued successful journey.

Stockholm, 5 February 2018

Johan Molin
President and CEO

ASSA ABLOY ANNUAL REPORT 2017

STATEMENT BY THE PRESIDENT AND CEO 5

Value creation strategy

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

To lead in innovation and provide well-designed, safe,
secure and convenient solutions that give true added
value to our customers.

To offer an attractive company to our employees.

Strategy for growth and profitability

The Group’s overall strategic direction is to spearhead the trend toward 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

Beliefs

Sustainability

Continuing professional
development, capabilities and
beliefs are the basis for the
Group’s success.

Based on accountability, diversity
and commitment for a focused,
results-driven company with high
business ethics.

Is integrated in all Group pro-
cesses: innovation, product
development, manufacturing,
logistics and sales.

VALUE CREATION STRATEGY

ASSA ABLOY ANNUAL REPORT 2017

Goals and outcomes

GROWTH AND PROFITABILITY

10%

annual growth through a combination
of organic and acquired growth1

16–17% operating margin1

1 Long-term target as an average over

a business cycle

MARKET PRESENCE

+ increased sales on emerging markets

PRODUCT LEADERSHIP

25% of sales from new products

COST-EFFICIENCY

–28% reduction in number of suppliers

ENVIRONMENT

–20% greenhouse gas emissions

SOCIAL KPI

–55%

injury rate

30%

women in management positions

SEK M
80,000

60,000

40,000

20,000

%
20

SEK M
20,000

15,000

10,000

5,000

%
35
30
25
20
15
10
5
0

Number
10,000

8,000

6,000

4,000

2,000

Tons/SEK M
12

Injury rate
8

%
25

Average annual growth over the past ten years
has been 9 percent. The Group’s growth in
2017 was 7 percent, including 4 percent
organic growth and 2 percent from acquisi-
tions.

Average operating margin over the past ten
years was about 16 percent, excluding items
affecting comparability.

Group sales on emerging markets increased
sharply and the annual growth rate over the
past ten years was nearly 20 percent. In 2017
sales in emerging markets increased.

The goal of having at least 25 percent of total
sales from products less than three years old
has been exceeded in recent years. In 2017 the
share was 28 percent.

Reducing the number of suppliers is impor-
tant for reducing costs and improving quality.
Active efforts have reduced the total number
of suppliers by 28 percent over the past five
years.

The target is to reduce the intensity of green-
house gas emissions related to the Group’s
energy consumption by 20 percent from 2015
to 2020. In 2017 the reduction was 2 percent
and the reduction since 2015 is 14 percent.

The target is to reduce the injury rate by
55 percent from 2015 to 2020. In 2017 the
injury rate decreased by 20 percent and
totaled 4.1 injuries per million hours worked.
Since 2015 the injury rate has declined by
39 percent.

The target is to have 30 percent of manage-
ment positions held by women by 2020. In
2017 the share was 23 percent.

ASSA ABLOY ANNUAL REPORT 2017

GOALS AND OUTCOMES 7

ASSA ABLOY’s value-creating model

Value creation for all
stakeholders

OVERALL STRATEGY

RESOURCES

EXTERNAL FACTORS

The Group’s overall

strategic direction is

to spearhead the

trend toward

increased safety

and security with a

product-driven offer-

ing centered on the

customer.

The strategy is

based on:

Market presence

Product leadership

Cost-efficiency

Financial capital

47,500 employees
in over 70 countries

Strong common processes
in a decentralized customer-
focused organization

Sustainability is an
integrated part of all
business processes within
the Group

Efficient production and
assembly facilities all over
the world

Strategic and cost-effective
suppliers

Strong brands, patents and
well-diversified product
portfolio that meets local
regulations and standards

Customers all over the world
with a large installed base

• Growing security needs
• Urbanization
• Digitization
• Automation
• Sustainability

ASSA ABLOY’S
MOST IMPORTANT
ACTIVITIES

Marketing,
sales, advisory, service
and support

Innovation and product
development

Sourcing, manufactur-
ing, and streamlining of
processes

Acquisitions and
integration

STAKEHOLDERS

• Customers
• Suppliers and partners
• Shareholders and investors
• Employees
• Society

VALUE-CREATING MODEL

ASSA ABLOY ANNUAL REPORT 2017

OVERALL VALUE-
CREATION

Security

Safety

Convenience

Profitable growth

RESULT

VALUE FOR STAKEHOLDERS

Products, services and
support

Electromechanical products
and automatic solutions
account for 55 percent of
sales

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

Customers:
• Security, safety and convenience
• Retained market and product leadership
• Sustainable products with environmental

product declaration

Suppliers and partners:
• Technological development
• Stable partner
• Earnings and employment

Shareholders and investors:
• Dividends and capital appreciation

Employees:
• Safe workplace
• Professional development and income
• Ethically, stable and long-term business

Society:
• Growth
• Employment
• Sustainability
• Increased safety and security

ASSA ABLOY ANNUAL REPORT 2017

VALUE-CREATING MODEL 9

Value creation strategy #1

Market
presence

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 seg-
mentation of sales channels and the strength of the brand portfolio,
which includes the global ASSA ABLOY master brand as well as many of
the strongest brands in the industry.

No.1Global leader in door

opening solutions

Global market leader with
stable growing demand

ASSA ABLOY has a unique global market presence with operations in over 70 countries. The basic
human need for safety and security increases with rising prosperity, urbanization and technological
development. At the same time, demand is growing for electromechanical, digital and mobile door
opening solutions, as well as increasingly sustainable and energy-saving products and solutions.
The result is stable and growing demand for ASSA ABLOY’s door opening solutions and good
conditions for profitable growth.

Institutional and commercial markets – complex,
demanding projects
Approximately 75 percent of ASSA ABLOY’s total sales go
to buildings in education, health care, public administra-
tion, private offices, shopping centers, stores and ware-
houses – environments where people work, shop and
seek out services.

Customers are knowledgeable and demanding, and
procurement often takes place in large, complex projects.
ASSA ABLOY can deliver total door opening solutions as
well as services and professional advice, with high profita-
bility potential . Demand is growing particularly strongly
for complete electromechanical and advanced door
opening solutions with digital and mobile technologies,
where ASSA ABLOY is the world leader. The Group’s
focused and segmented sales forces have contact with
many stakeholders in the value chain to develop optimal

solutions for the multifaceted needs of the customers.
Distribution and installation are largely handled by install-
ers, system integrators and locksmiths.

Residential market – urbanization and smart door
locks drive growth
Residential sales account for about 25 percent of total
sales. Demand for secure door opening solutions is grow-
ing in response to the urbanization trend, with more and
more people moving to cities. Demand is also growing for
smart door locks, driven by the “smart home” trend where
ASSA ABLOY is spearheading the development of smart
digital and mobile door opening solutions for private
homes, often in partnership with suppliers of other smart
home products. Private customers often need profes-
sional advice and installation assistance. Depending on the
geographic market, ASSA ABLOY cooperates with door

×523 percent of sales are in

emerging markets, a fivefold
increase in ten years

55%

The percentage of electro-
mechanical products and
entrance automation has
increased from 33 percent to
55 percent of sales in ten
years

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2017

BREAKDOWN OF ASSA ABLOY’s SALES

Working and shopping

Aftermarket

Institutional and commercial

market – share of sales 75%

Renovations, remodeling and
additions, replacements and
upgrades of existing door open-
ing solutions, as well as ongoing

service – share of sales 67%

Living

New construction

Private customers and residential

market – share of sales 25%

New buildings – share of sales 33%

and window manufacturers or specialist distribution chan-
nels such as home improvement stores and locksmiths.

Aftermarket – stability and profitability
The aftermarket is significant in both the institutional,
commercial markets and the residential market,
accounting for two thirds of ASSA ABLOY’s total sales.
The aftermarket includes renovations, remodeling and
additions, replacements and upgrades of existing door
opening solutions, as well as ongoing service. The after-
market provides stability and good profitability thanks to
the Group’s global market presence and the world’s
largest installed base of door opening solutions. New ser-
vice concepts based on long-term contracts, preventive

maintenance and modernization strengthen customer
relationships and provide good opportunities for
upselling. Increased demand for electromechanical, digi-
tal and mobile door opening solutions also has a positive
impact on growth in the aftermarket.

These solutions have shorter life spans and are supple-

mented or replaced more often than mechanical solu-
tions, which drives growth. ASSA ABLOY’s software plat-
forms for flexible solutions enable customers to constantly
upgrade their security with more and new features. Con-
nected products, service products, subscription services
and licenses contribute to stronger customer relation-
ships, as well as to increased recurring revenue streams
based on supply and service collaborations.

ASSA ABLOY ANNUAL REPORT 2017

MARKET PRESENCE 11

Market presence

Market strategies

ASSA ABLOY’s strategies for an increased market presence is based on increased customer
relevance. The cornerstones are effective market and customer segmentation, specification,
strong brands and acquisitions.

Increase growth through segmentation
and specification
Customer relevance is strengthened through segmenta-
tion where specialized marketing and sales teams focus
on different markets and customer segments to gain the
industry’s best understanding of customer needs, build
relationships and generate demand. The aspiration is to
be an expert on total door opening solutions adapted to
each segment. ASSA ABLOY offers solutions that meet
customer requirements for safety, security, convenience
and sustainability, special local requirements, rules and
standards, as well as the need for integration into new or
existing security systems.

ASSA ABLOY’s market organization works closely with

architects, security consultants, large end users and dis-
tributors. A substantial portion of the business processes
are digitized, including product information, design and
configuration, order management, logistics and pay-
ments. For example, ASSA ABLOY supports the custom-
ers with digital drawings and configurations of door
opening solutions, as well as objects for building infor-
mation modeling (BIM). The digitization initiative for
business processes and Seamless Flow has resulted in a
reduction in the number of people involved in indirect
sales, while the number of employees involved in direct
sales has increased and continues to grow.

Entrance automation, 28%

Mechanical locks, lock
systems and fittings, 27%

Growth through acquisitions
Acquisitions are an important part of the strategy to
increase market presence. The ambition is 5 percent
acquired growth per year. Over the past ten years the
Group has made some 150 acquisitions to further
increase its market presence, especially in emerging mar-
kets, complementing existing operations and increasing
its offering of electromechanical, digital and mobile solu-
tions. On average these acquisitions have contributed to
an annual growth of about 6 percent. In 2017, 16 acquisi-
tions were consolidated and one business was divested.
The Group sales increased by SEK 1,753 M net from
acquisitions and divestments , or totally by 2 percent.

Electromechanical and
electronic locks, 27%

Security doors and
hardware, 18%

Exploiting the strength of the brands
and the sales force
ASSA ABLOY’s portfolio includes valuable, leading and
well-known brands as a result of the Group’s many
acquisitions. To optimize benefit from the brand port-
folio locally and globally, the brands are continually
consolidated in parallel with market and customer
segmentation.

ASSA ABLOY is the global master brand that often sup-

ports individual brands that are well versed in local
knowledge, regulations and security standards. The ASSA
ABLOY brands account for around 70 percent of Group
sales. Global brands, which are all leaders in their respec-
tive market segments, serve as a complement to sales:

HID in secure identity and access management, Yale in
the residential market, Mul-T-Lock for locksmiths, and
ABLOY in high-security locks. These brands account for
almost 20 percent of Group sales. The Group also has
brands that are not associated with ASSA ABLOY. These
brands, which represent leading expertise in specialty
products and service, complement ASSA ABLOY’s market
presence and positioning. Sales for these brands, which
mainly occur through distributors and installers, account
for about 10 percent of sales.

Improve sales processes
ASSA ABLOY’s market strategies aim to continually
enhance customer value. Through the Group-wide initia-
tive to improve sales processes, the Group is developing
and streamlining its processes for pricing, brand posi-
tioning, marketing and sales, with an increased focus on
sales processes.

Over the past 12 years, ASSA ABLOY has focused its
strategies for profitable growth on market leadership
with acquisitions, a high pace of innovation and product
development, as well as cost efficiency. A fundamental
idea is to gradually move more and more resources for-
ward in the value chain to strengthen the sales processes
and to increase customer value.

In a first step, the initiative emphasizes streamlining
the Group’s sales processes with strong support in digital
solutions to further develop customer relationship man-
agement and constantly enhance customer relevance in
all dimensions. Being an ASSA ABLOY customer should
be easy, convenient and value-creating.

An extensive project conducted throughout the Group
identified a number of sub-processes to understand how
different product lines reach the market. These sub-pro-
cesses addressed control of all channels in the supply
chain for sales based on specifications to professional
buyers, consumers and for OEM delivery, including sales
organizations, functions, responsibilities, digital tools and
sales channels, contact paths, pricing and sales messages.
Although the sales processes in ASSA ABLOY’s global
organization vary because of rules, norms and traditions,
the initiative provided extensive knowledge-based syner-
gies for more structured and efficient change manage-
ment. Knowledge and experience are shared in the
Group through Group-wide work groups for the various
sales channels. The different sales approaches and tech-
niques are analyzed, along with a large number of cus-
tomer transactions. The result is a better understanding
of customer needs and behaviors, along with further
development of more efficient sales processes with
reporting and follow-up. In a first step, specifiction sales
aimed at commercial customers will be prioritized. Their
projects are usually large and complicated, with many
parties involved. Roll-out of the structured sales pro-
cesses that were developed will begin in Asia.

MARKET STRATEGY

ASSA ABLOY’s world-leading
market presence is based on
three strategies:

• Leveraging the strength of

the brand portfolio

• Increasing growth in the

core business and

• Expanding into new markets

and segments.

SALES BY PRODUCT GROUP

Mechanical locks, lock
systems and fittings, 27%

Entrance automation, 28%

Electromechanical and
electronic locks, 27%

Security doors and
hardware, 18%

The Group sees fast-growing
demand for electromechani-
cal products, as well as elec-
tronic and digital solutions.
Since 2007 these have sharply
increased from 33 percent to
55 percent of Group sales.
Mechanical products con-
tinue to increase, but electro-
mechanical products are
growing considerably faster.

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2017

Markets

The global market for door opening solutions has good underlying growth because of positive
trends such as growing demand for security, urbanization and digitization. ASSA ABLOY is the
world-leading supplier with operations in over 70 countries and sales worldwide. The mature
markets account for about three quarters of ASSA ABLOY’s total sales. For several years the Group
has focused on increasing its market presence in emerging markets.

Fragmented competition – continued
consolidation
The global market for door opening solutions is still
fragmented, especially in emerging markets where the
largest manufacturers have a small market share. Con-
solidation is underway and has advanced farthest in
North America, followed by Europe, with ASSA ABLOY as
a driving force. The Group is the global market leader and
considerably larger than its closest competitors the
Germany-Swiss group Dormakaba, Allegion (USA), and
Hörmann (Germany).

Globalization benefits ASSA ABLOY
The difference in demand for door opening solutions
between countries is significant due to different cli-
mates, security needs, development level, regulations
and standards. As a global player with a local presence on
all major markets, this gives ASSA ABLOY competitive
advantages. The same applies to the globalization trend
that promotes Group-wide smart and cost-effective
solutions that are requested by more and more global
companies. Demand is simultaneously shifting increas-
ingly towards electromechanical technology, with rapid
growth in higher value digital and mobile solutions.

Large potential in emerging markets
Group sales to customers in Asia, Eastern Europe, the
Middle East, Africa and South America have increased
over the past ten years from 13 percent of total sales in
2007 to 23 percent in 2017, and continues to have great
potential. Demand for mechanical locks is somewhat
stronger in emerging markets than in mature markets.
But growth figures are high for electromechanical door
opening solutions due to rapid technological develop-
ments and increased prosperity, especially mobile solu-
tions both in the commercial segment and the residen-
tial market. Another encouraging trend for the future is
that the aftermarket for maintenance and upgrades is
expected to grow.

Asia has the greatest growth potential because of its
large population. The large Chinese market, where the
Group is the largest supplier of door opening solutions,
remains an important expansion area for the Group
although the growth rate has slowed down considerably
in recent years. Even so, growth in the region has been
positive.

Group sales trend 2017
by region in local
currencies

EUROPE

NORTH AMERICA +8%
SOUTH AMERICA +4%
+7%
+1%
+4%
+16%

OCEANIA

AFRICA

ASIA

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 13
percent in 2007 to 23 percent
in 2017.

SALES BY REGION

SALES ON EMERGING MARKETS1

Europe, 38%

Africa, 1%

North America, 40%

South America, 3%

Asia, 14%

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 2017

MARKET PRESENCE 13

OceanienAsienSydamerikaNordamerikaAfrikaEuropaMarket presence

Distribution

Distribution is an important part of ASSA ABLOY’s value creation for the customers. The Group
reaches its end-customers through a variety of distribution channels at various stages in the supply
chain. The number of employees who work directly with customers has been substantially growing
for many years, thanks to digitization and streamlining provided by the Group’s Seamless Flow pro-
cesses. One example is the growing number of specifiers tasked with increasing knowledge and
demand by offering expertise 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 opening solutions. This
takes place in close collaboration with customers and
their advisers in distribution, creating good customer
relations, market demand and entry barriers for competi-
tors. Distributors also play a key role in providing service
and support after installation.

In the commercial segment, distributors in some mar-

kets act as advisers and project managers. They have a
good understanding of customer needs and ensure that
the solutions meet local rules and standards. Electro-
mechanical solutions are distributed from manufacturer

to end-user mainly through security installers and spe-
cialist distributors. The solutions are also sold through
systems integrators, who offer total solutions for installa-
tion of perimeter protection, access control, and access
to computers and other connected devices.

Specification – advice and digital tools
Rapid technological development and the growing num-
ber of rules and standards, especially in the area of sus-
tainability, are constantly increasing complexity for
builders and other end-customers. The trend goes from
component to prefabricated door openings and
advanced total door opening solutions. This is also

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.

ASSA ABLOY
representative Distributor

ASSA ABLOY

DISTRIBUTION / PARTNERS

DISTRIBUTION takes place through many
different players depending on customer
segment and stage in the supply chain:

security systems integrators, locksmiths, security
installers, building and lock wholesalers, retailers,
home improvement stores, hardware and security
stores, OEMs, door and window manufacturers.

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 2017

increasing the competence required by distributors. A
central role in marketing is therefore played by ASSA
ABLOY’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 that provide total
security solutions that meet all rules and standards. They
also collaborate with other key groups early in the distri-
bution chain, such as building consultants, architects,
security consultants and building standards agencies, to
educate them regarding new, innovative security solu-
tions and to create demand with their business-driving
competence.

The Group is spearheading the industry trend for
product configurations and 3D modeling using building
information modeling (BIM), which facilitates the work
of architects and building consultants. BIM technology
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 the solution’s products can be

ordered online. Distributors have constant access to
advice.

The complex information in BIM creates good oppor-

tunities for repeat business, since the customer can
quickly see exactly which products are installed in the
building, along with their location. This simplifies the
upgrade, service and repair processes.

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 ABLOY 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

Input

STAKEHOLDERS

CODES AND SECURITY STANDARDS

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

Small and medium-sized
customers
• Offices • Stores

Residential market
• Apartments • Houses

STAKEHOLDERS
Such as architects, security
consultants, government
agencies responsible for
security standards, and other
stakeholders.

ASSA ABLOY has developed close cooperation with customers, architects and security
consultants to specify appropriate products and a well-functioning security solution.
Many door and window manufacturers install lockcases, hardware and other fittings in
their products before delivery to customers.

ASSA ABLOY ANNUAL REPORT 2017

MARKET PRESENCE 15

Value creation strategy #2

Product
leadership

Product leadership is achieved through innovation and continuous prod-
uct 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.

No.1The most innovative

supplier of total door
opening solutions

World-leading technology for
digital and mobile solutions

A constant flow of new, innovative and sustainable products is the most important driver for ASSA
ABLOY’s target of five percent organic growth. The Group has sharply increased investments in inno-
vation and product development since 2007. One goal is for products less than three years old to
account for at least 25 percent of total sales. The goal has been surpassed for seven consecutive years,
and the figure was 28 percent in 2017. ASSA ABLOY is the global market leader in meeting the needs
of the digital and mobile society for intelligent, connected and networked door opening solutions.

55%

The percentage of electro-
mechanical products and
entrance automation has
increased from 33 percent to
55 percent of sales in ten
years

Product leadership

Strategies for a high innovation rate
The Group’s vision is to be the most innovative supplier
of total door opening solutions, in order to deliver con-
venient, secure and well-designed security solutions that
provide real added value to customers. The strategy is
aimed at global product leadership. It is based on an
innovation process with technology development of
Group-wide global platforms, with 114 competence
centers close to the customers and focused product
development work in all divisions. R&D investment has
increased by 190 percent since 2007, reaching a new
record level of SEK 2,200 million in 2017. Over 2,000
employees are engaged in product development.

Technology development and new technologies
Technology development for door opening solutions
takes place in steps. The foundation is usually a solid reli-
able mechanical product. Electromechanical solutions
make it possible to digitally control the bolt, door and
the entire entrance environment for more efficient and
convenient operation. A connected smart solution is the
next step. It can be remotely controlled for added secu-
rity and linked to a system of products and solutions with
multiple security features. In addition, the status of con-
nected products can be constantly followed for purposes
such as saving energy and ensuring that they are always
in operation and that they receive the service that they

PRODUCT LEADERSHIP

ASSA ABLOY ANNUAL REPORT 2017

28%

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

The strategy for product leadership is based on four points:

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

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

Developing and using
common technology plat-
forms and common tech-
nologies.

Continuing to expand the
number of R&D competence
centers close to customers.

relating to identification and authentication. Global
Technologies is the global market leader for products
and solutions for secure identities for physical access to
buildings and areas, as well as logical access to com-
puters and other connected devices. This is a core com-
petence in the development of digital door solutions.
The products include access cards, both physical and
mobile, readers, and complex systems services for iden-
tity management for physical and logical access.

Sustainable solutions
Another important driver for product development is the
sharply rising demand for sustainable solutions. Invest-
ments in sustainable buildings are growing worldwide,
with requirements for energy savings, lower materials
consumption, and renewable or recycled materials
becoming increasingly important. The various openings
of a building can account for up to 20 percent of energy
consumption. ASSA ABLOY offers a growing selection of
products with environmental declarations and saves
energy for customers in a variety of ways, while also
reducing consumption of materials and other resources
used in production.

need. ASSA ABLOY’s global platforms currently provide
customers with a complete, intelligent ecosystem that
coordinates multidimensional security solutions for
whole complexes of buildings, with user identification
and preventive and acute signaling of security risks. Plat-
forms such as Aperio, Seos, Cliq and Accentra that have
been adapted to local needs have undergone annual
growth of 12–24 percent globally and even higher in cer-
tain markets.

The main driver of innovation and product develop-
ment is the rapid growth of digital and mobile technolo-
gies. Sales of electromechanical products have grown by
270 percent since 2007. Electromechanical lock solu-
tions, entrance automation and Global Technologies
identity and access management solutions currently
account for 55 percent of Group sales. Demand in certain
product areas is particularly strong. The number of smart
residential door locks sold in 2017 was 2 million, an
increase of 270 percent since 2012. Sales of mechanical
products continue to increase, but electromechanical
products are growing considerably faster.

Technological leadership in the digital and mobile
world provides substantial potential for robust profitable
growth for some time to come. More electronics means
increased sales growth per door with rapid technological
developments that require more frequent replacements
and upgrades, while recurring service and maintenance
revenues also increase. The market potential is large
when over 10 percent of doors today are equipped with
some form of electronic/digital solution.

A key competitive advantage is ASSA ABLOY’s Global
Technologies division with its technology development

ASSA ABLOY ANNUAL REPORT 2017

PRODUCT LEADERSHIP 17

Product leadership

Future security solutions –

Convenient, secure, digital

Human needs in the new digital and connected service society serve as an important point of depar-
ture for ASSA ABLOY’s innovation and product development. Secure, convenient and intelligent door
opening solutions that interact with people and products play a major role in the continued develop-
ment of successful e-commerce, the Internet of Things, home services and the sharing economy.

The technology shift for door opening solutions in the
digital society is accelerating, providing ASSA ABLOY with
major growth opportunities. Strong growth is expected
for home delivery of products and services. Broadening
and deepening demand are boosting revenue with more
value per product, faster replacements and upgrades,
more recurrent revenues and new business opportunities.

E-commerce, sharing economy och home care
Online commerce is rapidly expanding worldwide and
many customers want their goods physically delivered to
their homes or workplaces, which requires trusted suppli-
ers to have access and be able to open doors even when
the recipient is not there. ASSA ABLOY delivers smart door
locks and access management systems with the technol-
ogy to create digital identities, which are represented in
mechanical systems by a key that fits in a lock. This digital
identity, a code or a digital signal that is programmed to
apply for a certain person and a certain door during a cer-
tain time period, can be given to a supplier who thereby
gains access at a certain point in time. The code or digital
signal – the key – can be sent to a mobile phone and the
supplier can securely and conveniently deliver goods.

The same type of solutions will make it easier for the
rapidly growing sharing economy where individuals and
families can share housing, vacation homes, vehicles and
equipment. Secure identification and digital identities
enable secure and convenient access to whatever is
shared.

An aging population means an increased need for
home care, where caregivers and home care providers
need to be able to visit the home to provide their ser-
vices. Home care is rapidly growing in many mature mar-
kets. The problem is the same as for delivery of goods.
Care providers have to be able to get into the home to

provide care and nursing. In simple cases, smart door
locks provide secure and convenient access. In some
cases, however, care providers need access to a gate, a
garage or other area to perform the services such as laun-
dry or picking up the mail. ASSA ABLOY’s Accentra prod-
uct platform for multi-family buildings and small and
medium enterprises enables easy and intuitive manage-
ment of access to housing and other areas using digital
keys, cell phones or other mobile devices while providing
the safety and security that small businesses, care provid-
ers and their customers demand.

The Group works in partnership with several local and
global participants to facilitate the delivery of goods, the
sharing economy, and home care. During the year, Ama-
zon launched a home delivery solution with video moni-
toring in which ASSA ABLOY is a partner and delivers
smart door locks.

Security for shipping and logistics
Shipping and logistics is another growing area in which
the Group is developing systems, products and solutions.
There is a great need for security and surveillance. Loss
during shipping is a huge problem and many shipments
take place in unlocked trucks with unidentified drivers.
The Group is developing total solutions based on a pro-
prietary service platform, software and hardware in the
form of locks, digital and mobile keys, gates, identifica-
tion and access management systems that work around
the clock.

The Internet of Things and Information Services
ASSA ABLOY’s products and technologies are well-posi-
tioned to grow with the Internet of Things, where various
machines and products at home and at work are con-
nected for control and monitoring of functions and pro-

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

PRODUCT LEADERSHIP

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 conven-
ient 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.

ASSA ABLOY ANNUAL REPORT 2017

duction. Estimates indicate about 25 billion connected
devices today, or about 3.5 per person. This figure is pro-
jected to double by 2020 to a total of 50 billion con-
nected devices.

The Group has world-leading technology and solu-
tions for secure digital and mobile management of iden-
tity and authentication to determine who should have
access when, where and how, with various layers of secu-
rity and control. ASSA ABLOY’s Seos is a flexible and mod-
ular technology platform that serves as an eco-system of
products and services that are integrated in various solu-
tions for the Internet of Things.

A significant source of revenue in the future is also the

information that ASSA ABLOY’s products and solutions
can give customers. Movement patterns as people enter
and leave buildings provide valuable information about
how different areas are used at different times. This infor-
mation provides signals about both security needs and
energy needs – one of the largest cost items for property
operations – for efficient climate control and use of vari-
ous areas of the building. Control may also include open-
ing and closing doors, surveillance of high-security areas
and goods and transport flows. These information flows
provide greater opportunities for preventive and more
efficient service and maintenance before errors occur.

More recurrent services
As ASSA ABLOY’s product portfolio contains more digital
electronics, software and information, revenues shift
increasingly toward recurrent services in the Group’s
offering. These services are often based on subscription

agreements for upgrades, information and analysis, as
well as licenses. ASSA ABLOY strives to achieve open
standards to facilitate integration with customers’ secu-
rity and administrative systems. The trend toward com-
plex, multifunctional systems creates new business
opportunities, promotes close customer relationships,
and generates stronger recurring revenue streams, often
with long-term contracts for supply and service collabo-
rations for cloud services. Improved function and more
benefit thanks to more efficient solutions and opera-
tional cost savings entail higher value for customers and
more efficient administrative processes for ASSA ABLOY.

Entrance automation
A strong and fast-growing market for the new electronic
technologies is entrance automation, in which ASSA
ABLOY has gained global market leadership with its
Entrance Systems division through acquisitions, innova-
tion and organic growth. Hospitals, schools, airports,
offices, warehouses, commercial buildings and industrial
buildings are typical facilities with many entrances and
doors of various types. The total market for entrance
automation is estimated at about SEK 200 billion, with a
robust growth rate. Connected products with electronic
monitoring of installations provide the facility services
provider with information about maintenance needs. If a
problem arises, accurate information is received about
what happened and what spare parts are needed to fix
the problem. This approach allows errors to be quickly
and efficiently remedied, while generating substantial
customer value.

ASSA ABLOY is leading the
development of digital and mobile
security solutions. Shared
Technologies, the Group’s joint
development center, plays a key
role in this initiative.

ASSA ABLOY ANNUAL REPORT 2017

PRODUCT LEADERSHIP 19

Product leadership

Continuously improved innovation process

ASSA ABLOY’s product leadership is based on the Group’s joint innovation process. Guiding prin-
ciples are insights into customer needs, product development based on a long-term plan, active
management of product portfolios, and a cost-efficient innovation process. Shared Technologies,
the Group’s joint development center, plays a key role in this initiative.

Value creation with customer insight
Each new product and product solution should create as
much customer value as possible through improved
function and lower costs. All new projects aim to solve an
identified customer need and are based on insight into
underlying customer needs and requirements. Broad
monitoring and collection of market data and surveys of
different customer segments are conducted on an
ongoing basis, which also include efforts to understand
unspoken customer needs. Cost-savings are achieved
through improved designs, new materials and compo-
nents, as well as continuous improvement of the devel-
opment and production process.

Sustainability
ASSA ABLOY’s sustainability program is integrated into
the development process from the concept stage to
recycling of worn-out products. Specifications for the
development of new products and customer solutions
may be based on life cycle analyses and a reduction in
energy consumption in buildings, as well as concrete sav-
ings 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.

Product platforms

CLIQ™

Seos™

Aperio™

Accentra™

CLIQ is a secure locking sys-
tem with advanced micro-
electronics in programmable
keys and cylinders. The sys-
tem 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 soft-
ware programs provides the
global market with custom-
ized, flexible access control
solutions.

Seos is an identification tech-
nology solution that allows
the customer to use various
devices, from smart cards to
cell phones, for secure access
to applications. Seos’ appli-
cations range from building
access control, computer
login and cashless payments
to IoT (Internet of Things)
applications, time and
attendance reporting, and
secure printing.

Aperio is a technology devel-
oped as a complement to
existing electronic access
control systems. It is a con-
venient solution for end-
users to improve the security
and control of their prem-
ises. Central to Aperio is a
wireless communications
protocol, which functions at
short distances and can con-
nect an online access control
system to an Aperio-com-
patible mechanical lock.

Accentra is a cloud-based
access control system that
focuses on solutions for
multi- family buildings and
small and medium-sized
enterprises. A scalable infra-
structure through a cloud
provider provides a high
level of service and full con-
trol over information in a
centrally based security sys-
tem. Accentra supports mul-
tiple global products at door
level (Aperio, Yale, ASSA and
HID readers) and is devel-
oped for, and deployed in, a
true cloud environment for a
global reach, while comply-
ing with local demands.

Hi-O™

Hi-O (Highly intelligent
Opening) is a concept that
simplifies installation, ser-
vice and maintenance of
connected doors thanks to
advanced technology and
the plug-and-play principle.
Hi-O is a standardized tech-
nology for control and secu-
rity of door environments.
The technology enables
communication between all
the components included in
a door opening solution.

PERCENTAGE OF SALES OF
PRODUCTS LAUNCHED IN
PAST THREE YEARS
%

INVESTMENTS IN RESEARCH
AND DEVELOPMENT

SEK M

2,500

2,000

1,500

1,000

500

Design and design language
The Group has established a unit for development of
industrial design and a common design language. Plan-
ning of a Group-wide design center is the next step in the
development, to create an even clearer expression of
ASSA ABLOY’s basic values and the physical experience of
products with common guidelines for design, location of
brand names, colors and visuals. During the year the
Group also launched a Concept Lab where the product
development teams can test prototypes and conduct
user tests of technologies for the future.

Product management and product development
Product management ensures that each product group
has a vision-based long-term plan founded on market
insight, technology development, customer value and
the strengths of each product. These plans form the basis
for the portfolio balancing that must then take place
across all product groups within each unit. Projects are

planned and run according to Lean principles, where a
clear vision and a visual overview are important com-
ponents.

Product development is continuous and has three
phases: pre-development projects, new product devel-
opment and development of products already on the
market. Good development builds on knowledge and
reuse. A modular approach provides an opportunity to
reuse designs, make improvements and substitute parts
of a product or solution. Shared Technologies, the
Group’s joint development center for global product
platforms in which a modular approach to both hard-
ware and software is the basis for the joint solutions,
plays a key role in this initiative. The Group continually
invests in improvements to make the innovation process
more efficient by expanding its IT support with common
platforms for collaboration, project management and
product data management.

New products

ABLOY PULSE is a sustainable ecosystem in which the
cylinder generates energy from the movement when
the key is turned; no cables or batteries are needed. The
PULSE key can also be reused for other lock systems,
which reduces the quantity of waste. A mechanical
cylinder can easily be replaced with a PULSE cylinder –
all that needs to be replaced is the core of the lock, the
existing cylinder can be reused.

Aperio H100 has a narrow door handle that contains
energy and flexibility for wireless electronic access con-
trol. The H100 fits standard European and Scandinavian
interior doors, and can be integrated with many third-
party solutions and security systems. The H100 has an
environmental product declaration that describe the
environmental impact of the product throughout its life
cycle.

The new sectional door ASSA ABLOY OH1042S
from ASSA ABLOY Entrance Systems can be
opened at a speed of one meter per second – four
times faster than a standard door, saving an aver-
age of 20 seconds per opening cycle. This pro-
vides temperature control, less draft and dust
and shorter lead times.

HID Location Services is an award-winning solution that
allows organizations to see where staff is located inside a
building, which makes it possible to analyze how the
premises are used to achieve better control of the build-
ing and increased operational efficiency. This offering is
tailored for companies, universities, manufacturing
plants or other organizations that want to optimize their
workforce and improved efficiency within the facility.

Yale Assure Lock SL is the slimmest key free deadbolt
available in the US. This sleek and modern touchscreen
deadbolt allows homeowners to enjoy the convenience
of 100% key free unlocking while enhancing curb appeal.
It is upgradeable for smart home or security systems
with a Yale Network Module - available in HomeKit
(iM1), Z-Wave or Zigbee.

Lockwood T-Lock is a new smart and keyless lock
from ASSA ABLOY in Australia. The lock can be
controlled remotely using Telstra’s Smarthome
app. The lock is specially designed for Telstra’s
Connected Home product series and can be con-
nected with other digital products.

Value creation strategy #3

Cost-
efficiency

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

$Price management for

price leadership

Increased efficiency through
automation and digitization

ASSA ABLOYs strategy for radically reducing costs and increasing efficiency is fundamental to
continue to drive profitable growth by investing in market presence and innovation, while
simultaneously achieving the target of an operating margin of 16–17 percent. The work includes
recurring programs to streamline production and enhance efficiency in all processes within the
Group along the entire chain from product development and purchasing through production and
administration, to marketing, sales and distribution. Initiatives to improve efficiency through
digitization and automation of production and administrative flows are a top priority.

Production structure

ASSA ABLOY’s production structure is continually evolving
with recurring multiyear structural programs. One strong
driving force is the Group’s acquisition strategy, with an
average of one acquisition per month. A significant part of
the synergy effects on acquisition are the streamlining of
manufacturing and modernization of production, efficien-
cies in the organization and global logistics that result in
lower costs, increased flexibility, improved service to cus-
tomers and a better work environment.

The goal is to concentrate product assembly to sophis-

ticated plants close to customers primarily in mature

markets. Production of the more strategic components,
such as cylinders, rim locks and some electromechanical
products, is concentrated to the Group’s own produc-
tion plants in low-cost countries, while other compo-
nents are increasingly sourced from production partners.
Since 2006, 77 production plants have closed, more

than 126 plants have been remodeled into assembly
plants, and about sixty offices have closed. The majority
of the remaining production units in high-cost countries
have switched to mainly final assembly and customiza-
tion. These streamlining measures have been accompa-

COST-EFFICIENCY

ASSA ABLOY ANNUAL REPORT 2017

-28%

The number of suppliers has
been reduced by 28 percent
over the past five years.

nied by a staff reduction of 13,564 employees, largely in
production in high-cost countries. Including acquisi-
tions, the number of employees in low-cost countries has
nearly doubled since 2006 to about 20,370, and the
share has increased from 34 percent in 2007 to 43 per-
cent in 2017.

In 2016 the sixth Group-wide manufacturing footprint
program was launched, which will be implemented over
a three-year period. The goal is to close 10 production
plants and about 40 offices, and the work is proceeding

according to plan. The estimated cost of the program is
SEK 1,597 million.

A review of ASSA ABLOY’s logistics structure con-
tinued in 2017. Work is underway to reduce the number
of freight and other logistics providers, while creating a
more efficient structure for warehouse and logistics
centers with a high degree of standardization of materi-
als and products and a seamless flow-based, digital IT
infrastructure for fast, efficient and secure transportation
solutions.

PLANTS IN LOW-COST COUNTRIES

+Restructuring program

provides significant results

Czech Republic
Hungary
Croatia

Poland

Romania
Bulgaria

Mexico

Colombia

United
Arab Emirates

China

India

Malaysia

Chile

Brazil

South Africa

ASSA ABLOY ANNUAL REPORT 2017

COST-EFFICIENCY 23

Cost-efficiency

Professional sourcing

The transition from in-house production to an increased share of sourced standard components for
final assembly and customization, means that the Group’s purchasing processes are gaining in
importance. Purchasing accounts for a very large proportion of total costs, and is significant for
reducing costs. Purchasing has increased by around160 percent over the past decade and at the
same time the purchases have concentrated on fewer and more qualified suppliers, which has
entailed significant cost reductions.

The aim of the purchasing process is to ensure high qual-
ity at a low cost. This occurs in processes that drive a
number of activities for development and management
of purchases, where the Group's suppliers become stra-
tegic partners. They participate to a greater extent in
product development and grow in close collaboration
with ASSA ABLOY to be able to deliver not only compo-
nents, but entire subsystems and products based on sup-
plier agreements with category and quality manage-
ment. The Group contributes competence transfer and
its production and quality expertise.

The purchasing organization has become highly pro-
fessional over the past ten years. It categorizes and seg-
ments suppliers based on the strategic needs identified
by the Group and according to a number of different
quality categories. The best suppliers achieve partner
status, and the worst may not remain as suppliers, or may
only remain if they meet certain conditions. The condi-
tions are demanding, with a thousand terminated collab-
orations in 2017. The divisions have specialized purchas-
ing managers for each component category. Purchasing
centers efficiently manage different categories of com-
ponents. Cost trends are monitored on a monthly basis.
The ambition is to have an increasingly limited num-

ber of larger, high-quality suppliers for more of the
Group’s divisions, mainly in low-cost countries. Over the
past five years, the number of suppliers has been reduced
by 28 percent to around 6,900 worldwide, with a major-
ity in low-cost countries. The goal is to continue to
reduce the number of suppliers.

ASSA ABLOY requires all suppliers and business part-

ners to comply with the principles of the Code of Con-
duct for business partners, and to accept their social,
environmental and ethical responsibilities. This often

results in continual improvement in the sustainability
efforts of our suppliers regarding resource consumption,
health and safety, the working environment and condi-
tions, and other sustainability-related issues. Collabora-
tion is terminated with business partners who fail to live
up to the Code of Conduct, or who show no interest in
improvements. Reviews are conducted to check the pro-
gress of over 2,000 suppliers in Latin America, Asia, Africa
and eastern Europe. In 2017 two suppliers were black-
listed because they failed to live up to the demands and
deliveries from 20 suppliers were halted while waiting for
improvements.

Quality and price are at the focus of all purchases.

ASSA ABLOY has developed an analytical tool, the
“Should Cost analysis”, to get a picture of what deliveries
from subcontractors should cost. It breaks down costs at
multiple levels, including value analyses and cost esti-
mates to gain an understanding of the true costs and
pricing of products. The analysis is complemented by the
Group’s extensive knowledge of product optimization
based on VA/VE methodology and potential process
improvements. The Group has trained over 200
employees in Should-Cost methods, which provide the
knowledge to conduct cost reduction negotiations.

Current initiatives include a special quality council for
subcontractors launched in 2016 and a process for better
risk management of subcontractors, which will strengthen
the Group-wide control process beginning in 2018.
E-commerce in purchasing is substantially growing with
the purchase of goods and services online with electronic
payment. Another successful initiative is the investment in
e-auctions where divisions put out tenders for materials
and services for competitive bidding by suppliers. The
process is effective and leads to significant savings.

NUMBER OF SUPPLIERS

SHARE OF TOTAL PURCHASES IN LOW-COST COUNTRIES

Number

10,000

8,000

6,000

4,000

2,000

Reducing the number of suppliers is important for reducing costs and
improving quality. Active efforts have reduced the total number of sup-
pliers by 28 percent over the past five years.

Raw materials, components and finished goods from low-cost
countries accounted for 48 percent of the Group’s total purchases
in 2017.

COST-EFFICIENCY

ASSA ABLOY ANNUAL REPORT 2017

Process development

A constant effort is underway to apply and develop methods and processes in all stages of the
value chain to improve cost efficiency and customer benefit. Lean methodology encompasses all
processes in all divisions. The same applies to Seamless Flow, referring to the automation of all of
the Group’s administrative flows.

Lean methods are central in achieving on-demand flow
manufacturing, in which testing and packing have been
integrated into the flows. Production becomes transpar-
ent, with better material cost control, improved deci-
sion-making procedures, shorter development times,
and increased collaboration with the marketing and sales
staff. Today Lean methods are applied in all of the Group
units and the number of projects is increasing each year.
Seamless Flow encompasses the entire Group and
aims to streamline administrative work, especially in
sales support and indirect production, where over 40
percent of the Group’s personnel costs can be found. By
standardizing flows and processes through digitization
and automation, the Group improves the quality of
administrative processes while freeing up resources that
can be dedicated to direct customer relationships to
increase customer value. This trend makes it easier to be
an ASSA ABLOY customer and enhances the added value
in the relationship as fewer resources are used for
administration. The implementation of Seamless Flow

and optimization of the IT infrastructure will enable
more efficient coordination of an increasing number of
support functions.

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. Value Analysis/Value
Engineering (VA/VE) entails an in-depth analysis of the
product’s design, components and production methods,
which systematically reduces costs and enhances cus-
tomer value with improved quality. Cost savings may
amount to 20–40 percent. VA/VE has resulted in consid-
erable savings for the Group since the methodology was
first introduced.

Investments in increased automation of production
flows have accelerated in recent years. The number of
robots has doubled every year since 2013 and efficient
customization of individual products shortens lead times
and improves quality.

Seamless Flow

PDM

CAD

SUPPLIERS & PARTNERS

PURCHASES

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 2017

COST-EFFICIENCY 25

The result of ASSA ABLOY’s strategy

Profitable
growth

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

Focus on long-term
value-creation

127%

Sales growth since 2007

ASSA ABLOY focuses on long-term value- creation. Average annual sales growth has been nine per-
cent over the past decade, despite periods with financial crisis and a weak economy. Operating
income grew by an average of 13 percent per year during the same period. The Group has met its
target of an operating margin of 16–17 percent over a business cycle.

158%

Increase in earnings per share
since 2007

126%

Increase in operating income
since 2007

PROFITABLE GROWTH

ASSA ABLOY was formed in 1994 through the merger of
Swedish ASSA and Finnish ABLOY. The Group grew rap-
idly during its first decade - mainly through acquisitions -
from being a regional lock company in the Nordic coun-
tries into the leading global player. With a new manage-
ment team in 2006 the Group entered a new phase of
growth based on three main strategies for market pres-
ence, product leadership and cost-efficiency. With a
focus on profitable growth, great value has been created
for shareholders and other stakeholders.

Market presence and growth
ASSA ABLOY’s growth rests on a strong long-term trend:
the growing human need for safety, security and conven-
ient solutions for locks and doors. This trend follows the
development of prosperity around the world, which is

expected to be particularly strong in emerging markets,
especially in fast-growing cities, and contribute to strong
demand for ASSA ABLOY’s products and services. The
Group has rapidly expanded in the emerging markets.
This segment now accounts for 23 percent of total sales,
compared with 13 percent in 2007. The Group is currently
represented in over 70 countries. These driving forces also
contribute to growing demand for electromechanical,
digital and mobile door opening solutions, as well as
increasingly sustainable and energy-saving products and
solutions. Another significant factor for ASSA ABLOY’s sta-
ble growth is the Group’s installed base of locks and
doors, which is the largest in the world. It provides a con-
tinuous flow of profitable and recurring business.

Organic growth is supplemented with an acquisition
strategy to strengthen the Group’s market presence geo-

ASSA ABLOY ANNUAL REPORT 2017

graphically, and to expand the product range with more door opening
solutions and new technology in selected areas. Over the past decade,
ASSA ABLOY has completed some 150 acquisitions that have con-
tributed an average of six percent growth annually. As a result of several
major acquisitions in entrance automation and in industrial, warehouse
and garage doors, ASSA ABLOY’s Entrance Systems division has become
the market leader and the Group’s largest division with sales of SEK
21,781 million and a 29 percent share of sales. The division has grown by
over 20 percent annually over the past ten years.

Growth-driving product leadership
ASSA ABLOY is the leading innovator and product developer in the tech-
nology shift toward more electromechanical, digital and mobile solu-
tions. Products that are less than three years old account for 28 percent of
the Group’s total sales and continual investments in product develop-
ment is the main driver for achieving the target of 5 percent annual
organic growth. Electromechanical solutions are rapidly growing and now
account for 55 percent of Group sales, compared with 33 percent in 2007.

Cost-efficiency for profitability
Constant cost-cutting measures and efficiency enhancements are
essential for good and stable profitability, as well as a sustainable busi-
ness and products. The Group continually streamlines the global pro-
duction structure through recurring multiyear restructuring programs.
The purpose of these programs is to concentrate assembly and customi-
zation close to the major customer markets and to relocate component
production to low-cost countries. Since 2006, the Group has completed
five such programs, and a sixth has been in progress since 2016. As of the
end of 2017, 77 production plants have closed, about 126 were con-
verted into assembly plants, and about 60 offices closed as a result of

these programs. The programs reduced the number of employees by
13,564 people. At the same time, sourcing has increased substantially
and been concentrated to fewer, larger and better suppliers. They have
been reduced in number by one third since 2008.

ASSA ABLOY runs several group-wide programs to reduce costs while

improving efficiency and customer benefit. All units operate based on
Lean processes with professional teams for smarter production flows.
VA/VE methods in product development reduce the cost of new prod-
ucts while improving their customer benefit and sustainability perfor-
mance. Seamless Flow is a top-priority, group-wide initiative that pro-
motes more efficient digital processes for information flows. It focuses
on the administration, which accounts for more than 40 percent of staff
costs, and moves resources closer to the market and customer. The
Group is making major investments in common IT systems, as well as in
the use of automation and robotics in production processes.

SALES AND OPERATING INCOME (EBIT)

Sales

Operating income (EBIT)

Sales, SEK M

80,000

65,000

50,000

35,000

20,000

EBIT, SEK M

15,000

12,500

10,000

7,500

5,000

1, 2

1 Excluding items affecting comparability.
2 Reclassification has been made.

ASSA ABLOY ANNUAL REPORT 2017

PROFITABLE GROWTH 27

ASSA ABLOY’s divisions

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

Regional
divisions

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

EMEA

Americas

Asia Pacific

Share of
sales

Share of
operating income

Share of
sales

Share of
operating income

Share of
sales

Share of
operating income

23%

24%

23%

30%

11%

Read more on page 33

entre

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2017

EMEA

Good growth and high
innovation rate

Demand improved in the region with organic sales growth of 4 percent.
Growth was strong or good in most markets in Europe. Sales increased in
Africa but decreased in the Middle East. Sales of electromechanical locks
with digital and mobile solutions increased sharply. Product development
continued at a high pace and efficiency and streamlining programs pro-
duced good results.

Market trend
Demand growth for the division improved in 2017. Growth was strong in Finland and the
UK, as well as in Eastern and Southern Europe, and good in Scandinavia, France and Israel.
DACH and the Benelux countries had growth, while the Middle East was negative. The Afri-
can markets recovered despite weak demand. Growth was characterized by three overar-
ching trends: more major projects in the institutional and commercial segments, contin-
ued strong demand for electromechanical, digital and mobile solutions, as well as signifi-
cant successes for the Yale brand and smart locks for the residential market, especially in
Northern Europe. Another strong demand trend is sustainable solutions, where EMEA has a
leading range of products and solutions that meet the increasing demands, for example for
increased environmental classification of buildings in the EU.

The division continues to move more resources to commercial functions and the
number of employees in direct customer contact has increased by 37 percent over the
past five years. In the Group-wide Commercial Excellence initiative, efforts continued to
focus on brand development, value-based pricing, recurring revenue and specification.
Digital support is gradually being expanded to architects and security experts with
ASSA ABLOY Openings Studio, a BIM-enabled tool and BIM objects now available in
most countries. The division has over 250 specifiers and the number of projects speci-
fied continued to increase sharply. The e-commerce initiative continued to expand and
new online stores were launched in Sweden, the UK, Belgium and Germany.

During the year IDS, the leading manufacturer and distributor of electronic security

FACTS ON EMEA

Financials in brief 2017
• Sales: SEK 18,081 million (16,837) with 4 percent

organic growth.

• Operating income (EBIT): SEK 2,990 million

(2,722).1

• Operating margin: 16.5 percent (16.2).1

1 Excluding items affecting comparability.

See key figures for EMEA

p59

SALES AND OPERATING INCOME

Sales
SEK M

20,000

18,000

16,000

14,000

12,000

Operating income
SEK M

3,000

2,750

2,500

2,250

2,000

Sales
Operating income1

1 Excluding items affecting

comparability 2013 and 2016.

solutions in South Africa, was acquired.

SALES BY PRODUCT GROUP

Product leadership
The high pace of product development continued during the year. The share of new
products introduced over the past three years was 28 percent of total sales. Nearly 300
product development projects, of wich more than 30 percent are electromechanical or
digital solutions, are expected to reach the market over the next few years. The devel-
opment of the CLIQ system, with programmable keys and cylinders for new segments,
continued with great success. Yale launched a new series of smart door locks for the
Scandinavian market and Abloy introduced Pulse, a lock system that generates its own
energy and requires neither batteries nor cables. More and more products are under
development for the division’s electromechanical platforms, which showed strong
double-digit growth during the year.

Cost-efficiency
The division’s restructuring program to reduce the number of plants and to concen-
trate on assembly close to customers continued according to plan. As a result, compo-
nent production was moved to low-cost countries with continued consolidation of
sub-contractors to fewer and larger partners. The number of direct sub-contractors
declined by more than 10 percent during the year. Automation of production contin-
ued at a high pace and the number of robots has doubled in two years to over 250. The
Seamless Flow initiative is providing significant results with gradual consolidation of 60
different ERP systems. Migration to the Group’s Product Data Management (PDM) sys-
tem, with standardised data storage and management, was successfully concluded dur-
ing the year.

Mekaniska lås, låssystem
och tillbehör, 54%

Mechanical locks, lock
systems and fittings, 52%

Elektromekaniska
och elektroniska, 31%

Säkerhetsdörrar
och beslag, 15%

Electromechanical and
electronic, 33%

Security doors and
hardware, 15%

Offering: Mechanical and electromechanical locks, digital
door locks, security doors and fire doors, as well as hardware.

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 primar-
ily through a number of distribution channels, but also
directly to end-users.

Acquisitions 2017: IDS in South Africa.

ASSA ABLOY ANNUAL REPORT 2017

ASSA ABLOY’S DIVISIONS 29

Säkerhetsdörrar och beslagElekromekaniska och elektroniskaMekaniska lås, låssystem och tillbehörAmericas

Increased market presence with
new electromechanical solutions

Sales continued to increase in 2017, with 4 percent organic growth.
Growth was good in the US. Sales growth was strong in Canada and
Mexico, as well as in most markets in South America with the exception of
Brazil where the market continued to be weak. Sales of electromechanical
products with digital and mobile solutions were strong in all of the divi-
sion’s markets, including Yale, with Yale as a market-leading smart door
lock brand in the residential segment. Growth along with continued
efficiency initiatives contributed to an increase in operating income and
a very good operating margin.

Market trend
The division’s largest market (US) continued to show a positive trend though demand
was somewhat weaker in the commercial and institutional markets, which together
account for about three quarters of the division’s sales. Growth in the residential mar-
ket continued, with a weakening in the multi-family housing segment after a long
period of strong demand. The important markets of Canada and Mexico had strong
growth, as did Colombia and Peru. In Brazil, the multi-year recession continued, though
demand stabilized toward the end of the year.

Demand for advanced electromechanical solutions continued to grow in all markets
and segments. ASSA ABLOY has partnered with Amazon in a highly publicized launch of
a solution that enables home deliveries to “smart homes.” Growth was high for high-se-
curity products, security doors and perimeter solutions. Traditional lock products and
accessories also showed growth.

The trends toward more wireless and mobile lock solutions and a growing number of

sustainable products that provide energy savings are strong and important driving
forces of future growth. To further strengthen customer relevance, marketing and sales
processes are being optimized at every level for rapid and seamless information flows,
including digital technologies.

During the year the US company August Home was acquired to complement the

division’s offering of smart door opening solutions and home delivery solutions.
Additionally, Jerith Aluminum Fence was acquired in the US.

Product leadership
The division has a very competitive offering of new products due to its high innovation
rate. New products launched in the past three years accounted for 25 percent of total
sales in 2017. In all, 119 new products were introduced during the year and an addi-
tional 178 products are heading for the market. The division is the market leader for
smart door solutions for the connected home under the Yale and August brands.
During the year several solutions were launched that provide security while enabling
homeowners to control and monitor home deliveries via mobile phone applications.

Cost-efficiency
The division continues with a strong focus on efficiency improvements and has a long
tradition of Lean practices which provide significant efficiency gains each year. The
Seamless Flow initiatives cover the entire administrative flow of information with a
focus on customer-oriented processes to strengthen and deepen customer relation-
ships. The transition to a common business system continues to be on schedule and the
division’s Group-wide restructuring program continued according to plan. A large
number of products have been updated and processes simplified using VA/VE methods.
Investments in robots accelerated during the year with 80 new robots for a total of 329.

FACTS ON AMERICAS

Financials in brief 2017
• Sales: SEK 17,940 million (17,044) with 4 percent

organic growth.

• Operating income (EBIT): SEK 3,815 million

(3,640).1

• Operating margin: 21.3 percent (21.4).1

1 Excluding items affecting comparability.

See key figures for Americas

p59

SALES AND OPERATING INCOME

Sales
SEK M

18,000

16,000

14,000

12,000

10,000

8,000

Operating income
SEK M

4,000

3,500

3,000

2,500

2,000

1,500

Sales
Operating income1

1 Excluding items affecting

comparability 2013 and 2016.

SALES BY PRODUCT GROUP

Mekaniska lås, låssystem
och tillbehör, 41%

Mechanical locks, lock
systems and fittings, 41%

Elektromekaniska
och elektroniska, 15%

Säkerhetsdörrar
och beslag, 44%

Electromechanical and
electronic, 15%

Security doors and
hardware, 44%

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 US 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 seg-
ments. These segments account for 85 percent of sales,
while the private residential segment accounts for 15 per-
cent of sales.
Sales in South America and Mexico take place mainly
through distributors, wholesalers and home improvement
stores. Sales in these markets are more evenly distributed
between the non-residential and residential segments.

Acquisitions 2017: August Home and Jerith Aluminium
Fence, both in the US.

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2017

Säkerhetsdörrar och beslagElekromekaniska och elektroniskaMekaniska lås, låssystem och tillbehörAsia Pacific

Strong growth in APAC with
the exception of China

The division’s sales returned to organic growth just over 0 percent.
Growth was strong in most markets in the region, but China continued to
be challenging and showed decreased sales. Streamlining measures in
China are proceeding according to plan. The number of new products
continues at a high level with strong demand for smart door locks and
other digital solutions.

Market trend
Demand in large parts of the region was good and sales were strong in the Pacific region,
South Korea, Southeast Asia, Japan and India. In India the division is building a mar-
ket-leading position that was strengthened with in-house production with the acquisition
of SMI. This leading manufacturer of locks and door hardware, with sales of approximately
SEK 140 million and 960 employees, has a high potential for product development and
increased sales. However, demand in China, which accounts for about half of the division’s
sales, remained weak, especially in the residential segment and in the northern parts of
the country where the division has its largest market. Sales declined sharply for fire and
security doors. Organic sales in China declined with –4 percent. The commercial segment
had low growth, but accounts for a smaller portion of the business.

Demand for digital and mobile solutions is strong and rapidly growing in the region,

with Korea leading the way as a global pioneer. Digital, smart door locks are also an
extremely popular product and continued to grow with double-digit figures. Demand
for sustainable and climate-smart solutions go hand in hand with the digital trend and
increased sharply from a low level, especially in China where the desire to address envi-
ronmental problems has now become an important driver. The division is developing
its market leadership with clear market segmentation, investments in specifications
and increased customer focus.

Product leadership
The division continued to launch new products at a high pace. The share of products
launched in the past three years increased to 38 percent of total sales, compared with
the Group target of 25 percent. The region has a large generation of young consumers
who are extremely interested in technology. The division is strengthening its product
leadership by increasing investments in innovation and new products. The number of
development engineers continued to increase in the division’s 15 development
centers, including in China, where products are also developed for the entire region.
Interest in sustainable products is rapidly growing, especially in China, where regulatory
requirements promote for environmentally rated and energy-efficient products. The
division has the widest range of “green” products with a rapidly growing number of
environmental product declarations.

Cost-efficiency
The sharp decline in demand in the Chinese market after a prolonged construction
boom in the residential segment has been ongoing for three years. In addition, account-
ing errors were found at some companies in 2016, which has led to improved and
increased control. The division has sharply cut back on staff and in 2017 the number of
employees declined by about 1,000 in China to a total of 8,900 or a 10 percent reduc-
tion. As a result the number of employees in the division have been reduced by 23 per-
cent, excluding acquisitions, in the last three years. For several years the division has
been working intensively on streamlining the production structure, increased out-
sourcing, greater efficiency throughout the value chain, robotics and expanded Lean
programs. These efforts provide continuous results that pointed in a positive direction
during the year, though the gains were partially offset by higher commodity prices.

The Seamless Flow initiative also continued. Over 60 percent of the division is now

working in a common business system. Streamlining of administrative information
flows broadened to include more processes such as product data, order and billing sys-
tems, as well as marketing with the expansion of e-commerce.

FACTS ON ASIA PACIFIC

Financials in brief 2017
• Sales: SEK 9,211 million (9,189) with 0 percent

organic growth.

• Operating income (EBIT): SEK 934 million (787).1
• Operating margin: 10.1 percent (8.6).1

1 Excluding items affecting comparability.

See key figures for Asia Pacific

p59

SALES AND OPERATING INCOME

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

1 Excluding items affecting

comparability 2013 and 2016.

SALES BY PRODUCT GROUP

Mekaniska lås, låssystem
och tillbehör, 51%

Mechanical locks, lock
systems and fittings, 51%

Elektromekaniska
och elektroniska, 20%

Säkerhetsdörrar
och beslag, 29%

Electromechanical and
electronic, 20%

Security doors and
hardware, 29%

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

Markets: The Asian countries are predominately emerging
markets without established security standards. New con-
struction accounts for around three-quarters of sales. In the
Chinese market the same types of lock, handle and hardware
are often used in both homes and workplaces. The produc-
tion units in China also produce for ASSA ABLOY’s other divi-
sions. Australia and New Zealand are mature markets with
established lock standards, where renovations and upgrades
account for the majority of sales.

Acquisitions 2017: SMI (Shree Mahavir Metalcraft) in India.

ASSA ABLOY ANNUAL REPORT 2017

ASSA ABLOY’S DIVISIONS 31

ServiceHotellåsMekaniska lås, låssystem och tillbehörGlobal Technologies

Strong sales and
earnings trend

Global Technologies, which consists of HID Global and ASSA ABLOY
Hospitality, achieved strong organic sales growth of 7 percent. Demand
for HID Global’s products and services grew in most markets and within
most product segments. Strong growth continued for ASSA ABLOY
Hospitality due to growing demand for hotel locks with mobile keys.

HID GLOBAL
Underlying global demand continued to be strong with growing security needs and
upgrades to electromechanical technology with digital and mobile solutions. The year
showed good sales growth in Europe and North America. Even in the emerging markets,
sales growth was solid, with slightly weaker growth in China and Latin America.

Market growth is driven by rapid developments toward digital and mobile solutions.

Demand from government agencies and institutional customers took off once again
after several years of relatively weak growth. Sales increased in access management and
identification technology, where the Group has launched several new solutions. Secure
Issuance, which offers printing products, showed strong sales growth, as did Citizen ID,
due to several projects for national identity documents during the year.

Two strategically important acquisitions were completed during the year: Mercury
Security in the US, a leading OEM provider of control systems for physical access man-
agement with sales of about SEK 500 million, and Arjo Systems in France, a leading sup-
plier of physical and digital identity solutions, with sales of about SEK 550 million. The
division also sold the project business AdvanIDe with sales of about SEK 1,250 million.
HID Global’s innovation and product development continued on a high level. The
share of products launched in the past three years is about 34 percent, compared with
the Group average of 25 percent. One strong driver is the technology shift to digital and
mobile solutions with increased software content. These products have a shorter ser-
vice life and require updates and modifications in response to technological develop-
ments.

FACTS ON GLOBAL TECHNOLOGIES

Financials in brief 2017
• Sales: SEK 10,373 million (9,697) with 7 percent

organic growth.

• Operating income (EBIT): SEK 1,946 million

(1,752).1

• Operating margin: 18.8 percent (18.1).1

1 Excluding items affecting comparability.

See key figures for Global Technologies

p59

SALES AND OPERATING INCOME

Sales
SEK M

12,000

10,000

8,000

6,000

4,000

2,000

Operating income
SEK M

2,000

1,800

1,600

1,400

1,200

1,000

800

Sales
Operating income1

1 Excluding items affecting

comparability 2013 and 2016.

The division’s identity and access management products undergo constant develop-

SALES BY PRODUCT GROUP

ment with new features and adaptations to different mobile platforms. In the field of
printers, new products were launched with better sustainability performance, lower
operating costs and higher resolution. During the year HID Location Services was
launched. This service solution locates people in buildings, which increases security and
makes it possible to map the flow of people in workplaces and commercial premises.

Efficiency initiatives continued, both through streamlining of operations, but also by
improving processes. The relocation of passport and ID card production from Ireland to
Malaysia was completed, resulting in cost savings and greater flexibility. The consolida-
tion of development units made major advances with new units in Krakow, Poland, and
in Chennai and Bangalore, India. The aim is to create fewer units with larger critical mass
for product development, while increasing engineering capacity in emerging markets.

ASSA ABLOY HOSPITALITY
ASSA ABLOY Hospitality continued to have strong sales growth with high operating
income and very good margin growth. Demand continues to be stronger in the mature
markets than in emerging markets, where the decline in China began to level off.
Demand for renovations, upgrades, systems and software also continues to be high. The
main driver is the rapid growth of demand for electromechanical door opening solu-
tions using mobile technology. Several major global hotel chains have installed and
continue to install ASSA ABLOY Hospitality’s high-end systems with both hardware and
software that enable guests to check in by mobile phone, as well as integration with
other mobile applications. ASSA ABLOY Hospitality has also begun to offer solutions for
student housing, hospitals and senior housing, as well as multi-family buildings.

Passerkontroll, 71%

Access management, 71%

Hotellås, 22%

Service, 7%

Hotel locks, 22%

Service, 7%

Offering: HID Global is a worldwide leader in trusted identity
solutions, powering the trusted identities of the world’s
people, places and things. Millions of people around the
world use HID products and services to navigate their every-
day lives, and over 2 billion things are connected through
HID-technology. Customers comprise companies, health-
care, education, financial, government and state institutions.
ASSA ABLOY Hospitality manufactures and sells electronic
lock systems, safes, energy management systems and mini-
bars for hotels and cruise ships under the VingCard and
Elsafe product 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.

Acquisitions 2017: Mercury Security in the US and Arjo
Systems in France.

ASSA ABLOY’S DIVISIONS

ASSA ABLOY ANNUAL REPORT 2017

ServiceHotellåsPasserkontrollEntrance Systems

Continued good growth
and efficiency improvement

Demand showed a positive trend in 2017, with continued good sales
growth in North America and Pacific, an improvement to good growth in
Western Europe and a return to high growth in emerging markets. Inno-
vation and product development continued to focus on effective and sus-
tainable solutions. The restructuring programs for a more efficient pro-
duction structure proceeded according to plan, and other efficiency
measures continued to give results.

Market trend
The division’s sales grew organically by 4 percent. Good demand continued in North
America in most market segments. In Europe, demand strengthened, with sales in
Northern and Central Europe continuing to grow at about the same rate as last year,
while it increased to a good level in Western and Southern Europe. In the emerging
markets, sales increased strongly, except in China, where demand continued to be
weak. The division continues to invest in an increased presence in emerging markets
with the aim of increasing the share of sales from the current 12 percent to 25 percent.
Sustainability and energy savings are strong drivers of demand in all product seg-
ments. The division has a competitive and comprehensive offer, such as in entrance
automation, industrial doors and high-performance doors, all products that are achiev-
ing good or strong growth, especially in Europe. Another driving force is the growth in
e-commerce that is driving demand for warehouse and logistics solutions. For garage
doors, growth was strong in the US, while growth was negative in Europe.

The service offering, which accounts for 27 percent of the division’s sales, continued
to perform well. New service concepts based on long-term contracts, with an efficient
information flow and analysis for preventive maintenance and modernization,
strengthen customer relationships and provide good opportunities for upselling.

Acquisitions are an important part of growth. During the year five companies were
acquired: Southeastern Dock & Door, Atlantic Door Control and OHD Nashville in the
US, Reco Port in Sweden, and Dimension Engineering in Ireland.

Product leadership
Innovation and product development continued at a high level. New products
launched in the past three years accounted for 26 percent of sales. The Group target is
25 percent. Launches of new products and solutions encompass essentially all product
segments and include a complete system for swing doors, a new generation of revolv-
ing doors, new garage products for the US market with smart digital app-based solu-
tions, new solutions for high-performance doors and sliding doors. The division has a
large and growing range of energy-saving solutions. Important product features include
the ability to be quickly opened and closed, good insulation and various intelligent
solutions with sensors and digital technology to monitor energy consumption.

Cost-efficiency
Consolidation of the production structure continued according to plan. The division
continued to pursue efficiency initiatives with investments in robotics, implementation
of Lean practices and by reducing purchasing and production costs through VA/VE anal-
yses. The division took a major step forward in its Seamless Flow initiative, implement-
ing a new common ERP system. The division’s Commercial Excellence initiative includes
improvements in its work with customer segmentation, specification projects and sales
processes, including increased digitization. In addition, a transition to use only the ASSA
ABLOY brand in direct sales channels is also underway.

FACTS ON ENTRANCE SYSTEMS

Financials in brief 2017
• Sales: SEK 21,781 million (19,789) with 4 percent

organic growth.

• Operating income (EBIT): SEK 3,087 million

(2,753).1

• Operating margin: 14.2 percent (13.9).1

1 Excluding items affecting comparability.

See key figures for Entrance Systems

p59

SALES AND OPERATING INCOME

Sales
SEK M

24,000

20,000

16,000

12,000

8,000

4,000

Operating income
SEK M

3,500

3,000

2,500

2,000

1,500

1,000

500

Sales
Operating income1

1 Excluding items affecting com-

parability 2013 and 2016.

SALES BY PRODUCT GROUP

Produkter, 73%

Products, 73%

Service, 27%

Offering: Products, service and components in entrance
automation. The product range includes automatic swing,
sliding and revolving doors, industrial doors, garage doors,
high-performance doors, docking solutions, hangar doors,
gate automation, components for overhead sectional doors
and sensors.

Markets: Entrance Systems is a global leader with sales
worldwide. It has sales companies in 35 countries and dis-
tributors 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 directly 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, Cardo, sells compo-
nents and fittings for industrial doors in the industrial and
residential segments, as well as sensors for the door and
elevator industries.

Acquisitions 2017: Southeastern Dock & Door, Atlantic
Door Control and OHD Nashville in the US, Reco Port in
Sweden, and Dimension Engineering in Ireland.

ASSA ABLOY ANNUAL REPORT 2017

ASSA ABLOY’S DIVISIONS 33

ServiceProdukterPractical examples of
ASSA ABLOY’s security solutions

Luxury Parisian property enhances classic
design with installation of Mobile Access

Smart locks
for smart homes

CUSTOMER: Future Park Istanbul is a complex of
several high-rise buildings covering 35,000 square
meters, and comprised of an estimated 1,700 smart
homes, a 5-star hotel, a shopping mall, banks, mul-
ti-sports facilities, offices and restaurants.

CHALLENGE: The apartments are designed
around a ‘smart home’ concept with the most
advanced technologies – including for access con-
trol. Solutions such as mechanical keys and locks
were not an option for such an investment.

SOLUTION: Project developer Hiper Gayrimenku

chose a smart door lock (model YDM 3168) from
ASSA ABLOY brand Yale, with around 1,700 smart
locks installed on the front door to every residen-
tial apartment. The locks provide the highest level
of security at a cost-effective price.

The energy-efficient smart door lock enables resi-
dents to open the door to their apartment via their
smart home system, with a secure PIN or RFID smart
card. The lock’s easy operation and design contrib-
uted to the choice of ASSA ABLOY’s solution.

Integration of the smart door lock with the
apartment’s smart home system was straightfor-
ward and wire-free. RF communication allows
remote opening of the entrance door using Future
Park’s smart home app.

CUSTOMER: The five-star hotel Park Hyatt Paris-Vendôme is located in the heart of Paris. With 153

bedrooms, 43 of the luxury hotel’s suites are decorated in a refined and contemporary style and
guests can enjoy an array of onsite amenities, including the hotel’s three restaurants.

CHALLENGE: Desiring to renovate Park Hyatt Paris-Vendôme with an innovative design solution, the
Hyatt Group wanted to install security technologies that would not only adapt to the amenities offered
by the hotel, but would also respond to the demands of its sophisticated guests. These innovative tech-
nologies needed to meet the requirements of a palace, in terms of both functionality and design.

SOLUTION: ASSA ABLOY Hospitality provided the property with the latest in locking technology to
enhance both the design aesthetic and the guest experience, while optimizing the management of its
rooms. Hotel guests can now enjoy a seamless experience by bypassing the front desk and accessing
their rooms immediately upon arrival with the use of their mobile device. In addition to having the abil-
ity to book their room directly via their smartphone, they can now use it to retrieve their digital room key
immediately upon arrival and have it automatically removed from their mobile device as soon as they
are ready for check-out. Operating with secure Seos technology, a digitally encrypted key is delivered
directly to a guests’ mobile device, providing unsurpassed security with the hotel management system.

Northwestern University achieves an
advanced degree of access control

these doorways is WiFi locks from ASSA ABLOY
Group brand Sargent.

The locks form the base of the access control
system along with Sargent exit devices, mortise
locks and a mix of access control components,
hardware and a key system from HID Global,
ASSA ABLOY Architectural Door Accessories and
Group brand Medeco.

Installing an online access control system can
be costly, requiring either labor-intensive hard-
wiring of doorways or a separate proprietary
wireless network. But the IN120 WiFi locks pro-
vided a cost savings for the university by leverag-
ing the school’s existing IT infrastructure to
deliver advanced access control to more loca-
tions.

“We are a longstanding Sargent customer and

believe in the quality and integrity of the ASSA
ABLOY family of products,” said Anthony Hicks,
head locksmith for the University’s Evanston and
Chicago campuses. “Thanks to our wireless
access control system, we have a higher level of
security on campus.”

CUSTOMER: Northwestern University is a pri-
vate research university based in Evanston, Illi-
nois with an enrollment of 21,000 students.

CHALLENGE: Northwestern University wanted

an online access control system that could be
implemented without hardwiring infrastructure
or a proprietary wireless network.

SOLUTION: An interconnected web of wire-
less access control locks weaves a thorough sys-
tem of doorway security throughout Northwest-
ern University. The common thread connecting

Entrematic chosen for North
America’s largest automated
freezer facility

CUSTOMER: Preferred Freezer Services offers full service temperature
controlled warehouses in 37 locations in the United States and Asia. The
new 42,000 square meter facility in Richland, Washington is the largest
automated freezer building in North America with over one million cubic
meter of storage capacity; turning over 135 million kg of frozen potato
products per quarter.

CHALLENGE: This high volume facility includes a 2,2 degrees Celsius load-

ing dock area adjacent to the freezer building so the customer required a
dock design solution that provided the highest degree of sealing capability
and energy efficiency. Washington gets warm during the summer months
and the temperature differential between outside and inside can be as
much as 18 degrees Celsius. Additionally, the dock and door controls had to
be integrated into singular panels and sequenced so product would operate
only in the proper order for safety and energy efficiency.

SOLUTION: The Entrematic team worked very closely with the Preferred
Freezer Services design staff to collaborate on how to seal the building effec-
tively. The loading dock solution with Kelley dock levelers now provides a
very tight seal around the trailer and the proper level of activation sequenc-
ing for safety and efficiency. The dock door selected was the TKO Verticool,
which was the natural selection to eliminate condensation often present in
these applications. This package has since become the standard for
Preferred Freezer Services facilities worldwide.

Stylish security for new theater

CUSTOMER: The newly-completed Jiangsu Grand Theater in Nanjing,
China, spans over 270,000 square meters and was constructed at a cost of
around EUR 250 million. Its intricate design includes an opera house, a
theater, a concert hall and a multifunctional hall, which can accommodate
up to 8,000 people.

CHALLENGE: The hardware for the building had to adhere to stringent
product configuration requirements: as well as being functional, the solu-
tions had to have excellent visual appeal. It was also necessary to specify dif-
ferent hardware for different locations and applications such as the audito-
riums, shops and offices.

SOLUTION: ASSA ABLOY Guoqiang therefore supplied hardware with cus-

tomized colors to fit the various applications, as well as spider fittings for
glass curtain walls and aluminum alloy hardware for windows and doors. In
total, ASSA ABLOY Guoqiang supplied 1,000 window, facade and door hard-
ware sets.

Despite the complexity associated with supplying such a large quantity of

different solutions combined with a short lead time, Jingfang Li, general
manager of ASSA ABLOY Guoqiang, says that the people involved in the pro-
ject ensured its success.

“The R&D, production and sales teams worked closely together to accom-

plish the project,” Jingfang says.

Mobile Access for India’s largest broadcaster

CUSTOMER: Star India is the country’s largest
multimedia entertainment company, with over 50
channels in its network and programs that are
broadcast to over 100 countries.

CHALLENGE: Star India sought a solution to pro-
vide advanced and convenient access control for
the staff at its Mumbai headquarters. The solution
needed to be easier to manage. With the company’s
existing access card system, cards were easily dam-

aged and misplaced. Each new or replacement card
had to be provisioned manually.

SOLUTION: HID Global’s Mobile Access solution
provided a total of 2,500 mobile IDs to staff member
smartphones, with iCLASS SE contactless readers at
gates and doors throughout the building.

Mobile IDs are at the center of the solution.
Because they are provisioned via an online portal,
mobile IDs can be easily changed, issued or revoked

by administrators at a moment’s notice. HID’s
breakthrough Seos credential technology ensures
that end-user identity data stored on mobile IDs is
protected using secure data encryption.

In addition to making it possible for staff mem-
bers to use their own smart device of choice, Star TV
India no longer has to maintain an inventory of
physical access cards, which saves the company
time and money while reducing its environmental
footprint.

Sustainable development

Continued good progress in
sustainability

ASSA ABLOY’s sustainability initiatives continued to make good progress in 2017, with advances in
line with the five-year sustainability plan, with many new sustainable products, improved water and
energy efficiency, more plants with certified environmental management systems (ISO 14001) and
fewer workplace accidents.

Commercial driver
Global demand for environmentally certified products
and products with improved environmental perfor-
mance is growing. Customers are increasingly choosing
sustainable security solutions, especially when it comes
to energy consumption and health aspects for the build-
ing’s users.

Sustainability initiatives are integrated into all of ASSA
ABLOY’s business processes, from product development
to purchasing, production and logistics, and finally to
sales. The goal is to reduce the impact on the environ-
ment, conserve resources and lead developments to
meet the rapidly growing demand for sustainable prod-
ucts. Substantial sustainability gains can be achieved in
the Group’s product development, streamlining of the
Group’s production structure, investments in modern
equipment and other efficiency programs such as Seam-
less Flow and smarter IT systems.

Governance
Responsibility for operational sustainability lies with the
divisions. Governance is based on the Group’s Code of
Conduct for all employees and the Code of Conduct for
business partners, as well as a series of policy documents
that comprise the Group’s sustainability commitment. A
global sustainability council collects, inspires and
spreads common experiences and ideas. The Group’s
sustainability performance is reported in detail in its Sus-
tainability Report, which is prepared in accordance with
GRI Standards: Core.

Results and focus areas
ASSA ABLOY’s operational work is based on its five-year
sustainability program through 2020, with more indica-
tors and broader and faster follow-up than previous pro-
grams. Energy consumption is an important area with
investments in more efficient processes and control sys-
tems. The results in 2017 are favorable and in line with
the plan. Efforts to increase the share of renewable
energy with the goal of 20 percent of total energy con-
sumption in 2020 faced constraints in many countries
with difficulties finding this type of energy at competitive
prices. The percentage of renewables in 2017 was 12 per-
cent of total energy consumption.

Water consumption is following the plan in the sus-
tainability program with progress in recovery due to tech-
nology and facility investments, especially in various sur-
face treatment processes. The use of solvents when paint-
ing products also continues to decline due to the intro-
duction of more environmentally friendly alternatives.

ASSA ABLOY is investing more in careful sorting and
recycling of waste, and as a result in some cases clean
waste fractions can be sold and generate revenue. The
Group is also working to find smarter production meth-
ods and more environmentally friendly packaging.

The Group’s initiative to implement environmental

management systems in all divisions with significant
environmental impact is making progress. At the end of
2017, 131 units had environmental management sys-
tems, which means that the system now covers approxi-
mately 79 percent of employees in the Group’s plants.
These practices are gradually being implemented in all
acquired companies with production facilities.

To spread commitment and increase activity in sus-
tainability efforts, employees are also encouraged to
form “Green Teams” at workplaces throughout the
Group. They are formed through local initiatives and
work concretely and practically with everyday sustaina-
bility, health and safety issues.

ASSA ABLOY is working systematically with its suppli-

ers to improve sustainability performance across the
supply chain. Evaluation and improvement of the sup-
plier base is a continuous process, with a special focus on
suppliers in low-cost countries. The number of supplier
audits continues to increase and was 919 in 2017. To ver-
ify the quality of the audits, external auditors have
assessed the work processes and confirmed the audit
outcomes.

Strong safety culture
In 2017 a new Group-wide strategy was implemented to
reduce the injury rate. The initiative is being conducted
for preventive purposes. The results show a positive
trend, based on a systematic approach to education, risk
identification and in-depth reporting of accidents and
incidents. New analytical tools and indicators have been
developed to be able to quickly monitor the trend in
greater detail.

Sustainable products
ASSA ABLOY is a world leader in innovation, product
development and sales of climate-smart and environ-
mentally certified products. The Group has an increased
proportion of products with industry-leading sustaina-
bility characteristics, several of which are certified by a
third party, such as the “Green Circle.” ASSA ABLOY has a
system for internal measurement of sales of sustainable
products where each division defines the criteria to be
included in the measurement. The objective is to stimu-
late development and sales of sustainable products.

Read more about ASSA
ABLOY’s sustainability
initiatives in the 2017
Sustainability Report.

THE GROUP’S REPORTING
UNITS

Number

400

350

300

250

200

150

100

The number of reporting units in
the Group is now 360 (347).

276The number of products

with environmental product
declarations at the end of
2017 was 276.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY ANNUAL REPORT 2017

Focus on employee
commitment and development

Employee commitment and competence are crucial for ASSA ABLOY’s success. The basic beliefs of
transparency, accountability and valuing results and performance along with a clear innovation
culture are the main features of the Group’s role as an employer. The aim is to offer stimulating
work tasks and good development opportunities, where all employees feel they are making a
contribution.

ASSA ABLOY actively invests worldwide in an array of
common programs for increased commitment and
development for all employees. Focus areas include
increased internal mobility, diversity and health and
safety. The programs are decentralized and run in a
decentralized manner and are harmonized with local
regulations and standards and coordinated at Group
level.

Recruitment and internal mobility
ASSA ABLOY’s recruitment policy gives priority to inter-
nal candidates provided they have equal qualifications to
external applicants. All job vacancies are advertised on
the Group’s global intranet. Recruitment takes place
locally in the majority of cases. The focus on develop-
ment aims to meet the demands that the digital transfor-
mation not the least place on the future organization. All
employees complete an introduction program and
ongoing training online. To increase internal mobility, the
Group offers a variety of programs, for example the pos-
sibility to trade jobs with colleagues, or to work together
for periods of time.

Diversity and gender equality
ASSA ABLOY’s Code of Conduct states that gender,
nationality, social or ethnic origin, age, religion, physical
disability, sexual orientation and political opinion must
not be the basis for negative discrimination. A key con-
cept is “diversity of perspectives,” an aspiration for an
open exchange of ideas and more perspectives that pro-
mote creativity and change. The Group operates on all
levels in order to achieve increased diversity. During
recruitment, managers are expected to prioritize the
underrepresented gender in the case of equal qualifica-
tions, provided compliance with local legislation, and to
have at least one person from the underrepresented
gender among the final candidates. One target is to have
30 percent of management positions held by women.

Europe excl. Sweden, 33%

Sweden, 21%

Pacific

North America, 20%

Asia, 16%

South America

Africa and Middle East, 4%

Africa ME

WOMEN AT DIFFERENT LEVELS OF THE ORGANIZATION

South America, 4%

Pacific, 2%

Level

Pacific

2 – reports to CEO
3 – reports to level 2
4 – reports to level 3
5 – reports to level 4
Levels 2–5
Africa ME
All employees

South America

Asia

Share of women, %

20131 2014

North America
2015

2016

2017

27
12
19
24
22
31

Sweden

Europe

27
16
17
24
22
31

27
17
16
25
23
31

27
18
16
24
22
31

27
17
16
25
23
30

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

Asia

for comparability with 2014.

North America

Sweden

Europe

In 2017 the share was 23 percent. The Group currently
has 28 different nationalities in the senior management
structure.

Health and safety
A new health and safety program was launched during
the year for all buiness entities with at least 10 employ-
ees. The goal is to significantly reduce injuries and injury
incidents, improve working conditions and strengthen
the safety culture of the Group. The initiative involves a
Group-wide structured process with greatly expanded
reporting, documentation and indicators that provide
the basis for analysis of safety risks and injuries. The pro-
gram includes employee training with a strong emphasis
on prevention and showed positive results during the
year. ASSA ABLOY’s employee survey is a tool for report-
ing on the work environment, skills development and
career opportunities and is conducted every second year.
The most recent survey in 2016 had a very high response
rate of 92 percent.

Development and career
ASSA ABLOY is guided by a vision to be an attractive
employer for our all employees. The annual performance
reviews, during which managers and employees monitor
and plan the employee’s professional development, are a
foundation in the effort to obtain and inspire commit-
ment and continuous development.

Leadership development aims to promote active lead-

ership, where each employee is seen as an individual
according to the motto “know your people,” and based
on continuous feedback. The Group has a well-estab-
lished global development process for senior managers,
the Talent Management Process, which aims to ensuring
that the Group has the expertise it needs to meet the
demands of the future.

The foundation consists of two development pro-
grams for senior managers: ASSA ABLOY MMT and ASSA
ABLOY IMD, “Leading the future”. MMT has three mod-
ules based on the Group’s three basic strategies: market
presence, product leadership and cost-efficiency. The
IMD training program is conducted in cooperation with
the world-famous Swiss management school IMD in
Lausanne. The collaborative effort also includes a cus-
tomized IMD program with about 30 participants per
session. Its aim is to support the implementation of the
Group’s strategies, with a focus on problem solving and
activities based on an analysis of various case studies.
Over 500 of the Group’s senior managers from 35 coun-
tries have participated in the IMD training program.

SUSTAINABLE DEVELOPMENT 37

NATIONALITIES
– ASSA ABLOY’s
MANAGEMENT TEAMS

Europe excl. Sweden, 33%

Sweden, 21%

North America, 20%

Asia, 16%

Africa and Middle East, 4%

South America, 4%

Pacific, 2%

ASSA ABLOY ANNUAL REPORT 2017

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 statement of cash flows

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 Profit from discontinued operations

32 Cash flow

33 Employees

34 Financial risk management and financial

instruments

Comments on five years in summary

Five years in summary

Quarterly information

Definitions of key ratios

Proposed distribution of earnings

Auditor’s report

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2017

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 fiscal year January 1 through December 31, 2017.
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 increased by 7 percent and totaled SEK 76,137 M
(71,293). The increase consisted of organic growth of 4 per-
cent (2), acquired growth of 3 percent (3) and discontinued
growth of –1 percent (0). The exchange rate impact on sales
was 1 percent (0).

Operating income (EBIT) excluding items affecting com-
parability increased by 10 percent to SEK 12,341 M (11,254),
equivalent to an operating margin of 16.2 percent (15.8).
There were no items affecting comparability for 2017, while
for the comparative year there were costs for the restructur-
ing program that was launched.

Net financial items were SEK –668 M (–705). Income
before tax excluding items affecting comparability totaled
SEK 11,673 M (10,549). Operating cash flow increased by
4 percent to SEK 10,929 M (10,467). Earnings per share after
full dilution, excluding items affecting comparability,
increased 10 percent to SEK 7.77 (7.09).

Restructuring
During the year, the restructuring program that was
launched the previous year involving the closure of about
fifty factories and offices made progress and was effective.
The savings rate has been favorable and as expected. Activi-
ties were also carried out within the framework of previously
launched structural programs.

At year-end 2017, 13,564 employees had left the Group,
of which 1,402 employees during the year, as a result of the
changes in the production structure since the restructuring
programs began in 2006. A total of 77 plant closures have
been implemented, including one closure in 2017. A large
number of plants in high-cost countries have switched from
production to final assembly.

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 for the restructuring programs totaled SEK 612 M
(442) for the year. At year-end 2017, the remaining provisions
for restructuring measures amounted to SEK 944 M (1,572).

Acquisitions and divestments
In July 2017, ASSA ABLOY acquired 100 percent of the share
capital in the French company Arjo Systems, a leading pro-
vider of physical and digital identity solutions for national ID
documents. The acquisition strengthens the current offering
of secure identity solutions and will strengthen the Group’s
position in national ID documents, while offering additional
growth opportunities. Arjo Systems operates in France, Italy
and Hong Kong.

In August 2017, ASSA ABLOY acquired 76 percent of the
share capital in Shree Mahavir Metalcraft (SMI), one of India’s
leading manufacturers of locks and hardware. In connection
to the acquisition, an agreement was signed on future acqui-
sition of outstanding interests, and the company is therefore
consolidated 100 percent from the acquisition date. The

acquisition strengthens the Group’s position in the Indian
market. SMI also offers opportunities to develop market-
specific and competitive products and is a good fit with
ASSA ABLOY’s other operations in India. The company’s
headquarters are located in Jamnagar in India.

In October 2017, ASSA ABLOY acquired 100 percent of
the share capital of Mercury Security, a leading US OEM sup-
plier of control systems for physical access control. The
acquisition strengthens the current offering in physical
access management where Mercury Security considerably
strengthens the Group’s position in physical access manage-
ment and offers complementary growth opportunities
Mercury Security is headquartered in Long Beach, California.
In November 2017, ASSA ABLOY acquired 100 percent of
the share capital of August Home Inc., a leading US supplier
of smart digital locks. The acquisition of August Home fur-
ther strengthens the strategy for smart door solutions aimed
at the residential market with additional smart digital locks,
doorbells with camera and complete home delivery solu-
tions. August Home is headquartered in San Francisco,
California.

Other acquisitions during the year included Southeastern

Dock & Door in the US, which strengthens the leading posi-
tion in entrance automation, and Jerith in the US, a leading
provider of aluminum fences for private, commercial and
industrial applications.

A total of 16 businesses, including minor acquisitions,
were consolidated during the year. The total purchase price
of these acquisitions was SEK 6,862 M on a debt-free basis,
and acquisition analyses indicate that goodwill and other
intangible assets with an indefinite useful life amounted to
SEK 5,111 M. Net financial items were SEK 365 M.

Additional acquisitions of non-controlling interests
occurred during the year for SEK 130 M (40). The holdings
were previously 100 percent consolidated.

In August 2017, operations at AdvanIDe, a leading pro-
vider of products such as semiconductors and chip cards,
were sold to a Singapore holding company with the Japanese
South East Asia Fund as the principal owner. The operation,
with headquarters in Singapore, was expected to have sales
of about SEK 1,250 M in 2017. The disposal resulted in a
small capital loss and had a positive impact on ASSA ABLOY’s
operating margin moving forward, all else being equal.

Research and development
ASSA ABLOY’s expenditure on research and development
during the year totaled SEK 2,244 M (2,218), equivalent to
2.9 percent (3.1) of sales.

The pace of innovation remained high throughout the
year, including in areas such as digital door opening solu-
tions, products with increased sustainability and energy-
saving products. New products launched in the past three
years accounted for 28 percent of sales for the year.

ASSA ABLOY ANNUAL REPORT 2017

REPORT OF THE BOARD OF DIRECTORS 39

Report of the Board of Directors

Sustainable development
ASSA ABLOY’s operations in Gothenburg, Sweden, carry on
licensable and notifiable activities under the Swedish
Environmental Code. The affected operation is part of the
Entrance Systems division in Gothenburg.

A number of units outside Sweden carry on licensable
activities and hold equivalent licenses under local legisla-
tion. ASSA ABLOY’s units worldwide are working systemati-
cally and purpose fully to reduce their environmental impact.
In accordance with the Swedish Annual Accounts Act,
Chapter 6, Section 11, ASSA ABLOY opted to prepare the
Sustainability Report as a separate report from the Annual
Report. The Sustainability Report has been submitted to the
auditor at the same time as the Annual Report. The 2017
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.

Internal control and financial reporting
ASSA ABLOY strengthened the internal audit and internal
control functions in terms of staffing during the year. More
reviews were conducted, and work continued during the
year to strengthen internal control and compliance in the
business in general. Special emphasis has been placed on
financial reporting and internal control compliance issues
related to the internal control framework that has been in
effect for some time.

Tax matters
In 2016 the Administrative Court in Sweden 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-
sion was appealed to the Administrative Court of Appeal. In
2017 the Administrative Court of Appeal ruled not to change

the previous decision. Tax payment that resulted from the
Court’s decision totaled SEK 928 M.

In 2015 the Finnish Tax Administration decided not to
allow tax deductions for interest expenses in the Finnish
operations for the years 2008–2012. The decision was
appealed to a higher court. In 2017, the earlier decision was
reconsidered to ASSA ABLOY’s advantage. The decision has
since been appealed by the Finnish tax authority. The total
tax exposure amounts to around SEK 800 M.

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

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

Proposed distribution of earnings
The Board of Directors and the President propose that the
2018 Annual General Meeting should approve a dividend of
SEK 3.30 (3.00) per share, representing an increase of 10 per-
cent. The proposal for profit distribution can be found in its
entirety on page 98 of the Annual Report.

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 ASSA ABLOY’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 2017

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
ASSA ABLOY, and to keep risk analysis and risk management
as close as possible to the actual risks, a large proportion of
operational risk management takes place at division and
business unit 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
accordance with the ASSA ABLOY’s decentralized approach
to organization, 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
framework established in the financial policy, with the excep-
tion of credit risks relating to operational business activities,
which are managed locally at company level and monitored
at division level.

Review process
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 43.

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 2017

REPORT OF THE BOARD OF DIRECTORS 41

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
• Customer behavior
• Competitors
• Brand positioning
• Reputational risk

• Legal risks
• Environmental risks
• Tax risks
• Acquisition of new businesses
• Restructuring measures
• Price fluctuations 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
addition, 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
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. Consequently the Group has increased expo-
sure to the emerging markets, which may entail a higher risk
profile for country-specific risks in the form of inadequate
compliance, policy decisions, overall changes in regulations
and more.

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
for employees and the Code of Conduct for business part-
ners. These codes express the Group’s values relating to busi-
ness ethics, human rights and working conditions, as well as
the environment, health and safety.

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 43 describes in more detail the

management of these risks.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2017

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 countries
in which it operates. Ongoing and potential disputes
and other legal matters are reported regularly 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 2017, there are considered to be
no outstanding legal disputes that may lead to
significant costs for the Group.

Environmental risks

Ongoing and potential environmental risks are regu-
larly monitored in the operations. External expertise
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.

At year-end 2017, there are considered to be
no ongoing tax cases with a significant impact
on the Group’s earnings. A tax-related case in
Finland has been appealed to a higher court.
For further information see the Report of the
Board of Directors.

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.

During the year ASSA ABLOY acquired 16 busi-
nesses. The Group’s acquisitions in 2017 are
reported in the Report of the Board of Direc-
tors and in Note 30, Business combinations.

Restructuring measures

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

Price fluctuations and
availability of raw materials

Credit losses

Insurance risks

Risks relating to internal
control

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

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 monitored on a regular
basis.

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 com-
ponents.

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 com-
pany level and monitored at division level.

A Group-wide insurance program is in place, mainly
relating to property, business interruption and liabil-
ity 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 trans-
parent, with a clear allocation of responsibilities.
A well-established Controller organization at both
division and Group level monitors financial report-
ing quality.

Instructions about the allocation of responsibilities,
authorization and procedures for ordering, sourcing
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 per-
formed for selected Group companies on a rotating
basis.

During the year, the restructuring program
that was launched at the end of the previous
year involving the closure of about fifty facto-
ries and offices made progress and was effec-
tive in 2017. The scope, costs and savings of
the restructuring programs are presented in
more detail in the Report of the Board of
Directors.

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,
mainly regarding China.

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

ASSA ABLOY strengthened the internal audit
and internal control functions in terms of staff-
ing in 2017 and the number of audits was
increased, in part because of the previously
discovered errors in the financial reporting in
China during the previous year. Internal con-
trol and other related issues are reported in
more detail in the Report of the Board of
Directors, section on Corporate governance.

Further information on risk management
relating 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 2017

REPORT OF THE BOARD OF DIRECTORS 43

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 34, 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
solid 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 2017. 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 compre-
hensive 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 25,275 M (23,127) at year-end 2017. 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,
various 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 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
certain counterparty risks. Such exposure may arise, for
example, as a result of the placement of surplus cash, bor-
rowings and derivative financial instruments. Counterparty
limits are set for each financial counterparty and are con-
tinuously monitored.

Pension obligations
At year-end 2017, ASSA ABLOY had obligations for pensions
and other post-employment benefits of SEK 8,014 M (8,184).
The Group manages pension assets valued at SEK 5,081 M
(5,063). Provisions in the balance sheet for defined benefit
and defined contribution plans and post-employment medi-
cal benefits totaled SEK 2,933 M (3,121). 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
remeasurement of obligations and plan assets is recognized
on a current basis in the balance sheet and in other compre-
hensive income. The assumptions made include discount
rates and anticipated inflation and salary increases.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2017

Aperio gives access for students at Lund’s University

CUSTOMER: Lund University, Sweden, among the top 100 universities in the
world, is also one of Scandinavia’s largest: with a single smart access card for its
42,000 students and 7,500 staff.

CHALLENGE: The Faculty of Law sought a replacement for its 20-year-old
access control system. It needed a modern, user-friendly system, so security
staff could focus on service rather than administration.

There was a need to update faculty access rights without thousands of users
having to return smart cards for reprogramming. Security managers needed to
block lost cards centrally, without technicians having to visit every door.

SOLUTION: The solution is based on seamless integration between ASSA
ABLOY Aperio wireless locks and PACOM’s Unison security management plat-
form, which is already installed at Lund. The installed Aperio locks with inte-
grated card readers are opened with existing student and staff cards.

With Aperio, security managers can block lost cards centrally, and it is easy to

de-authorize staff and students who leave the university – an operator simply
removes them from the user database and their smart card is disabled. There’s
no longer any security threat from lost or copied physical keys. Security staff
focus on security rather than user management and system administration.

Mobile Access provides
seamless solution

CUSTOMER: The Mohammed Bin Rashid Housing Establishment (MRHE) is a
public company with around 200 employees. It provides housing solutions for
Dubai’s residents.

CHALLENGE: MRHE needed to upgrade its employee access control to an
advanced solution where a mix of smart cards, smartphones and wearables
could be used to open doors throughout its facilities. The company wanted a
seamless upgrade and a secure and easy to use solution.

SOLUTION : MRHE chose HID Global’s Seos smart cards and HID Mobile
Access, enabling employees to use any combination of mobile devices and
smart cards for access control. Mobile-ready iCLASS SE readers were already
installed at MHRE in a phased upgrade plan.

The solution enables a new level of convenience for both users and in access

management. HID Mobile Access provides employees with the option to use
HID Global’s patented ‘Twist and Go’ gesture technology or to simply tap their
smartphone or wearable at a mobile-ready iCLASS SE reader to open doors.

Employee feedback has been positive and ‘Twist and Go,’ where users twist

their phone to gain access, is very popular.

The solution enabled MRHE to simplify access management for administra-

tors with the HID Mobile Access portal for issuing, managing and revoking
Mobile IDs to smartphones and wearables.

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 Swed-

ish Companies Act, the Annual Accounts Act, the Nasdaq
Stockholm Rule Book for Issuers and the Swedish Corporate
Governance Code, as well as other applicable external laws,
rules and regulations, and internal rules and regulations.

This Corporate Governance Report has been prepared as
part of ASSA ABLOY’s application of the Swedish Corporate
Governance Code. 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 inter-
acting components, which are described below.

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 Corporate Governance Code

(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-Bribery Policy

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2017

Shareholders
At the end of 2017, ASSA ABLOY had 33,811 shareholders (27,638).
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 sharehold-
ers accounted for 66.6 percent (64.0) of the share capital and 45.4 percent
(43.7) of the votes. The ten largest shareholders accounted for 40.3 percent
(39.5) of the share capital and 59.3 percent (58.7) of the votes. For further
information on shareholders, see page 105.

ASSA ABLOY’s Articles of Association contains a pre-emption clause for own-
ers of Series A shares regarding Series A shares. 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’ agree-
ments or other agreements between shareholders in ASSA ABLOY.

Share capital and voting rights
ASSA ABLOY’s share capital at the end of 2017 amounted to SEK 370,858,778
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. The total number of votes
amounted to 1,630,310,055. Each Series A share carries ten votes and each
Series B share one vote. All shares have a par value of around SEK 0.33 and
give shareholders 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
Series B shares. The aim has been, among other things, to secure the compa-
ny’s undertakings in connection with its long-term incentive programs (LTI).
The 2017 Annual General Meeting authorized the Board of Directors to
acquire, during the period until the next Annual General Meeting, a maxi-
mum 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) 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 consid-
eration amounted to SEK 103 M (103). No shares were repurchased in 2017.

Share and dividend policy
ASSA ABLOY’s Series B share is listed on the Nasdaq Stockholm Large Cap list.
At the end of 2017, ASSA ABLOY’s market capitalization amounted to SEK
189,276 M, calculated based on shares of both Series A and Series B. 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 pre-
scribes that a proposal should be supported by a higher majority. Individual
shareholders who wish to submit a matter for consideration at the General
Meeting can send such request to ASSA ABLOY’s Board of Directors at a spe-
cial address published on the company’s website well before the Meeting.

The Annual General Meeting should be held within six months of the end

held if the Board of Directors considers this necessary or if ASSA ABLOY’s
auditors or shareholders holding at least 10 percent of the shares so request.

2017 Annual General Meeting
The Annual General Meeting in April 2017 was attended by shareholders rep-
resenting 55.3 percent of the share capital and 69.6 percent of the votes.
The Annual General Meeting’s resolutions included the following.
• Dividend of SEK 3.00 per share.
• Lars Renström, Carl Douglas, Ulf Ewaldsson, Eva Karlsson, Birgitta Klasén,
Eva Lindqvist, Johan Molin and Jan Svensson were re-elected as members
of the Board of Directors and Sofia Schörling Högberg was elected as new
member of the Board of Directors. Further, Lars Renström was re-elected
as Chairman of the Board of Directors, and Carl Douglas was re-elected as
Vice Chairman.

• PricewaterhouseCoopers AB (PwC) was re-appointed as the company’s

auditor.

• Remuneration of the Board of Directors.
• Remuneration guidelines for senior management.
• Authorization to the Board of Directors regarding repurchase and trans-

fers of own Series B shares.

• A long-term incentive program for senior executives and other key staff in

the Group (LTI 2017).

• Members of the Nomination Committee prior to the 2018 Annual

General Meeting and determination of the assignment of the Nomination
Committee.

For more information about the Annual General Meeting, including the
minutes, please see www.assaabloy.com.

Nomination Committee
The Nomination Committee prior to the 2018 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. Carl Douglas is also Vice
Chairman of ASSA ABLOY’s Board of Directors. The Nomination Committee
thus deviates from the Swedish Corporate Governance Code in that the Vice
Chairman of the Board of Directors is Chairman of the Nomination Commit-
tee. The reason for this deviation is that the major shareholders consider it to
be important to have the representative from the largest shareholder as
Chairman of the Nomination Committee.

If a shareholder represented by one of the members of the Nomination
Committee ceases to be among the major shareholders in ASSA ABLOY, the
Committee has the right to appoint another representative of one of the major
shareholders to replace such a member. The same applies if a member of the
Nomination Committee ceases to be employed by such a shareholder or
leaves the Nomination Committee before the 2018 Annual General Meeting.
The Nomination Committee has the task of preparing and recommend-
ing, on behalf of the shareholders, proposals for the election of the Chairman
of the Annual General Meeting, the election of the Chairman, the Vice Chair-
man and other members of the Board of Directors, the appointment of the
auditor, resolution on fees to the auditor and to the Board of Directors
(including division between the Chairman, Vice Chairman and other mem-
bers of the Board of Directors, as well as remuneration for committee work),
as well as the appointment of members to the Nomination Committee and
determination of the assignment of the Nomination Committee. The Audit
Committee assists the Nomination Committee in work associated with the
proposal regarding the appointment of the auditor.

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 Direc-
tors; appointment of the Nomination Committee and auditors; and determi-
nation of remuneration guidelines for senior management and fees for the
Board of Directors and auditors. An Extraordinary General Meeting may be

Prior to the 2018 Annual General Meeting, the Nomination Committee
makes an assessment of whether the current Board of Directors is appropri-
ately composed and fulfills the requirements imposed on the Board of Direc-
tors by the company’s present situation and future direction. The annual
evaluation of the Board of Directors and its work is part of the basis for this
assessment. Moreover, the Nomination Committee has applied ASSA
ABLOY’s diversity policy for the Board of Directors, which is based on Rule 4.1

ASSA ABLOY ANNUAL REPORT 2017

REPORT OF THE BOARD OF DIRECTORS 47

Report of the Board of Directors

Corporate governance

of the Swedish Corporate Governance Code, when preparing its proposal for
election of members of the Board of Directors. The search for suitable board
members is carried on throughout the year and proposals for new board
members are based in each individual case on a profile of requirements
established by the Nomination Committee.

Shareholders wishing to submit proposals to the Nomination Committee

can do so by e-mailing: nominationcommittee@assaabloy.com.

The Nomination Committee’s proposals for the 2018 Annual General
Meeting are published at the latest in conjunction with the formal notifica-
tion of the Annual General Meeting, which is expected to be issued around
21 March 2018.

Board of Directors
In accordance with the Swedish Companies Act, the Board of Direc-
tors is responsible for the organization and administration of the
Group and for ensuring satisfactory control of bookkeeping, asset manage-
ment and other financial 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. Acquisitions
and divestments with a value (on a debt-free basis) exceeding SEK 200 M are
decided by the Board of Directors. This amount presumes that the matter
relates to acquisitions or divestments in accordance with 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 decisions
concerning the Group’s financial structure.

The Board of Directors’ other ongoing duties include:

• appointing, evaluating and if necessary dismissing the CEO,
• approving the CEO’s significant assignments outside the company,
• establishing appropriate guidelines to govern the company’s conduct in
society with the aim of ensuring long-term value-creating capability,

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

• 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

• ensuring that external information provided by the company is transpar-

ent, accurate, relevant and reliable.

Each year, the Board of Directors reviews and adopts the Board of Directors’
rules of procedure, which is the document that governs the work of the
Board and the distribution of duties between the Board of Directors and the
CEO. The rules of procedure include instructions for the CEO, instructions
relating to financial reporting and internal control, and instructions to the
Remuneration Committee and the Audit Committee.

Included in the rules of procedure is a description of the role of the Chair-
man of the Board. In addition to organizing and leading the work of the Board
of Directors, the Chairman’s duties include maintaining contact with the CEO
to continuously monitor the Group’s operations and development, consult-
ing with the CEO on strategic issues, representing the company in matters

concerning the ownership structure, ensuring that the Board receives satis-
factory information and data on which to base decisions and ensuring that
Board decisions are implemented. In addition, the Chairman should ensure
that the work of the Board of Directors is evaluated annually.

The Board of Directors has at least four ordinary meetings and one statu-
tory meeting per year. An ordinary 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 operations,
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 provided 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
members of the Committees are appointed annually by the Board of Direc-
tors at the statutory board meeting.

Board of Directors’ composition
The Board of Directors is elected annually at the Annual General Meeting for
the period until the end of the next Annual General Meeting and shall,
according to the Articles of Association, comprise a minimum of six and a
maximum of ten members elected by the Meeting. Two of the members are
appointed by the employee organizations in accordance with Swedish law.
The employee organizations also appoint two deputies. The Board of Direc-
tors has consisted of nine elected members and two employee representa-
tives since the 2017 Annual General Meeting. 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 signifi-
cant business relationships with ASSA ABLOY.

The diversity policy that ASSA ABLOY applies with respect to the compa-

ny’s Board of Directors is based on Rule 4.1 of the Swedish Corporate Gov-
ernance Code. The objective is that the composition of the Board of Direc-
tors, taking into account the company’s operations, phase of development
and other circumstances, shall be appropriate, characterized by versatility
and breadth regarding qualifications, experience and background of the
elected members, and strive to achieve gender equality. In 2017 the Nomi-
nation Committee has taken the diversity policy into account when prepar-
ing its proposal for election of members of the Board of Directors prior to the
2017 Annual General Meeting, which resulted in the current Board, which in
the opinion of the Nomination Committee is essentially appropriate for the
purpose with respect to both the diversity policy and the company’s opera-
tions, phase of development and other circumstances. After the election at
the 2017 Annual General Meeting, four of nine elected members of the
Board of Directors are women. In addition, in-depth reviews of operations
were conducted during the year at selected divisions and the Group’s com-
mon development center, Shared Technologies, in order to broaden the
expertise of the Board of Directors within ASSA ABLOY. As a result of the
Board’s evaluation, the Board will complete training at Shared Technologies
in early 2018 to gain further understanding of ASSA ABLOY’s new technologi-
cal solutions.

SUMMARY OF
BOARD OF DIRECTORS’
WORK AND COMMITTEE
MEETINGS IN 2017

Ordinary board meeting
Year-end results
Proposed distribution of earnings
Approval Annual Report
Final Audit Report
Proposals to Annual General Meeting
Evaluation Executive Team
Acquisitions

Ordinary board meeting
Interim Report Q1
Acquisitions
Presentation Entrance Systems

January

February

March

April

May

June

Remuneration Committee
meeting

Audit Committee meeting

Extraordinary board meeting
Notice Annual General Meeting

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

Audit Committee meeting

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

Extraordinary board meeting
Acquisitions

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2017

Board of Directors’ work in 2017
The Board of Directors held twelve meetings during the year. At the ordinary
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 Directors during the

year comprised recruiting a new CEO, a number of acquisitions, including
Arjo Systems, August Home and Mercury Security, and the divestment of
business operations of AdvanIDe. During the year, the Board of Directors also
conducted in-depth reviews of the Group’s operations in the Entrance Sys-
tems division, Americas division, EMEA division, and Global Technologies
division’s HID Global business unit, and visited the EMEA division’s opera-
tions in Birmingham, England. The Board of Directors’ work is summarized in
the timeline on pages 48–49.

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 individ-
ually. The 2017 evaluation focused on the field of skills development for the
Board of Directors within ASSA ABLOY’s areas of operation. A summary of the
results is reported to the Board of Directors at the board meeting in Novem-
ber. Board members who wish can access the complete results of the evalua-
tion. The Secretary to the Board of Directors presents the complete results of
the evaluation to the Nomination Committee.

Remuneration Committee
In 2017 the Remuneration Committee comprised Lars Renström
(Chairman) and Jan Svensson.

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 2018 Annual General Meeting is set out on page 55.
The Remuneration Committee also prepares, negotiates and evaluates
matters regarding salaries, bonus, pension, severance pay and incentive pro-
grams for the CEO and other senior executives. The Committee has no deci-
sion-making powers.

of the evaluation. The Audit Committee also has the task of supporting the
Nomination Committee in providing a proposal for the appointment of audi-
tors. Furthermore, the Audit Committee shall review and monitor the impar-
tiality and independence of the auditor, paying particular attention to whether
the auditor provides the company with services other than auditing services.
The Audit Committee establishes guidelines for procurement of services other
than audit services from the company’s auditor, but otherwise, the Committee
has no decision-making powers.

The Audit Committee held four meetings in 2017, which were attended

by committee members, the company’s auditor and representatives of
senior management. More important matters dealt with by the Audit Com-
mittee during the year included internal control, financial statements and
valuation matters, tax matters, insurance and risk management matters, IT
security, and legal risk areas. Audit Committee meetings are minuted; a copy
of the minutes is enclosed with the materials provided to the Board and a
verbal report is given at board meetings.

Remuneration of the Board of Directors
The Annual General Meeting passes a resolution on the remuneration to be
paid to board members. The 2017 Annual General Meeting passed a resolu-
tion on board fees totaling SEK 6,450,000 (excluding remuneration for com-
mittee work) to be allocated between the members as follows: SEK
2,000,000 to the Chairman, SEK 850,000 to the Vice Chairman, and SEK
600,000 to each of the other members elected by the Annual General Meet-
ing and not employed by the company. As remuneration for committee
work, the Chairman of the Audit Committee is to receive SEK 250,000, the
Chairman of the Remuneration Committee SEK 150,000, members of the
Audit Committee (except the Chairman) SEK 200,000 each, and members of
the Remuneration Committee (except the Chairman) SEK 75,000 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 information on the remuneration of board
members in 2017, see Note 33.

The Committee held two meetings in 2017. Its work included preparing a

Attendance 2017, Board of Directors and Committees

proposal for the remuneration of the Executive Team, evaluating existing
incentive programs, and preparing a proposal for a long-term incentive pro-
gram for 2018. Remuneration Committee meetings are minuted; a copy of
the minutes is enclosed with the materials provided to the Board and a
verbal report is given at board meetings.

Audit Committee
From the 2017 Annual General Meeting, the Audit Committee has
consisted of Jan Svensson (Chairman), Birgitta Klasén and Sofia

Schörling Högberg.

The duties of the Audit Committee include continuous monitoring and
quality assurance of ASSA ABLOY’s financial reporting. Regular communication
is maintained with the company’s auditor, including the focus and scope of the
audit. The Audit Committee is also responsible for evaluating the audit assign-
ment and obtaining the results of the Swedish Inspectorate of Auditors’ quality
control of the auditor, as well as informing the Board of Directors of the results

Name

Lars Renström
Carl Douglas
Ulf Ewaldsson
Eva Karlsson
Birgitta Klasén
Eva Lindqvist
Johan Molin
Sofia Schörling Högberg
Jan Svensson
Bert Arleros
Rune Hjälm
Mats Persson

Board of
Directors

Audit
Committee

Remuneration
Committee

2/2

4/4

2/2
4/4

12/12
12/12
9/12
12/12
12/12
12/12
11/12
8/9
12/12
3/3
9/9
11/12

The maximum number of meetings varies due to appointment and resignation in 2017.

Ordinary board meeting
Interim Report Q2
Acquisitions

Ordinary board meeting
Presentation Americas
Acquisitions

Ordinary board meeting and
visit to operations
Visit EMEA
Presentation HID
Acquisitions

Ordinary board meeting
Interim Report Q3

Ordinary board meeting
Presentation Entrance Systems
Evalution Board of Directors
work
Acquisitions

Extraordinary board meeting

Acquisitions

Audit Committee meeting

Remuneration Committee
meeting

Extraordinary board meetings
CEO recruitment

July

August

September

October

November

December

ASSA ABLOY ANNUAL REPORT 2017

REPORT OF THE BOARD OF DIRECTORS 49

Report of the Board of Directors – Corporate governance

Board of Directors

Board members elected by the 2017 Annual General Meeting

Lars Renström

Carl Douglas

Ulf Ewaldsson

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 2004–2016. President and CEO of
Seco Tools AB 2000–2004. President and Head of Division of Atlas
Copco Rock Drilling Tools 1997–2000. Previously a number of senior
positions at ABB and Ericsson.
Other appointments: Chairman of Tetra Laval Group.
Shareholdings (including through companies and related natural
parties): 30,000 Series B shares.

Birgitta Klasén
Board member since 2008.
Born 1949.
Master of Science in Engineering and degree in Business and
Economics.
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 Avanza.
Shareholdings (including through companies and related natural
parties): 21,000 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 through companies and related natural
parties): 41,595,729 Series A shares and 63,900,000 Series B shares
through Investment AB Latour.

Ulf Ewaldsson
Board member since 2016.
Born 1965.
Master of Science in Engineering and Business Management.
Senior Vice President and Head of Business Area Digital Services at
Ericsson since 1 April 2017. Various managerial positions within the
Ericsson Group since 1990, including Chief Technology Officer, Head
of Strategy and Head of Group Function Strategy and Technology
(September 2016–March 2017), Chief Technology Officer and Head
of Group Function Technology (2012–september 2016), and Head of
Product Area Radio within Business unit Networks (2007–2012). Ulf
has worked internationally for over 11 years (China, Japan and Eastern
Europe).
Other appointments: Chairman of KTH Royal Institute of Technology.
Member of the Royal Swedish Academy of Engineering Sciences (IVA).
Shareholdings (including through companies and related natural
parties): –

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 through companies and related natural
parties): –

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 TeliaSonera AB, including
President and Head of Business Operation International Carrier, and
various positions in the Ericsson Group 1981–1999.
Other appointments: Board member of Caverion Oy, Sweco AB, Com
Hem, Alimak Group AB, Mr Green & Co AB, Keller group plc and
Bodycote plc. Member of the Royal Swedish Academy of Engineering
Sciences (IVA).
Shareholdings (including through companies and related natural
parties): 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 through companies and related natural
parties): 2,000,000 Series B shares.

Appointments and shareholdings as at 31 December 2017.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2017

Board members appointed by employee organizations

Sofia Schörling Högberg

Jan Svensson

Rune Hjälm

Mats Persson

Bjarne Johansson

Nadja Wikström

Sofia Schörling Högberg
Board member since 2017.
Born 1978.
BSc (Bachelor of Science) in Business Administration.
Other appointments: Board member of Melker Schörling AB,
Securitas AB and Hexagon AB.
Shareholdings (including through companies and related
natural parties): 15,930,240 Series A shares and 26,882,608
Series B shares through Melker Schörling AB and 514,500
Series B shares through Edeby-Ripsa Skogsförvaltning
Aktiebolag.

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, Troax Group AB and Tomra Systems ASA. Board
member of Loomis AB, Oxeon AB, Alimak Group AB and
Investment AB Latour.
Shareholdings (including through companies and related
natural parties): 6,000 Series B shares.

Rune Hjälm
Board member since 2017.
Born 1964.
Employee representative, IF Metall. Chairman of
European Works Council (EWC) in the ASSA
ABLOY Group.
Shareholdings (including through companies
and related natural parties): –

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

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

Nadja Wikström
Deputy board member since 2017.
Born 1959.
Employee representative, Unionen.
Shareholdings (including through companies
and related natural parties): –

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

Independence of the Board of Directors

Name

Position

Lars Renström
Carl Douglas
Ulf Ewaldsson
Eva Karlsson
Birgitta Klasén
Eva Lindqvist
Johan Molin
Sofia Schörling Högberg
Jan Svensson

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

Independent of
the company and
its management

Independent of
the company’s
major shareholders

Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes

Yes
No
Yes
Yes
Yes
Yes
–
No
No

The Board of Directors’ composition and shareholdings

Name

Position

Elected

Lars Renström
Carl Douglas
Ulf Ewaldsson
Eva Karlsson
Birgitta Klasén
Eva Lindqvist
Johan Molin
Sofia Schörling Högberg
Jan Svensson
Rune Hjälm
Mats Persson
Bjarne Johansson
Nadja Wikström

Chairman
Vice Chairman
Board member
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

1 Shareholdings through companies and related natural parties.

2008
2004
2016
2015
2008
2008
2006
2017
2012
2017
1994
2015
2017

Born

1951
1965
1965
1966
1949
1958
1959
1978
1956
1964
1955
1966
1959

Remuneration
Committee

Audit Commit-
tee

Series A shares1

Series B shares1

Chairman
–
–
–
–
–
–
–
Member
–
–
–
–

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

–
41,595,729
–
–
–
–
–
15,930,240
–
–
–
–
–

30,000
63,900,000
–
–
21,000
7,650
2,000,000
27,397,108
6,000
–
–
–
–

ASSA ABLOY ANNUAL REPORT 2017

REPORT OF THE BOARD OF DIRECTORS 51

Appointments and shareholdings as at 31 December 2017.

Report of the Board of Directors – Corporate governance

Executive Team

Johan Molin

Carolina Dybeck Happe

Mogens Jensen

Anders Maltesen

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 through com-
panies and related natural parties):
2,000,000 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 positions
in the ASSA ABLOY Group, including CFO
of ASSA ABLOY EMEA 2007–2011 and
ASSA ABLOY Central Europe 2002–2006.
Previous to that various positions in
finance at EF Education First.
Other appointments: Member of the
Supervisory Board of E.ON.
Shareholdings: 21,360 Series B shares.

Mogens Jensen
Executive Vice President and Head of
Entrance Systems division since 1 January
2018.
Born 1958.
Master of Science in Mechanical
Engineering, MBA.
Previous positions: Various positions in
the ASSA ABLOY Group, including BA
President Industrial Door and Docking

Solutions, Entrance Systems division
2016–2017, Market Region Manager
Scandinavia, EMEA division 2006–2016
and Managing Director Ruko A/S
Denmark. Previously various Managing
Director positions.
Shareholdings: 12,439 Series B shares.

Anders Maltesen
Executive Vice President and Head of Asia
Pacific division since 1 September 2017.
Born 1965.
Bachelor’s degree in Marketing and
Bachelor’s degree in Financial and
Management Accounting.
Previous positions: Regional General
Manager och President, Asia Pacific, GE
Energy, Power Services 2015–2017,
Managing Director, Asia Pacific, Alstom
Thermal Services 2014–2015, Vice
President, East Asia, Alstom Thermal
Services 2011–2014, General Manager,
board member, Tianjin Alstom Hydro Co.,
Ltd. 2003–2011. Previously various
positions within Alstom.
Shareholdings: –

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 52–53.

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 50 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 include
financial control, communication issues, insider issues, the
Group’s brands, environmental issues, business ethics, data
protection and export control. ASSA ABLOY’s financial policy
and accounting manual provide the framework for financial
control and monitoring. The Group’s communication policy
aims to ensure that information is provided at the right time
and in compliance with applicable rules and regulations.
ASSA ABLOY has adopted an insider policy to complement
applicable insider legislation. This policy applies to individu-

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2017

Thanasis Molokotos

Christophe Sut

Ulf Södergren

Stefan Widing

Tzachi Wiesenfeld

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
Manufacturing 1993–2001.
Shareholdings: 169,010 Series B
shares.

Christophe Sut
Executive Vice President and Head of
Global Technologies business unit
ASSA ABLOY Hospitality since 2016.
Born 1973.
Master of Science in Business and
Marketing, Bachelor of Science in
Language and Mathematics.
Previous positions: Various positions in
the ASSA ABLOY Group, 2001–2010
and 2012–2014, including CTO and
Vice President Business Development
ASSA ABLOY Hospitality and Platform

Director for ASSA ABLOY AB. Niscayah
Group 2010–2012. SPIT France (ITW
group) 1999–2001 and SAM Outillage
1997–1999.
Shareholdings: 3,498 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.
Other appointments: Board member
of Mantex AB.
Shareholdings: 133,630 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
Bachelor 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.
Previously various positions in the Saab
Group 2001–2006.
Shareholdings: 10,082 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 positions at Mul-T-Lock 1990–
2000.
Shareholdings: 50,962 Series B shares.

Changes in the Executive Team

Nico Delvaux has been appointed to serve as new President and CEO for ASSA ABLOY with effect
from 15 March 2018. He succeeds Johan Molin, who has requested to leave the position.
Thanasis Molokotos, Executive Vice President and Head of Americas division has announced
that he will leave ASSA ABLOY during 2018. Recruitment of a successor has begun.
Chris Bone has been appointed Executive Vice President and CTO with effect from 1 March
2018. He succeeds Ulf Södergren, who retires in 2018.

In 2017 Magnus Kagevik and Juan Vargues left the Executive Team.

Appointments and shareholdings as at 31 December 2017.

als in managerial positions at ASSA ABLOY AB (including sub-
sidiaries) as well as certain other categories of employees.
Brand guidelines aim to protect and develop the major assets
that the Group’s brands represent.

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.

ASSA ABLOY had adopted a Code of Conduct for employees
and a separate ASSA ABLOY Code of Conduct for business part-
ners. The Codes, which are based on a set of internationally
accepted conventions, define the values and guidelines that
should apply both within the Group and for ASSA ABLOY’s
business partners with regard to business ethics, human rights
and working conditions, as well as the environment, health
and safety. ASSA ABLOY has also adopted an anti-bribery pol-
icy and an export control policy that apply to the whole Group.
In 2017 ASSA ABLOY adopted a new data protection policy
that applies to the entire Group.

Auditor
At the 2017 Annual General Meeting, Pricewater-
houseCoopers (PwC) was re-appointed as the com-
pany’s external auditor up to the end of the 2018 Annual Gen-
eral Meeting. In connection with the 2017 Annual General

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), and generally accepted
auditing standards in Sweden. The audit of the financial state-
ments 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 2016, Note 3.

ASSA ABLOY ANNUAL REPORT 2017

REPORT OF THE BOARD OF DIRECTORS 53

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.

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
policy, 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 and good internal control.

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 most recently reviewed and
updated in 2016, and compliance is monitored systemati-
cally 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. A major focus has been on auditing the reconciliation
between local accounts and consolidated reporting in
recent years. 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 accord-
ance 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.

In 2017 ASSA ABLOY strengthened the internal audit and
internal control functions in terms of staffing, which in turn
has resulted in an expanded number of audits at the division
level. Each division will employ full-time internal auditors
who will audit the companies and monitor internal control.

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 impor-
tant 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 regular 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
external auditors. An action plan focused on concrete
measures was implemented a few years ago to further
improve basic processes with an impact on the company’s
financial position.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2017

Report of the Board of Directors

Remuneration guidelines
to senior management

The Board of Directors’ proposal for remuneration
guidelines to 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 other members of the ASSA ABLOY
Executive Team (the Executive Team). Except for certain
adjustments to the long-term incentive program for 2018,
the proposed guidelines below do not involve any material
change, compared with the guidelines adopted by the 2017
Annual General Meeting. The basic principle is that remuner-
ation and other employment conditions should be in line
with market conditions and be competitive. ASSA ABLOY
takes into account both global remuneration practice and
practice in the home country of each member of the Execu-
tive Team. The total remuneration of the Executive Team
should consist of base salary, variable components in the
form of annual and long term variable remuneration, other
benefits and pension.

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

Fixed and variable remuneration
The base 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 base 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 annual development of
ASSA ABLOY’s earnings per share in relation to target levels,
as defined by the Board of Directors, during the measure-
ment period 1 January 2018 – 31 December 2020, where
each year during the measurement period is compared to
the previous year. The outcome is calculated yearly, whereby

one third of the maximum outcome is measured against the
outcome for 2018, one third is measured against the out-
come for 2019 and one third is measured against the out-
come for 2020. The remuneration shall, if the share price is
unchanged, be equivalent to a maximum of 90 percent of
the base salary (excluding social security costs).

The company’s annual cost of variable remuneration for
the Executive Team as above, assuming maximum outcome,
can total around SEK 63 M (excluding social security costs
and financing 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 based on the executive’s
base salary and paid by the company during the period of
employment. In addition, the Swedish participants may be
given the possibility to use the outcomes from the com-
pany’s long-term incentive program for pension savings
according to a pension obligation. The obligation will be
secured by depositing a gross amount in an endowment
insurance owned by ASSA ABLOY. The pension amount must
be invested in shares in ASSA ABLOY during the time the
participant is employed by the Group.

Notice and severance pay
If the CEO is given notice, the company is liable to pay the
equivalent of 24 months’ base 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’ base salary and other employment benefits plus an
additional twelve months’ base salary.

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

ASSA ABLOY ANNUAL REPORT 2017

REPORT OF THE BOARD OF DIRECTORS 55

Consolidated financial statements

Sales and income

• Net sales increased by 7 percent to SEK 76,137 M (71,293). Organic growth was 4 percent (2).

Growth from acquisitions and divestments amounted to 2 percent (3).

• Operating income (EBIT) excluding items affecting comparability increased by 10 percent to

SEK 12,341 M (11,254), equivalent to an operating margin of 16.2 percent (15.8).

• Earnings per share after full dilution and excluding items affecting comparability increased by

10 percent till SEK 7.77 (7.09).

Sales
The Group’s sales totaled SEK 76,137 M (71,293), represent-
ing a 7-percent increase.

Change in sales

Organic growth
Acquisitions and divestments
Exchange rate effects
Total

2016

2017

2
3
0
5

4
2
1
7

The total change in sales for 2017 was 7 percent (5). Organic
growth was 4 percent (2) and acquired growth and divest-
ments contributed 3 percent (4) and –1 percent (–1). The
exchange rate impact on sales was 1 percent (0).

Sales by product group
Mechanical locks, lock systems and fittings accounted for
27 percent (28) of total sales. Electromechanical and elec-
tronic locks rose to 27 percent (26) of sales and entrance
automation accounted for 28 percentage points (28). Secu-
rity doors and hardware accounted for 17 percent (18) of
sales.

Cost structure
Total wage costs, including social security expenses and pen-
sion expenses, amounted to SEK 21,618 M (21,231), equiva-
lent to 28 percent (30) of sales. The average number of
employees was 47,426 (46,928).

The Group’s material costs amounted to SEK 27,630 M

(26,067), equivalent to 36 percent (37) of sales.

Other purchasing costs totaled SEK 13,144 M (12,675),

equivalent to 17 percent (18) of sales.

Depreciation and amortization of non-current assets
amounted to SEK 1,688 M (1,580), equivalent to 2 percent
(2) of sales.

Operating income
Operating income (EBIT) excluding items affecting compara-
bility increased by 10 percent to SEK 12,341 M (11,254), due
to efficiency improvements and continued growth in opera-
tions. The operating margin was 16.2 percent (15.8). The
exchange rate effects in operating income amounted to
SEK 37 M (–12).

Operating income before amortization of intangible
assets recognized in business combinations (EBITA), exclud-
ing items affecting comparability, was SEK 12,584 M
(11,450) The corresponding margin was 16.5 percent (16.1).

Items affecting comparability
No items affecting comparability of material significance
occurred in 2017. In 2016 a restructuring program was
launched for a cost of SEK 1,597 M before tax. The program
involves the closure of about fifty plants and offices over a
three-year period.

Income before tax
Income before tax excluding items affecting comparability
totaled SEK 11,673 M (10,549). The exchange rate effect
before taxes amounted to SEK 17 M (–2). Net financial items
were SEK –668 M (–705). The profit margin was 15.3 percent
(14.8).

The Parent company’s operating income for 2017 was

SEK 1,701 M (1,687).

Taxes
The Group’s tax expense totaled SEK 3,038 M (2,328), equiv-
alent to an effective tax rate of 26 percent (26). The effective
tax rate for 2017 included a positive impact corresponding
to 0.8 percentage points attributable to the new tax reform
in the US.

Earnings per share
Earnings per share before and after full dilution and exclud-
ing items affecting comparability amounted to SEK 7.77
(7.09), an increase of 10 percent.

SALES AND OPERATING INCOME

SEK M

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

SEK M

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

Sales
Omsättning
Operating income1
Rörelseresultat1

1 Excluding items affecting

comparability 2013 and 2016.

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2017

Consolidated financial statements

Consolidated income statement and
Statement of comprehensive income

Note

4
5
6–9, 24, 33

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 for the year from continuing operations

Profit from discontinued operations
Net income

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

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

Statement of comprehensive income, SEK M

Net income

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

Items that may be reclassified subsequently to profit or loss
Share of other comprehensive income of associates
Cash flow hedges
Net investment hedges
Other hedges
Exchange rate differences
Tax attributable to items that may be reclassified subsequently to profit or loss
Total

Total comprehensive income

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

2016

71,293
–44,319
26,974

–11,543
–3,473
–2,218
–210
127
9,657

9
–714
8,952

–2,328
6,625

28
6,653

6,651
1

5.99
7.09

2016

6,653

–138
36
–102

126
7
–39
23
1,955
3
2,077

8,627

8,627
1

2017

76,137
–46,148
29,988

–12,008
–3,680
–2,244
156
129
12,341

19
–687
11,673

–3,038
8,635

–
8,635

8,633
2

7.77
7.77

2017

8,635

26
–77
–51

50
8
15
–
–1,864
4
–1,788

6,796

6,794
2

SALES BY PRODUCT GROUP, 2017

EARNINGS PER SHARE BEFORE AND AFTER DILUTION

Mekaniska lås, låssystem
Mechanical locks, lock
och tillbehör, 28% (29)
systems and fittings, 27% (28)
Entréautomatik, 28% (27)
Entrance automation,
Elektromekaniska och
28% (28)
elektroniska lås, 26% (23)
Electromechanical and
Säkerhetsdörrar och
electronic locks, 27% (26)
beslag, 18% (20)
Security doors and hardware,
18% (18)

SEK

Earnings per share before
Vinst per aktie efter
skatt och utspädning1
and after dilution1

1 Excluding items affecting

comparability 2013 and 2016.

ASSA ABLOY ANNUAL REPORT 2017

CONSOLIDATED FINANCIAL STATEMENTS 57

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 Oceania) 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 18,081 M (16,837), with organic growth of
4 percent (3). Acquired units contributed 3 percent (0) to
sales. Operating income excluding items affecting compara-
bility amounted to SEK 2,990 M (2,722), with an operating
margin (EBIT) of 16.5 percent (16.2). Return on capital
employed was 21.4 percent (19.9). Operating cash flow
before interest paid was SEK 2,977 M (2,577).

Growth was strong or robust in the region for most mar-

kets. Sales of electromechanical locks with digital and
mobile solutions increased sharply during the year. A con-
tinuing focus on innovation and new products, as well as
improved efficiency and streamlining initiatives contributed
to EMEA’s continued good growth and high operating
margin.

Americas
Sales totaled SEK 17,940 M (17,044), with organic growth of
4 percent (5). Acquired units contributed 1 percent (3) to
sales. Operating income excluding items affecting compara-
bility amounted to SEK 3,815 M (3,640), with an operating
margin (EBIT) of 21.3 percent (21.4). Return on capital
employed was 24.2 percent (25.0). Operating cash flow
before interest paid was SEK 3,491 M (3,447).

Growth was robust in the Americas with continued posi-
tive demand in the important commercial and institutional
customer segments in the US, in part due to the high pace of
innovation and new product launches. Canada, Mexico and
most markets in South America showed strong growth. Prof-
itability remained strong due to robust growth in key cus-
tomer segments and continuous streamlining initiatives.

Asia Pacific
Sales totaled SEK 9,211 M (9,189), with organic growth of
0 percent (–9). Acquired units contributed 0 percent (1) to
sales. Operating income excluding items affecting compara-
bility amounted to SEK 934 M (787), with an operating mar-
gin (EBIT) of 10.1 percent (8.6). Impairment of operating
assets, etc., reduced operating income for the comparative
year, 2016, by a total of SEK 300 M. Return on capital
employed was 7.8 percent (6.6). Operating cash flow before
interest paid was SEK 859 M (1,564).

The division’s growth was strong in most markets in the
region, with the exception of China. Pacific, South Korea and
Southeast Asia all showed strong growth. The market posi-
tion in India was strengthened through acquisitions. Mean-
while, demand remained weak in China with declining sales
primarily in the residential segment and in the northern
parts of the country. The division’s operating margin
increased due to stabilized sales, continued streamlining
initiatives and improved efficiency.

Global Technologies
Sales totaled SEK 10,373 M (9,697), with organic growth of
7 percent (3). Acquired and divested units contributed 5
percent (3) and –5 percent (–) to sales, respectively. Operat-
ing income excluding items affecting comparability
amounted to SEK 1,946 M (1,752), with an operating margin
(EBIT) of 18.8 percent (18.1). Return on capital employed
was 14.4 percent (16.6). Operating cash flow before interest
paid was SEK 1,732 M (1,724).

Growth for the HID Global business unit was generally
robust for Europe and the US, but emerging markets also
showed good growth in general, albeit with a somewhat
weaker trend in China and Latin America. ASSA ABLOY Hospi-
tality showed strong growth and good profitability, driven by
continued increased demand for electromechanical door
opening solutions with mobile technology.

Entrance Systems
Sales totaled SEK 21,781 M (19,789), with organic growth of
4 percent (4). Acquired units contributed 6 percent (6) to
sales. Operating income excluding items affecting compara-
bility amounted to SEK 3,087 M (2,753), with an operating
margin (EBIT) of 14.2 percent (13.9). Return on capital
employed was 16.4 percent (15.7). Operating cash flow
before interest paid was SEK 3,065 M (2,713).

Most market segments in North America reported con-
tinued robust growth. In Europe growth increased, primarily
in western and southern Europe. Sales rose sharply in most
emerging markets with the exception of China. New product
launches, a strong service offering and consolidation of the
production structure were contributing factors to the trend
of continued robust growth, cash flow and increasing oper-
ating margins.

Other
The costs of Group-wide functions, such as corporate man-
agement, accounting and finance, supply management and
Group-wide product development, totaled SEK 432 M (401).
Elimination of sales between the Group’s segments is
included in ‘Other’.

EXTERNAL SALES, 2017

Legend
EMEA, 23% (23)
Legend
Americas, 23% (24)
Legend
Asia Pacific, 11% (12)
Legend
Global Technologies, 14% (13)
Legend
Entrance Systems, 29% (28)

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2017

Consolidated financial statements

Results by division

EMEA

Americas

Asia Pacific

SEK M

Sales, external
Sales, internal
Sales

2016

2017

2016

2017

16,535
302

17,873
67
16,837 18,081 17,044 17,940

17,729
351

16,963
81

Organic growth
Share of earnings in associates

3%
–

4%
–

5%
–

4%
–

2016

8,491
698
9,189

–9%
23

2017

8,553
658
9,211

0%
25

Global
Technologies

Entrance
Systems

Other

Total

2016

2017

2016

2017

2016

2017

2016

2017

9,619
78

10,301
72

0
100 –1,2623
9,697 10,373 19,789 21,781 –1,262

19,685
104

21,681

0
–1,2493
–1,249

71,293
–

76,137
–
71,293 76,137

3%
–

7%
–

4%
104

–
–

2%
127

4%
129

Operating income (EBIT) excluding
items affecting comparability
Operating margin (EBIT) excluding
items affecting comparability
Items affecting comparability1

Operating income (EBIT)
Operating margin (EBIT)
Net financial items
Tax on income
Profit from discontinued operations
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 excluding
items affecting comparability

Operating income (EBIT)
Restructuring costs
Depreciation and amortization
Investments in property, plant and
equipment and intangible assets
Sales of property, plant and equipment
and intangible assets
Change in working capital
Cash flow2

Non-cash items
Interest paid and received
Operating cash flow2

2,722

2,990

3,640

3,815

787

934

1,752

1,946

2,753

3,087

–401

–432

11,254 12,341

16.2%
–781

1,942
11.5%

16.5%
–

2,990
16.5%

21.4%
–34

3,606
21.2%

21.3%
–

3,815
21.3%

8.6%
–258

529
5.8%

10.1%
–

934
10.1%

18.1%
–148

1,603
16.5%

18.8%
–

1,946
18.8%

13.9%
–207

2,546
12.9%

14.2%
–

3,087
14.2%

–
–168

–569
–

–
–

15.8%
–1,597

16.2%
–

–432
–

9,657 12,341
16.2%
13.5%
–668
–705
–3,038
–2,328
28
–
8,635
6,653

13,275
8,348

13,865
8,571

15,749
11,012

16,095
11,190

11,803
7,920

12,048
7,752

11,331
8,784

15,615
11,121

18,291
11,480

18,379
11,696

3,296
9

3,567
9

3,516
–

3,310
–

3,900
496

3,789
519

2,499
–

4,064
17

4,282
1,605

4,273
1,699

–98
–

125
–

–71
–

140
–

70,351
47,544

75,932
50,330

17,618
2,109

19,144
2,243

19.9%

21.4%

25.0%

24.2%

6.6%

7.8%

16.6%

14.4%

15.7%

16.4%

–

16.5%

16.6,%

1,942
781
402

2,990
–
421

3,606
34
330

3,815
–
333

529
258
283

934
–
310

1,603
148
296

1,946
–
353

2,546
207
257

3,087
–
255

–569
168
11

–432
–
15

9,657
1,597
1,580

12,341
–
1,688

–480

–659

–385

–479

–221

–353

–239

–296

–222

–288

–28

–30

–1,575

–2,105

8
–75
2,577

88
136
2,977

13
–152
3,447

13
–191
3,491

9
705
1,564

16
–48
859

1
–86
1,724

–1
–271
1,732

65
–141
2,713

14
–4
3,065

–
–188
–607

–354
–597

–
30
–417

–221
–557

97
62

130
–347
11,418 11,706

–354
–597

–221
–557
10,467 10,929

Average number of employees

10,835

11,033

8,961

8,836

12,481

11,756

3,907

4,328

10,505

11,211

240

264

46,928

47,426

1 Items affecting comparability consist of restructuring costs.
2 Excluding restructuring payments
3 Of which eliminations SEK –1,249 M (–1,262).

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, 20171, 2

AVERAGE NUMBER OF EMPLOYEES, 2017

Legend
EMEA, 24% (23)
Legend
Americas, 30% (31)
Legend
Asia Pacific, 7% (7)
Legend
Global Technologies, 15% (15)
Legend
Entrance Systems, 24% (24)

1 “Other” is not included in the calcula-
tion. See section Comments by divi-
sion for what is included in “Other”.

2 Excluding items affecting

comparability.

Legend
EMEA, 23% (23)
Legend
Americas, 19% (19)
Legend
Asia Pacific, 25% (27)
Legend
Global Technologies, 9% (8)
Legend
Entrance Systems, 24% (23)

ASSA ABLOY ANNUAL REPORT 2017

CONSOLIDATED FINANCIAL STATEMENTS 59

Consolidated financial statements

Financial position

• Capital employed amounted to SEK 75,932 M (70,351).

• Return on capital employed remained high at 16.6 percent (16.5).

• The net debt/equity ratio was 0.50 (0.49).

SEK M

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

2016

70,351
47,544
23,127
47,224
5

2017

75,932
50,330
25,275
50,657
9

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 75,932 M
(70,351). The return on capital employed excluding items
affecting comparability was 16.6 percent (16.5).

Intangible assets amounted to SEK 61,409 M (57,096).
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 5,063 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 8,065 M

(8,066). Capital expenditure on property, plant and equip-
ment and intangible assets, less sales of property, plant and
equipment and intangible assets, totaled SEK 1,975 M
(1,478). Total depreciation and amortization amounted to
SEK 1,688 M (1,580).

Trade receivables amounted to SEK 13,068 M (12,648)
and inventories totaled SEK 9,430 M (9,565). The average
collection period for trade receivables was 54 days (56).
Material throughput time was 92 days (95). The Group is
making systematic efforts to increase capital efficiency.

Net debt
Net debt amounted to SEK 25,275 M (23,127), of which pen-
sion commitments and other post-employment benefits
accounted for SEK 2,933 M (3,121).

Net debt was increased by acquisitions and the dividend

to shareholders during the year, while it was reduced by a
continued strong positive operating cash flow, as well as
from exchange rate effects. Over the whole period net debt
changed marginally although it fluctuated during the year.

External financing
The Group’s long-term loan financing mainly consists of a
Private Placement Program in the US totaling USD 442 M, of
which USD 320 M (442) is long-term, a GMTN program of
SEK 10,700 M (9,976), of which SEK 9,329 M (8,585) is long-
term, a loan from the European Investment Bank of EUR 55 M
(73) and USD 137 M (154), and a loan from the Nordic
Investment Bank of EUR 110 M (110). During the year, ten
new issues were made under the GMTN program for a total
amount of SEK 2,157 M. In addition, a new long-term bank
loan of EUR 90 M was obtained. 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. The size of the
loans decreased because of currency fluctuations, in particu-
lar regarding the USD. A total of SEK 3,226 M was raised in
new long-term loans, while SEK 2,637 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 1,307 M (455) 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 unutilized at year-end. The interest coverage ratio,
defined as income before tax plus net interest, divided by
net interest, was 19.1 (14.1). Fixed interest terms increased
during the year, with an average term of 25 months (28) at
year-end.

Cash and cash equivalents amounted to SEK 459 M (750).

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
Consolidated equity was SEK 50,657 M (47,224) at year-end.
The return on equity was 17.6 percent (15.0). The equity
ratio was 50.9 percent (49.6). The debt/equity ratio, defined
as net debt divided by equity, was 0.50 (0.49).

NET DEBT

CAPITAL EMPLOYED AND RETURN ON CAPITAL EMPLOYED

SEK M

30,000

24,000

18,000

12,000

6,000

Nettoskuldsättning
Net debt
Nettoskuldsättning/
Net debt/equity
Eget kapital

1.0

0.8

0.6

0.4

0.2

0.0

SEK M

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

Sysselsatt kapital
Capital employed
Avkastning på
Return on capital employed1
sysselsatt kapital1

1 Excluding items affecting

comparability 2013 and 2016.

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2017

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 interests
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

2016

2017

14
15
17
19
18

20
21

34
34
34

34
18
24
25

34
34

25
26
27

57,096
8,066
2,109
86
1,899
69,257

9,565
12,648
497
1,273
1,123
167
2
750
26,025
95,282

371
9,675
2,540
34,634
47,220
5
47,224

16,901
2,344
3,121
1,945
1,634
25,945

3,929
137
7,443
1,142
797
3,190
5,474
22,112
95,282

61,409
8,065
2,243
227
1,355
73,299

9,430
13,068
472
1,552
1,015
107
43
459
26,145
99,444

371
9,675
2,489
38,113
50,648
9
50,657

16,859
2,218
2,933
1,447
836
24,293

6,151
112
7,811
751
699
3,446
5,524
24,494
99,444

ASSA ABLOY ANNUAL REPORT 2017

CONSOLIDATED FINANCIAL STATEMENTS 61

Consolidated financial statements

Cash flow

• Operating cash flow remained strong and amounted to SEK 10,929 M (10,467).

• Net capital expenditure totaled SEK 1,975 M (1,478).

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

2016

8,575
442
–1,478
2,928
10,467

2017

9,248
612
–1,975
3,044
10,929

Investments in subsidiaries
The total purchase price of investments in subsidiaries
amounted to SEK 6,885 M (2,866), of which the cash flow
effect was SEK 6,825 M (2,640). Acquired cash and cash
equivalents totaled SEK 187 M (263).

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 on income
Acquisitions/Divestments
Dividend
Actuarial gain/loss on post-employment
benefit obligations
Exchange rate differences, etc.
Net debt at 31 December

2016

22,269
–10,467
442
2,928
3,037
2,944

138
1,836
23,127

2017

23,127
–10,929
612
3,044
6,790
3,332

–26
–675
25,275

Operating cash flow

SEK M

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

2016

9,657
1,597
1,580
–1,478
62
–597
–354
10,467

2017

12,341
–
1,688
–1,975
–347
–557
–221
10,929

Operating cash flow/Income before tax

0.992

0.94

1 Excluding restructuring payments
2 Excluding restructuring costs.

The Group’s operating cash flow amounted to SEK 10,929 M
(10,467), equivalent to 94 percent (99) of income before tax
excluding restructuring costs.

Net capital expenditure
Net capital expenditure on intangible assets and property,
plant and equipment totaled SEK 1,975 M (1,478), equiva-
lent to 117 percent (94) of amortization and depreciation
on intangible assets and property, plant and equipment. The
higher net capital expenditure compared with the previous
year can largely be explained by somewhat larger invest-
ments in property and facilities in China and the US.

Change in working capital

SEK M

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

2016

–551
–61
461
213
62

2017

–158
–696
454
52
–347

The material throughput time was 92 days (95) at year-end.
Capital tied up in working capital increased somewhat dur-
ing the year, which had an impact on cash flow of SEK –347 M
(62) overall.

INCOME BEFORE TAX AND OPERATING CASH FLOW

CAPITAL EXPENDITURE

SEK M

12,000

10,000

8,000

6,000

4,000

2,000

Resultat före skatt1
Income before tax1
Operativt kassaflöde2
Operating cash flow2

1 Excluding items affecting

comparability 2013 and 2016.

2 Excluding restructuring payments.

Nettoinvesteringar
Net capital expenditure
Avskrivningar
Depreciation and amortiza-
tion
Nettoinvesteringar
i % av omsättningen
Net capital expenditure
% of sales

SEK M

2,000

1,500

1,000

500

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2017

Consolidated financial statements

Consolidated statement of cash flows

SEK M

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

Interest paid
Interest received
Tax paid on income
Cash flow before changes in working capital

Change 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
Divestments of subsidiaries
Other investments
Cash flow from investing activities

FINANCING ACTIVITES
Dividend
Long-term loans raised
Long-term loans repaid
Purchase of shares in subsidiaries from non-controlling interest
Stock purchase plans
Change in short-term loans, etc.
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

2016

2017

14, 15
14, 15
30

9,657
1,580
1,597
–442
–354
12,037

–613
16
–2,928
8,512

62
8,575

–1,575
97
–2,640
–1
55
0
–4,063

–2,944
2,876
–2,223
–40
–80
–1,859
–4,271
240

501
240
9
750

12,341
1,688
–
–612
–221
13,196

–570
13
–3,044
9,595

–347
9,248

–2,105
130
–6,825
0
139
0
–8,661

–3,332
3,226
–2,637
–130
–74
2,085
–861
–274

750
–274
–17
459

ASSA ABLOY ANNUAL REPORT 2017

CONSOLIDATED FINANCIAL STATEMENTS 63

Consolidated financial statements

Changes in consolidated equity

SEK M

Opening balance 1 January 2016
Net income
Other comprehensive income
Total comprehensive income
Dividend for 2015
Stock purchase plans
Total contributions by and distributions
to parent company’s shareholders
Change in non-controlling interests
Total transactions with shareholders
Closing balance 31 December 2016

Opening balance 1 January 2017
Net income
Other comprehensive income
Total comprehensive income
Dividend for 2016
Stock purchase plans
Total contributions by and distributions
to parent company’s shareholders
Change in non-controlling interests
Total transactions with shareholders
Closing balance 31 December 2017

Parent company’s shareholders

Share
capital

Other con-
tributed
capital

371

9,675

Reserves

2,642

–102
–102

Note

371

9,675

2,540

371

9,675

2,540

–51
–51

371

9,675

2,489

Retained
earnings

Non-controlling
interests

28,888
6,651
2,077
8,729
–2,944
–39

–2,982
–
–2,982
34,634

34,634
8,633
–1,788
6,845
–3,332
–33

–3,366
0
–3,366
38,113

4
1
0
1
–
–

–
–
–
5

5
2
0
2
–
–

–
3
3
9

Total

41,579
6,653
1,975
8,627
–2,944
–39

–2,982
–
–2,982
47,224

47,224
8,635
–1,839
6,796
–3,332
–33

–3,366
3
–3,363
50,657

EQUITY PER SHARE AFTER DILUTION AND
RETURN ON EQUITY AFTER TAX

DIVIDEND AND EARNINGS PER SHARE

SEK

Eget kapital per aktie
efter utspädning, SEK

Equity per share after
dilution, SEK
Avkastning på eget
kapital efter skatt, %

Return on equity after tax, %

SEK

Utdelning per aktie
Dividend per share
Vinst per aktie efter
Earnings per share after
utspädning1
dilution1

1 Excluding items affecting

comparability 2013 and 2016.

CONSOLIDATED FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2017

ASSA ABLOY secures
Chinese skyscraper

CUSTOMER: Ping An International Finance Center is
the second highest skyscraper in China and the fourth
highest in the world. The center is 599 meters high with
118 stories. The headquarters of China Ping An Insur-
ance, it also houses offices, a hotel, a conference center
and a shopping mall.

CHALLENGE: The customer needed a supplier who
could provide a cost-efficient door opening solution
and was able to provide technical advice and recom-
mend hardware at the design stage. As a landmark
building, the hardware was required to present good
visual appeal on top of its functionality, security and
convenient access control.

SOLUTION: ASSA ABLOY has delivered door opening
solutions to optimize the security and aesthetic needs.
The hardware solution meets ANSI and EN-standards
for the various security needs around the building.
Electromechanical locks matching convenience and
aesthetic appeal have been provided in selected areas
where access control is critical.

Mobile Access works across
international offices

CUSTOMER: CafeX Communications develops software for web and mobile applications.

Headquartered in New York City, it has offices in the United States, Canada and the UK.

CHALLENGE: CafeX needed to modernize its access control system to work across its inter-
national locations. The company wanted a centralized solution enabled on smartphones and
wearables with speedy issuance of employee and visitor digital IDs.

SOLUTION: CafeX chose HID Mobile Access, which enables employees to easily and securely
open doors in the company’s offices using their smartphones or wearable devices, such as the
Apple Watch.

Employees use HID Global’s patented ‘Twist and Go’ feature or simply tap their smartphone
on the HID Global readers to access the building or other sensitive entrances within the offices.
With the HID Global Mobile Access app, which holds the digital credentials, employee and

visitor passes can be issued within minutes.

The solution has enabled the company to streamline its access control processes, thereby

reducing administration costs and saving money. This is because it is very simple to issue,
manage and revoke mobile IDs to smartphones and wearables.

Parent company financial statements

Income statement
– Parent company

SEK M

Administrative expenses
Research and development costs
Capitalized work for own account
Other operating income and expenses
Operating income

Financial income
Financial expenses
Income before appropriations and tax

Group contributions
Change in excess depreciation and amortization
Tax on income
Net income

Statement of
comprehensive income
– Parent company

SEK M

Net income

Other comprehensive income
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
Fund for development expenses
Non-restricted equity
Share premium reserve
Retained earnings including net income for the year
Total equity

Untaxed reserves

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

Note

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

4
9, 33

10
9, 11

2016

–1,464
–872
–
4,023
1,687

1,697
–433
2,952

1,240
–
–573
3,619

2016

3,619

–
3,619

2017

–1,524
–911
73
4,063
1,701

2,955
–418
4,238

1,300
–565
–303
4,670

2017

4,670

–
4,670

Note

2016

2017

14
15
16
19

408
30
33,611
1,621
35,670

10,329
44
175
0
10,548
46,218

371
275
8,905
–

787
10,852
21,190

–

8,786
108
8,894

1,404
91
14,144
170
5
319
16,134
46,218

3,497
32
34,242
1,808
39,579

12,716
14
10
0
12,740
52,319

371
275
8,905
139

787
12,017
22,494

565

10,491
90
10,581

1,371
116
16,805
5
10
372
18,679
52,319

PARENT COMPANY FINANCIAL STATEMENTS

ASSA ABLOY ANNUAL REPORT 2017

Cash flow statement
– Parent company

Note

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 property, plant and equipment 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 January 1
Cash flow
Cash and cash equivalents at December 31

2016

1,687
448
2,135

–279
1,601
–541
2,916

–263
2,653

–203
–669
–1
–873

–2,944
2,637
–1,473
–1,780
0

0
0
0

Change in equity
– Parent company

SEK M

Opening balance January 1, 2016
Net income
Total comprehensive income
Dividend for 2015
Stock purchase plans
Total transactions with shareholders
Closing balance December 31, 2016

Opening balance January 1, 2017
Net income
Total comprehensive income
Dividend for 2016
Stock purchase plans
Reclassifications
Total transactions with shareholders
Closing balance December 31, 2017

Restricted equity

Non-restricted equity

Share
capital

Revaluation
reserve

Statutory
reserve

371

275

8,905

371

275

8,905

371

275

8,905

371

275

8,905

Fund for
development
expenses

–

139
139
139

Share
premium
reserve

787

Retained
earnings

10,215
3,619
3,619
–2,944
–39
–2,982
10,852

10,852
4,670
4,670
–3,332
–33
–139
–3,505
12,017

2017

1,701
339
2,040

–285
2,832
–614
3,973

1,431
5,404

–3,431
–630
0
–4,061

–3,332
2,977
–988
–1,343
0

0
0
0

Total

20,553
3,619
3,619
–2,944
–39
–2,982
21,190

21,190
4,670
4,670
–3,332
–33
–
–3,366
22,494

ASSA ABLOY ANNUAL REPORT 2017

PARENT COMPANY FINANCIAL STATEMENTS 67

Notes

Note 1 Significant accounting and
valuation principles

Group
ASSA ABLOY applies International Financial Reporting
Standards (IFRS) as adopted 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 2017 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 39–98.

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, as well as in determining actuarial assumptions
for calculating employee benefits. Estimates and assessments
also affect valuation of deferred taxes, other provisions and
deferred considerations. Estimates and assessments are con-
tinually evaluated and are based on both historical experi-
ence and reasonable expectations about the future.

The Group considers that estimates and assessments
relating to impairment testing of goodwill and other intangi-
ble assets with indefinite useful life are of material impor-
tance to the consolidated financial statements. The Group
tests carrying amounts for impairment on an annual basis.
The recoverable amounts of cash generating units are deter-
mined by calculating their values in use. The calculations are
based on certain assumptions about the future which, for
the Group, are associated with the risk of material adjust-
ments in carrying amounts during the next financial year.
Material assumptions and the effects of reasonable changes
in them are described in Note 14.

The actuarial assumptions made when calculating post-
employment employee benefits also have material impor-
tance for the consolidated financial statements. For informa-
tion on these actuarial assumptions, see Note 24.

New and revised standards applied by the Group
None of the standards and interpretations to be applied for
the first time for the financial year beginning 1 January 2017
had a significant impact on the consolidated financial state-
ments.

New and revised IFRS not yet effective
The following IFRS have been published but were not yet
effective as of the closing date, and have not been applied in
the preparation of the financial statements.
• IFRS 9 Financial Instruments
• IFRS 15 Revenue from contracts with customers
• IFRS 16 Leases

IFRS 9 and 15 came into force 1 January 2018 and the Group
applies them from this date. IFRS 16 is applicable for financial
years beginning on 1 January 2019. Early application is per-
mitted, but the Group has chosen not to make use of this
opportunity.

IFRS 15 supersedes IAS 11 Construction contracts and IAS

18 Revenue and includes a new single model for revenue
recognition related to customer contracts. The project initi-
ated in 2016 relating to the implementation of IFRS 15 has
proceeded according to plan in 2017 with evaluation and
analysis of the effects on the Group’s financial statements.
The Group’s assessment of the financial effects over the
course of the project have been communicated in the con-
solidated quarterly reports. Upon completion of the project
in the fourth quarter of 2017 the Group concluded that its
current revenue recognition practices are essentially in
accordance with IFRS 15. The new standard will therefore
have no impact on the Group’s performance and financial
position, though the Group’s future financial statements will
be affected by the expanded disclosure requirements that
accompany IFRS 15.

IFRS 9 addresses classification, measurement and recog-
nition of financial liabilities and assets and replaces the parts
of IAS 39 that relate to the classification and measurement of
financial instruments. The Group has analyzed the standard
and concluded that it will not have any material impact on
the Group’s performance and financial position. No effects
of changes in accounting policies as a result of IFRS 9 will be
recognized in equity in 2018. The part of the standard that
has the greatest impact on the Group is the new impairment
model that is being implemented, based on expected credit
losses rather than incurred losses. For the Group, the new
model will entail a new procedure for measurement of credit
losses.

In 2017 the Group started preparing for IFRS 16, which is

applicable from 1 January 2019, but it has not yet assessed
the financial impact of the standard.

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

NOTES

ASSA ABLOY ANNUAL REPORT 2017

Note 1 cont.

an individual basis for each acquisition whether a non-con-
trolling interest in the acquired company shall be recognized
at fair value or at the interest’s proportional share of the
acquired company’s net assets. Any negative difference, neg-
ative 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 pre-
sent value. Acquisition-related transaction costs are
expensed as incurred.

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 presen-
tation currency, all balance sheet items except net income
are translated at the year-end rate and net income is trans-
lated at the average rate. The income statement is translated
at the average rate for the period. Exchange differences aris-
ing from the translation of foreign subsidiaries are recognized
as translation differences in other comprehensive income.

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

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

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.

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-

Country

Currency

2016

2017

2016

2017

Average rate

Closing rate

ARS
Argentina
AUD
Australia
BRL
Brazil
CAD
Canada
CHF
Switzerland
CLP
Chile
CNY
China
COP
Colombia
CZK
Czech Republic
DKK
Denmark
Euro zone
EUR
United Kingdom GBP
HKD
Hong Kong
HUF
Hungary
ILS
Israel
INR
India
KES
Kenya
KRW
South Korea
MXN
Mexico
MYR
Malaysia
NOK
Norway
NZD
New Zealand
PLN
Poland
RON
Romania
RUB
Russia
SGD
Singapore
THB
Thailand
TRY
Turkey
USD
US
ZAR
South Africa

0.58
6.36
2.47
6.46
8.67
0.013
1.29
0.0028
0.35
1.27
9.44
11.60
1.11
0.030
2.24
0.127
0.084
0.0074
0.46
2.06
1.02
5.97
2.16
2.10
0.13
6.19
0.24
2.84
8.58
0.59

0.51
6.54
2.67
6.57
8.67
0.013
1.27

0.37
1.30
9.64
11.03
1.10
0.031
2.38
0.131
0.083

0.57
6.58
2.80
6.75
8.91
0.014
1.31
0.0029 0.0030
0.35
1.29
9.58
11.19
1.17
0.031
2.37
0.134
0.089
0.0076 0.0076
0.44
2.03
1.05
6.33
2.17
2.11
0.15
6.30
0.25
2.58
9.11
0.67

0.45
1.99
1.03
6.07
2.26
2.11
0.15
6.19
0.25
2.36
8.55
0.64

0.43
6.43
2.49
6.57
8.44
0.013
1.27
0.0028
0.39
1.32
9.86
11.11
1.06
0.032
2.38
0.129
0.080
0.0077
0.42
2.03
1.00
5.86
2.36
2.12
0.14
6.17
0.25
2.18
8.25
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 rec-
ognized on a continuous basis over the contract period. In
the case of installations over a longer period of time, the per-
centage 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.

ASSA ABLOY ANNUAL REPORT 2017

NOTES 69

Note 1 cont.

Notes

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.

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 uti-
lized. 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 and amounts to 5–12 years for technol-
ogy and 8–15 years for customer relationships. 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
includes expenditure directly attributable to acquisition of
the asset. Subsequent expenditure is capitalized if it is prob-
able that economic benefits associated with the asset will
flow to the Group, and if the cost can be reliably measured.
Expenditure on repairs and maintenance is expensed as
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.

NOTES

ASSA ABLOY ANNUAL REPORT 2017

Note 1 cont.

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. Impair-
ment losses are recognized in the amount by which the car-
rying amount of the asset exceeds the recoverable amount.
The recoverable amount is the higher of an asset’s fair value
less selling expenses and its value in use.

Inventories
Inventories are valued in accordance with the ‘first in, first
out’ principle at the lower of cost and net realizable value at
the reporting date. Deductions are made for internal profits
arising from deliveries between Group companies. Work in
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 com-
prehensive income.

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

Loans and receivables are initially recognized at fair value

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

Financial liabilities
Financial liabilities include deferred considerations, loan lia-
bilities, trade payables and derivative instruments. Recogni-
tion depends on how the liability is classified.

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

Loan liabilities
Loan liabilities are initially valued at fair value, net of transac-
tion costs, and subsequently at amortized cost. Amortized
cost is determined based on the effective interest rate calcu-
lated when the loan was raised. Accordingly, surplus values
and negative surplus values as well as 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 subse-
quently at amortized cost using the effective interest
method.

Recognition and measurement of financial assets and
liabilities
Acquisitions and sales of financial assets are recognized on
the trade date, the date on which the Group commits to 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.

ASSA ABLOY ANNUAL REPORT 2017

NOTES 71

Note 1 cont.

Notes

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 off-
setting 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 instru-

ments, see Note 34, ‘Financial risk management and financial
instruments’. Derivatives at fair value, with a maturity of
more than 12 months, are classified as non-current interest-
bearing liabilities or receivables. Other derivatives are classi-
fied 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 recog-
nized directly under financial items.

Net investment hedges
For derivatives that are designated and qualify as net invest-
ment hedges, the portion of value changes in fair value des-
ignated as effective is recognized in other comprehensive
income. The ineffective portion of the gain or loss is recog-
nized directly in profit or loss for the period under financial
items. Accumulated gain or loss in other comprehensive
income is recognized in the income statement when the for-
eign 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 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.

Remuneration of employees
The Group operates both defined contribution and defined
benefit pension plans. Comprehensive defined benefit plans
are found chiefly in the US, the UK and Germany.
Post-employment medical benefits are also provided, mainly
in the US, and are reported in the same way as defined bene-
fit pension plans. Calculations relating to the Group’s
defined benefit plans are performed by independent actuar-
ies and are based on a number of actuarial assumptions such
as discount rate, future inflation and salary increases. Obliga-
tions are valued on the reporting date at their discounted
value. For funded plans, obligations are reduced by the fair
value of the plan assets. Actuarial gains and losses resulting
from experience-based adjustments and changes in actuar-
ial 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 ser-
vice period. The Group’s payments relating to defined contri-
bution pension plans are recognized as an expense in the
period to which they relate, based on the services performed
by the employee. Swedish Group companies calculate tax on
pension costs based on the difference 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

NOTES

ASSA ABLOY ANNUAL REPORT 2017

Note 1 cont.

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
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.

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 receiva-
bles and liabilities, and external borrowing. The Parent com-
pany 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) adopted 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.

Property, plant and equipment
Property, plant and equipment owned by the Parent com-
pany are recognized at cost less accumulated depreciation
and any impairment 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 subsidi-
aries. 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 2017

NOTES 73

Notes

Note 2 Sales

Customer sales by country

Group

SEK M

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

2016

25,276
5,308
3,895
3,510
2,949
2,961
2,194
1,974
1,747
1,674
1,568
1,395
1,240
1,066
956
997
822
762
829
639
596
521
572
384
498
425
420
328
338
261
258
282
181
274
210
199
244
242
194
159
129
163
136
137
121
106
85
8
52
72
1,940
71,293

2017

26,940
4,853
4,203
3,714
3,193
3,134
2,420
2,145
1,866
1,761
1,580
1,556
1,423
1,308
1,274
1,057
922
811
784
697
632
621
585
488
484
447
406
365
362
300
297
280
278
251
243
221
215
211
200
189
182
166
161
158
138
113
104
100
97
84
2,116
76,137

Sales by continent

SEK M

Europe
North America
Central and South America
Africa
Asia
Oceania
Total

Group

2016

26,869
28,427
2,012
923
10,573
2,490
71,293

2017

28,961
30,635
2,176
1,099
10,617
2,649
76,137

Sales by product group

SEK M

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

Group

2016

20,228
19,693
18,545
12,828
71,293

2017

20,796
21,220
20,820
13,301
76,137

Note 3 Auditors’ fees

SEK M

Audit assignment
PwC
Others

Audit-related services in
addition to audit assignment
PwC

Tax advice
PwC
Others

Other services
PwC
Others
Total

Group

Parent company

2016

2017

2016

2017

47
13

9
5

52
16

10
9

20
10
106

32
6
126

4
–

1
0

1
1
8

5
–

1
1

1
0
8

The auditors’ fee for PwC in Sweden during the year was SEK
8 M and the fee for extra services was SEK 8 M.

Note 4 Other operating income and expenses
Group

SEK M

Rental income
Business-related taxes
Profit on sales of non-current assets
Profit/loss on sales of subsidiaries
Transaction expenses from acquisitions
Exchange rate differences
Impairment operating assets, etc., in China
Revalued Earnout
Other, net
Total

2016

12
–33
29
–33
–82
–30
–708
440
195
–210

2017

6
–40
45
–42
–86
–2
–191
300
165
156

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
SARA Loading Bay Ltd
Saudi Crawford Doors Factory Ltd
Others
Total

Group

2016

2017

95
23
–2
10
1
127

91
25
0
12
0
129

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 2017.

NOTES

ASSA ABLOY ANNUAL REPORT 2017

Note 6 Operating leases

Note 11 Financial expenses

SEK M

2016

2017

2016

2017

SEK M

2016

2017

2016

2017

Group

Parent company

Group

Parent company

Lease payments during
the year
Total

Nominal value of agreed
future lease payments:
Due for payment in:
(2017) 2018
(2018) 2019
(2019) 2020
(2020) 2021
(2021) 2022
(2022) 2023 or later
Total

895
895

1,029
1,029

14
14

19
19

822
646
481
334
236
316
2,835

904
726
542
398
276
373
3,218

17
17
18
18
19
19
107

23
23
24
25
26
26
147

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 33)
Direct material costs
Depreciation and amortization (notes 8,
14, 15)
Other purchase expenses
Total

Group

2016

21,231
26,067

1,580
12,675
61,553

2017

21,618
27,630

1,688
13,144
64,081

Note 8 Depreciation and amortization

SEK M

Intangible assets
Machinery
Equipment
Buildings
Land improvements
Finance leases
Total

Group

Parent company

2016

483
534
322
235
7
–
1,580

2017

2016

2017

598
528
334
210

11
1,688

445
–
3
–
–
–
448

329
–
10
–
–
–
339

Note 9 Exchange differences in the income statement
Parent company

Group

SEK M

2016

2017

2016

2017

–29

–2

–22

–13

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

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

–

–251

–263

–598

–584

–120

–132

–120

–111

–

–33

–4

–

–
–47
–714

–
–43
–687

1
–30
–433

0
–27
–418

1 Of which –23 (–14) is fair value adjustments on derivatives, non-hedge accounting,

for the Group.

Note 12 Tax on income

Group

Parent company

SEK M

2016

2017

2016

2017

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

–2,570
119
–28
152

–3,025
279
–52
–240
–2,328 –3,038

–573
0
–
–
–573

–484
–
–6
187
–303

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

Group

Parent company

Percent

2016

2017

2016

2017

Swedish rate of tax on
income
Effect of foreign tax rates
Non-taxable income/non-
deductible expenses, net
Utilized loss carryforward not
recognized in prior period
Other
Effective tax rate in income
statement

22
8

–1

–1
–2

22
8

–1

–1
–2

22
–

–8

–
–

22
–

–16

–
–

Note 13 Earnings per share
Earnings per share before and after dilution

Group

SEK M

Earnings attributable to the Parent
company’s shareholders
Net profit
Weighted average number of
shares issued (thousands)
Earnings per share (SEK)
of which from continuing operations
of which from discontinued operations

2016

2017

6,651
6,651

8,633
8,633

1,110,776 1,110,776
7.77
7.77
–

5.99
5.96
0.03

26
–4

20
18

–33
–55

8
–5

None of the Group’s outstanding long-term incentive pro-
grams are expected to result in significant dilution in the
future.

Note 10 Financial income

SEK M

2016

2017

2016

2017

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

–

–
–
1

8
9

–

–
–
1

18
19

1,556

2,783

45
96
–

49
123
0

–
1,697

0
2,955

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

SEK M

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

Group

2016

2017

6,651
1,221
7,872

8,633
–
8,633

1,110,776 1,110,776

7.09
7.06
0.03

7.77
7.77
–

1 Items affecting comparability consist of restructuring costs.

ASSA ABLOY ANNUAL REPORT 2017

NOTES 75

Notes

Note 14 Intangible assets

Group

Parent company

2017, SEK M

Goodwill

Brands

Opening accumulated acquisition cost
Purchases
Acquisitions of subsidiaries
Divestments 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

47,609
–
4,962
–76
–
–
–2,100
50,394

–65
–
–
–
2
–64
50,330

6,451
1
101
–
0
–
–209
6,344

–98
0
–
–2
0
–101
6,243

Other
intangible
assets

6,743
555
1,742
–
–25
34
–216
8,833

–3,544
15
–5
–596
133
–3,998
4,835

Total

60,804
556
6,805
–76
–25
34
–2,527
65,571

–3,708
14
–5
–598
135
–4,163
61,409

Intangible
assets

3,357
3,279
–
–
–
139
–
6,775

–2,949
–
–
–329
–
–3,278
3,497

Group

Parent company

2016, 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

42,838
–
2,451
–
–
2,321
47,609

–61
–
–
–
–5
–65
47,544

6,201
2
0
–
0
247
6,451

–98
–
–
0
0
–98
6,353

Other
intangible
assets

5,847
416
69
–30
90
352
6,743

–2,864
28
–5
–482
–221
–3,544
3,199

Total

54,885
419
2,520
–30
90
2,920
60,804

–3,022
28
–5
–483
–227
–3,708
57,096

Intangible
assets

3,161
196
–
–
–
–
3,357

–2,504
–
–
–445
–
–2,949
408

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 6,197 M (6,305) and relates to brands.

Useful life has been defined as indefinite where the time

period, during which an asset is deemed to contribute
economic benefits, cannot be determined.

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

which in turn are based on financial budgets for a three-year
period approved by management. Cash flows beyond the
three-year period are extrapolated using estimated growth
rates according to the information below.
Material assumptions used to calculate values in use:
• Budgeted operating margin.
• Growth rate for extrapolating cash flows beyond the

budget period.

• Discount rate after tax used for estimated future cash

flows.

Impairment testing of goodwill and intangible assets with
indefinite useful life
Goodwill and intangible assets with an indefinite useful life
are allocated to the Group’s Cash Generating Units (CGUs),
which consist of the Group’s five divisions.

For each cash-generating unit, the Group annually tests
goodwill and intangible assets with an indefinite useful life
for impairment, in accordance with the accounting principle
described in Note 1. Recoverable amounts for Cash Generat-
ing Units have been determined by calculating value in use.
These calculations are based on estimated future cash flows,

Management has determined the budgeted operating mar-
gin based on previous results and expectations of future
market development. A growth rate of 3 percent (3) has
been used for all CGUs to extrapolate cash flows beyond the
budget period. This growth rate is considered to be a con-
servative estimate. Further, an average discount rate in local
currency after tax has been used in the calculations. The dif-
ference in value compared with using a discount rate before
tax is not deemed to be material. The discount rate has been
determined by calculating the weighted average cost of
capital (WACC) for each division.

NOTES

ASSA ABLOY ANNUAL REPORT 2017

Note 14 cont.

2017
Overall, the discount rate after tax used varied between 8.0
and 9.0 percent (EMEA 8.0 percent, Americas 8.0 percent,
Asia Pacific 9.0 percent, Global Technologies 8.0 percent and
Entrance Systems 8.0 percent).

Goodwill and intangible assets with an indefinite useful life
were allocated to the Cash Generating Units as summarized
in the following table:

2017, SEK M

Goodwill
Intangible assets with indefinite
useful life
Total

EMEA

8,571

223
8,793

Americas

Asia Pacific

Global
Technologies

11,190

735
11,924

7,752

1,813
9,566

11,121

665
11,786

Entrance
Systems

11,696

2,762
14,458

Total

50,330

6,197
56,528

2016
Overall, the discount rate after tax used varied between 8.0
and 9.0 percent (EMEA 8.0 percent, Americas 8.0 percent,
Asia Pacific 9.0 percent, Global Technologies 8.0 percent and
Entrance Systems 8.0 percent).

Goodwill and intangible assets with an indefinite useful life
were allocated to the Cash Generating Units as summarized
in the following table:

2016, SEK M

Goodwill
Intangible assets with indefinite
useful life
Total

EMEA

8,348

218
8,566

Americas

Asia Pacific

Global
Technologies

11,012

809
11,821

7,920

1,862
9,782

8,784

623
9,407

Entrance
Systems

11,480

2,793
14,273

Total

47,544

6,305
53,849

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

extent. For Asia Pacific, a good future financial performance,
in terms of growth and increasing operating margins, is
essential for the carrying amount to be recoverable in the
long term.

2017
If the estimated operating margin after the end of the
budget 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 8 percent, Global Technologies 5 percent,
and Entrance Systems 7 percent).

If the estimated growth rate used to extrapolate cash
flows beyond the budget period had been one percentage
point lower than the basic assumption of 3 percent, the total
recoverable amount would be 15 percent lower (EMEA 15
percent, Americas 15 percent, Asia Pacific 13 percent, Global
Technologies 15 percent, and Entrance Systems 15 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 8.0 to 9.0 percent,
the total recoverable amount would be 16 percent lower
(EMEA 17 percent, Americas 17 percent, Asia Pacific 14 per-
cent, Global Technologies 17 percent, and Entrance Systems
17 percent).

2016
If the estimated operating margin after the end of the
budget period had been one percentage point lower than
the management’s estimate, the total recoverable amount
would be 6 percent lower (EMEA 6 percent, Americas 4 per-
cent, Asia Pacific 7 percent, Global Technologies 5 percent,
and Entrance Systems 7 percent).

If the estimated weighted capital cost used for the
Group’s discounted cash flows had been one percentage
point higher than the basic assumption of 8.0 to 9.0 percent,
the total recoverable amount would be 17 percent lower
(EMEA 17 percent, Americas 17 percent, Asia Pacific 15 per-
cent, Global Technologies 17 percent, and Entrance Systems
17 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, with the exception of Asia Pacific where the recovery
value exceeds the reported value, though only to a minor

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

ASSA ABLOY ANNUAL REPORT 2017

NOTES 77

Notes

Note 15 Property, plant and equipment

2017, SEK M

Buildings

ments Machinery

Equipment

Land and
land
improve-

Construc-
tion in
progress

Finance
leases

Total

Equipment

Group

Parent company

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

Opening accumulated
depreciation and impairment
Sales and disposals
Divestments of subsidiaries
Impairment incl. reversals
Depreciation
Reclassifications
Exchange rate differences
Closing accumulated
depreciation and impairment
Carrying amount

6,143
119
23
–
–251
–14
–209

1,215
67
12
–
–52
–29
–23

9,766
237
34
–3
–412
290
–410

3,663
214
25
0
–150
129
–119

5,811

1,191

9,503

3,763

–2,937
141
–
11
–210
5
82

–2,909
2,902

–138
0
–
–6
–7
–
–1

–151
1,040

–7,399
388
–
–28
–528
16
311

–7,241
2,261

–2,811
137
0
–7
–334
28
96

–2,890
873

564
912
1
–
–8
–589
–30

849

–
–
–
–
–
–
–

–
14
–
–
–1
181
1

21,351
1,562
94
–3
–873
–32
–790

194

21,311

– –13,286
667
1
0
–
–29
–
–1,090
–11
3
–46
488
1

–
849

–55 –13,246
8,065
140

51
12
–
–
–
–
–

–21
–
–
–
–10
–
–

–31
32

2016, SEK M

Buildings

ments Machinery

Equipment

Land and
land
improve-

Construc-
tion in
progress

Finance
leases

Total

Equipment

Group

Parent company

5,326
90
248
–4
–63
186
360

1,106
3
17
0
–16
40
66

8,578
188
53
–82
–36
333
732

3,168
210
33
–38
–77
104
262

6,143

1,215

9,766

3,663

–2,441
41
0
–17
–235
–102
–183

–2,937
3,205

–135
10
–
–
–7
0
–6

–138
1,078

–6,348
28
47
–94
–534
85
–583

–7,399
2,366

–2,327
65
22
–53
–322
21
–217

–2,811
853

636
665
5
–11
–17
–752
37

564

–
–
–
–
–
–
–

–
564

–
–
–
–
–
–
–

–

18,814
1,156
355
–135
–209
–89
1,459

21,351

– –11,252
144
–
69
–
–165
–
–1,097
–
4
–
–989
–

– –13,286
8,066
–

23
28
–
–
–
–
–

–18
–
–
–
–3
–
–

–21
30

From 2017 property, plant and equipment related to financial leases are reported separately in the table above. Comparative
year figures have not been restated. Finance leases primarily pertain to leases of buildings and were therefore reported under
Buildings in 2016.

Impairment losses for the year totaled SEK 29 M (165), of which SEK 11 M (151) related to restructuring programs.

NOTES

ASSA ABLOY ANNUAL REPORT 2017

Note 16 Shares in subsidiaries

Company name

ASSA Sverige AB
ASSA ABLOY Entrance Systems AB
ASSA ABLOY Kredit AB
ASSA ABLOY Försäkrings 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.
ASSA ABLOY Door Group, Inc.
ASSA ABLOY Australia Pacific Pty Ltd
Cerramex, S.A de C.V
ASSA ABLOY Mexico, S.A de CV
Cerraduras y Candados 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)
HID Global SAS
CEDES Holding AG
ASSA ABLOY East Africa Ltd
Total

1 The Group’s holdings amount to 100 percent.

Note 17 Investments in associates

2017
Company name

Agta Record AG
Goal Co., Ltd
PT Jasuindo Arjo Wiggins Security
SARA Loading Bay Ltd
Talleres Agui S.A.
Saudi Crawford Doors Ltd
Others
Total

Corporate identity number,
Registered office

Number of
shares

Share of
equity

Carrying
amount,
SEK M

Parent company

556061-8455, Eskilstuna
556204-8511, Landskrona
556047-9148, Stockholm
516406-0740, 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
1148165260, Montreal
814406948 RC0001, Ontario
ACN 095354582, Oakleigh, Victoria
CER8805099Y6, Mexico
AAM961204CI1, Mexico
CCP910506LK2, Mexico
860009826-8, Bogota
EC21330, Bermuda
53451, Hong Kong
556026-8517, Malmö
PT500243700, Alfragide
556909-5929, Stockholm
IT01254420597, Rome
CUIT 30-61783980-2, Buenos Aires
FR21341213411, Nanterre
CHE-101.321-677, Landquart
C.20402, Nairobi

70
1,000
400
60,000
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
4
50,108,549
112
2,201,670
100,100
1,000,000
27,000,000
1
50,000
650,000
2,400
1,000,000
300,000
13,500

100
100
100
100
100
100
100
100
100
100
661
100
981
100
100
100
100
901
100
100
100
100
100
100
0
100
0
711
100
100
100
100
100
100
21
100
100
100

Country of registration

Switzerland
Japan
Indonesia
United Kingdom
Spain
Saudi Arabia

Group

Number
of shares

Share of
equity, %

5,166,945
2,778,790
1,533,412
4,990
4,800
800

39
46
49
50
40
40

197
192
6,036
145
189
4,257
538
376
1,086
771
2,228
1,964
0
47
109
3,077
293
901
217
2,546
0
0
17
242
0
762
0
142
303
72
5,093
0
25
974
0
679
673
90
34,242

Carrying
amount,
SEK M

1,679
519
17
14
8
5
1
2,243

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 2017. For the period January to June, the company’s revenue
totaled SEK 1,682 M (1,542) and income after tax was SEK 98 M (78). The company’s assets totaled SEK 3,199 M (3,127) and
total liabilities amounted to SEK 1,033 M (1,148).

Group

2016
Company name

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

1,586
496
14
8
5
1
2,109

ASSA ABLOY ANNUAL REPORT 2017

NOTES 79

Notes

Note 18 Deferred tax

SEK M

Deferred tax assets
Non-current assets
Pension provisions
Tax losses and other tax credits
Other deferred tax assets
Deferred tax assets

Deferred tax liabilities
Non-current assets
Other deferred tax liabilities
Deferred tax liabilities
Deferred tax assets, net

Change in deferred tax

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

Group

2016

2017

120
550
378
851
1,899

1,660
684
2,344
–445

–597
15
152

36
–51
–445

–
572
191
592
1,355

1,652
566
2,218
–862

–445
–172
–240

–77
71
–862

The Group has tax loss carryforwards and other tax credits of
SEK 2,562 M (1,291) 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.

Note 19 Other financial assets
Group

Parent company

SEK M

2016

2017

2016

2017

Investments in associates,
parent company
Other shares and interests
Non-current interest-
bearing receivables
Other non-current
receivables
Total

Note 20 Inventories

SEK M

Materials and supplies
Work in progress
Finished goods
Advances paid
Total

–
11

34
86

–
11

171

1,621
–

–

44
227

–
1,621

187
1,808

Group

2016

2,744
1,959
4,531
331
9,565

2017

2,750
1,861
4,563
256
9,430

Impairment of inventories during the year amounted to
SEK 269 M (278).

Note 21 Trade receivables

SEK M

Trade receivables
Provision for bad debts
Total

Maturity analysis

Trade receivables not due
Trade receivables due:
<3 months
3–12 months
> 12 months

Impaired trade receivables:
<3 months
3–12 months
> 12 months

Total

Group

2016

13,608
–959
12,648

2017

14,228
–1,160
13,068

8,916

9,316

3,024
898
769
4,691

–111
–171
–677
–959
12,648

3,173
859
880
4,912

–138
–220
–802
–1,160
13,068

Trade receivables by currency

USD
EUR
CNY
GBP
SEK
KRW
AUD
CAD
Other currencies
Total

Current year change in provision
for bad debts

Opening balance
Acquisitions and divestments
Receivables written off
Reversal of unused amounts
Provision for bad debts
Exchange rate differences
Closing balance

2016

4,320
2,979
1,480
514
595
361
219
324
1,856
12,648

2016

758
18
–84
–80
299
49
959

2017

4,201
3,335
1,310
599
589
399
312
219
2,104
13,068

2017

959
48
–103
–46
335
–33
1,160

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 fund
for development expenses. The statutory reserve contains
premiums (amounts received from share issues that exceed
the nominal value of the shares) relating to shares issued up
to 2005.

Non-restricted equity consists of share premium
reserves, retained earnings and net income for the year.

Note 23 Share capital, number of shares and dividend

per share

Number of shares, thousands

Series A
shares

Series B
shares

Total

Share
capital,
SEK K

57,525 1,055,052 1,112,576 370,859

57,525 1,055 052 1,112,576 370,859

575,259 1,055,052 1,630,311

57,525 1,055,052 1,112,576 370,859

575,259 1,055,052 1,630,311

Opening balance at
1 January 2016
Closing balance at
31 December 2016

Number of votes,
thousands

Opening balance at
1 January 2017
Closing balance at
31 December 2017

Number of votes,
thousands

All shares have a par value of around SEK 0.33 (0.33) and give
shareholders equal rights to the company’s assets and earn-
ings. All shares are entitled to dividends subsequently deter-
mined. 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
2017 amounted to 1,800,000. No shares have been repur-
chased during the year.

Dividend per share
The dividend paid during the financial year totaled
SEK 3,332 M (2,944), equivalent to SEK 3.00 (2.65) per share.
A dividend for 2017 of SEK 3.30 per share, a total of
SEK 3,666 M, will be proposed at the Annual General
Meeting on Thursday, 26 April 2018.

NOTES

ASSA ABLOY ANNUAL REPORT 2017

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. The most comprehensive defined
benefit plans are found in the US, the UK and Germany.
The defined benefit plans in the US and the UK are
secured by assets in pension funds, while the plans in
Germany are chiefly unfunded. In the US, 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 according to
the nature of the local pension obligation, particularly the
remaining term and the breakdown between active mem-
bers and pensioners. The Group has not changed the pro-
cesses 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 produce 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 combi-
nation of ordinary government bonds and corporate 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 2017, shares accounted for 45 per-
cent (44) and fixed income securities for 33 percent (33) of
plan assets, while other assets accounted for 22 percent
(23). The actual return on plan assets in 2017 was SEK 386 M
(544).

Amounts recognized in the income statement

Pension costs, SEK M

2016

2017

Defined contribution pension plans
Defined benefit pension plans
Post-employment medical benefit plans
Total

of which, included in:
Operating income
Net financial items

576
168
32
777

685
92

566
147
30
744

658
86

Amounts recognized in the balance sheet

Pension provisions, SEK M

2016

2017

Provisions for defined benefit pension
plans
Provisions for post-employment medical
benefit plans
Provisions for defined contribution
pension plans
Total

2,497

2,350

610

573

14
3,121

10
2,933

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 2017 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 33 M (31), of which SEK 11 M
(11) relates to the Parent company. Pension contributions are
expected to remain largely unchanged in 2018.

Alecta’s surplus can be distributed to policyholders and/

or the insured. As at 31 December 2017, Alecta’s surplus
expressed as the collective consolidation level amounted
preliminarily to 154 percent (149 percent as at 31 Decem-
ber 2016). The collective consolidation level consists of
the market value of Alecta’s assets as a percentage of its
insurance commitments calculated according to Alecta’s
actuarial calculation assumptions, which do not comply with
IAS 19. 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
adjustment of the premium level should be taken to return
to the normal range.

Specification of defined benefit pension plans, post-employment medical benefits and plan assets by country

United Kingdom

Germany

Other countries

Total

Specification of defined
benefits, SEK M

2016

2017

2016

2017

2016

2017

Present value of funded obligations
Fair value of plan assets
Net value of funded plans

2,859
–2,543
317

2,878
–2,658
220

103
–23
81

95
–21
75

2,166
–1,629
538

2,046
–1,604
443

2016

1,268
–870
398

2017

1,179
–799
380

2016

2017

6,397
–5,063
1,333

6,199
–5,081
1,118

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

–

680

689

–

484

543

1,164

1,232

–

606

568

610

573

317

220

761

764

1,143

1,011

886

928

3,107

2,923

–
317

–
220

–
761

–
764

–
1,143

–
1,011

14
900

10
938

14
3,121

10
2,933

ASSA ABLOY ANNUAL REPORT 2017

NOTES 81

Notes

Note 24 cont.

Movement in obligations

2017, SEK M

Opening balance 1 January 2017

Acquisitions/divestments

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
Controls
Total payments
Closing balance 31 December 2017

2016, SEK M

Opening balance 1 January 2016

Acquisitions/divestments
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
Controls
Total payments
Closing balance 31 December 2016

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

610

–

7
–
–
23
30

–
22
–
–
22
–58
–36

–
0
–32
–
–31
573

7,560

108
3
–26
199
284

–
87
116
2
206
–248
–43

–
17
–351
–43
–377
7,431

Plan assets

–5,063

–

–
–
–
–136
–136

–254
–
–
–
–254
214
–40

–161
–17
294
43
158
–5,081

Post-employ-
ment medical
benefits

Defined
benefit
pension plans

582

6,823

Plan assets

–4,660

–
–

6
0
–
26
32

–
–19
–
–
–19
51
32

–
0
–37
–
–37
610

166
27

115
–4
–9
227
329

–
–26
663
–97
539
24
563

–
17
–352
–13
–347
7,560

–115
–

–
–
–
–161
–161

–383
–
–
–
–383
50
–333

–66
–23
281
13
205
–5,063

2016

2,237
630
719
297
319
40
101
720
5,063

Total

3,107

115
3
–26
86
178

–254
109
116
2
–26
–92
–118

–161
0
–89
–
–250
2,923

Total

2,745

51
27

121
–3
–9
92
201

–383
–45
663
–97
138
125
263

–66
–5
–108
–
–179
3,107

2017

2,309
689
736
250
302
22
86
687
5,081

NOTES

ASSA ABLOY ANNUAL REPORT 2017

Note 24 cont.

Key actuarial assumptions

United Kingdom

Germany

Key actuarial assumptions (weighted average), %

2016

2017

2016

2017

2016

2017

Discount rate
Expected annual salary increases
Expected annual pension increases
Expected annual medical benefit increases
Expected annual inflation

2.7
n/a
2.1
n/a
2.4

2.5
n/a
2.1
n/a
2.4

1.6
2.8
1.3
n/a
1.3

1.8
2.8
1.3
n/a
1.3

4.2
n/a
2.0
6.6
3.0

3.6
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 1.0 percentage change in some actuarial assumptions, change in percent

Discount rate
Expected annual medical benefit increases

Note 25 Other provisions

Group

Note 26 Other current liabilities

SEK M

Opening balance at
1 January 2016
Provisions for the year
Reclassifications
Acquisitions of subsidiaries
Divestments of subsidiaries
Reversal of non-utilized
amounts
Payments
Utilized during the year,
without cash flow impact
Exchange rate differences
Closing balance at
31 December 2016

SEK M

Opening balance at
1 January 2017
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 2017

Balance sheet breakdown:

Other non-current provisions
Other current provisions
Total

Restruc-
turing
reserve

Other

Total

551
1,597
–
–
–17

–
–442

–151
34

1,773
103
–30
–47
–24

–214
–405

–
17

2,324
1,700
–30
–47
–41

–214
–847

–151
51

1,572

1,170

2,742

Group

Restruc-
turing
reserve

1,572
–
–

–
–612

–11
–5

Other

Total

1,170
848
–1

–38
–772

–
–6

2,742
848
–1

–38
–1,384

–11
–11

944

1,202

2,146

Group

2016

1,945
797
2,742

2017

1,447
699
2,146

The restructuring reserve at year-end relates mainly to the
ongoing restructuring program launched in 2016. The
restructuring reserve is expected to be used over the next
two years. The non-current part of the reserve totaled
SEK 317 M. For further information on the restructuring
programs, see the Report of the Board of Directors.

Other provisions mainly relate to taxes and legal obliga-

tions including future environment-related measures.

+1.0%

–15.9%
11.2%

–1.0%

14.7%
–9.3%

Group

2016

2017

559
100
776

72
1,083
599
3,190

626
110
889

89
1,177
554
3,446

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

2016

2017

2016

2017

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

2,585

2,728

226

279

992
439
107
1,352
5,474

972
352
113
1,358
5,524

–
–
51
42
319

–
–
54
39
372

Note 28 Contingent liabilities
Group

Parent company

SEK M

Guarantees
Guarantees on behalf of
subsidiaries
Total

2016

2017

2016

2017

102

113

–

–
102

–

12,048 11,015
113 12,048 11,015

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

2016

2017

<1 year
>1 <2 years
>2 <5 years
>5 years
Total

44
7
35
17
102

61
16
19
17
113

Note 29 Assets pledged against liabilities to credit

institutions

Group

Parent company

SEK M

2016

2017

2016

2017

Real estate mortgages
Other mortgages
Total

148
113
261

114
131
244

–
–
–

ASSA ABLOY ANNUAL REPORT 2017

NOTES 83

–263

–187

On the reporting date the acquisition analysis is prelimi-

nary with respect to valuation of intangible assets.

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

2016

2017

2,388

6,501

568

365

–91
2,866

18
6,885

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 interests
Deferred tax liabilities
Pension provisions
Other non-current liabilities
Current liabilities
Total

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

69
355
77
6
251
291
263
–
–46
–51
–136
–665
415

2,451

2,388

1,843
94
16
18
232
416
187
–3
–188
–6
–95
–592
1,922

4,962

6,501

515

511

2,640

6,825

1,067
104
86

1,250
150
111

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 2017. The net sales of acquired units for 2017
totaled SEK 2,543 M (2,373) and net income amounted to
SEK 232 M (186). Acquisition-related costs for 2017 totaled
SEK 86 M (82) and have been reported as other operating
expenses in the income statement.

See below for an account of some acquisitions completed

in 2017 and 2016. No single acquisition is significant in
terms of size and separate acquisition details are therefore
not provided.

2017
Arjo Systems
On 3 July 2017, ASSA ABLOY acquired 100 percent of the
share capital in the French company Arjo Systems SAS, a
leading provider of physical and digital identity solutions for
national ID documents.

The acquisition strengthens the current offering of secure
identity solutions and will strengthen the Group’s position in
national ID documents, while offering additional growth
opportunities. Arjo Systems operates in France, Italy and
Hong Kong.

Intangible assets in the form of technology and customer
relationships have been disclosed in the purchase price allo-
cation. Residual goodwill mainly relates to synergies and
other intangible assets that do not meet the criteria for
separate reporting.

Mercury Security
On 18 October 2017, ASSA ABLOY acquired 100 percent of
the share capital of Mercury Security, a leading US OEM sup-
plier of control systems for physical access control.

The acquisition strengthens the current offering in physi-
cal access management where Mercury Security considera-
bly strengthens the Group’s position in physical access man-
agement and offers complementary growth opportunities
Mercury Security is headquartered in Long Beach, California.
Intangible assets in the form of the brand, technology and
customer relationships have been disclosed in the purchase
price allocation. Residual goodwill mainly relates to syner-
gies and other intangible assets that do not meet the criteria
for separate reporting.

August Home
On 21 November 2017, ASSA ABLOY acquired 100 percent
of the share capital of August Home Inc., a leading US sup-
plier of smart digital locks.

The acquisition of August Home further strengthens the

strategy for smart door solutions aimed at the residential
market with additional smart digital locks, doorbells with
camera and complete home delivery solutions. August
Home is headquartered in San Francisco, California.

Other acquisitions
Other noteworthy acquisitions during the year include Shree
Mahavir Metalcraft (India), Southeastern Dock & Door (US)
and Jerith (US). Please see the Report of the Board of Direc-
tors for further information on these acquisitions.

2016
CEDES
On 10 February 2016, ASSA ABLOY acquired 100 percent of
the share capital of the Swiss company CEDES, a leading sup-
plier of sensor technology to the door and elevator industry.
The acquisition represents yet another important step in
the strategy of providing more intelligence in entrance auto-
mation and is a strong addition to the current product port-
folio. The combination of a variety of technologies will lead
to highly innovative and integrated solutions for customers.
CEDES is headquartered in Landquart, Switzerland.

The goodwill that arose in connection with the acquisi-
tion mainly relates to synergies and other intangible assets
that do not meet the criteria for separate reporting.

Bluvision
On 30 November 2016, ASSA ABLOY acquired 100 percent
of the share capital of Bluvision, a leading US supplier of solu-
tions for Bluetooth Low Energy (BLE) solutions in the market
for the Internet of Things (IoT).

The company reinforces the current offering of solutions

for securely issuing cards. The acquisition will significantly
strengthen the Group’s position in the market for enterprise
solutions in the IoT and provides additional growth opportu-
nities. Bluvision is headquartered in Fort Lauderdale, Florida,
USA.

Other acquisitions
Other noteworthy acquisitions during the year include Light-
house (US), Trojan (UK) and Construction Specialties (US
and Mexico).

NOTES

ASSA ABLOY ANNUAL REPORT 2017

Note 31 Profit from discontinued operations
Group

Note 32 Cash flow

SEK M

2016

2017

SEK M

Group

2016

2017

Profit from discontinued operations
Sales
Cost
Profit from discontinued operations
– before taxes

Tax on income
Profit from discontinued operations
– after taxes

Profit from sale of disposal group classified
as held for sale
Profit from discontinued operations

Cash flow from discontinued operations
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Cash flow from discontinued operations

449
–436

–0

14
28

5
–10
35
30

–
–

–

–
–

–
–
–
–

In September 2016 the Group sold its car locks business.
The car locks business was an independent operation within
ASSA ABLOY, clearly distinguishable from the rest of the
Group. The business is recognized in the comparative year as
a discontinued operation.

Adjustments for non-cash items
Profit on sales of non-current assets
Profit/loss on sales of subsidiaries
Change in pension provisions
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

Divestments of subsidiaries
Purchase prices received, net
Cash and cash equivalents in acquired
subsidiaries
Change in consolidated cash and cash
equivalents due to divestments

–29
33
109
–127
45

–440
54
–354

–551
–61
461

213
62

–28

–45
42
92
–129
61

–300
58
–221

–158
–696
454

52
–347

140

–1

139

ASSA ABLOY ANNUAL REPORT 2017

NOTES 85

Notes

Note 33 Employees

Salaries, wages, other remuneration and social security costs

SEK M

Salaries, wages and other remuneration
Social security costs
– of which pensions
Total

Group

2016

16,536
4,694
685
21,231

2017

16,804
4,156
658
21,618

Fees to Board members in 2017 (including committee work), SEK thousand

Name and post

Lars Renström, Chairman
Carl Douglas, Vice Chairman
Ulf Ewaldsson, Member
Eva Karlsson, Member
Birgitta Klasén, Member
Eva Lindqvist, Member
Johan Molin, President and CEO
Sofia Schörling Högberg, Member
Jan Svensson, Member
Employee representatives (4)
Total

Board of
Directors

Remuneration
Committee

Audit
Committee

2,000
850
600
600
600
600
–
600
600
–
6,450

150
–
–
–
–
–
–
–
75
–
225

–
–
–
–
200
–
–
200
250
–
650

Parent company

2016

2017

204
115
33
319

231
137
36
368

Total

2,150
850
600
600
800
600
–
800
925
–
7,325

Total fees to Board members amounted to SEK 6.8 M in 2016.

Remuneration and other benefits of the Executive Team in 2017, SEK thousands

Name

Johan Molin, President and CEO
Other members of the Executive Team (8)
Total remuneration and benefits

Fixed
salary

18,153
47,845
65,997

Variable
salary

Stock-related
benefits

Other
benefits

13,500
21,399
34,899

7,881
14,273
22,154

129
4,444
4,573

Pension
costs

7,728
11,532
19,261

Total remuneration and other benefits of the Executive Team amounted to SEK 136.8 M in 2016.

Salaries and remuneration for the Board of Directors and
the parent company’s Executive Team
Salaries and other remuneration for the Board of Directors
and the parent company’s Executive Team totaled SEK 68 M
(56), excluding pension costs and social security costs. Pen-
sion costs amounted to SEK 12 M (10). 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 was to
create the prerequisites for retaining and recruiting compe-
tent staff for the Group, providing competitive remuneration
and aligning the interests of shareholders, senior executives
and key staff.

At the 2011 to 2017 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 2017 have been drawn up with similar terms to LTI 2010.
For each Series B share acquired by the CEO within the
framework of LTI 2015, LTI 2016 and LTI 2017, the company
awards one matching share award and four performance-
based share awards. For each Series B share acquired by
other members of the Executive Team, the company awards
one matching share award and three performance-based
share awards. For other participants, the company awards
one matching share award and one performance-based
share award. In accordance with the terms of the incentive
programs, employees have acquired a total of 376,926
shares in ASSA ABLOY AB, of which 126,777 shares were
acquired in 2017 within the framework of LTI 2017.

Each matching share award entitles the holder to receive
one free Series B share in the company after three years, pro-
vided that the holder, with certain exceptions, is still
employed in the Group when the interim report for Q1 2018,
2019 and 2020 for the respective program (LTI 2015–LTI 2017)
is published, and has retained the shares acquired within the
framework of the long-term incentive programs. Each per-
formance-based share award entitles the holder to receive
one free Series B share in the company three years after allot-
ment, 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 company’s
earnings per share must have been fulfilled. The perfor-
mance-based condition was 100 percent fulfilled for LTI 2015
and LTI 2017 and 67 percent for LTI 2016.

Outstanding matching and performance-based share
awards for LTI 2017 total 288,382. The total number of out-
standing matching and performance-based share awards for
LTI 2015, LTI 2016 and LTI 2017 amounted to 761,976 on the
reporting date of 31 December 2017.

Fair value is based on the share price on the respective
allotment date. The present value calculation is based on
data from an external party. Fair value is adjusted for partici-
pants who do not retain their holding of shares for the dura-
tion of the respective program. In the case of performance-
based shares, the company assesses the probability of the
performance targets being met when calculating the com-
pensation expense.

The fair value of ASSA ABLOY’s Series B share on the allot-
ment date for LTI 2017 of 26 May 2017 was SEK 192.10. The
fair value of ASSA ABLOY’s Series B share on the allotment
date for LTI 2016, 26 May 2016, was SEK 171.24. The fair value
of ASSA ABLOY’s Series B share on the allotment date for
LTI 2015, 28 May 2015, was SEK 169.50.

ASSA ABLOY ANNUAL REPORT 2017

1 Number of shares and fair values

have been recalculated for all histor-
ical periods reflecting the stock split
in 2015.

NOTES

Note 33 cont.

The total cost of the Group’s long-term incentive programs
(LTI 2014–LTI 2017) excluding social security costs
amounted to SEK 40 M (42) in 2017. In April 2017 a redemp-
tion of LTI 2014 took place and 395,304 shares (481,558) at
a total market value of SEK 74 M (80) were transferred to the
participants of the program. Parts of the redemption of
LTI 2014 were settled through endowment insurances.
The payment for the transferred shares in LT1 2014 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 2017,
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’ base 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’ base salary and other employment benefits plus an
additional twelve months’ base salary.

Average number of employees per country, broken down by gender

China
US
Sweden
France
United Kingdom
Germany
Mexico
Brazil
Finland
Czech Republic
Netherlands
India
Malaysia
Canada
Romania
Norway
Poland
South Korea
Belgium
Australia
Denmark
South Africa
Switzerland
Spain
Italy
United Arab Emirates
Chile
Hungary
Israel
New Zealand
Colombia
Ireland
Others
Total

Sweden
Total

Total

11,439
9,711
2,100
1,998
1,577
1,623
1,394
1,648
1,278
986
997
423
847
819
845
717
589
712
584
712
471
461
563
531
467
475
357
248
304
289
204
172
1,392
46,928

Total

183
183

Group

2016

of which
women

of which
men

5,399
2,567
512
604
510
473
428
519
368
350
147
37
385
188
340
132
119
267
118
211
118
208
182
167
129
34
98
39
88
98
52
58
346
15,290

6,040
7,143
1,588
1,394
1,067
1,150
966
1,130
910
637
850
385
462
631
505
585
470
445
466
500
353
253
381
365
338
441
259
209
216
191
152
114
1,046
31,638

2017

of which
women

of which
men

4,552
2,723
535
596
508
471
419
663
348
345
158
84
434
238
320
133
131
257
132
204
171
260
183
131
135
32
99
55
89
101
145
52
419
15,122

5,784
7,464
1,619
1,343
1,180
1,141
1,099
773
868
749
876
888
439
577
482
577
561
418
542
465
424
321
382
407
326
384
237
267
214
193
70
142
1,092
32,304

Total

10,337
10,188
2,154
1,939
1,688
1,611
1,518
1,435
1,216
1,094
1,034
972
873
815
802
710
692
676
674
669
595
581
565
538
461
416
336
321
303
294
215
193
1,512
47,426

Parent company

2016

of which
women

of which
men

42
42

141
141

2017

of which
women

of which
men

49
49

159
159

2017

of which
women

of which
men

4
1

1
5

5
8

3
13

Total

208
208

Total

9
9

4
18

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.

2016

of which
women

of which
men

3
1

1
4

6
8

2
14

Total

9
9

3
18

ASSA ABLOY ANNUAL REPORT 2017

NOTES 87

Notes

Note 34 Financial risk management and financial

instruments

Financial risk management
ASSA ABLOY is exposed to a variety of financial risks due to its
international business operations. Financial risk management
for ASSA ABLOY’s units has been implemented in accordance
with the ASSA ABLOY 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 financial activities.

ASSA ABLOY’s financial activities are coordinated centrally

and the majority of financial transactions are conducted by
the subsidiary ASSA ABLOY Financial Services AB, which is the
Group’s internal bank. External financial transactions are con-
ducted by Treasury. Treasury achieves significant economies of
scale when negotiating borrowing agreements, using interest
rate derivatives and managing currency flows.

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 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, including
negative market values of derivatives, plus pension provisions,
less cash and cash equivalents, and other interest-bearing invest-
ments including positive market values of derivatives. The table
‘Net debt and equity’ shows the position as at December 31.

Net debt and equity

SEK M

Non-current interest-bearing receivables
Current interest-bearing investments incl.
positive market values of derivatives
Cash and cash equivalents
Pension provisions
Other non-current interest-bearing liabilities
Current interest-bearing liabilities
incl. negative market values of derivatives
Total
Equity
Net debt/equity ratio, times

Group

2016

–41

–169
–750
3,121
16,901

4,065
23,127
47,224
0.49

2017

–171

–150
–459
2,933
16,859

6,263
25,275
50,657
0.50

Rating
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. The Group’s credit rating remained unchanged
during the year.

Agency

Short-term Outlook Long-term Outlook

Standard & Poor’s
Moody’s

A2
P2

Stable
Stable

A –
n/a

Stable

Maturity profile – financial instruments1

December 31, 2016

December 31, 2017

SEK M2

Long-term bank loans
Long-term capital market loans
Short-term bank loans
Commercial papers and short-term
capital market loans
Derivatives (outflow)
Total by period

Cash and cash equivalents
incl. interest-bearing receivables
Long-term interest-bearing receivables
Derivatives (inflow)
Deferred considerations
Trade receivables
Trade payables
Net total

Confirmed credit facilities
Credit facilities maturing <1 year
Adjusted maturity profile1

<1 year

–459
–2,626
–790

–455
–8,032
–12,363

752
41
8,013
–1,083
12,648
–7,443
565

8,620
–715
8,471

>1<2
years

–452
–2,765
–

–
–569
–3,787

–
–
547
–1,023
–
–
–4,264

–
–
–4,264

>2<5
years

–3,093
–4,745
–

–
–54
–7,892

–
–
121
–93
–
–
–7,864

–8,620
–
–16,484

>5 years

–856
–6,287
–

–
–54
–7,198

–
–
110
–50
–
–
–7,138

–
–
–7,138

<1 year

–343
–2,694
–1,907

–1,545
–9,295
–15,784

502
90
9,242
–1,177
13,068
–7,811
–1,870

8,874
–681
6,322

>1<2
years

–1,421
–1,609

>2<5
years

–2,904
–5,659

>5 years

–566
–5,852

–26
–3,056

–75
–8,638

–73
–6,491

57
56
–264

30
143
–118

148

–3,207

–8,584

–6343

–8,874

–3,207

–17,457

–6,343

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.

Financing risk and maturity profile
Financing risk is defined as the risk of being unable to meet
payment obligations as a result of inadequate liquidity or diffi-
culties in obtaining external financing. ASSA ABLOY manages
financing risk at Group level. Treasury is responsible for exter-
nal 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
available loan facilities, including available cash and cash
equivalents, should include a reserve (facilities available but
not utilized) equivalent to 10 percent of the Group’s total
annual sales.

Maturity profile
The table ‘Maturity profile’ above shows the maturities for
ASSA ABLOY’s financial instruments, including confirmed
credit facilities. The maturities are not concentrated to a par-
ticular date in the immediate future. An important compo-
nent of liquidity planning is the Group’s Multi-Currency
Revolving Credit Facility, which matures in June 2020. This
credit facility was wholly unutilized at year-end. Moreover,
existing financial assets are also taken into account. The table
shows undiscounted cash flows relating to the Group’s finan-
cial instruments at the reporting date, and these amounts are
therefore not found in the balance sheet.

NOTES

ASSA ABLOY ANNUAL REPORT 2017

Note 34 cont.

External financing/net debt

Credit lines/facilities
US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
Multi-Currency RCF

Bank loan EIB
Bank loan EIB
Bank loan NIB
Bank loan NIB
Global MTN Program

Amount,
SEK M
206
577
1,245
618
8,874

542
1,131
542
542
18,348

2,105
34,663

1,371

1,006
8,248
5,000
1,258
2,153
19,037
53,787

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 cash equivalents
Current interest-bearing investments
Non-current interest-bearing receivables
Market value of derivatives
Pension provisions
Net debt

Maturity
Aug 2019
May 2020
Aug 2022
Aug 2024
Jun 2020

May 20202
Apr 20222
Dec 2019
Dec 2021
Jan 2019
Aug 2019
Sep 2019
Nov 2019
Feb 2020
Jun 2020
Sep 2020
Nov 2020
Dec 2020
Feb 2021
Aug 2021
Oct 2021
Mar 2022
Apr 2022
Jun 2022
Jul 2022
Nov 2023
May 2024
Jul 2024
Sep 2024
Feb 2025
Mar 2025
Dec 2025
Feb 2027
Jun 2027
Jun 2027
Oct 2027
Oct 2029
Oct 2029
Apr 2030

Mar 2018
Jun 2018
Sep 2018
Oct 2018
Dec 2018

Carrying

amount, SEK M Currency
USD
206
USD
577
USD
1,265
USD
618
EUR
–

Amount
2016
25
70
150
75
900

Amount
2017
25
70
150
75
900

Of which Parent
company, SEK M

EUR
USD
EUR
EUR
USD
USD
USD
EUR
EUR
AUD
EUR
EUR
EUR
USD
USD
EUR
EUR
USD
EUR
USD
USD
USD
USD
EUR
EUR
EUR
USD
EUR
NOK
NOK
NOK
EUR
EUR
EUR

EUR
SEK
USD
EUR
USD
USD
SEK

73
154
55
55
10
50
20

50
20
70
35
30
50
10
15
50

100
50
30
50
30

50
500
10
30
122
50

55
137
55
55
10
50
20
50
50
20
70
35
30
50
10
15
50
10
10
5
25
20
30
100
50
30
50
30
150
150
200
28
26
70

50
500
10
30
122
25
1,100

542
1,131
542
542
82
412
165
496
493
128
689
3601
3071
412
82
148
493
82
98
41
2131
165
248
981
492
3281
4061
295
1491
150
2011
2721
254
684
2,105
16,859

493
500
82
296
1,005
206
1,101
1,258
1,210
6,151
23,010

–459
–43
–171
5
2,933
25,275

82
412
165
496
493
128
689

295
412
82
148
493
82
98
41

165
248
981
492
296
412
295
150
150
200
273
254
684
1,773
10,492

493
500
82
296

1,371
11,862

1 The loans are subject to hedge accounting.
2 The loans are amortizing. In the table the average dates of maturity of the loans have been stated.

SEK M
Opening balance January 1, 2017

Cash flow from financing activities
Long-term loans raised
Repayment of originally long-term loans
Other changes in cash flow short-term loans
Total

Changes in non-cash items
Acquisitions
Reclassifications
Unrealized exchange rate differences
Total
Closing balance December 31, 2017

Long-term loans
16,901

Short-term loans
3,929

Total
20,829

3,226
–
–
3,226

93
–2,698
–663
–3,268
16,859

–
–2,637
2,414
–223

83
2,698
–335
2,446
6,151

3,226
–2,637
2,414
3,003

176
–
–998
–822
23,010

ASSA ABLOY ANNUAL REPORT 2017

NOTES 89

Note 34 cont.

Notes

Interest-bearing liabilities
The Group’s long-term loan financing mainly consists of a
Private Placement Program in the US totaling USD 442 M, of
which USD 320 M (442) is long-term, a GMTN program of
SEK 10,700 M (9,976), of which SEK 9,329 M (8,585) is long-
term, a loan from the European Investment Bank of EUR 55 M
(73) and USD 137 M (154), and a loan from the Nordic Invest-
ment Bank of EUR 110 M (110). During the year, ten new issues
were made under the GMTN program for a total amount of
SEK 2,157 M. In addition, a new long-term bank loan of
EUR 90 M was obtained. 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. The size of the loans
decreased because of currency fluctuations, in particular the
strengthening of the USD against SEK. A total of SEK 3,226 M
was raised in new long-term loans, while SEK 2,637 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 1,307 M (455) of the Commercial Paper Programs had
been utilized. In addition, substantial credit facilities are avail-
able, mainly in the form of a Multi-Currency Revolving Credit
Facility of EUR 900 M (900). At year-end the average time to
maturity for the Group’s interest-bearing liabilities, excluding
the pension provision, was 44 months (49).

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

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

Cash and cash equivalents and other interest-bearing
receivables
Short-term interest-bearing investments totaled SEK 43 M (2)
at year-end. In addition, ASSA ABLOY has long-term interest-
bearing receivables of SEK 171 M (41) and financial derivatives
with a positive market value of SEK 107 M (167) which, in addi-
tion to cash and cash equivalents, are included in the defini-
tion of net financial debt. Cash and cash equivalents are mainly
invested in bank accounts or interest-bearing instruments
with high liquidity from issuers with a credit rating of at least
A–, according to Standard & Poor’s or similar rating agency.
The average term for cash and cash equivalents was 21 days
(1) at year-end 2017.

The Parent company’s cash and cash equivalents are held in

a sub-account to the Group account.

SEK M

2016

2017

2016

2017

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

689

362

61
750

167
960

97
459

171

107
321

–
0

–

–
0

–

–
0

Net debt by currency

SEK M

USD
EUR
CNY
SEK
NOK
CZK
DKK
KRW
AUD
PLN
CHF
Other
Total

December 31, 2016

December 31, 2017

Net debt excluding
currency swaps

Net debt including
currency swaps

Net debt excluding
currency swaps

Net debt including
currency swaps

9,907
9,728
–199
1,315
71
12
8
369
146
38
1,171
562
23,127

12,277
6,616
928
–493
640
340
456
534
524
299
653
352
23,127

8,522
12,074
451
2,185
565
21
37
363
134
50
214
658
25,275

12,236
7,241
1,764
1,171
645
449
366
363
357
325
259
99
25,275

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 interest-bearing assets are mostly short-term.
The term for the majority of these investments is three

months or less, although the share with a longer maturity rose
during the year. The fixed interest term for these short-term
investments was 136 days (113) at year-end 2017. A down-
ward change in the yield curve of one percentage point would
reduce the Group’s interest income by around SEK 6.8 M (1)
and consolidated equity by SEK 5 M (1).

NOTES

ASSA ABLOY ANNUAL REPORT 2017

Note 34 cont.

Interest rate risks in borrowing
Changes in interest rates have a direct impact on ASSA
ABLOY’s net interest expense. Treasury is responsible for
identifying and managing the Group’s interest rate exposure.
Treasury analyzes the Group’s interest rate exposure and
c alculates the impact on income of changes in interest rates
on a rolling 12-month basis. The Group strives for a mix of
fixed rate and variable rate borrowings, and uses interest rate
swaps to adjust the fixed interest term. The financial policy
stipulates that the average fixed interest term should nor-
mally be 24 months. At year-end, the average fixed interest
term on gross debt, excluding pension liabilities, was around
25 months (28). An upward change in the yield curve of one
percentage point would increase the Group’s interest
expense by around SEK 118 M (102) and reduce consoli-
dated equity by SEK 87 M (75).

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 pos-
sible. 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

2016

522
764
–1,255
267
1,833
565
–321
–2,194
291

2017

535
766
–1,316
160
2,033
438
–373
–2,637
979

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

2016

2017

AUD
CHF
CNY
EUR
GBP
HKD
KRW
NOK
USD

36
27
18
131
19
59
20
14
528

43
30
28
151
22
76
18
12
545

Translation exposure in the balance sheet
The impact of translation of equity is limited by the fact that
a large part of financing is in local currency.

The capital structure in each country is optimized based
on local legislation. Whenever possible, according to local

conditions, gearing per currency should generally aim to be
the same as for the Group as a whole to limit the impact of
fluctuations in individual currencies. Treasury uses currency
derivatives and loans to achieve appropriate financing and to
eliminate undesirable currency exposure.

The table ‘Net debt by currency’ on page 90 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 subsidi-
aries to repay the Group’s loans. This is primarily achieved
through cash pools put in place by Treasury. Around 93 per-
cent (91) of the Group’s sales were settled through cash
pools in 2017. 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
92 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 considered limited, but increased slightly in pace
with increased activity in emerging markets, mainly with
respect to China. The fair value of trade receivables is equiva-
lent to the carrying amount. Credit risks relating to operating
activities are managed locally at company level and moni-
tored 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 92 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 92 provides an
overview of financial assets and liabilities, measurement
category, and carrying amount and fair value per item.

ASSA ABLOY ANNUAL REPORT 2017

NOTES 91

Notes

Note 34 cont.

Disclosures of offsetting of financial assets and liabilities

2016

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

2017

Amounts
netted in
the
balance
sheet

Net
amounts
in the
balance
sheet

Amount
covered
by netting
agree-
ment but
not offset

Net
amount

–
–

167
137

76
76

91
61

107
112

–
–

107
112

39
39

68
73

SEK M

Financial assets
Financial liabilities

Gross
amount

167
137

Netted financial assets and financial liabilities only consist of derivative instruments.

Outstanding derivative financial instruments at December 31

Instrument, SEK M

Foreign exchange forwards, funding
Interest rate swaps 1
Cross currency swaps
Total

December 31, 2016

December 31, 2017

Positive fair
value

Negative
fair value

Nominal
value

Positive fair
value

Negative
fair value

Nominal
value

78
88
–
167

–78
–21
–38
–137

6,034
2,113
519
8,666

39
68
–
107

–45
–12
–55
–112

7,076
2 710
527
10,313

1 For interest rate swaps, only one leg is included in nominal value.

Financial instruments: carrying amounts and fair values by measurement category

IAS 39 category*

Carrying
amount

Fair value

Carrying
amount

Fair value

2016

2017

3
1
1
5
2
1
1

4
4

4
4
5
2
4
2

11
75
12,648
88
78
2
750

1,671
15,230
16,901

–
3,929
21
116
7,443
2,250

11
75
12,648
88
78
2
750

1,671
15,336
17,010

–
3,929
21
116
7,443
2,250

11
215
13,068
68
39
43
459

2,237
14,622
16,859

–
6,151
11
100
7,811
1,559

11
215
13,068
68
39
43
459

2,237
14,632
16,869

–
6,151
11
100
7,811
1,559

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 financial instruments

Financial liabilities
Derivative financial instruments
Deferred considerations 1

2016

2017

Carrying
amounts

Quoted
prices

Observable
data

Non-
observable
data

Carrying
amounts

Quoted
prices

Observable
data

Non-
observable
data

167

137
2,250

–

–
–

167

137
–

–

107

–
2,250

112
1,559

–

–
–

107

112
–

–

–
1,559

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.

NOTES

ASSA ABLOY ANNUAL REPORT 2017

ASSA ABLOY hits a home run at new ballpark

CUSTOMER: ASSA ABLOY has provided several prod-

uct solutions for the new baseball park being devel-
oped for Atlanta. More than just a stadium, the com-
plex also includes the Battery Entertainment District
and the Comcast Building incorporating housing, res-
taurants and retail space.

CHALLENGE: While ASSA ABLOY was initially pleased

to be providing hardware on the stadium, the sales
team saw an opportunity to expand its involvement to
include CECO doors, which would be a perfect comple-
ment to the existing manufacturer’s hollow metal
frames already on site. But some salesmanship was
needed, since the specifications clearly called for the
frames and doors to be from the same manufacturer.

SOLUTION: The team was able to demonstrate how
the ASSA ABLOY doors would be the best fit for the cus-
tomer for a variety of reasons. Making the manufac-
turer change would not impact cost or lead times, and
it would provide better coordination for the in-door
wiring and the electrified hardware mounted on the
door. Wiring the doors at the factory allowed trouble-
shooting off-site, which led to a seamless install when
the doors were delivered. In addition, the doors pro-
vide the best thermal rating in the industry; and order-
ing was both more efficient and faster through ASSA
ABLOY’s online portal. ASSA ABLOY was also able to
meet the aesthetic needs of the project, with a sleek
Sargent lever that’s currently particularly popular on
other marquee projects in Atlanta.

Building to the World’s Most Advanced Green Building Standard

struction firm building the Kern Center, Wright
Builders, spent months sourcing components and
ingredient lists from manufacturers. ASSA ABLOY
made their job easier by providing Declare labels
that list material ingredients for the door opening
products used on the project including doors, locks
and exit devices, hinges, door operators, accesso-
ries and pulls. “Having companies like ASSA ABLOY

declare that they meet standards, and provide ingre-
dient lists, was an incredible help,” said Andrew
Solem, assistant project manager for Wright Build-
ers. “The labels allow architects, designers, specifiers
and builders to know immediately whether or not
that the product will meet most green building pro-
grams and guidelines, including the Living Building
Challenge.”

CUSTOMER: Hampshire College is a private liberal

arts college in Amherst, Massachusetts, US. The col-
lege, being environmentally focused, sought to con-
struct a new classroom and administration facility to
reflect this ideal.

CHALLENGE: The R. W. Kern Center at Hampshire
College is a USD 7.8 million, 17,000 square foot class-
room and administration facility constructed to the
sustainability-driven Living Building Challenge (LBC),
the built environment’s most rigorous sustainability
performance standard. The intent of the LBC is to
build structures that are free from harmful chemi-
cals, protecting not only those that live and work
within, but alsothe people constructing the building,
the workersthat produce the building materials and
the environmentas a whole. To achieve this designa-
tion, a structure must generate its own electricity,
collect its own water and avoid building products –
including door openings – that contain “red list”
chemicals.

SOLUTION: Achieving this goal requires selection

of building products with accompanying transpar-
ency statements that openly list the material ingre-
dients of these products. Finding products with
transparency labels can be a challenge. The con-

Comments on five years in summary

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
automation for overhead sectional doors and in high-
security fencing and gates for the North American market.
These acquisitions increase annual sales by a total of around
SEK 3,700 M and provide important products and
technology.

A new restructuring program was launched during the
year for the purpose of continuing to increase the cost-effi-
ciency of all divisions. Some 30 production plants and offices
are set to close with an estimated payback period of just over
three years.

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 within ASSA ABLOY 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 comparabil-

ity, increased by 17 percent compared with 2013, and cash
flow remained strong. Earnings per share after full dilution,
excluding items affecting comparability, increased by
17 percent. A total of 20 acquisitions were consolidated dur-
ing 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 percent excluding exchange rate effects. The global market
showed a divided picture with strong demand in the USA
and much of Asia, while growth in Europe was more une-
venly distributed. Emerging markets showed a slowdown,
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.

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.

2016
Demand for door opening solutions was relatively good
during the year despite the weakened global economy. The
Group’s growth remained strong during the year, with total
sales growth of 5 percent excluding exchange rate effects.
The mature markets, primarily in Europe and the US, showed
robust growth, while the trend in the emerging markets in
Asia, Africa, the Middle East and parts of South America was
more subdued in general, affected by factors such as the low
prices for oil and other commodities. For ASSA ABLOY, the
weak demand in these markets was most pronounced in
China.

A new restructuring program was launched during the
year. About fifty production plants and offices are set to close
over a three-year period, with an estimated payback period
of less than three years.

The focus in recent years on product development, inno-

vation and sustainability continued at a high level during
2016. The ongoing technology shift toward an increased
share of electromechanics with more digital and mobile
solutions is expected to benefit ASSA ABLOY in the long
term, and the proportion of sales of electromechanical
products exceeded 50 percent.

Operating income for the year, excluding items affecting
comparability, increased by 2 percent compared with 2015,
and cash flow continued to be strong. Earnings per share
after full dilution, excluding items affecting comparability,
increased 2 percent.

A total of 13 acquisitions were consolidated during the
year, which strengthened the market position for the Group
in key areas such as entrance automation and secure identity
solutions. ASSA ABLOY’s car locks operation was sold.

2017
Sales growth continued to be robust during the year. Organic
growth was 4%, driven by growing demand for electro-
mechanical and digital door opening solutions. For ASSA
ABLOY, the mature markets primarily in Europe and the US
demonstrated continued robust growth, while the trend in
the emerging markets was weaker, especially in China, Brazil
and the Middle East. Growth in Asia outside China continued
to be robust.

The Group-wide programs to improve efficiency in all
processes continue to deliver good results according to plan,
as do the restructuring programs.

Product development continues to focus on areas such as

digital and mobile technologies, which are believed to pro-
vide substantial potential for robust profitable growth for
some time to come. ASSA ABLOY also has a growing selec-
tion of products with environmental product declarations as
part of its sustainable solutions initiative.

Operating income for the year, excluding items affecting

comparability, increased by 10 percent compared with
2016, and cash flow remained strong. Earnings per share
after full dilution, excluding items affecting comparability,
increased 10 percent.

A total of 16 acquisitions were consolidated during the
year, which strengthened the market position in areas such
as smart door locks, physical access management and iden-
tity solutions. ASSA ABLOY divested its project operation
within HID Global, AdvanIDe, in its entirety.

COMMENTS ON FIVE YEARS IN SUMMARY

ASSA ABLOY ANNUAL REPORT 2017

Five years in summary

Amounts in SEK M unless stated otherwise

2013

2014

2015

2016

2017

Sales and income
Sales
Organic growth, %
Acquired growth, %
Operating income before depreciation and amortization (EBITDA) 1
Depreciation and amortization
Operating income (EBIT) 1
Income before tax (EBT)
Net income

Cash flow
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Cash flow
Operating cash flow3

Capital employed and financing
Capital employed
– of which goodwill
– of which other intangible assets and property, plant and equipment
– of which investments in associates
Net debt
Non-controlling interests
Shareholders’ equity, excluding non-controlling interest

Data per share, SEK 5
Earnings per share before and after dilution
Earnings per share before and after dilution and excluding items
affecting comparability 1
Shareholders’ equity per share after dilution
Dividend per share
Price of Series B share at year-end

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

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

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

71,293
2
3
12,833
–1,580
11,254
8,952
6,653

8,575
–4,063
–4,271
240
10,467

70,351
47,544
17,618
2,109
23,127
5
47,220

76,137
4
2
14,029
–1,688
12,341
11,673
8,635

9,248
–8,661
–861
–274
10,929

75,932
50,330
19,144
2,243
25,275
9
50,648

4.30

5.79

6.93

5.99

7.77

4.95
25.94
1.90
113.27

5.79
32.50
2.17
138.27

6.93
37.43
2.65
178.00

7.09
42.51
3.00
169.10

7.77
45.60
3.302
170.40

Key figures
Operating margin (EBITDA, % 1
Operating margin (EBIT), % 1
Profit margin (EBT), %
Return on capital employed, %
Return on capital employed excluding items affecting comparability, %
Return on shareholders’ equity, %
Equity ratio, %
Net debt/equity ratio
Interest coverage ratio, times
Total number of shares, thousands 4
Number of outstanding shares, thousands 4
Weighted average number of shares issued, before and after dilution,
thousands 4
Average number of employees

18.4
16.3
13.2
14.9
17.1
17.5
43.8
0.68
13.5
1,112,576
1,110,776

18.3
16.3
15.3
16.9
16.9
19.8
45.1
0.62
17.4
1,112,576
1,110,776

18.4
16.3
15.2
17.8
17.8
19.8
48.2
0.54
16.7
1,112,576
1,110,776

18.0
15.8
12.6
14.1
16.5
15.0
49.6
0.49
14.1
1,112,576
1,110,776

18.4
16.2
15.3
16.6
16.6
17.6
50.9
0.50
19.1
1,112,576
1,110,776

1,110,776
42,556

1,110,776
44,269

1,110,776
45,994

1,110,776
46,928

1,110,776
47,426

1 Excluding items affecting comparability 2013 and 2016.
2 Dividend proposed by the Board of Directors.
3 Excluding restructuring payments.
4 Comparatives have been recalculated for all historical periods prior to 2015 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 2013 and 2016.

ASSA ABLOY ANNUAL REPORT 2017

FIVE YEARS IN SUMMARY 95

Quarterly information

THE GROUP IN SUMMARY
Amounts in SEK M unless stated otherwise

Q 1
2016

Q 2
2016

Q 3
2016

Q 4
2016

Full year
2016

Q 1
2017

Q 2
2017

Q 3
2017

Q 4
2017

Full year
2017

Sales
Organic growth
Gross income excluding items affecting
comparability
Gross margin excluding items affecting
comparability
Operating income before depreciation
and amortization (EBITDA), excluding
items affecting comparability
Operating margin (EBITDA)
Depreciation and amortization excl.
amortization attributable to business
combinations
Operating income before amortization
(EBITA), excluding items affecting com-
parability
Operating margin (EBITA)
Amortization attributable to business
combinations
Operating income (EBIT) excluding
items affecting comparability
Operating margin (EBIT)
Items affecting comparability2
Operating income (EBIT)
Operating margin (EBIT)
Net financial items
Income before tax (EBT)
Profit margin (EBT)
Tax on income
Profit from discontinued operations
Net income

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

15,891 17,894 18,025 19,484
1%

71,293 18,142 19,387 18,499 20,109
5%

76,137
4%

6,295

7,031

7,139

7,660

28,125

7,190

7,581

7,293

7,924

29,988

39.6%

39.3%

39.6%

39.3%

39.5%

39.6%

39.1%

39.4%

2,787
17.5%

3,305
18.5%

3,425
19.0%

3,316
17.0%

12,833
18.0%

3,208
17.7%

3,543
18.3%

3,488
18.9%

3,789
18.8%

14,029
18.4%

–329

–349

–353

–352

–1,384

–370

–376

–355

–344

–1,444

2,457
15.5%

2,956
16.5%

3,072
17.0%

2,965
15.2%

11,450
16.1%

2,839
15.6%

3,168
16.3%

3,132
16.9%

3,446
17.1%

12,584
16.5%

–46

–52

–51

–196

–52

–54

–52

–87

–244

2,411
15.2%
–
2,411
15.2%
–201
2,209
13.9%
–574
3
1,638

2,910
16.3%
–
2,910
16.3%
–181
2,729
15.2%
–709
7
2,026

3,020
16.8%
–
3,020
16.8%
–175
2,844
15.8%
–739
17
2,122

2,913
15.0%
–1,597
1,316
6.8%
–146
1,170
6.0%
–304
1
867

11,254
15.8%
–1,597
9,657
13.5%
–705
8,952
12.6%
–2,328
28
6,653

2,787
15.4%
–
2,787
15.4%
–195
2,593
14.3%
–674
–
1,918

3,114
16.1%
–
3,114
16.1%
–170
2,944
15.2%
–765
–
2,179

3,080
16.7%
–
3,080
16.7%
–171
2,910
15.7%
–757
–
2,153

3,359
16.7%
–
3,359
16.7%
–133
3,226
16.0%
–842
–
2,385

12,341
16.2%
–
12,341
16.2%
–668
11,673
15.3%
–3,038
–
8,635

1,638
0

2,026
0

2,122
0

866
1

6,651
1

1,919
0

2,178
1

2,153
1

2,384
1

8,633
2

OPERATING CASH FLOW

Operating income (EBIT)
Restructuring costs
Depreciation and amortization
Net capital expenditure
Change in working capital
Interest paid and received
Non-cash items
Operating cash flow1
Operating cash flow/Income before tax
excluding items affecting comparability2

Q 1
2016

2,411
–
376
–342
–1,836
–94
–17
498

Q 2
2016

2,910
–
395
–394
–139
–228
–26
2,519

Q 3
2016

3,020
–
406
–331
98
–96
–266
2,830

Q 4
2016

Full year
2016

1,316
1,597
403
–411
1,939
–179
–45
4,620

9,657
1,597
1,580
–1,478
62
–597
–354
10,467

Q 1
2017

2,787
–
421
–373
–1,882
–93
–36
824

Q 2
2017

3,114
–
429
–593
–207
–198
28
2,575

Q 3
2017

3,080
–
407
–448
–319
–77
11
2,654

Q 4
2017

Full year
2017

3,359
–
430
–561
2,061
–189
–224
4,876

12,341
–
1,688
–1,975
–347
–557
–221
10,929

0.23

0.92

0.99

1.67

0.99

0.32

0.87

0.91

1.51

0.94

CHANGE IN NET DEBT

Net debt at beginning of period
Operating cash flow
Restructuring payments
Tax paid on income
Acquisitions and divestments
Dividend
Actuarial gain/loss on post-employment
benefit obligations
Net debt of disposal group classified as
held for sale
Exchange rate differences, etc.
Net debt at end of period
Net debt/equity

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

Q 1
2016

Q 2
2016

Q 3
2016

Q 4
2016

Full year
2016

Q 1
2017

Q 2
2017

Q 3
2017

Q 4
2017

Full year
2017

22,269 24,681 27,122 25,571

–498
95
1,298
1,345
–

–2,519
50
478
556
2,944

–2,830
61
523
145
–

–4,620 –10,467
442
2,928
3,037
2,944

22,269 23,127 23,339 24,970 25,180
–2,575
136
961
268
3,332

23,127
–4,876 –10,929
612
3,044
6,790
3,332

–2,654
106
1,656
1,741
–

–824
84
629
461
–

286
–203
4,319
–

235
629
991
–

221

186

105

–374

138

–34

–50

–40

–26

0
–49

0
746

–
695
24,681 27,122 25,571 23,127
0.49

0
444

0.64

0.57

0.58

–
–104

–
1,836

–
–
608
–590
23,127 23,339 24,970 25,180 25,275
0.50

–
–590

0.48

0.54

0.53

0.49

–
–675
25,275
0.50

Q 1
2016

–34

–270
–578
3,002

Q 2
2016

–36

–222
–564
3,258

Q 3
2016

–41

–168
–604
3,406

Q 4
2016

–41

–169
–750
3,121

Q 1
2017

–41

–113
–697
3,058

Q 2
2017

–39

–211
–844
3,109

Q 3
2017

–212

–161
–440
2,929

Q 4
2017

–171

–150
–459
2,933

15,668 15,805 16,205 16,901

16,232 17,450 16,728 16,859

6,893

4,065
24,681 27,122 25,571 23,127

8,881

6,773

4,901

6,263
23,339 24,970 25,180 25,275

6,336

5,505

QUARTERLY INFORMATION

ASSA ABLOY ANNUAL REPORT 2017

CAPITAL EMPLOYED AND FINANCING

Capital employed
– 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 debt
Non-controlling interests
Equity attributable to the Parent
company’s shareholders

Q 1
2016

Q 2
2016

Q 3
2016

Q 4
2016

67,124 69,449 70,555 70,351
43,098 44,387 45,077 47,544

Q 1
2017

Q 2
2017

Q 3
2017

Q 4
2017

72,333 71,349 72,477 75,932
47,438 46,252 46,573 50,330

16,613 17,036 17,264 17,618
2,109

2,095

2,037

1,970

17,595 17,309 17,032 19,144
2,243

2,147

2,193

2,176

111

126

–
24,681 27,122 25,571 23,127
5

–

–
23,339 24,970 25,180 25,275
9

–

42,551 42,449 44,981 47,220

48,989 46,374 47,292 50,648

DATA PER SHARE, SEK

Earnings per share before and after dilution
Earnings per share before and after dilution
and excluding items affecting
comparability2
Shareholders’ equity per share after
dilution

Q 1
2016

1.47

Q 2
2016

1.82

Q 3
2016

1.91

Q 4
2016

Full year
2016

0.78

5.99

Q 1
2017

1.73

Q 2
2017

1.96

Q 3
2017

1.94

Q 4
2017

Full year
2017

2.15

7.77

1.47

1.82

1.91

1.88

7.09

1.73

1.96

1.94

2.15

7.77

38.31

38.22

40.50

42.51

44.10

41.75

42.58

45.60

NUMBER OF SHARES

Total number of shares, millions
Weighted average number of outstanding
shares, before and after dilution, millions

Mar
2016

Jun
2016

Sep
2016

Dec
2016

Full year
2016

Q 1
2017

Q 2
2017

Q 3
2017

Q 4
2017

Full year
2017

1,112.6 1,112.6 1,112.6 1,112.6

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 1,110.8 1,110.8 1,110.8 1,110.8

1 Excluding restructuring payments.
2 Items affecting comparability consist of restructuring costs.

Definitions of key ratios

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

Capital employed
Total assets less interest-bearing assets and non-interest-
bearing liabilities including deferred tax liability.

Operating margin (EBITDA)
Operating income before depreciation and amortization as a
percentage of sales.

Operating margin (EBITA)
Operating income before amortization of intangible assets
recognized in business combinations, as a percentage of
sales.

Operating margin (EBIT)
Operating income as a percentage of sales.

Profit margin (EBT)
Income before tax as a percentage of sales.

Operating cash flow
See the table on operating cash flow for detailed information.

Net capital expenditure
Investments in, less disposals of, intangible assets and
property, plant and equipment.

Depreciation and amortization
Depreciation and amortization of intangible assets and
property, plant and equipment.

Net debt
Interest-bearing liabilities less interest-bearing assets.

Equity ratio
Shareholders’ equity as a percentage of total assets.

Interest coverage ratio
Income before tax plus net interest divided by net interest.

Return on shareholders’ equity
Net income attributable to parent company’s shareholders
as a percentage of average parent company’s shareholders
equity.

Return on capital employed
Income before tax plus net interest as a percentage of aver-
age capital employed excluding restructuring reserves.

Earnings per share after tax and before dilution
Net income excluding non-controlling interests divided by
weighted average number of outstanding shares before
dilution.

Earnings per share after tax and dilution
Net income excluding non-controlling interests divided by
weighted average number of outstanding shares after any
potential dilution.

Shareholders’ equity per share after dilution
Equity excluding non-controlling interests divided by
number of outstanding shares after any potential dilution.

ASSA ABLOY ANNUAL REPORT 2017

QUARTERLY INFORMATION 97

Proposed distribution of earnings

The following earnings are at the disposal of the general meeting of shareholders:

Share premium reserve: SEK 787 M
Retained earnings brought forward: SEK 7,347 M
Net income for the year: SEK 4,670 M
TOTAL: SEK 12,804 M

The Board of Directors and the President and CEO propose that a dividend of SEK 3.30 per share, a total of SEK 3,666 M, be
distributed to shareholders and that the remainder, SEK 9,139 M, be carried forward to the new financial year. The dividend
amount is calculated on the number of outstanding shares as per 5 February 2018.

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 2018.

Monday, 30 April 2018 has been proposed as the record date for dividends. If the Annual General Meeting approves this
proposal, dividends are expected to be distributed by Euroclear Sweden AB on Friday, 4 May 2018.

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 finan-
cial 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 2018

Lars Renström
Chairman

Carl Douglas
Vice Chairman

Ulf Ewaldsson
Board member

Eva Lindqvist
Board member

Jan Svensson
Board member

Eva Karlsson
Board member

Johan Molin
Board member and
President and CEO

Birgitta Klasén
Board member

Sofia Schörling Högberg
Board member

Rune Hjälm
Board member
Employee representative

Mats Persson
Board member
Employee representative

Our audit report was issued on 5 February 2018

PricewaterhouseCoopers AB

Bo Karlsson
Authorized Public Accountant
Auditor in charge

Linda Corneliusson
Authorized public accountant

PROPOSED DISTRIBUTION OF EARNINGS

ASSA ABLOY ANNUAL REPORT 2017

Auditor’s report

To the general meeting of the shareholders of ASSA ABLOY AB (publ)
Corporate identity number 556059-3575

Report on the annual accounts and consolidated accounts

Opinions

We have audited the annual accounts and consolidated
accounts of ASSA ABLOY AB (publ) for the year 2017 with the
exception of the corporate governance report on pages
46–54. The annual accounts and consolidated accounts of
the company are included in this document on pages 39–98.
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 2017 and its financial
performance and cash flow for the year then ended in
accordance with the Annual Accounts Act. The consolidated
accounts have been prepared in accordance with the Annual
Accounts Act and present fairly, in all material respects, the
financial position of the Group as of 31 December 2017 and
their financial performance and cash flow for the year then

ended in accordance with International Financial Reporting
Standards (IFRS), as adopted by the EU, and the Annual
Accounts Act.

Our opinions do not cover the corporate governance
statement on pages 46–54. The statutory administration
report is consistent with the other parts of the annual
accounts and consolidated accounts.

We therefore recommend that the general meeting of the

shareholders adopt the income statement and balance
sheet for the Parent company and the Group.

Our opinions in this report on the annual accounts and
consolidated accounts are consistent with the content of
the additional report that has been submitted to the Parent
company’s audit committee in accordance with the Audit
Regulation (537/2014) Article 11.

Basis for Opinions

We conducted our audit in accordance with International
Standards on Auditing (ISA) and generally accepted auditing
standards in Sweden. Our responsibilities under those stand-
ards are further described in the Auditor’s Responsibilities
section. We are independent of the Parent company and the
Group in accordance with professional ethics for account-
ants in Sweden and have otherwise fulfilled our ethical
responsibilities in accordance with these requirements. This
includes that, based on the best of our knowledge and belief,

Our audit approach

Audit scope
We designed our audit by determining materiality and
assessing the risks of material misstatement in the consoli-
dated financial statements. In particular, we considered
where management made subjective judgements; for exam-
ple, in respect of significant accounting estimates that
involved making assumptions and considering future events
that are inherently uncertain. As in all of our audits, we also
addressed the risk of management override of internal con-
trols, including among other matters consideration of
whether there was evidence of bias that represented a risk
of material misstatement due to fraud.

We tailored the scope of our audit in order to perform suf-

ficient work to enable us to provide an opinion on the con-
solidated financial statements as a whole, taking into account
the structure of the Group, the accounting processes and
controls, and the industry in which the Group operates.

The ASSA ABLOY Group is comprised of a large number of

companies. None of these companies have, individually,
been deemed to be of major significance in the audit of the
Group. For the Group audit, we have selected the Parent
company and treasury company and some 70 companies
spread across the Group’s five divisions, which are audited
according to a group-wide audit program. The audit pro-
gram includes the assessment of the design and operating
effectiveness of selected controls in processes significant to
the financial reporting and also includes audit procedures in
the form of test of details supplemented with analytical pro-
cedures applied to the Group’s significant income statement

no prohibited services referred to in the Audit Regulation
(537/2014) Article 5.1 have been provided to the audited
company or, where applicable, its parent company or its con-
trolled companies within the EU, except for a minor branch
that was reported to the Audit Committee.

We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinions.

and balance sheet items. The majority of the subsidiaries in
the Group are also the subject of statutory audits according
to local requirements. During 2017, the Auditor-in-Charge
and co-signing auditor visited the audit teams in China and
the US to participate, on site, in the audit, and to take part in
the meetings with representatives from ASSA ABLOY’s local
companies and ASSA ABLOY’s head office. The operations in
China and the US have been selected as they are the coun-
tries with the largest external sales.

Materiality
The scope of our audit was influenced by our application of
materiality. An audit is designed to obtain reasonable assur-
ance whether the financial statements are free from material
misstatement. Misstatements may arise due to fraud or
error. They are considered material if individually or in aggre-
gate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the finan-
cial statements.

Based on our professional judgement, we determined
certain quantitative thresholds for materiality, including the
overall materiality for the financial statements as a whole.
These, together with qualitative considerations, helped us to
determine the scope of our audit and the nature, timing and
extent of our audit procedures and to evaluate the effect of
misstatements, both individually and in aggregate on the
financial statements as a whole.

ASSA ABLOY ANNUAL REPORT 2017

AUDITOR’S REPORT 99

Auditor’s report

Key audit matters

Key audit matters of the audit are those matters that, in our professional judgement, were of most significance in our audit
of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our
audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not
provide a separate opinion on these matters.

Key audit matter

How our audit addressed the Key audit matter

Goodwill and other intangible assets with indefinite
useful lives
Goodwill and other intangible assets with indefinite useful
lives are described in the annual report in Note 14 and in the
accounting principles in Note 1.

ASSA ABLOY is an acquisition-intensive company that

has an established and structured acquisition process.
During the 2017 financial year, a total of 16 acquisitions
were consolidated.

ASSA ABLOY’s goodwill of SEK 50 billion and its
intangible assets with indefinite useful lives of SEK 6 bil-
lion, are allocated to the Group’s five cash-generating
units which are equivalent to the Group’s five divisions.
We have specifically focused on the APAC division due to
the low headroom at this division.

In our audit, we have focused on the valuation of

goodwill and intangible assets with indefinite useful lives
as these items involve a large degree of judgement on
behalf of management in assessing future cash flows.

ASSA ABLOY’s annual test of goodwill and other intangible
assets with indefinite useful lives can be traced to observable
market data and to the company’s own business plans and fore-
casts on future development.

Through test of details we have examined whether ASSA
ABLOY’s assessment of whether there is any indication that an
asset may be impaired, is based on the company’s financial
budgets approved by management. We have also assessed the
growth rate that the company has used to forecast cash flows
beyond the first three-year period. In conjunction with this, we
have compared management’s assumptions regarding the sus-
tainable growth rate and the operating margin against actual
growth and the actual operating margin during recent years.
Our assessment of the discount rate applied in manage-
ment’s calculations reflects the specific risks found in the cash
generating units. We have reconciled the data in the calcula-
tions and checked it against external sources and have found
that the determination of the discount rate is based on estab-
lished theory. In this part of the audit, we have utilized PwC’s
valuation experts.

We have evaluated the company’s sensitivity analysis of the
valuation to changes in significant parameters, which, individu-
ally or on a collective basis, could imply the existence of an
impairment requirement.

Key audit matter

How our audit addressed the Key audit matter

Provisions – restructuring program
The restructuring program is described in the Report of the
Board of Directors in the annual report and in Note 25.

Restructuring programs were launched during the
previous financial years and the closing provision balance
amounts to SEK 944 million as of 31 December 2017.

In our audit, we have focused on these restructuring

programs as the determination of whether or not a
present obligation exists, and the valuation of that obli-
gation representing future expenditures, requires judge-
ment and is dependent on management estimates.

We have examined the company’s process for identifying pro-
jects and the estimated costs of these projects.

Our audit measures include an evaluation of whether the
restructuring programs comply, in all significant aspects, with
the Group’s accounting principles for reporting provisions.

Furthermore, we have challenged management’s assump-
tions that are the basis for the restructuring provisions with the
aim of assessing the reasonability of the provisions. Based on
risk and materiality, we have reconciled the parameters in the
calculations against supporting documentation. This includes,
amongst other things, the examination of minutes, agree-
ments, calculations and communication with employees.
We have evaluated the management’s assessments of
remaining cash flows by reviewing their quarterly project
updates.

100

AUDITOR’S REPORT

ASSA ABLOY ANNUAL REPORT 2017

Auditor’s report

Other information than the annual accounts and consolidated accounts

This document also contains other information than the
annual accounts and consolidated accounts and is found in
the sections Report on Operations, Divisions, Sustainability
Report, and Shareholder Information. The Board of Directors
and the Managing Director are responsible for this other
information.

Our opinion on the annual accounts and consolidated
accounts does not cover this other information and we do
not express any form of assurance conclusion regarding this
other information.

In connection with our audit of the annual accounts and

consolidated accounts, our responsibility is to read the infor-
mation identified above and consider whether the informa-
tion is materially inconsistent with the annual accounts and
consolidated accounts. In this procedure we also take into
account our knowledge otherwise obtained in the audit and
assess whether the information otherwise appears to be
materially misstated.

If we, based on the work performed concerning this infor-

mation, conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.

Responsibilities of the Board of Directors and the Managing Director

The Board of Directors and the Managing Director are
responsible for the preparation of the annual accounts and
consolidated accounts and that they give a fair presentation
in accordance with the Annual Accounts Act and, concern-
ing the consolidated accounts, in accordance with IFRS as
adopted by the EU. The Board of Directors and the Managing
Director are also responsible for such internal control as they
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.
In preparing the annual accounts and consolidated

accounts, the Board of Directors and the Managing Director

are responsible for the assessment of the company’s and the
group’s ability to continue as a going concern. They disclose,
as applicable, matters related to going concern and using the
going concern basis of accounting. The going concern basis
of accounting is however not applied if the Board of Direc-
tors and the Managing Director intends to liquidate the
company, to cease operations, or has no realistic alternative
but to do so.

The Audit Committee shall, without prejudice to the
Board of Director’s responsibilities and tasks in general,
among other things oversee the company’s financial
reporting process.

Auditor’s responsibility

Our objectives are to obtain reasonable assurance about
whether the annual accounts and consolidated accounts as
a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that
includes our opinions. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in
accordance with ISAs and generally accepted auditing stand-
ards in Sweden will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error

and are considered material if, individually or in the aggre-
gate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
annual accounts and consolidated accounts.

A further description of our responsibility for the audit of
the annual accounts and consolidated accounts is available
on Revisorsnämnden (Inspectorate of Auditors) website:
www.revisorsinspektionen.se/revisornsansvar. This descrip-
tion is part of the auditor’s report.

Report on other legal and regulatory requirements

Opinions

In addition to our audit of the annual accounts and consoli-
dated accounts, we have also audited the administration of
the Board of Directors and the Managing Director of ASSA
ABLOY AB (publ) for the year 2017 and the proposed appro-
priations of the company’s profit or loss.

We recommend to the general 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 Managing Director be dis-
charged from liability for the financial year.

Basis for opinions

We conducted the audit in accordance with generally
accepted auditing standards in Sweden. Our responsibilities
under those standards are further described in the Auditor’s
Responsibilities section. We are independent of the Parent
company and the Group in accordance with professional
ethics for accountants in Sweden and have otherwise ful-
filled our ethical responsibilities in accordance with these
requirements.

We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinions.

ASSA ABLOY ANNUAL REPORT 2017

AUDITOR’S REPORT 101

Auditor’s report

Responsibilities of the Board of Directors and the Managing Director

The Board of Directors is responsible for the proposal for
appropriations of the company’s profit or loss. At the pro-
posal of a dividend, this includes an assessment of whether
the dividend is justifiable considering the requirements
which the company’s and the Group’s type of operations,
size and risks place on the size of the Parent company’s and
the Group’s equity, consolidation requirements, liquidity
and position in general.

The Board of Directors is responsible for the company’s
organization and the administration of the company’s affairs.
This includes among other things continuous assessment of

the company’s and the Group’s financial situation and ensur-
ing that the company’s organization is designed so that the
accounting, management of assets and the company’s finan-
cial affairs otherwise are controlled in a reassuring manner.
The Managing Director shall manage the ongoing adminis-
tration according to the Board of Directors’ guidelines and
instructions and among other matters take measures that
are necessary to fulfill the company’s accounting in accord-
ance with law and handle the management of assets in a
reassuring manner.

Auditor’s responsibility

Our objective concerning the audit of the administration,
and thereby our opinion about discharge from liability, is to
obtain audit evidence to assess with a reasonable degree of
assurance whether any member of the Board of Directors or
the Managing Director in any material respect:
• has undertaken any action or been guilty of any omission

•

which can give rise to liability to the company, or
in any other way has acted in contravention of the
Companies Act, the Annual Accounts Act or the Articles
of Association.

Our objective concerning the audit of the proposed appro-
priations of the company’s profit or loss, and thereby our
opinion about this, is to assess with reasonable degree of

assurance whether the proposal is in accordance with the
Companies Act.

Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with
generally accepted auditing standards in Sweden will always
detect actions or omissions that can give rise to liability to
the company, or that the proposed appropriations of the
company’s profit or loss are not in accordance with the
Companies Act.

A further description of our responsibility for the
audit of the administration is available on the Revisors-
nämnden (Inspectorate of Auditors) website:
www.revisorsinspektionen.se/revisornsansvar. This
d escription is part of the auditor’s report.

The auditor’s examination of the corporate governance statement

The Board of Directors is responsible for that the corporate
governance statement on pages 46–54 has been prepared in
accordance with the Annual Accounts Act.

auditing standards in Sweden. We believe that the examina-
tion has provided us with sufficient basis for our opinions.
A corporate governance statement has been prepared.

Our examination of the corporate governance statement

is conducted in accordance with FAR’s auditing standard
RevU 16 The auditor’s examination of the corporate govern-
ance statement. This means that our examination of the cor-
porate governance statement is different and substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing and generally accepted

Disclosures in accordance with chapter 6 section 6 the
second paragraph points 2–6 of the Annual Accounts Act
and chapter 7 section 31 the second paragraph the same law
are consistent with the other parts of the annual accounts
and consolidated accounts and are in accordance with the
Annual Accounts Act.

PricewaterhouseCoopers AB, 113 97 Stockholm, was appointed auditor of ASSA ABLOY AB (publ) by the General Meeting of
shareholders on 26 April 2017 and has been the company’s auditor since 1994.

Stockholm, 5 February 2018

PricewaterhouseCoopers AB

Bo Karlsson
Authorized Public Accountant
Auditor in charge

Linda Corneliusson
Authorized public accountant

102

AUDITOR’S REPORT

ASSA ABLOY ANNUAL REPORT 2017

Energy efficient door opening solution for METRO Cash&Carry

CUSTOMER: METRO Cash & Carry is an international wholesale retailer

SOLUTION: The building itself is a wood construction, the electrical energy is

founded 1963 in Germany. Metro has about 120.000 employees and 200 stores
globally. In Austria Metro has about 12 shops with around 2100 employees.
There are about 48.000 goods in each store.

CHALLENGE: For the building renewal-concept of METRO the architect was

requested to create a zero-emission building for the retailer including sales
area, goods receiving and dispatch for goods to other retailers. The building will
have a BREEAM Outstanding certification and is a full new design concept for
METRO.

produced by photovoltaic modules. The new market is divided into cold-stor-
age goods, the home equipment, the vegetables zone - all are separated by
doors. ASSA ABLOY Entrance Systems supported the architect from the begin-
ning of the project with product solutions and BIM objects. For the best solu-
tion in relation of usage and energy consumption / energy-lost ASSA ABLOY
delivers six Isolated dock-levelers with sectional doors. At the fresh vegetable
delivering zone, ASSA ABLOY built galvanized dock-levelers with telescopic lips.
Inside the building, there are different climate zones, which are separated with
high-speed doors and automatic sliding doors. The main entrance for the
customers was built as air trap with two different door solutions. At the dis-
patching area there is also a manual dock-leveler type “emergency loading bay”
in case of total energy loss of the building.

Flexible solution for multi-person housing

CUSTOMER: The Waites in Birmingham, Alabama, US, is a new multi-use

housing development, with 14 two-bedroom apartments and 31 one-bedroom
apartments, ideal for staff at the nearby hospital and university.

Yale Accentra provides a complete resident experience, with the security and
convenience that residents expect at a cost the developer can embrace.

CHALLENGE: The Waites needed a flexible and easily manageable access solu-
tion for residents, maintenance staff and others requiring various combinations
of access to both private and shared areas of the building.

SOLUTION: The customer chose Yale Accentra, a cloud-based access control
system designed by ASSA ABLOY’s Shared Technologies group. ASSA ABLOY was
involved with the building project from the outset and provided the door
opening solutions to utilize the platform.

Yale Accentra allows system administrators to manage access for residents,

guests or staff easily and securely anytime, anywhere and from any internet-
enabled device.

The solution is ideal for multi-person housing because access to both

residential and common areas is managed by one system. This allows residents
to access private and shared areas and permits delivery companies or main-
tenance people to enter specific parts of the building.

ASSA ABLOY ANNUAL REPORT 2017

AUDITOR’S REPORT 103

The ASSA ABLOY share

Share price trend
Once again, 2017 was a volatile year for the Stockholm Stock
Exchange. A strong first half with price increases of around
11 percent was followed by a weak summer and fall with
both upswings and downturns. The index for full-year 2017
ended at an increase of 6.4 percent, despite the weak con-
clusion to the year. ASSA ABLOY’s Series B share increased
slightly from the 2016 closing price of SEK 169.10 to the
2017 closing price of SEK 170.40. The upswing was 0.8 per-
cent. The highest closing price during the year of SEK 197.10
was recorded on 9 May 2017 and the lowest of SEK 163.80
was recorded on 23 January 2017.

At year-end, market capitalization amounted to
SEK 189,276 M (187,832), 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 1,698 million shares (1,859) in 2017,
equivalent to a turnover rate of 161 percent (167). Turnover
of the Series B share on Nasdaq Stockholm amounted to
583 million shares (564), equivalent to a turnover rate of
55 percent (51).

The trend of a slight decline in turnover for trading on
Nasdaq Stockholm continued in 2017. Over the past few
years, turnover on Nasdaq Stockholm has gradually declined
from 78 percent in 2012 to 63 percent in 2017. The average
turnover rate on Nasdaq Stockholm fell in 2017 to 63 per-
cent (67). Even among the most frequently traded shares the
average turnover rate dropped; the average turnover rate
was 65 percent (70) on the Large Cap list in 2017.

Since the implementation of the EU’s Markets in Financial

Instruments Directive (MiFID) in late 2007 the structure of
equity trading in Europe has totally changed. Share trading
now takes place on both regulated markets and other trad-
ing platforms, and has thus become more fragmented.
Consequently, an ever-increasing proportion of trading in
shares in Swedish companies now takes place on markets
other than Nasdaq Stockholm. In 2017 the ASSA ABLOY
share was traded on more than ten different markets, with
trading on Nasdaq Stockholm accounting for only around
30 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 2008–20171

DIVIDEND PER SHARE 2008–2017

SEK

300

250

200

150

100

No. of shares traded, thousands

600,000

500,000

400,000

300,000

200,000

100,000

SEK

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

ASSA ABLOY B
ASSA ABLOY B, total return

OMX Stockholm

No. of shares traded, thousands (incl. after hours)
Source: Fidessa and SIX

SIX Return Index

2017 proposed dividend

SHARE PRICE AND TURNOVER 2017

SEK

220

200

180

160

140

120

100

No. of shares traded, thousands

200,000

150,000

100,000

50,000

ASSA ABLOY B

OMX Stockholm

No. of shares traded, thousands (incl. after hours)
Source: Fidessa and SIX

1 Comparatives have been recalculated for all historical periods prior to

2015 reflecting the stock split (3:1) in 2015.

MARKETS FOR THE SHARE1

No. of shares traded, millions

2,000

1,500

1,000

500

Cboe BXE, CXE
Stockholm
London
Turquoise

Boat
Others

Source: Fidessa

104

THE ASSA ABLOY SHARE

ASSA ABLOY ANNUAL REPORT 2017

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

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

2015

5.79
2.17
1.6
37.4
138.27
139.17
105.63
32.50
1,112.6

6.93
2.65
1.5
38.2
178.00
189.00
135.00
37.43
1,112.6

2016
7.092
3.00
1.8
42.3
169.10
190.10
148.40
42.51
1,112.6

2017

7.77
3.303
1.9
42.5
170.40
197.10
163.80
45.60
1,112.6

1 Adjustments made for new issues and stock split (3:1) in 2015 for all historical

periods prior to 2015.

4 Dividend as percentage of share price at year-end.
5 Dividend as percentage of earnings per share after tax and dilution, excluding

2 Excluding items affecting comparability 2008, 2009, 2011, 2013 and 2016.
3 Dividend proposed by the Board of Directors.

items affecting comparability.

6 After full dilution.

Ownership structure
The number of shareholders at the end of 2017 was 33,811
(27,638) and the ten largest shareholders accounted for 40.3
percent (39.5) of the share capital and 59.3 percent (58.7) of
the votes. Shareholders with more than 50,000 shares, a total

of 422 shareholders, accounted for 97 percent (97) of the
share capital and 98 percent (98) of the votes.

Investors outside Sweden owned 66.6 percent (64.0) of
the share capital and accounted for 45.4 percent (43.7) of
the votes, and were mainly in the US and the UK.

ASSA ABLOY’s ten largest shareholders
Based on the share register at 30 December 2017.

Shareholders

Series A shares

Series B shares

Total number of shares Share capital1, %

Votes1, %

Latour
Melker Schörling AB
Capital Group
BlackRock
Government of Singapore
Fidelity
Swedbank Robur Funds
Vanguard
Norges Bank
Alecta Pension Insurance
Other shareholders
Total number

41,595,729
15,930,240

57,525,969

63,900,000
26,882,608
58,269,593
53,719,714
46,309,071
34,324,352
31,882,299
26,081,393
25,361,931
24,495,000
663,824,404
1,055,050,365

105,495,729
42,812,848
58,269,593
53,719,714
46,309,071
34,324,352
31,882,299
26,081,393
25,361,931
24,495,000
663,824,404
1,112,576,334

9.5
3.9
5.2
4.8
4.2
3.1
2.9
2.3
2.3
2.2
59.6
100.0

29.5
11.4
3.6
3.3
2.8
2.1
2.0
1.6
1.6
1.5
40.6
100.0

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, 5.2%

Legend

BlackRock, 4.8%

Government of Singapore, 4.2%

Melker Schörling AB, 3.9%

Legend

Legend
Fidelity, 3.1%
Legend

Swedbank Robur Funds, 2.9%

Melker Schörling AB, 11.4%

Latour, 29.5%

Legend

Capital Group, 3.6%

Legend

BlackRock, 3.3%

Legend

Government of Singapore, 2.8%

Legend
Fidelity, 2.1%
Legend

Swedbank Robur Funds, 2.0%

Vanguard, 2.3%

Norges Bank, 2.3%

Alecta Pension Insurance, 2.2%

Other shareholders, 59.6%

Vanguard, 1.6%

Norges Bank, 1.6%

Alecta Pension Insurance, 1.5%

Other shareholders, 40.6%

Share capital and voting rights
The share capital amounted to SEK 370,858,778 at year-end
2017, 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 Series B shares. The aim

has been, among other things, to secure the company’s
undertakings in connection with its long-term incentive
programs (LTI).

The 2017 Annual General Meeting authorized the Board

of Directors to acquire, 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) 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.
No shares were repurchased in 2017.

ASSA ABLOY ANNUAL REPORT 2017

THE ASSA ABLOY SHARE 105

The ASSA ABLOY share

Dividend and dividend policy
The objective of the dividend policy is that, in the long term,
the dividend should be equivalent to 33–50 percent of
income after standard tax, but always taking into account
ASSA ABLOY’s long-term financing requirements.

The Board of Directors and the President and CEO pro-
pose that the dividend to shareholders be raised by 10 per-
cent to SEK 3.30 per share (3.00) for the 2017 financial year,
equivalent to a dividend yield on the Series B share of 1.9
percent (1.8).

Changes in share capital

In 2017 the total return on the ASSA ABLOY share, defined as
market price movement plus reinvested dividends, was 2.3
percent, compared with the reinvested SIX Return Index,
which was up 9.5 percent. Over the ten-year period 2007–
2017, the total return on ASSA ABLOY’s Series B share was
599 percent, compared with a 127 percent rise in the SIX
Return Index and a 51 percent rise in OMX Stockholm.

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

Series A
shares

Series C

shares Series B shares

Share capital, SEK*

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

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

20,000

1,428,550
1,714,260

2,000,000

50,417,555
60,501,066
60,501,066
66,541,706
66,885,571
67,179,562

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

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

Name

Telephone

ABG Sundal Collier
Bank of America Merrill Lynch
Barclays
Berenberg Bank
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
Morningstar
Nordea
Oddo Securities
Pareto Securities
Redburn Partners
SEB
Société Général
UBS

Anders Idborg
Mark Troman
Lars Brorson
Rizk Maidi
Johan Wettergren
Andre Kukhnin
Max Frydén
Gael de-Bray
Mattias Holmberg
James Taylor
Daniela Costa
Peder Frölén
Michael Hagmann
Jeff Kessler
Peter Reilly
Andreas Willi
Markus Almerud
Daniel Cunliffe
Lucie A. Carrier
Denise Molina
Andreas Koski
Delphine Brault
Anders Roslund
James Moore
Fredrik Agardh
Alasdair Leslie
Guillermo Peigneux-Lojo

+46 8 5662 9674
+44 207 996 4194
+44 203 134 1156
+44 203 207 7806
+46 8 5886 8743
+44 207 888 0350
+46 8 5688 0523
+33 1 4495 6562
+46 8 473 4814
+44 203 430 8663
+44 207 774 8354
+46 8 701 1251
+44 207 991 2405
+1 212 351 9701
+44 207 029 8632
+44 207 134 4569
+46 8 723 5163
+44 203 100 2086
+44 207 677 0884
+31 20 797 0010
+44 77698 44597
+33 144 518 325
+46 70 0761586
+44 207 000 2135
+46 8 522 298 06
+44 207 762 4952
+46 8 453 73 08

anders.idborg@abgsc.se
mark.troman@baml.com
lars.brorson@barclays.com
rizk.maidi@berenberg.com
johan.wettergren@carnegie.se
andre.kukhnin@credit-suisse.com
max.fryden@danskebank.se
gael.de-bray@db.com
mattias.holmberg@dnb.se
james.taylor@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
daniel.cunliffe@liberum.com
lucie.carrier@morganstanley.com
denise.molina@morningstar.com
andreas.koski@nordea.com
dbrault@oddo.fr
anders.roslund@paretosec.com
james.moore@redburn.com
fredrik.agardh@seb.se
alasdair.leslie@sgcib.com
guillermo.peigneux-lojo@ubs.com

106

THE ASSA ABLOY SHARE

ASSA ABLOY ANNUAL REPORT 2017

Information for shareholders

Annual General Meeting
The Annual General Meeting of ASSA ABLOY AB will be held
at Moderna Museet (Museum of Modern Art), Skepps-
holmen, Stockholm at 3.30 pm on Thursday, 26 April 2018.
Shareholders wishing to attend the Annual General Meeting
should:
• Be recorded in the share register kept by Euroclear

Sweden AB by Friday, 20 April 2018.

• Notify ASSA ABLOY AB of their intent to attend no later

than Friday, 20 April 2018.

Notice of attendance
• Website
www.assaabloy.com
• Telephone +46 (0)8 506 485 14
• Address

ASSA ABLOY AB, “Annual General Meeting
2018”, c/o Euroclear Sweden AB
Box 191, SE-101 23 Stockholm, Sweden

The notice of attendance should state:
• Name
• Personal or corporate identity number
• Address and daytime telephone number
• Number of shares
• Any assistants attending

Nomination Committee
The Nomination Committee has the task of preparing and
recommending, on behalf of the shareholders, proposals for
the election of the Chairman of the Annual General Meeting,
the election of the Chairman, the Vice Chairman and other
members of the Board of Directors, the appointment of the
auditor, resolution on fees to the auditor and to the Board of
Directors (including division between the Chairman, Vice
Chairman and other members of the Board of Directors, as
well as remuneration for committee work), as well as the
appointment of the Nomination Committee and determina-
tion of the assignment of the Nomination Committee.

The Nomination Committee prior to the 2018 Annual
General Meeting comprises Carl Douglas (Investment AB
Latour), Mikael Ekdahl (Melker Schörling AB), Liselott Ledin
(Alecta), Marianne Nilsson (Swedbank Robur funds) and
Anders Oscarsson (AMF and AMF funds). Carl Douglas is
Chairman of the Nomination Committee.

Dividend
Monday, 30 April 2018 has been proposed as the record date
for dividends. If the Annual General Meeting approves the
proposal, dividend is expected to be distributed by Euroclear
Sweden AB on Friday, 4 May 2018.

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.

Nominee-registered shares
In addition of giving notice to attend, shareholders whose
shares are nominee-registered must be temporarily
r egistered 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
Friday, 20 April 2018, and shareholders should contact their
bank or nominee well in advance of this date.

Further information
Hedvig Wennerholm
Telephone +46 (0)8 506 485 51
hedvig.wennerholm@assaabloy.com

Reports can be ordered from
ASSA ABLOY AB
• Website www.assaabloy.com
• Telephone +46 (0)8 506 485 00
info@assaabloy.com
• Email
ASSA ABLOY AB
• Mail
Box 70340
SE-107 23 Stockholm

Financial reporting
First quarter: 26 April 2018
Second quarter: 18 July 2018
Third quarter: 19 October 2018
Fourth quarter and Year-end report: February 2019
Annual Report 2018: March 2019

ASSA ABLOY ANNUAL REPORT 2017

INFORMATION FOR SHAREHOLDERS 107

The total door solution
ASSA ABLOY’s security solutions
are installed all over the world

ASSA ABLOY is the global leader in door opening solutions and offers
mechanical and electromechanical locks, digital door locks, entrance
automation, hotel security and secure identity solutions. The Group’s
products are important for people all over the world – in schools, hospitals,
offices, stadiums, shops, museums, hotels, airports and private homes.

Multi-family buildings

Complete solutions for multi-famility buildings, ranging from mechanical locks to sophisticated,
customized access control systems. Digital door locks can easily be opened with a code or a smart

phone app. The app enables controlling the lock remotely to let in visitors, and receiving notifications
when children come home. In the future, online locks make it possible to safely and securely open the
door for service and deliveries directly into the home.

Garage doors, bars and gates are secure and easy to connect to the buildings access
control system.

Hospitality

Airports

Bollards and other safety devices pro-
tect pedestrians from motor vehicles.

High-security fences and gates pro-
tect against unauthorized entry at

The various models can be permanently
installed, portable or retractable, and they can
be integrated in security and alarm systems.

the airport. The doors can be integrated with
security systems, sensors and surveillance
cameras.

Revolving doors create spacious and
welcoming entrances with room for

luggage carts or wheelchairs. Revolving doors
are ideal when climate control is a
priority. Advanced sensor
technology ensures
functionality in the door’s
features, while con-
veniently controlling safe
traffic flows and providing
superior separation of indoor
and outdoor climates. Side doors
are added for increased accessibility and rapid
evacuation.

Automatic sliding doors are particu-
larly suitable for entrances and

indoor areas with large pedestrian flows.
Automatic sliding doors allow you to enter
a building without manually open doors –
and conveniently pass through even if
you are pushing a shopping or carrying
suitcases.

With Mobile Access for hotels guests
can use a smart phone to directly

book a room. Secure Seos technology then
sends a digital key directly to the guest’s
mobile phone, enabling the guest to go
directly to the room and unlock the door.
The solution is connected to the hotel’s
booking and security systems, and the key
will be deleted at check-out.

Complete solutions for hotel rooms,
including door solution, safes and

energy management systems.

Doors, door closers, exit devices
and masterkey systems.

Loading stations provide effi-
cient and safe handling of
goods. Levelers, shelters, loading
buildings and other accessories make
loading and unloading easier and
more energy efficient. ASSA ABLOY
also has a complete offering for ser-
vice, maintenance and modernization
of automatic entrances and docks.

The boarding process places
high demands on entrance
automation and security control. ASSA
ABLOY has total door solutions to
ensure that the right person opens and
closes doors, and that fire safety and
climate control are maintained.

Security-rated doors and
frames. Electromechanical locks

and other hardware work together
with physical access control systems,
including readers and controllers to
manage access.

Identity solutions with related
technology and services such as

electronic passports.

High-performance doors are
ideal for a variety of applications

and offer excellent wind load resistance.
The unique design essentially provides a
perfect seal, which means that the doors
are airtight and protect the environ-
ment against drafts, moisture and dirt.
High opening and closing speeds
guarantee maximum efficiency and help
you save energy.

Total door opening solutions for
retail premises.

Medicine cabinet with electronic
locks connected to the access

control system to ensure proper access
and opening history.

Security room - mechanical
and electromechanical key

systems, software and solutions for
access control. System to integrate
all airport control systems for e.g.
authorization, logistics, personnel,
etc. Solutions for secure issuance
and management of identities for
access to various systems with
specific security requirements, such
as staff ID cards. Positioning solu-
tions inform the building security
system about who is at a certain
place to ensure that no unauthor-
ized individuals, temporary contrac-
tors, etc., have access to the wrong
part of the building. At the same
time, the staff can keep track of
security personnel to see where
they are located in the building.

We are the global leader in
total door opening solutions

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
Reg. No. 556059-3575

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 2018.