ASSA ABLOY Annual Report 2018

FY2018 Annual Report · ASSA ABLOY

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Annual Report
2018

Our purpose is to every day
help people feel safe, secure and
experience a more open world

Contents

P 2

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

Divisions
ASSA ABLOY’s divisions
Opening Solutions EMEA
Opening Solutions Americas
Opening Solutions Asia Pacific
Global Technologies
Entrance Systems

Sustainability report
Value-creating model
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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The formal audited part of this document is on pages 42–102.

Innovation and product development
drive growth
ASSA ABLOY showed strong growth driven by new innovative products.

P 7

Value creation strategy
The Group’s overall strategic direction is to lead the trend toward increased
security with a product-driven offering centered around the customer.

P 28

Developments in the divisions 2018
Most divisions showed continued good organic growth with a strong
development for electromechanical solutions.

P 40

Sustainable development
ASSA ABLOY’s sustainability initiatives continued to make good progress in
2018, with advances in line with the five-year sustainability plan.

P 42

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

ASSA ABLOY in brief

#1 SEK 84 billion 48,500 employees

Who are we?

For whom?

The ASSA ABLOY Group is the global leader in access
solutions. The offering covers products and services
related to openings, such as locks, doors, gates and
entrance automation solutions. The Group also has
expertise in controlling identities, with keys, cards, tags,
mobile and biometric identity verification systems as
parts of the offering.

The ASSA ABLOY Group provides access solutions,
trusted identities, entrance automation and service for
institutional and commercial customers, as well as for
the residential market. The Group has the largest
installed base of products in the world, with a large
share of sales in the stable aftermarket.

What do we do?

Where are we?

Every day, ASSA ABLOY helps billions of people experi-
ence a more open world through innovations that
enable safe, secure and convenient access to physical
and digital places.

The Group has leading positions in most of Europe,
North and South America, Asia and Oceania.

Share of Group sales by region 2018

North America
South America
Europe
Asia
Oceania
Africa

42% (40)
(3)
38% (38)
13% (14)
(4)
(1)

3%
1%

Our divisions

Our brands

The regional divisions manufacture and sell mechanical
and electromechanical locks, digital door locks, cylin-
ders 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.

The ASSA ABLOY Group has considerable value in its
well-known brands. ASSA ABLOY is the Group’s master
brand and is often combined with local brands that are
well established in the local markets. Global brands offer
additional markets that complement ASSA ABLOY’s
main segments.

SALES BY DIVISION

OPERATING INCOME BY DIVISION

EMEA, 24% (23)
Legend

Americas, 23% (23)

Legend

Asia Pacific, 11% (11)

Legend

Global Technologies, 14% (14)

Legend

Entrance Systems, 28% (29)

Legend

EMEA, 24% (24)
Legend

Americas, 29% (30)

Legend

Asia Pacific, 4% (7)

Legend

Global Technologies, 18% (15)

Legend

Entrance Systems, 25% (24)

Legend

Financials in brief 2018

• Sales increased 10 percent during the year to SEK 84,048 M
(76,137) driven by continued strong growth for electro-
mechanical products.

• 19 acquisitions were completed during the year, con tributing

to net acquired growth of 2 percent for the year.

• Continued good earnings and strong cash flow achieved

during the year. Operating margin excluding items affecting
comparability was 15.4 percent (16.2).

• Investments in product development continued at a high pace.
About 27 percent (28) of sales was generated by products
launched during the last three years.

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 1
Operating margin, % 1
Income before tax (EBT), SEK M 1
Operating cash flow, SEK M2
Return on capital employed, % 1

2017

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

2018

84,048
5
2
3
12,909
15.4
12,110
11,357
16.2

Change

10%

4%
4%

Data per share

2017

2018

Change

Earnings per share after tax and dilution
(EPS), SEK/share 1
Equity per share diluted, SEK/share
Dividend, SEK/share
Weighted average number of shares,
diluted, thousands

1 Excluding impairment of goodwill and other
intangible assets of SEK 5,595 M and restruc-
turing costs of SEK 1,218 M in 2018.

7.77
45.60
3.30

8.09
46.71
3.503

4%
2%
6%

1,110,776

2 Excluding restructuring payments.
3 As proposed by the Board of Directors.

SALES AND OPERATING INCOME (EBIT)

Sales

Operating income (EBIT)

Sales, SEK M

90,000

75,000

60,000

45,000

30,000

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 IN EMERGING MARKETS

SEK

2
09

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 2018

STATEMENT BY THE PRESIDENT AND CEO

Global leader in access solutions

2018 was once again a good year for ASSA ABLOY. We strengthened our position as the market
leader with strong growth for electromechanical products, new smart and sustainable access
solutions and acquisition of 19 companies. We continued our operational efficiency initiatives and
accelerated our innovation efforts during the year. Sales increased to SEK 84,048 M, with organic
growth of 5 percent driven by strong growth in Americas and Global Technologies. Operating
income increased to SEK 13,309 M1, the operating margin was 15.8 percent1 and cash flow from
operation reached SEK 11,357 M.

Financial overview
Sales growth accelerated and total sales grew by 10 per-
cent versus last year, including 5 percent organic growth,
2 percent net growth through acquisitions and divest-
ments (4 percent gross) and 3 percent from currency
fluctuations. The growth was particularly strong in
Americas and Global Technologies and within electro-
mechanical and smart locks, but was moderate in Asia
Pacific due to the challenging situation in China.

There are significant growth opportunities in our

industry, which is why, during the year, we reaffirmed that
our target to grow over a business cycle by 5 percent
organically and by 5 percent through acquisitions
remains unchanged.

The technology shift from mechanical to electro-
mechanical and smart locks drives strong demand both

in advanced mature markets as well as in many emerging
markets. Digital door opening solutions have become
mainstream in the commercial segment, but the
mechanical locks business remains an important part of
our overall business and a significant cash generator in
which the Group continues to invest. We completed
19 acquisitions during the year, mainly strengthening
and expanding our core, but the acquisition of Cross-
match also reinforced our position in biometrics and
extended HID Global’s market leadership in the trusted
identity solutions.

Our operating income for 2018 increased by 8 percent
to SEK 13,309 M1, and the operating margin was 15.8 per-
cent1. Operating cash flow was SEK 11,357 M, supported
by constant focus on operational efficiency. Good profit-
ability requires good cost control. Our restructuring

1 Excluding impairment of goodwill, other intangible assets and write-down of

operating assets in China of SEK 5,995 M and restructuring costs of SEK 1,218 M.

ASSA ABLOY ANNUAL REPORT 2018

STATEMENT BY THE PRESIDENT AND CEO

program continued to deliver according to plan, as did
the Group-wide programs for more efficient processes at
every stage in the value chain from innovation, purchas-
ing, across production and administration to sales and
service. But price increases and operational efficiency
measures only partly compensated for the strong mate-
rial price increases in general and steel price increases in
particular. They had a dilutive effect on our margins,
mainly in the first part of the year. The target of an operat-
ing margin of 16–17 per cent on average over a business
cycle remains unchanged.

The situation in China remained challenging and
resulted in a required write-down of SEK 5,595 M for
impairment of goodwill and other intangible assets. We
are committed to China and are now implementing a
new comprehensive strategy around three consolidated
brands and a new key account organization. During 2018
we also put a new leadership in place and I look forward
to working closely with them in 2019.

Global leader in access solutions
Our purpose is to help people feel safe, secure and expe-
rience a more open world. Door openings, trusted identi-
ties and entrance automation are important in a world
with increasing needs for safe, secure and convenient
movement of people and things. Our divisions address
these areas with a specialized and focused approach, as
well as combining them into joint systems and solutions.
By combining them, we create access solutions address-
ing specific end user needs across a large breadth of
applications and business verticals.

Market growth through customer relevance, product
leadership, cost-efficiency and evolution through people
form the cornerstones of our strategy to maintain our
leadership in access solutions. During 2018 we contin-
ued to reinforce our customer focus by allocating more
resources to marketing and sales, and by improving our
service to customers. About 75 percent of our sales is
related to the commercial and institutional customer
segment, while the residential segment represents 25
percent of our sales. We have identified services, includ-
ing field services and Software as a Service, and the shift
from mechanical to electromechanical and smart
solutions as key drivers for accelerating our profitable
growth.

We will also look for more opportunities to grow our
core business in adjacent areas. During the year we
changed the name of ASSA ABLOY Hospitality to ASSA
ABLOY Global Solutions. This reflects ASSA ABLOY Global
Solutions’ broadened scope of its business, focusing on
more specific verticals and its role as service provider,
which is reflected in strong services growth.

Security, including locks, is considered by end-users to

be one of the more important parts of smart home eco-
systems. We have a strong position in the residential
smart lock market and our trusted brands enable us to be
a significant contributor to the strong development in
this segment. To maintain our leadership in this field,
we established a global organization to gain speed and
realize synergies between our divisions.

There are several growth trends that create strong
underlying demand. Besides urbanization, digitization
and sustainability, the need for safe, secure and conven-
ient solutions, drives demand for the Group’s customer
offerings. Sustainable access solutions add customer
value as they enable customers to improve cost-effi-
ciency, reduce energy consumption and lower the envi-
ronmental impact of their operations significantly. The
number of new sustainable building projects continues
to increase, driving higher end solutions. ASSA ABLOY is
leading in offering efficient, sustainable solutions ena-
bling us to win high profile and important projects.

Innovation as an enabler
In 2018 ASSA ABLOY was for the fourth time ranked on
Forbes’ list of the world’s 100 most innovative compa-
nies. Product innovation is an enabler, driving our organic
growth and supporting our margin ambition. In 2018 we
invested SEK 2,893 M in R&D and we have some 2,400
R&D engineers. The main driver for innovation and prod-
uct development is the ongoing rapid technological evo-
lution. We constantly update our existing product and
solutions offering and complement this with break-
through innovations. Every new product and solution
must add additional customer benefits at a reduced
overall cost.

In 2018 sales of new products launched during the
last three years accounted for 27 percent of total sales,
or above the target of 25 percent. In the EMEA division,
we launched a new mechanical door closer range with

“Market growth through customer relevance,
product leadership, cost-efficiency and
evolution through people form the
cornerstones of our strategy.”

ASSA ABLOY ANNUAL REPORT 2018

STATEMENT BY THE PRESIDENT AND CEO

ASSA ABLOY’s Executive Team.

Standing from the left:
Erik Pieder, Chief Financial
Officer, Christophe Sut, Head of
the ASSA ABLOY Global
solutions business unit, Maria
Romberg Ewerth, Chief Human
Resource Officer, Lucas Boselli,
Head of Americas division,
Mogens Jensen, Head of
Entrance Systems division,
Anders Maltesen, Head of Asia
Pacific division and Chris Bone,
Chief Technology Officer.

Sitting from the left:
Neil Vann, Head of EMEA
division, Stefan Widing, Head
of the HID Global business unit
and Nico Delvaux, President
and CEO.

“During the year we launched our core values:
Empowerment, Innovation and Integrity.”

a distinctive and contemporary design that won the
2018 German Design Council Iconic Awards. EMEA also
launched Pulse, an innovative energy harvesting key
solution making batteries for smart locks obsolete. In
the Americas division, Yale strengthened its position
and developed for, and in collaboration with, Nest, a
smart lock that brings a new level of security and con-
venience to the market. During the year we also linked
the Yale smart locks to the August cloud-based software,
which means that we can now use the advanced August
Software for smart residential Yale applications on a
global level. In Global Technologies, HID Global
demonstrated its product leadership in combating
ticket fraud by providing four million smart tickets for
the FIFA World Cup.

Our innovation capacity is reflected not only in our
products and solutions but also in our processes. Our
ambition is to increase efficiency in all parts of the value
chain by digitization. We constantly update our software
solutions and processes and for example our e-procure-
ment ratio is increasing steadily. Our operations are
becoming more seamless and our sales via digital chan-
nels are also increasing significantly.

People make the difference
Finally, a few important words on values, purpose and
beliefs. During the year we launched our core values:
Empowerment, Innovation and Integrity. The Group
mission is to build sustainable shareholder value, but
also to be an attractive company to our employees and
to conduct business in an ethical, compliant and sustain-
able way. For me, the employees and the competence
they possess are our most important asset. It is our
employees who bring everything together and I would
like to take this opportunity to thank all our employees
for the effort they have invested in ASSA ABLOY in 2018,
for making the difference, and for making my first year
such a remarkable one.

Thank you!

Stockholm, 4 February 2019

Nico Delvaux
President and CEO

ASSA ABLOY ANNUAL REPORT 2018

Goals and outcomes

Goal

Outcome

Growth and
profitability

10%

annual growth through a
combination of organic and
acquired growth

16–17%

operating margin

Growth through
customer
relevance

Group sales in 2018:
North America 42%,
South America 3%, Europe 38%
Asia Pacific 16%, Africa 1%

Product
leadership

25%

of sales from new
products

Cost-efficiency

–27%

reduction in
number of suppliers

People

Environment

30%

women in
management
positions

–20%

greenhouse
gas emissions

Social KPI

–55%

injury rate

SEK M
100,000

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
12,000

10,000

8,000

6,000

4,000

2,000

%
25

Tons/SEK M
10

Injury rate
8

GOALS AND OuTCOMES

Average annual growth over the past ten years has
been over 9 percent. The Group’s growth in 2018
was 10 percent, including 5 percent organic growth
and 2 percent from acquisitions.

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

The Group is active in over 70 countries, both in
mature and emerging markets. This enables ASSA
ABLOY to stay close to its customers and customize
its solutions and grow sales.

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 2018 the share was
27 percent.

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

The target is to have 30 percent of management
positions held by women by 2020. In 2018 the
share was 24 percent.

The target is to reduce the intensity of greenhouse
gas emissions related to the Group’s energy
consumption by 20 percent from 2015 to 2020.
In 2018 the reduction was 6 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 2018 the injury rate
decreased by 11 percent and totaled 3.7 injuries
per million hours worked. Since 2015 the injury
rate has declined by 45 percent.

ASSA ABLOY ANNUAL REPORT 2018

ASSA ABLOY’s brands

ASSA ABLOY has considerable value in its well-known
brands. ASSA ABLOY is the Group’s master brand and is
increasingly becoming the leading product brand for
commercial door solutions. Approximately 70 percent
of Group sales are under the ASSA ABLOY brand or a

combination of ASSA ABLOY and local brands. The local
brands are well established in the local markets and play
an important role in creating trust, loyalty, value and
differentiation.

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,
to further drive sales.

ASSA ABLOY ANNUAL REPORT 2018

VALuE CREATION STRATEGY

Value creation strategy

The Group’s strategic direction is to lead the trend towards the world’s most innovative
and well-designed access solutions. Our purpose is to help people feel safe, secure and
experience a more open world. Our core values, beliefs and strategic objectives help
guide our way.

Purpose

Financial targets

Strategic objectives

To every day help people feel safe,
secure and experience a more
open world

Vision

To be the leader in providing innovative
access solutions that help people feel
safe and secure so that they can experi-
ence a more open world

Mission

• Building sustainable shareholder

value

• Providing added value to our

customers, partners and end-users
• Being a world leading organization

where people succeed

• Conducting business in an ethical,
compliant and sustainable way

Growth

5%
organic

5%
acquired

=
10%
total

EBIT

Growth through
customer relevance

Product leadership
through innovation

Cost-efficiency in
everything we do

16–17%

Evolution
through people

Core values
& beliefs

Empowerment

We have trust
in people

Innovation

We have the
courage to change

Integrity

We stand up for
what’s right

ASSA ABLOY ANNUAL REPORT 2018

MARKET GROWTH

Value creation strategy #1
Growth through customer relevance

Market presence creates opportunities and gives possibilities to
increase customer value. A world-leading market presence is achieved
by expanding into new markets and segments organically and through
acquisitions. ASSA ABLOY has a unique global reach with brands
represented in all major regions, in both mature and emerging markets
worldwide, and with leading positions in much of Europe and North
America, Asia and the Pacific. Customer relevance is based on local
presence, the strength of the brand portfolio and efficient segmentation
of sales channels – while addressing the demands for safety, security,
convenience and sustainability.

No. 1

Global leader in
access solutions.

57%

23 percent of sales are in
emerging markets, a five-
fold increase in ten years.

The percentage of electro mechanical products
and entrance automation has increased from
34 percent to 57 percent of sales in ten years.

ASSA ABLOY ANNUAL REPORT 2018

MARKET GROWTH

Global market leader with
growing demand

Demand for security, electromechanical, digital and smart access solutions, as well as for
sustainable products, continues to increase. The combination of global growth trends, such as
urbanization and digitization, and new technology, has resulted in stable and growing demand for
ASSA ABLOY’s access solutions and form good prerequisites for underlying profitable growth. The
Group has a unique global market reach with its own presence in over 70 countries.

Institutional and commercial markets – service
offering and total access solutions
ASSA ABLOY’s large installed base drives organic growth.
Some 75 percent of ASSA ABLOY’s total sales derive from
the institutional and commercial markets. Buildings
related to education, health care, public administration,
private offices, shopping centers, stores and warehouses
– are all environments where ASSA ABLOY’s access solu-
tions can be found. These projects are often large and
complex. This provides ASSA ABLOY with an advantage as
a supplier of total access solutions.

Customers are competent and demanding and the
Group is in dialogue with many different stakeholders in
the value chain. The Group’s focused and segmented
sales forces develop products for the multifaceted cus-
tomer needs, while distribution and installation are
largely handled by channel partners, installers, system
integrators and locksmiths.

Residential market – smart residential in focus
Residential sales account for about 25 percent of total
sales. The increased demand for security and the meg-
atrends of urbanization, digitization and increased
wealth drive demand for secure access solutions as well
as for smart door locks. ASSA ABLOY is leading the devel-
opment of smart door locks for the residential market,
where demand is very strong.

There is also a demand for professional advice and
installation assistance. Depending on the geographic
market, ASSA ABLOY cooperates with door and window
manufacturers or specialist distribution channels such as

home improvement stores and locksmiths – and is often
developing residential products in partnership with
suppliers of other smart residential products for the
connected home.

Aftermarket – a significant contributor to sales
For ASSA ABLOY the aftermarket accounts for two thirds
of total sales and is therefore a significant contributor to
sales both in the residential as well as in the institutional
and commercial markets. Renovations, remodeling and
additions, replacements and upgrades of existing door
opening installations as well as ongoing service provide
a stable demand, enabling the Group to capitalize on the
world’s largest installed base and its global market
presence. New service concepts, based on longer-term
contracts, including preventive maintenance and
modernization efforts, strengthen customer relation-
ships and provide further opportunities for the Group
going forward.

The increased demand for electromechanical, digital
and smart solutions also drives growth in the aftermarket.
These products have shorter life spans and are more
frequently replaced, supplemented and upgraded than
mechanical solutions. The products are supported by
software platforms which enable customers to con-
stantly upgrade their security with more and new
features. While contributing to stronger customer
relationships, connected products, service products and
subscription services will also contribute to an increase
in recurring revenues.

Breakdown of ASSA ABLOY’s sales

Working and shopping
Institutional and
commercial market
– share of sales

Living
Private customers and
residential market
– share of sales

New construction
New buildings
– share of sales

Aftermarket
Renovations, remodeling and additions, replacements
and upgrades of existing access solutions, as well as
ongoing service – share of sales

75%

25%

33%

67%

ASSA ABLOY ANNUAL REPORT 2018

MARKET GROWTH

Strategies for a world-leading global market presence

ASSA ABLOY’s strategies for a world-leading global market presence include leveraging the strength
of its brand portfolio, increasing growth in the core business and expanding into new markets and
segments. The strategies are based on constantly increasing customer relevance, through effective
market and customer segmentation, specification, a strong brand portfolio and acquisitions.

Customer relevance through segmentation
ASSA ABLOY aims to build relationships, generate
demand and achieve the industry’s best understanding
of customer needs, and to be an expert in total access
solutions in each segment. This increases customer rele-
vance and allows ASSA ABLOY to offer solutions that
meet customer requirements for safety, security, conven-
ience and sustainability. The solutions need to meet local
requirements, rules and standards, as well as the need for
integration into new or existing security systems.

To reach the different segments, ASSA ABLOY’s market

organization works closely with architects, security con-
sultants, large end users and distributors. A substantial
portion of ASSA ABLOY’s business processes are digitized
– including product information, design and configura-
tion and smart specification tools. The digitization of
business processes – including order management, logis-
tics and payments, and Seamless Flow – has also resulted
in a shift of resources from indirect sales to direct sales.

Growth through acquisitions
As an important part of its strategy, ASSA ABLOY’s ambi-
tion is to achieve 5 percent acquired growth per year. The
aim is to further increase its market presence, comple-
ment existing operations and increase its offering of elec-
tromechanical, digital and smart solutions. On average
the latest ten years acquisitions have contributed to an
annual growth of about 6 percent. In 2018, 19 acquisi-
tions were consolidated and 2 were divested. In 2018 the
Group’s acquired gross growth was 4 percent and the net
growth (acquisitions and divestments) was 2 percent
corresponding to a sales increase of SEK 1,793 M.

Leveraging the strength of the brand portfolio
The Group’s brand portfolio, which includes valuable,
leading and well-known brands, is also a reflection of the
acquisition strategy. To optimize the advantages of the
brand portfolio both locally and globally, the brands are
continuously consolidated in parallel with the market
and customer segmentation.

SALES BY PRODuCT GROuP

The Group sees fast-growing
demand for electromechanical
products, as well as electronic and
digital solutions. Since 2008 these
have sharply increased from 34
percent to 57 percent of Group
sales. Mechanical products con-
tinue to increase, but electrome-
chanical products are growing
considerably faster.

Mechanical locks, lock
systems and fittings, 26%

Entrance automation, 28%

Electromechanical and
electronic locks, 30%

Security doors and
hardware, 16%

ASSA ABLOY is the Group’s global master brand. The
master brand is often combined with individual brands
that are well established locally and adjusted to local
regulations and security standards. The ASSA ABLOY
brands account for roughly 70 percent of Group sales.

The global brands, which are all leaders in their respec-

tive market segments, represent another 20 percent of
Group sales: HID in secure identity and access manage-
ment, Yale in the residential market, and ABLOY in
high-security locks.

In addition, the Group has brands that are not associ-
ated with ASSA ABLOY. These brands, representing some
10 percent of Group sales, have leading expertise in
specialty products and service, and are important
complements to ASSA ABLOY’s market presence and
positioning. These brands are usually sold through
distributors and installers.

Sales processes with a stronger sales force
ASSA ABLOY’s ambition is to gradually move an increas-
ing amount of resources forward in the value chain to
strengthen the sales processes and the sales force and to
increase customer value. To constantly enhance cus-
tomer relevance in all dimensions, the initiative empha-
sizes streamlining the Group’s sales processes with
strong support in digital tools. Through its Commercial
Excellence team, ASSA ABLOY is developing and stream-
lining its processes for pricing, brand positioning, mar-
keting and sales. This involves branding and marketing to
e-commerce, developing value-based pricing models
and implementing digital tools such as CRM (customer
relationship management), BIM (building information
modeling) and architectural marketing systems. The aim
is to improve ASSA ABLOY’s commercial capabilities and
interactions with customers, thereby enhancing the cus-
tomers’ experience of doing business with ASSA ABLOY.

The Group has identified a number of sales sub-
processes that differ depending on if it is sales based on
specifications, sales to consumers or sales based on OEM
delivery. Although the sales processes in ASSA ABLOY’s
global organization also vary because of rules, norms and
traditions, the Group has developed a structured and effi-
cient approach to supply chain and sales management.
Knowledge and experience are shared in the Group
through Group-wide work groups for the various sales
channels – and the different sales approaches and tech-
niques are regularly analyzed, along with a large number
of customer transactions. Among other things this
approach improves the understanding of customer
needs and behaviors.

ASSA ABLOY ANNUAL REPORT 2018

MARKET GROWTH

Markets

The underlying demand for access solutions is based on global growth trends and a rapid
technology change. ASSA ABLOY is a global player with local presence in all major markets.
Although the Group’s ambition is to increase its market presence in emerging markets, mature
markets accounted for most of ASSA ABLOY’s total sales in 2018.

Global scale and local presence
The demand for access solutions varies between coun-
tries – depending on security needs, climate, develop-
ment level, regulations and standards. One of ASSA
ABLOY’s major competitive advantages is that it is a
global player with local presence in all major markets and
with operations in over 70 countries. The globalization
trend is reflected in the increasing demand from global
companies for ASSA ABLOY’s Group-wide smart and
cost-effective solutions.

Rapid technology development drives demand
Customer demand is increasingly shifting from mechani-
cal to electromechanical solutions, driven by new tech-
nology and the development of more advanced electro-
mechanical and smart solutions. In 2018, the sale of elec-
tromechanical solutions increased by 20 percent. Digiti-
zation drives customer behavior and smart technology is
becoming an integral part of customers’ everyday life.
Besides an increasing share of electromechanical, digital
and smart access solutions, the aftermarket for upgrades
as well as recurring sales is expected to grow – driven by
software-based solutions and a continuous demand for
maintenance, training and safety.

Large potential in emerging markets
The share of sales derived from emerging market cus-
tomers has over the last ten years increased from 16 per-
cent to 23 percent in 2018. Demand for mechanical locks
is somewhat stronger in emerging markets than in
mature markets; however, electromechanical access
solutions are driven by urbanization and a stronger econ-
omy. This is evident both in the commercial segment and
the residential market, where the potential of connectiv-
ity drives demand for connected locks and smart home
security.

With a large population, Asia Pacific has the greatest
growth potential going forward as well. The vast Chinese
market, where the Group is one of the largest suppliers of
access solutions, remains important, despite recent mar-
ket challenges.

Fragmented competition – continued
consolidation
ASSA ABLOY is considerably larger than its closest com-
petitors, but the market remains fragmented. However,
consolidation is underway in mature markets and has
advanced farthest in North America, followed by Europe,
with ASSA ABLOY as a driving force. In the emerging
markets, the markets are still in their early stages and
consolidation activities have not yet taken off.

Group sales trend
2018 by region in
local currencies

North America
South America
Europe
Asia
Oceania
Africa

42%
3%
38%
13%
3%
1%

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 16 percent in 2008 to 23 percent in 2018.

SALES BY REGION

SALES ON EMERGING MARKETS1

North America, 42%

South America, 3%

Europe, 38%

Asia, 13%

Oceania, 3%

Africa, 1%

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 2018

MARKET GROWTH

Distribution

Distribution plays a key role in ASSA ABLOY’s value creation. ASSA ABLOY’s products and services
reach the customers through many different distribution channels. The distribution channel
depends on customer segment and if it is specifications based, sales to consumers, or sales based
on OEM delivery. Supported by digitization and improved sales processes, the shift in resources to
direct sales from indirect sales continues to increase.

Value creation in distribution
ASSA ABLOY’s ambition is to deliver well-designed, safe,
secure and convenient access solutions. In close collabo-
ration with customers and their advisers, the Group’s effi-
cient distribution process creates good customer rela-
tions, market demand and increases the entry barriers for
competitors.

Distributors are also important in their roles as provid-

ers of service and support after installation. In the com-
mercial and institutional segment, distributors in some
markets act as advisers and project managers. They have
a deep understanding of customer needs and ensure that
ASSA ABLOY’s solutions comply with the local market’s
standards and security requirements. In the residential
segment, the buying decision is less rational and the
competence of the buyer is often lower.

Electromechanical solutions are distributed to end-users
mainly through security installers and specialist distribu-
tors. The solutions are also sold through systems inte-
grators, who offer total solutions for installation of
perimeter protection, access control, and access to
computers and other connected devices.

Specification – advice and digital tools
Rapid technological development and the growing
number of rules and standards, especially in the area of
sustainability, are constantly increasing complexity for
builders and other customers. This trend applies to
everything from components to prefabricated door
openings and advanced access solutions. This is also
increasing the competence required by distributors.
A central role in marketing is therefore played by ASSA

DISTRIBuTION CHANNELS FOR THE SECuRITY MARKET

The distribution process provides opportunities for ASSA
ABLOY to create considerable value for customers. The Group’s
advisers, the specifiers, provide specialist advice on security
solutions. Architects, building and security consultants can use
ASSA ABLOY’s BIM technology 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.

ASSA ABLOY ANNUAL REPORT 2018

DISTRIBuTION CHANNELS FOR THE SECuRITY MARKET

MARKET GROWTH

ABLOY’s specifiers, who have increased sharply over the
past few years and continue to increase rapidly, especially
in emerging markets.

quickly see exactly which products are installed in the
building, along with their location. This simplifies the
upgrade, service and repair processes.

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 leading the industry trend for product
configurations and 3D modeling using building informa-
tion modeling (BIM), which facilitates the work of archi-
tects 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

Partners and distributors
Building and lock wholesalers, security consultants and
locksmiths have key roles in delivering the products
specified for different construction projects. Many door
and window manufacturers install lock cases and hard-
ware in their products before delivery to customers.
ASSA ABLOY also shares competence with locksmiths,
who are key distributors of mechanical and electrome-
chanical security products in many markets. Locksmiths
buy direct from ASSA ABLOY or through wholesalers and
provide advice, delivery, installation and service. Some
locksmiths have an increased focus on electronics, while
IT integrators are increasingly offering physical security
solutions.

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

INSTALLERS

END CUSTOMERS

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.

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 2018

PRODuCT LEADERSHIP

Value creation strategy #2
Product leadership through innovation

ASSA ABLOY is a product-driven company where product leader-
ship is achieved through a high rate of innovation and reliability.
Product leadership enhances customer value and quality, and
reduces product costs. The innovation process is carried out in
close cooperation with end-users on a continuous base with the
objective of exceeding customer expectations.

No. 1

The most innovative
supplier of access
solutions.

57%

The percentage of electro mechanical
products and entrance automation has
increased from 34 percent to 57 percent
of sales in ten years.

27%

Products launched in
the past three years
account for 27 percent
of total sales.

The strategy for product leadership is based on four points:

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

Applying Lean principles
and deep customer insight
to product management
and development.

Developing and using com-
mon modular platforms
and common technologies.

Continuing to invest in our
R&D competence centers.

ASSA ABLOY ANNUAL REPORT 2018

PRODuCT LEADERSHIP

World-leading technology for
digital and smart solutions

A constant flow of new, enhanced, innovative and sustainable products is an important driver for
ASSA ABLOY’s target of 5 percent organic growth. Products launched during the last three years
accounted for 27 percent of total sales in 2018, exceeding the Group target of at least 25 percent
of total sales. The outcome reflects the Group’s product leadership, the high innovation rate, as
well as the Group’s ability to meet the needs of the connected society for smart and connected
access solutions.

Product leadership

Strategies for a high innovation rate
ASSA ABLOY’s strategies for a high innovation rate form
the Group’s vision to be the leader in providing innova-
tive access solutions that help people feel safe and
secure. The Group’s innovation process has its roots in a
modular and sustainable approach to product develop-
ment based on the Group-wide global technology plat-
forms. Shared Technologies add skills and scale and
develop the product platforms that the local engineering
teams adapt to local standards, requirements and
brands. The Group has 114 competence centers close to
the customers, including product development, in all
divisions. R&D investment amounted to SEK 2,893 M in
2018, representing some 3 percent of total sales. Some
2,400 employees are engaged in product development.

Technology development and new technologies
Together with the global mega trends, the main driver of
innovation and product development is the rapid tech-
nology development. Sales of mechanical products con-
tinue to increase, but electromechanical products are
growing considerably faster. In the residential segment,
the demand for smart door locks is rapidly increasing. In
2018 ASSA ABLOY sold 2.5 million smart locks, up from
2 million smart locks in 2017.

Technology development of access solutions is grad-
ual, usually originating from a solid mechanical product.
An electromechanical solution enables digital control of
the bolt, door and the entire entrance environment for
more efficient and convenient operation. Adding soft-
ware or even cloud-based access management systems
creates additional value for the customer, not only
through added security but also through convenience.
A connected lock, for example, can be remotely con-
trolled and monitored while being linked to a network
of other products and solutions with multiple security
features. 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.

The platforms give the Group increased capabilities for
scaling and with the possibility to connect the products
for increased synergies. Demand for these global
connected products is high with strong annual growth
rates globally.

With the customer trends towards convenience and
speed, together with the low penetration of electronic
digital access solutions in the market, there is a huge
potential enabled by the rapid technology development.
ASSA ABLOY’s technology leadership provides a sub-
stantial platform for robust profitable growth. To ensure
leadership in all product areas, the Group also continues
to invest in innovative mechanical solutions. More elec-
tronics also means increased sales growth per door and
more customer value. The rapid technological develop-
ment requires more frequent replacements and
upgrades which provide opportunities for increasing
recurring revenue and services through software licens-
ing and maintenance.

ASSA ABLOY’s Global Technologies division, with its
technology development relating to identification and
authentication, is a key asset and offers a competitive
edge. The division, comprising of HID and Global Solu-
tions, is the global market leader for products and solu-
tions for secure identities for physical access to buildings
and areas, as well as logical access to computers and
other connected devices. This is a core competence in
the development of digital access solutions.

Sustainable solutions
Another important driver for product development is the
sharply rising demand for sustainable solutions. There is
strong growth in investment in sustainable buildings,
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, with focus on
energy savings, as well as reduced consumption of mate-
rials and other resources used in production.

ASSA ABLOY ANNUAL REPORT 2018

Continuous improvement of the innovation process

ASSA ABLOY’s product leadership is based on the Group’s joint innovation process. Guiding
principles are deep insights into customer and market needs, product development based on
long-term planning and active portfolio management throughout the product life-cycle to
enable innovative, sustainable and cost-efficient products. Shared Technologies, the Group’s
joint development center, plays a key role to achieve this objective.

Value creation with customer insight
Each new product and product solution should create
additional customer value through improved functional-
ity, usability, security and cost efficiency. All new projects
are based on insight into underlying customer needs and
requirements. Broad monitoring and collection of data,
analysis and surveys of different customer segments are
conducted on an ongoing basis, to uncover future and
underlying needs. Cost savings are achieved through
improved designs, new materials, software and compo-
nents, as well as continuous improvement of the devel-
opment and production process.

Sustainability
Sustainability is an integral part of product innovation
and is hence integrated into the development process
from the concept stage to end of life. The Group uses a
tool called the Sustainability Compass which outlines the
sustainability vision for individual products and includes
eight focus areas: raw materials, water, virgin material,
end-of-life reusability, recyclability, in-life energy con-
sumption, carbon footprint and financial cost. The mod-
ular approach and the technology platforms enable the
Group to standardize materials, reduce the number of
components, constantly improve quality, and considera-
bly reduce the costs of each new product. The modular
approach is also supportive in component procurement
and development, enabling the group to source compo-
nents that are sustainable.

Design and design language
The Group has established a unit for the 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. Design, especially of
residential door locks, is also increasing in importance as
door locks are seen more as lifestyle products. The Group
also has 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 integrated and cross-functional balancing and
optimization of the product portfolio throughout the
product life-cycle. Projects are planned and executed
according to Lean principles, where a clear vision and
a visual overview are important components.

Product development is continuous and has three
phases: pre-development projects, new product devel-
opment and continuous improvements of products
already in the market.

Efficient development is achieved through clear long-

term product strategies and a modular development
approach, providing an opportunity to reuse designs,
make improvements and substitute parts of a product or
solution. Shared Technologies, the Group’s joint develop-
ment center for global product platforms, in which a
modular approach to both hardware and software is the
basis for the joint solutions, plays a key role to achieve
this objective.

PRODuCT LEADERSHIP

PERCENTAGE OF SALES OF
PRODuCTS LAuNCHED IN
PAST THREE YEARS
%

INVESTMENTS IN RESEARCH
AND DEVELOPMENT

SEK M

3,000

2,500

2,000

1,500

1,000

500

NEW PRODuCTS

HID Global scores in world’s
greatest soccer event

HID Global delivered more than 4 million secure
RFID tickets for 2018 FIFA World Cup. The smart tickets
contained a Radio Frequency Identification (RFID) inlay
with several security features designed to prevent
forgery. Data that was stored in a ticket’s RFID chip
was encrypted and digitally signed.

ASSA ABLOY ANNUAL REPORT 2018

NEW PRODuCTS

PRODuCT LEADERSHIP

Excellent energy
efficiency
The new overhead sectional door reduces
energy usage while also cutting costs with
an increased focus on reducing energy
waste and meeting building regulations.
With a full 82 mm of insulation the door
delivers exceptional thermal separation.
The U-value is more than two times as
effective compared to a standard overhead
sectional door.

Global Solutions expands
innovative RFID Lock
Technology
Varying configurations of doors found
within office and hotel staff areas often
limit the ability to implement newer door
lock solutions. The VingCard E100 serves to
sidestep such issues, thanks to its narrow
and minimalistic design. By offering both
DIN and SIS compatibility, the E100 can be
implemented on doors that feature narrow
lock cases in aluminum frames and can also
be installed on sliding doors.

Ergonomically designed
smart lock
X300-FH is a premium push-pull digital
door lock designed to improve user experi-
ence by reducing door opening process
compared to lever type locks. It is designed
ergonomically by placing the fingerprint
scanner in an area where the thumb natu-
rally ends up when grabbing the handle.
This small difference is a unique value which
makes the lock stand out in the market.

Product platforms

CLIQ™
CLIQ is a secure locking sys-
tem with advanced micro-
electronics in programmable
keys and cylinders. The system
offers a large number of com-
binations of mechanical and
electronic products, which
satisfy various requirements
for secure, flexible access con-
trol. Most types of locks can be
fitted with CLIQ technology,
which together with various
software programs provides
the global market with cus-
tomized, flexible access con-
trol solutions.

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

Aperio™
Aperio is a technology devel-
oped as a complement to
existing electronic access con-
trol systems. It is a convenient
solution for end- users to
improve the security and con-
trol of their premises. Central
to Aperio is a wireless commu-
nications protocol, which
functions at short distances
and can connect an online
access control system to an
Aperio-com patible mechani-
cal lock.

Hi-O™
Hi-O (Highly intelligent Open-
ing) is a concept that simpli-
fies installation, service and
maintenance of connected
doors thanks to advanced
technology and the plug-and-
play principle. Hi-O is a stand-
ardized technology for control
and security of door environ-
ments. The technology enables
communication between all
the components included in
a door opening solution.

Accentra™
Accentra is a cloud-based
access control system that
focuses on solutions for multi-
family buildings and small and
medium-sized enterprises.
A scalable infrastructure
through a cloud provider pro-
vides a high level of service
and full control over informa-
tion in a centrally based secu-
rity system. Accentra supports
multiple 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 complying
with local demands.

ASSA ABLOY ANNUAL REPORT 2018

PRODuCT LEADERSHIP

Future security solutions – convenient, secure, digital

Human needs in the connected society serve as an important starting point for ASSA ABLOY’s
innovation and product development. Secure, convenient and smart access solutions that interact
with people and products play a major role in the continued development of successful e-services
and e-commerce. They add to the development of the sharing economy and the connected society
of the Internet of Things.

The technology shift for access solutions in the con-
nected society is accelerating, providing ASSA ABLOY
with major growth opportunities. Home services and
other services that are logically connected to the Group’s
products are experiencing strong demand. Strong
growth is expected for services both in home delivery of
products and services as well as in home care. Broad-
ening and deepening demand are boosting revenue
with more value per product, faster replacements and
upgrades, more recurrent revenues and new business
opportunities.

E-commerce, shared economy and home services
A smart home or office space starts with a smart front
door lock. ASSA ABLOY’s offering entails smart door locks
and access management systems with technology that
enables the creation and management of digital identi-
ties. This digital identity is programmed to only apply for
a certain person and a certain door during a certain time
period, and can only be shared with trusted individuals or
companies, who thereby gain access to the space at a
certain point in time. The code or “digital key” – an
encrypted digital token – is transmitted via a smart
phone.

In simple cases, smart door locks provide secure and
convenient access to a single door. In some cases, how-
ever, service providers need access to a gate, a garage or
other area to perform services such as laundry or picking
up the mail. E-commerce is a major driver. Buying prod-
ucts and services through online services or over the
internet means that many end-users want the goods they
acquire on the web to be physically delivered to their
homes, workplaces or cars. The applications are relevant
in many daily life situations in the shared economy,
including sharing housing, vacation homes, vehicles and
other equipment. Secure identification and digital iden-
tities enable secure and convenient access to whatever
is shared.

Home services, such as residential home care, is rapidly
growing in many mature markets. Sharing the digital
identity through a smart phone provides secure and
convenient access to the home on a regular basis. In the
example of residential home care, caregivers, home care
providers and relatives need to be able to enter the
homes of residents on a regular basis. ASSA ABLOY has
developed a product platform for multi-family buildings
and small and medium enterprises which enables easy
and intuitive management of access to housing and
other areas using digital keys, smart phones or other con-
nected devices – while providing the safety and security
that small businesses, care providers and their customers
demand.

Taking the stance in its products, the Group works
in partnership with both local and global organizations
and businesses to create an end-to-end experience in
deliveries, home services, care and other services in the
connected ecosystem. One example is the partnership
with Amazon, enabling convenient and secure in-home
delivery and home access for guests and service
appointments.

Internet of Things (IoT)
ASSA ABLOY’s products and technologies are well-posi-
tioned to grow with IoT. The number of connected resi-
dential and industrial devices and machines are rapidly
increasing, enabling the identification, communication,
control and monitoring of functions and production of
the things connected. The IoT enables the formation of
ecosystems connecting, for example, homes, devices,
cars, robots, shipping containers, traffic systems and
transport systems.

The Group has world-leading technology and solu-

tions for secure digital and mobile management of
identity and authentication to determine who should
have access when, where and how, with various layers of
security and control. This includes a flexible and modular

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

Today mechanical and electromechanical
access solutions are predominant world-
wide. 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 environ-
ment can be digitally controlled for more
effective and convenient function, and
lower operating costs in large multi-
functional systems. Shorter life cycles
with more frequent additions of new
technology solutions create business
opportunities for ASSA ABLOY.

ASSA ABLOY ANNUAL REPORT 2018

PRODuCT LEADERSHIP

identification technology platform that serves as an eco-
system of connected products and services, enabling the
collection and analyzing of disparate data, in real-time or
over time.

A significant value-add for the customers in the future,

and as a source of revenue for the Group, is hence the
data that the connected ASSA ABLOY products and solu-
tions generate. This data can be collected and analyzed
and used by the customers to develop, for example, new
business models. Movement patterns as people enter
and leave buildings provide valuable information about
how different areas are used at different times.

IoT can also be used as a cost efficiency tool, as
analyzing the data provides information about both
security needs and energy needs – one of the largest cost
items for property operations – for efficient climate con-
trol and use of various areas of the building. Control may
also include opening and closing doors, surveillance of
high-security areas and goods and transport flows.

More recurrent services and revenue
As ASSA ABLOY’s product portfolio contains more digital
electronics, software and data, revenues will shift toward
recurrent services in the Group’s offering. Subscription-

based agreements for upgrades, data and analysis, as well
as software licenses, are increasing. The trend toward
complex, 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 including
cloud solutions.

Entrance automation
In entrance automation, ASSA ABLOY has gained global
market leadership with its Entrance Systems division,
through acquisitions, innovation and organic growth.
Hospitals, schools, airports, offices, warehouses, com-
mercial 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. Con-
nected products enable the facility manager to collect
data and apply analytics to the data coming from the
entrance systems. The facility manager receives data
about what has happened and what spare parts are
needed to fix the problem. This approach allows pro-
active service and cost efficiency, while generating
substantial customer value.

NEW PRODuCTS

Redesigned door closer winner of the 2018
Iconic Awards – Innovative Architecture
The respected design award is given to products and buildings that contribute to
innovation in architecture. The award-winning door controls provide innovative
solutions for all door opening scenarios. With innovative Cam-Motion® technology
inside, the range delivers an outstanding and accessible door opening experience
with quiet, safe and secure door closing.

Yale Assure Lock
Connected by August
Yale Assure Locks, Connected by August are the first
product collaborations between the two ASSA ABLOY
brands August and Yale. The Assure Lock with the Con-
nected by August Upgrade Kit combines Yale’s secure
lock hardware with August’s app and cloud-based
software to create the most full-featured smart locks.
The Yale Assure Locks, Connected by August, and the
Connected by August Upgrade Kit for existing Assure
Lock owners, are available on Amazon.com, August.
com, ShopYaleHome.com and in Best Buy stores.

ASSA ABLOY ANNUAL REPORT 2018

COST-EFFICIENCY

Value creation strategy #3
Cost-efficiency in everything we do

ASSA ABLOY aims to continuously increase its cost-efficiency
through the implementation of operational improvements
and sustainable operations. Rigid cost control is achieved by
streamlining manufacturing, professional sourcing and processes.
The increased focus on professional sourcing adds competitiveness
through quality and cost efficiency.

48%

Share of total pur-
chases in low-cost
countries.

–27%

The number of suppliers has been
reduced by 27 percent over the past
five years.

7th

manufacturing footprint
program launched in
2018 with an expected
payback time of less than
three years.

ASSA ABLOY ANNUAL REPORT 2018

COST-EFFICIENCY

Increased efficiency through
automation and digitization

ASSA ABLOY’s strategy to increase efficiency is fundamental to continue to drive profitable
growth by investing in market presence through customer relevance, product leadership
through innovation , technology and in evolution through people. This will contribute to
achieving the target of an operating margin of 16–17 percent. In 2018, the Group launched
its seventh manufacturing footprint program (MFP), which will further improve efficiency
going forward. In parallel, ASSA ABLOY also, on an ongoing basis, implements other efficiency
measures such as professional sourcing to offset price pressure, including raw material prices,
which was in focus during 2018. Initiatives to improve efficiency through -digitalization of
processes and automation of production also remain top priority.

Production structure

ASSA ABLOY’s production structure and overall efficiency
continues to evolve through recurring multi-year struc-
tural programs. A significant part of synergy effects in
acquisitions is related to the streamlining of manufactur-
ing sites as well as efficient integration. In addition,
reducing the number of offices to increase efficiency in
the organizational structure is also an important element
in the ambition to drive profitable growth and enhance
performance. Improved global logistics result in lower
costs, increased flexibility, improved added value for
customers and a better work environment.

The goal is to concentrate product assemblies to
sophisticated plants close to customers, primarily in
mature markets. Production of the more strategic com-
ponents, such as cylinders, rim locks and some electro-
mechanical products, is concentrated in the Group’s own
production plants in low-cost countries, while other
components are increasingly sourced from production
partners.

Since the first MFP in 2006, 88 production plants have
been closed, more than 143 plants have been remodeled
into assembly plants, and about 60 offices have closed.
The majority of the remaining production units in high-
cost countries have switched to mainly final assembly

lines and customization centers. In 2018, the restructur-
ing programs have proceeded according to plan and led
to efficiency improvements and a reduction of 1,798
employees. Including acquisitions, the number of
employees in low-cost countries was about 21,000 in
2018, representing 44 percent of the total workforce
compared with 38 percent in 2008. Since the MFP’s
were launched back in 2006, the number of employees
has been reduced by 15,362, largely related to produc-
tion in high-cost countries.

In 2018 the seventh Group-wide MFP was launched.
The program will have an expected payback time of less
than three years and includes the closure of 15 produc-
tion plants and about 30 offices. The estimated total cost
of the program is SEK 1,500 M, of which SEK 1,218 M was
accounted for in 2018.

A review of ASSA ABLOY’s logistics structure con-
tinued in 2018. Work is underway to reduce the number
of logistic providers, while creating a more efficient
structure for logistics centers with a high degree of
standardization of materials and products. Standardized
digital processes enable fast, efficient and secure trans-
portation solutions.

PLANTS IN LOW-COST
COuNTRIES

Czech Republic
Hungary
Croatia

Poland

Romania
Bulgaria

Mexico

Colombia

China

India

Malaysia

Chile

Brazil

South Africa

ASSA ABLOY ANNUAL REPORT 2018

COST-EFFICIENCY

Professional sourcing

The Group’s purchasing processes are gaining in importance, mainly driven by an increased share
of sourced standard components for final assembly and customization, but also as a significant
tool for cost efficiency. In addition, improving sourcing offers significant cost efficiency potential
also from a product quality and sustainability perspective. The Group’s ambition is to decrease the
number of suppliers and increase the number of partner suppliers and this entails significant cost
reductions. As a result, the role of the partner suppliers continues to increase. In addition, due to
the higher raw material prices, the focus on sourcing increased in 2018.

NuMBER OF SuPPLIERS

Number

12,000

10,000

8,000

6,000

4,000

2,000

Reducing the number of suppliers
is important for reducing costs
and improving quality. Active
efforts have reduced the number
of suppliers by 27 percent over
the past five years for comparable
units.

SHARE OF TOTAL PuRCHASES
IN LOW-COST COuNTRIES

Raw materials, components and
finished goods from low-cost
countries accounted for 48 per-
cent of the Group’s total pur-
chases in 2018.

The aim of the Group’s purchasing process is to ensure
high quality at a lowest cost. Hence, the Group is increas-
ingly focusing on the role of professional sourcing to
improve product quality and improve cost efficiency. This
occurs in processes that drive a number of activities for
development and management of purchases, where the
Group’s suppliers become strategic partners. The suppli-
ers participate to a greater extent in product develop-
ment and work in close collaboration with ASSA ABLOY
to be able to deliver not only components, but entire
subsystems and products based on supplier agreements
with category and quality management. The Group con-
tribution is competence transfer and its production and
quality expertise.

The purchasing organization has become more

sophisticated over the past ten years. It categorizes and
segments suppliers based on the strategic needs identi-
fied by the Group and according to a number of different
quality categories. The best performing suppliers achieve
partner status, and the worst performers may not remain
as suppliers, or may only remain if they meet certain con-
ditions. The divisions have specialized purchasing man-
agers for each component category. Purchasing centers
efficiently manage different categories of components.
Cost trends are monitored on a monthly basis.

The ambition is to have an increasingly limited num-
ber of larger, high-quality partner 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 27 percent to around 8,000 worldwide, with
a majority in low-cost countries. The goal is to continue
to reduce the number of suppliers and in 2018 the num-
ber of suppliers decreased by 6 percent on Group level.
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 the 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 that 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.

Quality and price are at the focus of all purchases.
As data flows continue to increase, the need for efficient
processes increases, and hence efficient digital tools are
a necessity. ASSA ABLOY has, for example, 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 estimates 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 Value Analysis/Value
Engineering methodology and potential process
improvements.

Current initiatives include a special quality team for

subcontractors launched in 2016 and a process for
better risk management of subcontractors, which is a
Group-wide control process which has been imple-
mented in 2018. E-procurement is substantially growing
with the purchase of goods and services done online, and
investment in e-auctions where divisions put out tenders
for materials and services for competitive bidding by
suppliers is also increasing. Both these processes lead to
significant savings.

ASSA ABLOY ANNUAL REPORT 2018

COST-EFFICIENCY

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 add customer value. Lean methodology also encompasses
all internal processes in all divisions. The automation and digitization of all of the Group’s
administrative flows is a prerequisite for process efficiency.

With the strong growth in data flows, the Group’s focus is
on improving its digital processes. Digitalization of pro-
cesses is a prerequisite to deliver products and services
to customers and according to customers’ requirements
and needs. The Seamless Flow automation program, in
conjunction with Lean methods, is central in achieving
fully automated production logistics and seamless pro-
duction – which means that production becomes trans-
parent, with better material cost control, improved deci-
sion-making procedures, shorter development times,
and increased collaboration with the marketing and sales
staff. Today, Seamless Flow automation and Lean meth-
ods are applied in all of the Group units and the number
of projects is increasing each year.

Seamless Flow encompasses the entire Group, and
enables seamless transaction flows between divisions,
regions, suppliers and customers. The aim is to achieve
full automation and to streamline processes, especially in
sales support, production and supply chain, enabling a
seamless customer experience throughout all interac-
tions with the Group. Standardized product databases
and efficient product data management, together with

an efficient ERP (Enterprise Resource Planning) system
enable the Group to improve the quality of administra-
tive flows and processes, whilst freeing up resources that
can be dedicated to direct customer relationships
instead of support functions and other back-end admin-
istrative functions. By the end of 2018, more than 150
companies have implemented one of the six divisional
ERP systems.

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
customer value with improved quality.

Investments in increased automation of production
flows have accelerated in recent years. E-procurement
processes as well as e-commerce are also important
elements in the ambition to automate and digitalize
the processes throughout the value chain.

SEAMLESS FLOW – A MORE EFFICIENT FLOW THROuGHOuT THE VALuE CHAIN

PDM

CAD

SuPPLIERS & PARTNERS

PuRCHASES

PRODuCTION

PRODuCT
CONFIGuRATION

CuSTOMERS

ORDERS

LOGISTICS / WAREHOuSE

FREIGHT

ASSA ABLOY ANNUAL REPORT 2018

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.

PEOPLE

Value creation strategy #4
Evolution through people

Employee commitment and expertise are crucial for the Group’s
success. In 2018, ASSA ABLOY developed core values and beliefs to
support a common ASSA ABLOY Group culture. A global workforce
also requires digital platforms and tools to provide innovative and
efficient ways of working seamlessly.

different nationalities
in senior manage-
ment positions.

87%

of the employees participated
in the employee survey 2018.

3.6

injuries per million hours
worked. Since 2015 injury rate
decreased with 46 percent.

Core values
• Empowerment
• Innovation
• Integrity

Beliefs
• We have trust in people
• We have the courage to change
• We stand up for what’s right

The human resources framework
is based on three foundations:
• Increase diversity and inclusion
• Improve talent management
• Improve health and safety

ASSA ABLOY ANNUAL REPORT 2018

Employees lead the way

PEOPLE

During the year, ASSA ABLOY lunched core values and
beliefs that will be activated throughout the Group in
2019. They form the base for the human resources vision,
strategy and framework that were updated during the
year. This will support the work toward being the
Employer of Choice. The business-oriented strategy with
a clear focus on people creates an environment that ena-
bles employees to make a difference and to act with
authority. ASSA ABLOY believes that the right people in
the right place is the driving force for growth. By improv-
ing the Group’s processes and structures, ASSA ABLOY’s
aim is to create a culture that adds value to the business
and encourages internal mobility, diversity and knowl-
edge sharing.

Increasing diversity and inclusion
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. ASSA ABLOY
has a performance culture based on the diversity of per-
spectives and is set to lead by example.

Diversity of perspectives is an important aspiration for
ASSA ABLOY, contributing to more dynamic structures –
promoting creativity and an open exchange of ideas.
ASSA ABLOY’s extensive experience of working with
more diverse teams has shown that they often provide a
more holistic approach and better results, particularly in
terms of innovation and business process.

The participants of ASSA ABLOY’s executive manage-
ment program consists of a diverse group of employees
to promote multiple perspectives.

The Group’s target is to have 30 percent of manage-
ment positions held by women. In 2018 the share was
24 percent and currently there are 28 different nationali-
ties in senior management positions. During 2018
several female appointments to executive positions
were made.

Improving talent management
ASSA ABLOY believes that people can achieve great
things. Combined with the opportunity to work together
and an environment with diverse perspectives, ASSA
ABLOY has the ability to innovate the business, the prod-
ucts and the industry. The Group actively invests in
opportunities to learn, grow and achieve results that
make a positive impact.

Every other year ASSA ABLOY conducts a Group-wide
Employee Survey: an important tool to understand how
employees feel about their workplace and role. The sur-
vey for 2018 had a response rate of 87 percent and with
overall positive results, specifically concerning innova-
tion, employee development and work processes.

The Group operates on all levels to strengthen internal
mobility and cross-level development opportunities.
ASSA ABLOY’s recruitment policy gives priority to inter-
nal candidates provided they have equal qualifications to
external applicants. Job vacancies are published on the
Group’s intranet to encourage internal mobility and
there are several common programs for increased
commitment and personal growth.

The Group has a global development process for senior
managers, which is aimed at ensuring that the Group has
the expertise it needs to meet future demands. Its foun-
dation consists of two development programs for senior
managers: ASSA ABLOY MMT and ASSA ABLOY IMD,
“Leading the future.” About 620 of the Group’s senior
managers from 35 countries have participated in the IMD
training program. It includes a customized IMD program
in collaboration with the Swiss management school, the
International Institute for Management Development
(IMD) in Lausanne, with 30 participants per session.

Improving health and safety
ASSA ABLOY works for a workplace free of injuries in all
its operations. With a Group-wide safety culture that
promotes safe behavior, workplace hazards and risk
taking are reduced. The objective is to have zero acci-
dents in the workplace.

Digital workplace
With a global workforce that requires working from any-
where at any time requires a robust, secure and allowing
IT infrastructure. To provide innovative and more effi-
cient ways to work as well as effective access to informa-
tion in a secure and compliant way, ASSA ABLOY invests
in digital platforms, identity & access management and
self-service tools. For example, cloud computing pre-
sents opportunities for ASSA ABLOY to realize tangible
benefits including scalability, reliability, resilience and a
more agile organization. It also offers multiple benefits to
ASSA ABLOY by leveraging economies of scale, commod-
itizing IT infrastructure, and a paying per-use model.

Leveraging integration can be a source of competitive
differentiation to provide effective access to information,
cope with fast technology innovation and accelerated
pace of business. By combining technology and IT tools
with step changes to processes and ways of working, the
Group achieves improved information flow, visibility,
speed and efficiency.

ASSA ABLOY ANNUAL REPORT 2018

PROFITABLE GROWTH

The result of ASSA ABLOY’s strategy
Profitable growth

ASSA ABLOY’s strategic objectives are customer relevance, product
leadership through innovation, cost-efficiency in everything we
do and evolution through people. This has resulted in strong
growth and earnings trends that have created significant value
for customers, shareholders and employees.

141%

Sales growth since 2008.

164%

Increase in earnings per
share since 2008.

134%

Increase in operating
income since 2008.

Sales

Operating income (EBIT)

ASSA ABLOY ANNUAL REPORT 2018

PROFITABLE GROWTH

Focus on long-term
value-creation

ASSA ABLOY’s focus is on long-term value-creation. Average annual sales growth over the last ten
years has been over 9 percent, while operating income grew by an average of 9 percent per year
during the same period. The Group targets to grow over a business cycle by 5 percent organically
and 5 percent through acquisitions remains firm as well as the operating margin target of
16–17 percent.

ASSA ABLOY was formed in 1994 through the merger
of Swedish ASSA and Finnish ABLOY. The Group grew
rapidly during its first decade – mainly through acquisi-
tions – from being a regional lock company in the Nordic
countries into a leading global player.

Market presence through customer relevance
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. The Group is currently
represented in over 70 countries and has rapidly
expanded in the emerging markets, which represented
some 23 percent of total sales in 2018. The market driv-
ers, including urbanization, digitalization and sustain-
ability, contribute to growing demand for mechanical,
electromechanical, digital and smart access and identifi-
cation solutions, as well as increasingly sustainable and
energy-saving products and solutions. Electromechani-
cal solutions are rapidly growing with a growth in 2018
of 20 percent and now account for 30 percent of Group
sales.

Another significant factor for ASSA ABLOY’s stable
growth is the Group’s installed base of locks and doors,
and a product range which is the largest in the world. It
provides a continuous flow of profitable and recurring
business. Organic growth is supplemented with an acqui-
sition strategy to strengthen the Group’s market pres-
ence geographically, and to expand with more access
solutions and new technology in selected areas. Over the
past decade, ASSA ABLOY has completed 146 acquisi-
tions that have contributed with an average of 6 percent
growth annually. In 2018, acquisitions contributed a net
2 percent growth. As a result of several major acquisi-
tions in entrance automation and in industrial, ware-
house and garage doors, ASSA ABLOY’s Entrance Systems
division has become the market leader and the Group’s
largest division with sales of SEK 23,762 M, representing
28 percent of total sales.

Product leadership through innovation
ASSA ABLOY is an innovative product leader and spends
annually about 3 percent of the Group’s sales on
Research & Development. This is becoming more impor-

tant as part of the move to more electromechanical, digi-
tal and mobile solutions. Products that are less than
three years old accounted for 27 percent of the Group’s
total sales in 2018 compared with the Group target of 25
percent. The continuous investments in product devel-
opment and innovation is a main driver for achieving the
target of 5 percent annual organic growth.

Cost-efficiency in everything we do
Constant efficiency enhancements are essential for good
and stable profitability, as well as a sustainable business
and products. The Group continually streamlines the
global production structure through recurring multiyear
restructuring programs. An effect of this is that the
Group’s external sourcing has increased substantially and
been concentrated to fewer and larger partner suppliers.
The purpose of the manufacturing footprint programs is
to concentrate assembly lines while keeping customiza-
tion close to the major customer markets and to relocate
component production to low-cost countries. A seventh
program was launched in 2018. The ongoing programs
resulted during 2018 in efficiency improvements and a
reduction of 1,798 employees.

In addition to the manufacturing footprint programs,
ASSA ABLOY runs several other efficiency improvement
and customer benefit initiatives. All units operate based
on Lean processes with professional teams for smarter
production flows, and Seamless Flow covers the entire
Group. The Group is making major investments in com-
mon IT systems, standardized databases as well as in
automation and robotics in production processes, all
with the aim to improve efficiency and allow for further
profitable organic growth and growth through
acquisitions.

Evolution through people
The employees are the most important asset and the
development of their expertise is crucial for the ASSA
ABLOY Group’s future success. In 2018, ASSA ABLOY
developed core values to support a common culture that
unites the Group across geographies, divisions, brands
and companies. The values are: Empowerment, Innova-
tion and Integrity.

ASSA ABLOY ANNUAL REPORT 2018

ASSA ABLOY’S DiViSiOnS

ASSA ABLOY’s 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.

Opening Solutions
EMEA

Opening Solutions
Americas

Opening Solutions
Asia Pacific

P 30

P 31

P 32

Share of
sales

Share of
operating income

Share of
sales

Share of
operating income

Share of
sales

Share of
operating income

24%

23%

29%

11%

emea

Americas

Asia

FinAnCiALS in BRiEF 2018

• Sales: SEK 20,201 M (18,081) with 2 percent

• Sales: SEK 19,817 M (17,940) with 9 percent

• Sales: SEK 9,949 M (9,211) with

organic growth.

• Operating income (EBIT): SEK 3,256 M

• Operating income (EBIT): SEK 3,941 M

(2,990).1

(3,815).1

• Operating margin: 16.1 percent (16.5).1

• Operating margin: 19.9 percent (21.3).1

4 percent organic growth.

• Operating income (EBIT): SEK 492 M (934).1
• Operating margin: 4.9 percent (10.1).1

Sales
SEK M

22,000

20,000

18,000

16,000

14,000

12,000

10,000

Operating income1
SEK M

Sales
Operating income1

3,500

3,250

3,000

2,750

2,500

2,250

2,000

Sales
SEK M

20,000

18,000

16,000

14,000

12,000

10,000

Operating income1
SEK M

Sales
Operating income1

4,000

3,500

3,000

2,500

2,000

1,500

Sales
SEK M

12,000

10,000

8,000

6,000

4,000

2,000

Operating income1
SEK M

Sales
Operating income1

1,500

1,200

900

600

300

Sales

Operating income1

1 Excluding items affecting comparability.

SALES BY PRODUCT GROUP

Mekaniska lås, låssystem
och tillbehör, 54%

Mechanical locks, lock
systems and fittings, 50%

Elektromekaniska
och elektroniska, 31%

Mekaniska lås, låssystem
och tillbehör, 41%

Mechanical locks, lock
systems and fittings, 39%

Elektromekaniska
och elektroniska, 15%

Mekaniska lås, låssystem
och tillbehör, 51%

Mechanical locks, lock
systems and fittings, 50%

Elektromekaniska
och elektroniska, 20%

Säkerhetsdörrar
och beslag, 15%

Electromechanical and
electronic, 35%

Security doors and
hardware, 15%

Säkerhetsdörrar
och beslag, 44%

Electromechanical and
electronic, 20%

Security doors and
hardware, 41%

Säkerhetsdörrar
och beslag, 29%

Electromechanical and
electronic, 24%

Security doors and
hardware, 26%

ASSA ABLOY ANNUAL REPORT 2018

ASSA ABLOY’S DiViSiOnS

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

Global
Technologies

P 33

Entrance
Systems

P 35

Share of
sales

Share of
operating income

Share of
sales

Share of
operating income

14%

18%

28%

25%

global

entre

FinAnCiALS in BRiEF 2018

• Sales: SEK 11,951 M (10,373) with

• Sales: SEK 23,762 M (21,781) with 4 percent

8 percent organic growth.

organic growth.

• Operating income (EBIT): SEK 2,387 M

• Operating income (EBIT): SEK 3,358 M

(1,946).1

(3,087).1

For more key figures see p 61.

• Operating margin: 20.0 percent (18.8).1

• Operating margin: 14.1 percent (14.2).1

Sales
SEK M

12,000

10,000

8,000

6,000

4,000

2,000

Operating income1
SEK M

Sales
Operating income1

2,400

2,000

1,600

1,200

800

400

Sales
SEK M

24,000

20,000

16,000

12,000

8,000

4,000

Sales

Operating income1

1 Excluding items affecting comparability.

Operating income1
SEK M

Sales
Operating income1

3,500

3,000

2,500

2,000

1,500

1,000

500

SALES BY PRODUCT GROUP

Passerkontroll, 71%

Access management, 69%

Hotellås, 22%

Produkter, 73%

Products, 72%

Service, 27%

Service, 7%

Hotel locks, 23%

Service, 8%

Service, 28%

ASSA ABLOY ANNUAL REPORT 2018

ASSA ABLOY’S DiViSiOnS

Opening Solutions EMEA

Good growth and a high
innovation rate

Neil Vann
Executive Vice President and
Head of EMEA division

The sale of electromechanical
locks increased by 18 percent
during 2018. What are the
drivers for this growth?
The growth was mainly driven by
the continued focus on critical
infrastructure and the conver-
sion of commercial mechanical
Master Key systems into flexible
digital solutions.

You acquired the door seal
company Planet in 2018. How
will you integrate it?
This acquisition delivers on our
strategy to expand our core
business as Planet is a leading
supplier of door drop down seals
and finger protection covers.
Planet will be fully integrated
into EMEA’s Switzerland set-up
which is part of our DACH mar-
ket region. This includes the
integration of shared services,
endorsing the Planet brand and
applying best practices, whilst
maintaining the location and
operations in Tagelswangen just
outside Zurich. A dedicated inte-
gration manager on the ground
ensures the execution to plan.
Making Planet our competence
centre for drop down seals and
finger protection technology,
the integration is also centred
around maximising revenue syn-
ergy potential, particularly
through ASSA ABLOY’s interna-
tional network, cross-sell and
specification.

In which geographical areas
did you grow the most in
2018?
Our largest growth from a geo-
graphical point of view has come
from Eastern Europe, particularly
in Poland. We also had strong
growth in Germany and Finland.

Demand in the region was good with organic sales growth close to 2 percent. Sales of
electromechanical locks with digital and mobile solutions increased sharply. Growth was good
in many markets in Europe. Product development continued at a high pace and efficiency and
streamlining programs continue to produce good results, driven by robotics and the continued
consolidation of suppliers.

Market trend
In 2018 growth was strong in Germany, Eastern Europe
and Finland and good in Scandinavia, the UK and South-
ern Europe. Africa/ Middle East and France also reported
growth while sales in Benelux declined. Electromechani-
cal products showed very strong growth. Commercial
products driven by specification remain the largest part
of the business, while consumer awareness, consistent
and innovative product development including quality
and service, are key drivers in the residential market. In
EMEA demand for sustainable solutions continues to
grow strongly.

Brand development, value-based pricing, recurring

revenue and specification are major cornerstones in
EMEA’s strategy to increase customer relevance. The divi-
sion has over 200 specifiers and the number of projects
specified continued to increase sharply. The customer
offerings are adapted to the local market’s standards and
security requirements, supported by local knowledge of
the Group’s brands. In EMEA, these include some of the
most respected in the industry, such as ABLOY, Yale, Mul-
T-Lock, TESA, IKON and Vachette, amongst others. Whilst
digital products are providing significant growth,
mechanical locks still play a significant role and are
growing.

Acquisition principles include a strategic fit, new tech-
nology, geographical expansion or growth into adjacent
sectors. In 2018 the Group acquired HKC and Planet.
Both are examples of acquisitions in adjacent sectors
which expanded the addressable market.

Product leadership
The share of new products introduced over the past
three years was 29 percent of total sales. In 2018 EMEA
launched its first energy harvesting product, Pulse, which
features a cutting-edge electronic cylinder that requires
no batteries or power supply. In product development,
the division is also committed to developing environ-
mental product declarations which enable customers to
fully understand the environmental impact of any new
product. This is a significant competitive advantage. The
software share of the offering is also constantly increas-
ing and the service offering is developed in the areas of
maintenance, training and safety.

Cost-efficiency
The division’s restructuring program to reduce the num-
ber of plants and to concentrate on assemblies close to
customers continued according to plan, with continued

consolidation of sub-suppliers to fewer and larger part-
ners. In Scandinavia the division has consolidated its
operational sites, which will be reflected in improved
efficiency and service improvements across the product
portfolio. Automation of production continued at a high
pace. Here, advanced robotics with intelligent vision sys-
tems play a key role. The number of robots has increased
by 75 percent over three years and in 2018 they
increased by 30 percent. The commercial excellence
program made good progress in several areas, such as
pricing, recurring revenue and digitalization. One
example is the business-to-business web shop. During
the year the division increased the number of order lines
received seamlessly by over 10 percent as the focus on
customer experience continues at full pace.

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 primarily through a num-
ber of distribution channels, but also directly to end-users.

Acquisitions 2018: Dale & Excel, Lorient and Exidor in the UK,
HKC in Ireland, LOB in Poland, Lukkoaitta in Finland, Luleå
Låskonsult in Sweden, Marenco in Holland and Planet GDZ in
Switzerland.

EMEA’s offering includes door and window systems, access control
and service.

ASSA ABLOY ANNUAL REPORT 2018

ASSA ABLOY’S DiViSiOnS

Opening Solutions Americas

Electromechanical and smart lock
solutions drive growth

Sales increased at a strong rate with organic growth of 9 percent, driven by very strong growth
in north America. in particular, demand was very strong for electromechanical locks in both
the commercial and residential segments. The division’s operating margin was good, despite
headwinds from increased material costs.

Lucas Boselli
Executive Vice President and
Head of Americas division

How did you work with
offsetting rising raw material
prices during the year?
We were able to gradually
compensate for the raw material
inflation through price adjust-
ments. In addition, we imple-
mented cost efficiency measures
across the division.

What is driving your strong
electromechanical growth?
We continue to see strong adop-
tion of electromechanical prod-
ucts throughout the Americas,
both in the residential and
non-residential segments. In the
residential segment, as consum-
ers embrace connected home
technologies, we have experi-
enced an increased demand for
our smart lock solutions. We
have also experienced solid
growth from our partnership
with key players in the smart
home segment. In addition to
brick-and-mortar gains, our
eCommerce are proven to be
an interesting channel to our
electromechanical solutions.

In non-residential, accelerat-
ing demand for access control
solutions has resulted in robust
growth for our entire range of
electromechanical products, in
both institutional and commer-
cial segments.

In which geographical areas did
you grow the most in 2018?
All of North America experi-
enced strong growth in 2018.
While the US saw the most
significant gains, Canada and
Mexico also grew nicely. In Latin
America, we had good develop-
ment across Central America
and Caribbean regions, while
South America did not grow as
much as we had expected.

Market trend
The division’s largest market, the US, reported strong
growth in 2018. Growth was strong in both the commer-
cial and institutional segments and accelerated in the
residential market. Canada delivered strong growth,
particularly in the institutional segment. Political uncer-
tainty in several countries in South America affected the
growth negatively. Demand for electromechanical solu-
tions continued to grow in all markets and segments. In
the residential segment the penetration of digital locks is
still low and forms a large untapped market opportunity.
Smart lock solutions and sustainable energy saving
products remain important growth drivers. Growth was
high for high-security products, architectural hardware
and perimeter solutions. Traditional lock products and
accessories also showed growth. The market for smart
residential solutions accelerated as home sharing,
in-home deliveries and other access services continue to
drive demand for smart locks. ASSA ABLOY’s partnerships
with Google Nest, Walmart and other retailers offer
strong growth potential for in-home delivery. In 2018,
the division acquired Luxer One, a leading advanced
package locker solutions business in the US. Brüken in
Mexico, a company specialized in glass and aluminum
door hardware, and Pioneer and Concept Frame in the
US, which added regional door, frame and project detail-
ing capabilities. The Wood Door business and Maiman
Company in the US was divested during the year.

Product leadership
New products launched in the past three years
accounted for 27 percent of total division sales in 2018.
Technology and software integration serves as an enabler
to innovate differentiated features such as integrated
access control and cloud based solutions for all markets
including the smart residential market. The division is the
US market leader for smart lock solutions for the con-
nected home under both the Yale and August brands.

The software platform from August Home has had a
positive impact on the division’s product development
for smart locks and home delivery solutions. During the
year several smart solutions for the connected home
were launched, providing security while enabling home-
owners to control and monitor home deliveries via
mobile apps.

Cost-efficiency
The division continues to improve efficiency through
the implementation of lean processes, seamless flow,

continuous improvement in manufacturing, automation,
robotics and footprint rationalization. To further improve
cost efficiency and support customer relevance, market-
ing and sales processes are being optimized at every level
for seamless data flows. E-commerce is implemented
both for the residential as well as the commercial and
institutional segments. For the residential segment, the
focus is on smart residential products, while e-commerce
tools for the commercial and institutional segments
enable channel partners to speed up delivery of products
when there is project time sensitivity. Investments in
automation and robotics continue at a high pace
improving safety, quality and efficiency.

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 com-
mercial customers are the largest end-customer segments.
These segments account for 80 percent of sales, while the
private residential segment accounts for 20 percent 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 2018: Brûken in Mexico, Pioneer, Concept
Frame and Luxer One in the US.

Divestment 2018: Wood Door business and Maiman
Company in the US.

Americas’ offering includes doors, locks, hardware accessories,
perimeter systems, access control and service.

ASSA ABLOY ANNUAL REPORT 2018

ASSA ABLOY’S DiViSiOnS

Anders Maltesen
Executive Vice President and
Head of Asia Pacific division

How is the implementation
of the new strategy in China
progressing?
The new strategy in China is pro-
gressing well. The organizational
structure allows the teams to be
more focused by allocating dedi-
cated employees to serve differ-
ent customer segments with
specialized solutions and
brands. We are also further
streamlining our production
which will improve our competi-
tiveness going forward.

How is the adoption of digital
locks progressing in the
different markets?
South Korea currently has the
highest digital lock adoption
rate in Asia Pacific. Most new res-
idential buildings have smart
door solutions, and the Gateman
brand from ASSA ABLOY is lead-
ing the market. With this high
penetration rate, we are focus-
ing on more advanced functions
and smart locks for the replace-
ment and upgrade markets.
China is another fast-growing
market for digital and smart
locks, and our extensive product
range helps us effectively pene-
trate different market segments.

In which geographical areas did
you grow the most in 2018?
We achieved strong growth in
South Korea in 2018, especially
with our digital and architec-
tural solutions. We are also
happy to see steady growth in
some other south east Asia mar-
kets.

Opening Solutions Asia Pacific

Good growth in APAC –
transforming China

Overall sales growth in the division was good with strong growth in South Korea, Japan and for
electromechanical products in particular. The Group has a new business strategy in place in China
to transform it into a more focused organization to respond to the rapidly changing business
environment. The development of new products continues at a high level in the division, with
strong demand – especially for smart door locks in the residential market.

Market trend
Demand in large parts of the APAC region was good. Sales
growth was strong in South Korea, Japan and South East
Asia and good in the Pacific. Demand in China, which
accounts for about half of the division’s sales, remained
weak. Sales continued to decline for fire and security
doors. Organic sales in China declined by 1 percent, com-
pared with 4 percent in 2017.

In APAC, demand for digital and mobile solutions is
strong and rapidly growing, as is the adoption of new
technology. This is also reflected in the division’s sales
by product group, where sales of mechanical locks and
system fittings decreased to below 50 percent in 2018.
Demand for smart door locks continues to grow with
strong double-digit figures, as does demand for sustain-
able solutions. Market transformation, urbanization, as
well as new regulations promoting environmentally-
rated and energy-efficient products, drive demand.

In China, smart locks are increasingly regarded as con-

sumer electronics, even lifestyle products, and are rap-
idly spreading beyond early adopters. The business in
China has been reorganized to focus on meeting the spe-
cific needs of different market channels and has consoli-
dated a number of brands into Pan Pan, Yale and ASSA
ABLOY with separate sales organizations. The new brand
strategy will support the division’s growth ambitions also
in the replacement market. In addition to the brand
strategy, to better serve the construction market, a key-
account organization has been established in China.

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 2018: Pacific Door Systems in New Zealand.

Asia Pacific’s offering includes mechanical and smart door locks,
window systems, access control, and service.

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 40 percent of total sales, compared
with the Group target of 25 percent. By increasing invest-
ments in innovation and new products, the division con-
tinues to strengthen its product leadership. The Group is
reducing the number of product platforms, as a means of
simplification, while the share of software is increasing,
enabling customer offerings entailing differentiated fea-
tures and comprehensive solutions for the residential
market. Attractive design is also increasing in impor-
tance. 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. The division has the widest range
of “green” products with a rapidly growing number of
environmental product declarations.

Cost-efficiency
The new construction market in China is expected to
grow at a slower pace and consolidation of the construc-
tion developers continue. As the operating margin in
China is expected to remain low for the next few years,
the Group took a write-down of SEK 5,595 M for impair-
ment of goodwill and other intangible assets in 2018.
The Group also made provisions of SEK 400 M for
receivables and inventory in China.

In China, the Group continues to optimize the manu-

facturing footprint to fit the market demand. These
efforts include increasing specialization and streamlining
production structure as well as optimizing the size of
the manufacturing plants. The ambition is to improve
efficiency throughout the value chain.

The Seamless Flow initiative also continued. Over
60 percent of the division is now working in a common
business system.

ASSA ABLOY ANNUAL REPORT 2018

ASSA ABLOY’S DiViSiOnS

Global Technologies

Strong sales and earnings trend

Global Technologies, which consists of HiD Global and ASSA ABLOY Global Solutions, reported
strong organic sales growth of 8 percent. Demand for HiD Global’s products and services was
strong, especially in north America, driven by upgrades and large investments in the institutional
and commercial market. Global Solutions continued to report strong growth, reflecting the strong
demand for hotel locks with mobile access and strong demand also in the other verticals: marine,
elderly care and student accommodation.

HiD Global
Market trend
Trusted digital identities are key enablers in the digital
society to underpin security, safety and convenience.
Hence, underlying global demand in the identity market
continued to be strong, driven by growing security
needs, upgrades and rapid technology developments.

Sales were strong in Physical Access Control Solutions,

Extended Access Technologies, Identity & Access Man-
agement Solutions and Identification Technologies.
Secure Issuance reported good growth while Citizen ID
declined. Driven by the very strong growth in North
America, sales growth in the mature markets was as
strong as in the emerging markets.

During the year HID Global acquired Crossmatch in
the US. Crossmatch’s product portfolio includes biomet-
ric identity management hardware and software that
complement HID Global’s product portfolio. The acquisi-
tion makes HID Global one of the world’s major providers
of fingerprint biometric technologies and strengthens its
ability to offer innovative biometric identity solutions.

Product leadership
While innovation and product development continued
on a high level, the share of products launched in the past
three years was about 21 percent, or close to the Group’s
target of 25 percent.

The division’s identity and access management prod-
ucts undergo constant development with new features
and platform adaptations, addressing the increasing
demand for updates and modifications. Supported by
software, HID Global’s trusted identity products and ser-
vices can handle all aspects of the lifecycle of an identity.
The increasing share of software in the products also
allows HID Global to complement its existing physical
products with software solutions. One example is com-
plementing a printing product with Financial Instant Issu-
ance. This creates recurring revenue and added customer
value.

HID Location Services has showed strong growth in
2018, driven by the fast growing enterprise IoT market.
HID Location Services provides real-time location aware-
ness and improves organizations’ ability to manage
assets and people within buildings and enables the loca-
tion of people in a facility. Analyzing room usage, map-
ping the flow of people for better building management
and security as well as increased operational efficiency
are some of the value-added features.

Cost efficiency
Efficiency initiatives continued, both through stream-
lining of operations, but also by improving processes.
During the year the Group announced the intent to con-
solidate HID Global’s credential manufacturing footprint
and shared services footprint in Europe to Ireland. This
will be reflected in cost savings and improved flexibility
going forward.

Offering: HID Global is a worldwide leader in trusted identity
solutions, dedicated to powering the trusted identities of the
world’s people, places and things.

Markets: Millions of people around the world use HID prod-
ucts and services to navigate their everyday lives, and over
2 billion things are connected through HID-technology.
Customers comprise companies, healthcare, education,
financial, government and state institutions. Customers are
mainly in the institutional and commercial sectors world-
wide.

Acquisitions 2018: Crossmatch in the US and ISLOG in
France.

HID’s offering include trusted identity and access solutions.

Stefan Widing
Executive Vice President and
Head of Global Technologies
business unit HiD Global

What products were driving
your strong sales growth
during 2018?
We had good growth across
many product lines. One high-
light is Location Services where
we have had breakthrough wins
in several important customer
segments. We are now getting
key references and customer
success stories that will drive
continued growth in this area.
Also, Mobile Access continues to
develop very well with contin-
ued triple-digit growth in user
adoption and with several foun-
dational aspects being put in
place in 2018 that will enable us
to scale even better in the
future. And then, finally, our
Authentication and Threat
Detection solution that we
launched this year, that is based
on machine learning technol-
ogy, has enjoyed significant early
market traction that bodes well
for the future.

How will you develop and
integrate Crossmatch going
forward?
Crossmatch will be integrated
into the three HID Business
Units that aligns with their three
product segments. Some core
technology and other functional
areas move into HID’s global
functions. The main develop-
ment will be on the commercial
side by leveraging HID’s market
footprint, and on the innovation
side where we will increase
investments into Crossmatch’s
biometric technologies.

In which geographical areas did
you grow the most in 2018?
North America grew the most
in 2018.

ASSA ABLOY ANNUAL REPORT 2018

ASSA ABLOY’S DiViSiOnS

Christophe Sut
Executive Vice President and
Head of Global Technologies
business unit Global Solutions

What products were driving
your strong sales growth in
2018?
Mobile key has really become a
priority for the hotel industry
and has been materializing dur-
ing 2018. Most of the locks deliv-
ered during the year have been
with mobile key capabilities as
well as the number of properties
where the service is enable. This
is the first step of the digitaliza-
tion of our offering. We have also
presented Vostio and Bluvision
and have had a lot of interest for
those solutions even if sales are
not significant yet.

How did your recurring
revenues develop?
We are having a very positive
development of our Credential
and Software as a service based
recurring revenue, driven by an
accelerating conversion to
Mobile access technology.

In which areas did you grow
the most in 2018?
The growth was spread across
most geographical markets and
verticals. It is pleasing that our
marine business developed
strongly with our customer
migrating to better guest experi-
ence. North America grew faster
than ever. At the same time,
China came back with double
digit growth while Europe
remained strong.

The electromechanical lock –
an enabler of growth

Global Solutions
Market trend
In 2018 ASSA ABLOY Hospitality changed its name to
Global Solutions to reflect the Group’s expansion into
new verticals beyond hospitality. The strong growth con-
tinued, in combination with high operating income and
very good margin growth. Global Solutions continues to
strengthen its market presence, expand into new geo-
graphical areas and digitize the customer offering.

Renovations, upgrades, solutions and software sales
continue to drive growth. The focus is on understanding
the customer’s journey and the way to create added cus-
tomer value. Electromechanical locks are the enablers:
creating potential for the customers to add value to their
clients by applying cloud based services, software solu-
tions and introducing keyless mobile access. Several
major global hotel chains have installed and continue to
install the Group’s high-end systems, while new verticals
– including multi-family housing, care, education, and
student accommodation – are markets where Global
Solutions’ product portfolio offers additional growth
potential. Cloud-based solutions allow the customers to
streamline their operations and improve both property
and data security – thereby adding value.

Markets: ASSA ABLOY Global Solutions are leading the devel-
opment within safe and secure access solutions for hotels,
cruise ships, student accommodations and elderly care facili-
ties. ASSA ABLOY Global solutions’ systems and products are
installed in over seven million hotel rooms in more than
42,000 hotels worldwide. Customers are mainly in the
institutional and hospitality sectors worldwide.

Acquisitions 2018: Phoniro in Sweden.

Integrated service solutions, including applications such
as lighting and security, as well as recurring revenue by
selling software licenses, are also steadily increasing as a
share of total sales.

During 2018, the Group acquired Phoniro, a major
player in elderly care solutions for homecare and nursing
homes in the Nordic region. Its business model is similar
to that used in hospitality: that is, offering electro-
mechanical and digital products with the capability for
the care providers to launch cloud-based mobile access
services.

Product leadership
Innovation and product development are central ele-
ments to drive product leadership and continue at a high
level. The share of sales from products launched in the
past three years was about 34 percent; significantly
higher than the Group target of 25 percent. Software is
constantly updated and R&D investments consist to a
large extent of software development.

Global Solutions addresses the full life-cycle of a prod-

uct, including software updates, upgrades and service.
The products undergo constant development with new
features and platform adaptations. Physical products are
complemented with software solutions which, over
time, generate recurring revenue and added customer
value. In 2018 Global Solutions launched a cloud-based,
maintenance free, access management system that
requires no local servers.

Cost efficiency
Efficiency initiatives continued during the year, both
through streamlining of operations, but also by improv-
ing processes. Global Solutions has a focus on lean
processes and a streamlined production structure –
including the reuse of common functions and IT systems,
continuous streamlining of administrative processes and
seamless flows. For example, there is only one dedicated
plant, in Shanghai. Products are sold primarily directly to
customers, with the resources constantly being adjusted
to the development of the market.

Global Solutions’ offering include access solutions for hotels, cruise
ships, student accommodations and elderly care facilities.

ASSA ABLOY ANNUAL REPORT 2018

ASSA ABLOY’S DiViSiOnS

Entrance Systems

Strong growth in services

in 2018 good organic growth continued in the Entrance Systems division with strong growth in
north America and good growth in EMEA. The service offering showed strong growth. Sustainable
solutions were in high demand. The restructuring programs for a more efficient production
structure proceeded according to plan.

Mogens Jensen
Executive Vice President and
Head of Entrance Systems
division

Your organic growth was
4 percent in 2018. Which
markets performed best?
Geographically, Entrance Systems
had a strong development in
North America and Emerging
Markets Europe. Western Europe
had a moderate growth but in
Asia/Pacific and Latin America
the growth was negative due to
the challenging development in
China mainly in our component
business. The decline in Latin
America was mostly due to
some big projects in 2017 that
did not reoccur in 2018.
On the product side we had a
very strong development in
loading dock equipment where
the demand in the distribution
and logistics segment continues
to be strong in both North
America and Europe. The growth
was also strong in the US for
Residential Doors.
High Performance Doors and
Residential Doors in Europe had
a negative development.

How did the Service Business
develop during the year?
We have started to invest more
in our service business during
2018 and saw an improvement
of growth in service from previ-
ous years, especially in our
industrial service business. In
addition to investing more, we
have also done organizational
changes to get an increased
focus on service and for 2019
our ambition is to further
increase the sales.

How did the sale of your newly
developed products develop
during the year?
Sales of new products reached
the target of 25% of sales in 2018
and we have launched a number
of new products both in the
industrial and pedestrian seg-
ment during the year.

ASSA ABLOY ANNUAL REPORT 2018

Market trend
The division’s sales grew organically by 4 percent.
Acquired growth was 1 percent. There was strong growth
in North America and good growth in EMEA driven by a
strong development in Eastern Europe. In China the mar-
ket conditions were challenging and the sale in many
emerging markets outside Europe declined.

In services, connected products and solutions drive

growth, and electromechanical and sustainable solu-
tions are major drivers of growth in all product seg-
ments. Sliding doors, entrance automation, and
industrial doors are all products that are achieving
good or strong growth. Another driving force is the
growth in e-commerce that helps to increase demand
for warehouse and logistics door opening solutions.

The service offering, which accounts for 28 percent of
the division’s sales, showed strong growth. The division
is investing in its service offering both in sales people
specializing in services, and technicians. New service
concepts based on long-term contracts, with efficient
data flow and analysis for preventive maintenance and
modernization, strengthen customer relationships and
provide good growth opportunities.

Acquisitions are an important part of growth. In 2018,
the Group acquired Door Systems in the US and K.A.D. in
South Korea. Door Systems is a distributor of commercial
and residential doors in the Chicago metropolitan area
with a strong service organization.

Product leadership
Innovation and product development continued at a
high level. New products launched in the past three years
accounted for 25 percent of sales. The division has a com-
petitive and comprehensive offering, and continues to
launch new products and solutions which encompass,
essentially, all product segments. Entrance Systems has
also launched new service offerings with enhanced user
experience, strong features and improved maintenance.
The division has a large and growing range of energy-
saving solutions and launched a new insulated door with
strong thermal performance, measured in heat loss,
ahead of new building regulations. During the year, a new
compact revolving door built for improved user experi-
ence with enhanced ease and comfort was also intro-
duced. The division also launched a new range of garage
products with smart digital app-based solutions and con-
nected doors which shorten lead times for maintenance
and service if the doors fail. Digitization has resulted in a
strong focus on smart solutions and connectivity, while
sustainability drives product development in the direc-
tion of energy savings and climate control.

Cost-efficiency
Consolidation of the production structure and organiza-
tional resources continued according to plan. The divi-
sion continued to pursue efficiency initiatives with
investments in robotics, implementation of Lean prac-
tices and by reducing purchasing and production costs
through VA/VE analyses. The division’s Commercial Excel-
lence initiative includes improvements in its work with
customer segmentation, specification projects and sales
processes, including increased digitization. In addition,
the transition to use only the ASSA ABLOY brand in direct
sales channels continues.

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 world-
wide. It has sales companies in 35 countries and distributors
in 90 countries. Service operations account for nearly one-
third of sales. The products are sold through three channels.
In the direct channel, new equipment and comprehensive
service are sold 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 components and fittings for indus-
trial doors in the industrial and residential segments, as well
as sensors for the door and elevator industries.

Acquisitions 2018: Door Systems in the US and K.A.D in
South Korea.

Entrance Systems’ offering includes automatic doors, industrial
doors, loading dock equipment, high-performance doors and service.

ASSA ABLOY’S DIVISIONS

Customer solutions around the world

Photo © Terri Meyer Boake

Safety, security and
sustainability at
Australian school

ASSA ABLOY brings its
star power to Los Angeles’
grandest new hotel

Hotel guests and staff
benefit from Mobile
Access

CUSTOMER: Beaumaris Secondary College,
servicing Year 7–12 students for Beaumaris and the
surrounding area. As part of the design for their
brand new facilities, the school was dedicated to
environmental awareness, including development
of a wetland area to provide educational opportu-
nities and environmental benefits.

CUSTOMER: The Wilshire Grand InterContinental
Hotel is the marquee tenant for the LA Financial
District’s new Wilshire Grand, the tallest building
west of the Mississippi River. The hotel includes
nearly 1,000 guest rooms, plus a swanky rooftop
bar, numerous restaurants, a health club, ballroom,
conference space and more.

CHALLENGE: Create the ideal education building
for students and administrators that minimizes
energy usage, water usage, and waste generation,
while offering easy access, yet maintaining security
and accountability. This delicate balance between
safety and security while improving sustainability
and energy efficiency called for careful selection of
door hardware and the means by which it was
provided.

SOLUTION: ASSA ABLOY provided a variety of prod-
ucts and services that are environmentally sound
throughout the entire production process and
product life cycle, and several of the products had
with Environmental Product Declarations (EPD’s).
Furthermore, ASSA ABLOY provided Australian
made products that exceeded expectations for
safety and security. Services included utilizing ASSA
ABLOY’s Openings Studio software program, which
created workflow efficiencies, helped reduce costs,
and reduced the environmental impact of
construction documentation.

CHALLENGE: The luxury property commanded the
highest level of aesthetics, but the solutions had to
be functional and safe as well as decorative. Featur-
ing a wide range of products from a utilitarian look
in the parking garage to unique, upscale elements
in the common areas, consistency was key.

SOLUTION: Working across divisions, ASSA ABLOY
was able to offer a complete suite of products that
met the requirements for design aesthetics, func-
tionality and safety. Among the key solutions was an
mortise lock with an integrated card reader featur-
ing HID technology. This lock allows the hotel to use
mixed credentials. The same principle applied with
the ASSA ABLOY Global Solutions lock used on the
guest room doors. Guest rooms’ door closers were
replaced with a concealed closer, which met the
needs for both fire safety and aesthetics. Elevator
lobby doors and stairwell doors were equipped
with the ASSA ABLOY surface mounted door opera-
tor, which has the ability to power close as well as
power open, a necessity to meet fire ratings on the
project. Sound seal acoustic gaskets and door bot-
toms contributed to better acoustics, and many of
the products chosen were endorsed with Health
Product Declarations (HPD).

Throughout the design and implementation,
collaboration among multiple ASSA ABLOY divi-
sions kept the project on schedule and provided
the desired consistent finishes across the entire
spectrum of products.

CUSTOMER: Nordic Choice Hotels is one of the
largest hotel groups in Scandinavia, operating 190
properties.

CHALLENGE: With today’s tech-savvy climate in the
hospitality industry, Nordic Choice Hotels required
a mobile key solution for six of its hotels in Stock-
holm. The company wanted minimal upgrades to
the existing RFID-enabled locks and easy integra-
tion with Nordic Choice Hotels’ mobile application.

SOLUTION: Looking to implement a digital key
offering that is as convenient as it is secure, Nordic
Choice Hotels chose ASSA ABLOY Global Solutions
Mobile Access – a solution that brings benefits to
both guests and staff.

As ASSA ABLOY Global Solutions is a long-term

partner of Nordic Choice Hotels, it was able to
swiftly and efficiently upgrade more than 3,000
existing electronic locks to allow for mobile keys.

With Mobile Access, hotel guests can bypass the

front desk by checking in with the hotel’s mobile
app and leverage ASSA ABLOY’s secure Seos tech-
nology to open their room with a quick swipe of
their mobile device.

The solution allows hotel staff to focus their time

on customer service. Now that guests no longer
need to wait at the front desk for a keycard to enter
their room, staff can more efficiently provide other
guests with the assistance they need.

ASSA ABLOY ANNUAL REPORT 2018

ASSA ABLOY’S DIVISIONS

E-passport solution for
Tanzania makes travel
simpler

CLIQ’s flexibility meets
museum’s high security
demands

Service agreement
keeps doors open for
business

CUSTOMER: With a population of over 55 million,
the country of Tanzania shares borders with eight
neighboring African states.

CHALLENGE: As part of a transformative e-immigra-
tion program, the government of Tanzania wanted
to modernize its passports to improve the traveling
experience for its citizens and to prevent the use of
counterfeit passports.

SOLUTION: Tanzania’s government selected a com-
plete electronic passport solution from HID Global.
The new e-passport makes travel easier for the

country’s citizens, such as simply scanning their
passports electronically at border control stations
upon entry and exit. The e-passport conforms to all
international standards as set out by the Interna-
tional Civil Aviation Organization, ensuring that its
features can be used by Tanzanians as they travel
around the world.

A notable benefit is that an e-passport holder can

be issued with an emergency passport on their
smartphone if their passport is stolen or lost. This
convenient solution is enabled using HID’s
award-winning Seos technology for mobile citizen
IDs, called HID goID.

The new Tanzania e-passport contains a contact-
less chip embedded in its polycarbonate data page,
which is proven as tamper-proof.

HID Global has established a lasting relationship

with the government of Tanzania to ensure the
highest levels of security for many years to come.

CUSTOMER: The Design Museum, in London, hosts
exhibitions related to architectural, fashion,
graphic, industrial and product design. Founded in
1989, it moved to a new site in Kensington in 2016.

CUSTOMER: Decathlon, a world-leading sporting
goods retailer, has 27 stores in Belgium, including a
flagship store in Brussels with around 14,000 cus-
tomers every week.

CHALLENGE: It took a EuR 90 M investment to cre-
ate a new London site for the Design Museum. This
new space needed an access control system suited
to such a high-profile project, designed to protect
high-value exhibits. The solution had to be flexible
to meet the security requirements of three galler-
ies, a café and an events space, with 100 permanent
staff and hundreds of daily visitors.

SOLUTION: CLIQ access control has an established
track record in the museums and heritage sector,
and when the museum’s construction company
was asked to recommend the best solution, it
picked CLIQ.

CLIQ is an easy-to-use access control system
based on mechanical high-security cylinders com-
bined with encrypted electronic locking and identi-
fication. CLIQ PROTEC2 electromechanical locks
control access through 56 doors. Staff carry one
battery-powered CLIQ key, programmed with the
appropriate, pre-authorized access permissions.

using intuitive CLIQ software, security managers

can change or cancel a user’s permissions at any
time. Contractors are issued with temporary pro-
grammable keys, which saves time formerly wasted
escorting them around the building.

CHALLENGE: At all the Decathlon stores it is vital to
ensure that the front doors always function to allow
a seamless flow of customers, while the rear doors
operate smoothly to receive regular deliveries of
merchandise.

SOLUTION: Decathlon has peace of mind thanks to
a service agreement with ASSA ABLOY Entrance
Systems.

under the agreement, in the event of a break-
down, a specialized ASSA ABLOY service technician
is on hand to get the door back up and running and
keep business moving. This is particularly helpful in
the case of automatic doors, where Decathlon’s
maintenance manager doesn’t have the specialist
skills required to carry out repairs.

The agreement means that there’s no need for

the maintenance manager to know the state of
every door, how it works, or how to fix it. All the
Decathlon staff can feel safe and secure at work,
confident that an ASSA ABLOY technician will
swiftly attend to any door-related issue.

ASSA ABLOY ANNUAL REPORT 2018

ASSA ABLOY’S VALuE-CREATING MODEL

Value-creation for all stakeholders

Overall strategy

Resources

External factors

The Group’s strategic direction
is to lead the trend towards the
world’s most innovative and
well-designed access solutions.
Our purpose is to everyday help
people feel safe, secure and
experience a more open world.
Our core values, beliefs and
strategic objectives help guide
our way.

Strategic objectives:

Growth through customer
relevance

Product leadership through
innovation

Cost-efficiency in everything
we do

Evolution through people

Financial capital

48 ,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 port-
folio that meets local regula-
tions 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, manufacturing,
and streamlining of
processes

Acquisitions and
integration

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

Stakeholders

ASSA ABLOY ANNUAL REPORT 2018

ASSA ABLOY’S VALuE-CREATING MODEL

Result

Value for stakeholders

Products, services and support

Electromechanical products
account for 30 percent of sales

Entrance automation account
for 28 percent of sales

Mechanical locks account for
26 percent of sales

Security doors account for
16 percent of sales

Products launched in the
past three years account for
27 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

Overall
value- creation

Security

Safety

Convenience

Profitable
growth

ASSA ABLOY ANNUAL REPORT 2018

SuSTAINABLE DEVELOPMENT

Read more about ASSA ABLOY’s
sustainability work in the
Group’s Sustainability Report.

Continued good progress
in sustainability

ASSA ABLOY’s sustainability initiatives continued to make good progress in 2018, with advances
in line with the five-year sustainability plan, new sustainable products, improved water and energy
efficiency. The focus on health and safety has led to a decrease of injury rate by 11 percent in 2018
and fewer workplace accidents. The Group’s materiality analysis was updated during the year with
input from employees, customers and suppliers. The result confirms that the Group is working with
the right priorities.

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 activities supports the Group’s vision
and strategy. 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 environment, conserve resources and lead develop-
ments to meet the rapidly growing demand for sustaina-
ble products. Substantial sustainability gains can be
achieved in the Group’s product development, stream-
lining of the Group’s production structure, investments
in modern equipment and other efficiency programs
such as Seamless Flow and smarter IT systems.

Governance
ASSA ABLOY works to continuously strengthen sustaina-
bility within its operations. 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 pol-
icy 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 Sustainability Report, which is prepared in accord-
ance with GRI Standards: Core and fulfils the require-
ments in the Swedish Annual Accounts Act on a statutory
sustainability report.

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 2018 are positive and in line with the
plan. Efforts to increase the share of renewable energy
with the goal of 20 percent of total energy consumption
in 2020 faced constraints in many countries with difficul-
ties finding this type of energy at competitive prices. The
percentage of renewables in 2018 was 12 percent of
total energy consumption.

Water consumption is following the plan in the sus-

tainability program with progress in recovery due to
technology and facility investments, especially in various
surface treatment processes. The water intensity
decreased by 10 percent in 2018. The use of solvents

when painting products also continues to decline due
to the introduction 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 ambition is to implement environmental

management systems in all factories with significant
environmental impact. At the end of 2018, 77 percent of
employees in the Group’s plants were working in facto-
ries with environmental management systems. These
practices are gradually being implemented in all
acquired companies with production facilities. To spread
commitment and increase activity in sustainability
efforts, employees are also encouraged to form “Green
Teams” at workplaces throughout the Group. They are
formed through local initiatives and work practically with
everyday sustainability, health and safety issues.

ASSA ABLOY is working systematically with its suppliers

to improve sustainability performance across the supply
chain. Evaluation and improvement of the supplier base is
a continuous process, with a special focus on suppliers in
low-cost countries. The number of supplier audits contin-
ues to increase and was 1,055 (919) in 2018. To verify the
quality of the audits, external auditors have assessed the
work processes and confirmed the audit outcomes.

Improving health and safety
The health and safety management system covers all
business entities with at least 10 employees. The system
includes indicators to identify hazards and follow up
training to prevent injuries, as well as safety communica-
tions and incident investigation. Since the system’s
implementation ASSA ABLOY has seen a steady decrease
in the injury rate. The focus for 2019 will be to reduce
workplace hazards and to minimize days lost due to
workplace injuries. The objective is to have zero
accidents in the workplace.

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.

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

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 Cash flow

32 Reserves

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

100

101

102

103

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

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, 2018.
ASSA ABLOY is the global leader in access solutions, dedicated to satisfying end-user needs for
security, safety and convenience.

Significant events
Sales and income
Sales increased by 10 percent and totaled SEK 84,048 M
(76,137). The increase consisted of organic growth of 5 per-
cent (4), acquired growth of 4 percent (3) and discontinued
growth of –2 percent (–1). The exchange rate impact on sales
was 3 percent (1).

Operating income (EBIT) excluding items affecting com-
parability increased by 5 percent to SEK 12,909 M (12,341),
equivalent to an operating margin of 15.4 percent (16.2).
Impairment of operating assets within Asia Pacific reduced
operating income by SEK 400 M. Items affecting comparabil-
ity relate to impairment of goodwill, other intangible assets
of SEK 5,595 M (–) and costs for the new restructuring pro-
gram that was launched at year-end 2018 of SEK 1,218 M (–).
Net financial items were SEK –799 M (–668). Income
before tax excluding items affecting comparability totaled
SEK 12,110 M (11,673), an increase of 4 percent. Operating
cash flow increased by 4 percent to SEK 11,357 M (10,929).
Earnings per share after full dilution, excluding items affect-
ing comparability, increased 4 percent to SEK 8.09 (7.77).

Restructuring
A new restructuring program that covers all divisions was
launched during the year. About fifty closures of plants and
offices are planned and some production will be outsourced,
as well as continued automation. The new program affects
approximately net1,600 people. The total cost of the pro-
gram is estimated at SEK 1,500 M before tax, of which SEK
1,218 M was expensed in 2018. The payback period is
expected to be less than three years. Activities related to the
previous programs continued with effective cost-cutting
measures during the year.

At year-end 2018, 15,362 employees had left the Group,

including 1,798 employees who left during the year, as a
result of the changes in the production structure since the
restructuring programs began in 2006. A total of 88 plant
closures have been implemented, including 11 closures in
2018. A large number of plants in high-cost countries have
switched from production to final assembly.

The Group is increasingly concentrating production to its
own plants in Asia, Central Europe and Eastern Europe, as well
as to outsourcing to external suppliers in low-cost countries.
Payments for the restructuring programs totaled SEK
793 M (612) for the year. At year-end 2018, the remaining
provisions for restructuring measures amounted to
SEK 1,190 M (944).

Acquisitions and divestments
In February 2018 the Group acquired Phoniro, the leading
company in integrated solutions for digital key management
and alarms in home services and senior housing in the
Nordic countries. The acquisition is viewed as strategic and
strengthens the Group’s position in the healthcare and
long-term care market. The company is headquartered in
Halmstad, Sweden.

In June 2018, ASSA ABLOY acquired HKC, a leading Irish

provider of alarms and cloud-based monitoring services.

The product offering includes an extensive portfolio of wired
and wireless alarm products, as well as monitoring services
that are a good complement to ASSA ABLOY’s offering on the
Irish market. The company is headquartered in Dublin,
Ireland.

In September 2018 ASSA ABLOY acquired 100 percent

of the share capital in the US company Crossmatch Inc.,
a leader in biometric identity management and secure
authentication solutions. The acquisition of Crossmatch
strengthens the ability to offer innovative biometric solu-
tions to hundreds of millions of users worldwide and
expands HID’s market leadership in secure identity solu-
tions. The company is headquartered in Palm Beach Gardens,
Florida, USA.

In December 2018, ASSA ABLOY acquired 100 percent of

the share capital of Luxer One, a leading provider of
advanced package locker solutions in the US. The acquisition
further strengthens ASSA ABLOY’s market position in home
delivery solutions and provides excellent opportunities for
synergies in vertical segments, such as education and com-
mercial properties. The company is headquartered in Sacra-
mento, California, USA.

Other acquisitions during the year include Lorient in the
UK and Planet in Switzerland, which complement the prod-
uct portfolio with innovative door sealing systems and finger
protection covers, as well as Brüken, a leading Mexican com-
pany in locks, hardware and accessories for glass and alu-
minum products.

A total of 19 businesses, including minor acquisitions,
were consolidated during the year. The total purchase price
of these acquisitions, including adjustments for acquisitions
from previous years, was SEK 7,300 M on a debt-free basis,
and the acquisition analyses indicate that goodwill and other
intangible assets with an indefinite useful life amounted to
SEK 5,329 M. Estimated deferred consideration were SEK
1,150 M.

Additional acquisitions of non-controlling interests
occurred during the year for SEK 229 M (130). The holdings
were previously 100 percent consolidated.

In June 2018 the US wooden door business within the
Americas was sold to Masonite. The business, consisting of
the two companies Graham Wood Doors and the Maiman
Company, had sales of about SEK 600 M in 2017. The disposal
resulted in a small capital gain and had a positive impact on
ASSA ABLOY’s operating margin moving forward, all else
being equal. A small business in Norway within EMEA was
also sold at the beginning of the year.

Research and development
ASSA ABLOY’s expenditure on research and development
during the year totaled SEK 2,893 M (2,244), equivalent to
3.4 percent (2.9) 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 27 percent of sales for the year.

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

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 and CEO propose
that the 2019 Annual General Meeting should approve a
dividend of SEK 3.50 (3.30) per share, representing an
increase of 6 percent. The proposal for profit distribution can
be found in its entirety on page 102 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
position 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.

Sustainable development
A number of ASSA ABLOY units outside Sweden carry on
licensable activities and hold equivalent licenses under local
legislation. ASSA ABLOY’s units worldwide are working sys-
tematically and purposefully 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 2018 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 2015 the Finnish Tax Administration decided not to allow
tax deductions for interest expenses in the Finnish opera-
tions 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 just over SEK 800 M.

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

Significant risks and risk management

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

ASSA ABLOY is an international Group with a wide geo-

graphical spread, involving exposure to various forms of
strategic, operational and financial risks. Strategic risks refer
to changes in the business environment with potentially
significant effects on ASSA ABLOY’s operations and business
objectives. Operational risks comprise risks directly attribut-
able 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. Treasury then has
the main responsibility for financial risks within the frame-
work established in the financial policy, with the exception
of credit risks relating to operational business activities,
which are managed locally at company level and monitored
at division level.

Review process
Strategic risks, such as competitors, brand positioning and
so on, are regularly reviewed at ASSA ABLOY AB’s board
meetings. The Group’s operational risk management is con-
tinuously monitored by the Executive Team through divi-
sional reporting and divisional board meetings. For further
information on monitoring and management of operational
risks, see page 46.

Financial operations are centralized in a Treasury function,

which manages most financial transactions as well as finan-
cial risks with a Group-wide focus. ASSA ABLOY’s Treasury
monitors the Group’s short- and long-term financing, finan-
cial cash management, currency risk and other financial risk
management.

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY’s risks

STRATEGIC RISKS

OPERATIONAL RISKS

FINANCIAL RISKS

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

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

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

• 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 addi-
tion, there are country-specific risks.

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.

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.

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
business 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, customer dependence etc. 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 46 describes in more detail the man-

agement of these risks.

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

Significant risks and risk management

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 applica-
ble competition, export control, anti-corruption and
data protection legislation have been implemented.

At year-end 2018, 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 2018, there are considered to be
no ongoing tax cases with a significant impact
on the Group’s earnings. A tax-related case in
Finland from previously 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 19 busi-
nesses. The Group’s acquisitions in 2018 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 prin-
cipally 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 commit-
tees coordinate these activities with the help of sen-
ior coordinators for selected material components.

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

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

A Group-wide insurance program is in place, mainly
relating to property, business interruption and 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.

A new restructuring program was launched at
the end of 2018 involving the closure of about
fifty factories and offices. The scope, costs and
savings of the restructuring programs are pre-
sented 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 expansion
in recent years 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 2018 and more audits were carried out.
Internal control 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 2018

REPORT OF THE BOARD OF DIRECTORS

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 2018. 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 29,246 M (25,275) at year-end 2018. 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 swaps 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 cer-
tain counterparty risks. Such exposure may arise, for exam-
ple, as a result of the placement of surplus cash, borrowings
and derivative financial instruments. Counterparty limits are
set for each financial counterparty and are continuously
monitored.

Pension obligations
At year-end 2018, ASSA ABLOY had obligations for pensions
and other post-employment benefits of SEK 8,107 M (8,014).
The Group manages pension assets valued at SEK 5,227 M
(5,081). Provisions in the balance sheet for defined benefit
and defined contribution plans and post-employment medi-
cal benefits totaled SEK 2,880 M (2,933). 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.

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

Corporate governance

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

The Group’s corporate governance is based on the
Swedish Companies Act, the Annual Accounts Act, the
Nasdaq Stockholm’s 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 examined by ASSA ABLOY’s
auditor.

ASSA ABLOY’s objective is that its activities should gener-

ate good long-term returns for its shareholders and other
stakeholders. An effective scheme of corporate governance
for ASSA ABLOY can be summarized in a number of interact-
ing components, which are described below.

Corporate governance structure

Shareholders

Nomination Committee

Auditor

Remuneration Committee

Audit Committee

General Meeting

Board of Directors

CEO

Executive Team

Divisions

Important external rules and regulations
• Swedish Companies Act
• Annual Accounts Act
• Nasdaq Stockholm’s 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 Policy
• Internal control procedures
• Code of Conduct and Anti-Bribery Policy

At year-end 2018, ASSA ABLOY had 31,143 share-

1 Shareholders
holders (33,811). 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 (3.4 percent of the
share capital and 11.1 percent of the votes). Foreign share-
holders accounted for 70.5 percent (66.6) of the share
capital and 48.1 percent (45.4) of the votes. The ten largest
shareholders accounted for 36.9 percent (40.3) of the share
capital and 56.9 percent (59.3) of the votes. For further
information on shareholders, see page 109.

ASSA ABLOY’s Articles of Association contains a pre-
emption clause for owners 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’ agreements or
other agreements between shareholders in ASSA ABLOY.

Share capital and voting rights
ASSA ABLOY’s share capital at the end of 2018 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 company’s undertakings
in connection with its long-term incentive programs (LTI).
The 2018 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

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

that after each repurchase ASSA ABLOY holds a maximum
10 percent of the total number of shares in the company.

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

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 (103). No shares were repurchased in 2018.

Share and dividend policy
ASSA ABLOY’s Series B share is listed on Nasdaq Stockholm,
Large Cap. At the end of 2018, ASSA ABLOY’s market capitali-
zation amounted to SEK 175,954 M, calculated on both
Series A and Series B shares. 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.

2 General Meeting
Shareholders’ rights to decide on the affairs of ASSA
ABLOY are exercised at the General Meeting. Shareholders
who are registered in the share register on the record date
and have duly notified their intent to attend are entitled to
take part in the General Meeting, either in person or by
proxy. Resolutions at the General Meeting are normally
passed by simple majority. For certain matters, however, the
Swedish Companies Act prescribes that a proposal should be
supported by a higher majority. Individual shareholders who
wish to submit a matter for consideration at the General
Meeting can send such request to ASSA ABLOY’s Board of
Directors at a special address published on the company’s
website well before the Meeting.

The Annual General Meeting should be held within six
months of the end of the company’s financial year. Matters
considered at the Annual General Meeting include: dividend;
adoption of the income statement and balance sheet; dis-
charge of the Board of Directors and the CEO from liability;
election of members of the Board of Directors, Chairman of
the Board of Directors and auditor; and determination of
remuneration guidelines for senior management and fees
for the Board of Directors and auditor. An Extraordinary Gen-
eral Meeting may be held if the Board of Directors considers
this necessary or if ASSA ABLOY’s auditor or shareholders
holding at least 10 percent of the shares so request.

2018 Annual General Meeting
The Annual General Meeting in April 2018 was attended by
shareholders representing 52.7 percent of the share capital
and 67.8 percent of the votes.
The Annual General Meeting’s resolutions included the
following.
• Dividend of SEK 3.30 per share.
• Lars Renström, Carl Douglas, Ulf Ewaldsson, Eva Karlsson,
Birgitta Klasén, Sofia Schörling Högberg and Jan Svensson
were re-elected as members of the Board of Directors
and Lena Olving 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 transfers of own Series B shares.
• A long-term incentive program for senior executives
and other key employees in the Group (LTI 2018).
• Instructions for appointment of the Nomination

Committee and its assignment.

3 Nomination Committee
According to the instructions adopted by the Nomi-
nation Committee at the 2018 Annual General Meeting the
Nomination Committee shall be composed of representa-
tives of the five largest shareholders in terms of voting rights
registered in the shareholders’ register maintained by Euro-
clear Sweden AB as of 31 August the year before the Annual
General Meeting who wish to participate on the Nomination
Committee.

The Nomination Committee prior to the 2019 Annual Gen-
eral 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. Carl Douglas is also Vice Chair-
man of ASSA ABLOY’s Board of Directors. The Nomination
Committee thus deviates from the Swedish Corporate Gov-
ernance Code in that the Vice Chairman of the Board of Direc-
tors is also Chairman of the Nomination Committee. The rea-
son 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.

Should the ownership structure change, the composition

of the Nomination Committee may change to reflect such
changes.

The Nomination Committee has the task of preparing, on
behalf of the shareholders, proposals regarding the election
of Chairman of the General Meeting, members of the Board
of Directors, Chairman of the Board, Vice Chairman of the
Board, auditor, fees for the board members including divi-
sion between the Chairman, the Vice Chairman, and the
other board members, as well as fees for committee work,
fees to the company’s auditor and changes of the instruc-
tions for the Nomination Committee. The Audit Committee
assists the Nomination Committee in work associated with
the proposal regarding appointment of the auditor.

Prior to the 2019 Annual General Meeting, the Nomination

Committee makes an assessment of whether the current
Board of Directors is appropriately composed and fulfills the
requirements imposed on the Board of Directors by the com-
pany’s present situation and future direction. The annual eval-
uation of the Board of Directors and its work is part of the basis
for this assessment. Moreover, the Nomination Committee
applies ASSA ABLOY’s diversity policy for the Board of Direc-
tors, which is based on Rule 4.1 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 propos-
als 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 2019
Annual General Meeting are published at the latest in conjunc-
tion with the formal notification of the Annual General Meet-
ing, which is expected to be issued around 21 March 2019.

In accordance with the Swedish Companies Act, the

4 Board of Directors
Board of Directors is responsible for the organization and
administration of the Group and for ensuring satisfactory
control of bookkeeping, asset management and other finan-
cial circumstances. The Board of Directors decides on the
Group’s overall objectives, strategies, significant policies,
acquisitions and divestments as well as investments of major

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

Corporate governance

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 Direc-
tors approves the Annual Report and Interim Reports, pro-
poses a dividend and remuneration guidelines for senior man-
agement 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 compa-
ny’s conduct in society with the aim of ensuring long-term
value-creating capability,

• ensuring that appropriate systems are in place for monitor-
ing 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 com-

pany is transparent, 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 proce-
dure 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 Chairman 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, consulting with the CEO
on strategic issues, representing the company in matters con-
cerning the ownership structure, ensuring that the Board
receives satisfactory information on which to base decisions and
ensuring that Board decisions are implemented. In addition, the
Chairman shall ensure that the work of the Board of Directors is
evaluated annually.

The Board of Directors has at least four ordinary meetings

and one statutory 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 businesses,
combined with a board meeting. In addition, extraordinary
board meetings are held when necessary. All meetings follow
an approved agenda. Prior to each meeting, a draft agenda,
including documentation, is 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 Directors
at the statutory board meeting.

Board of Directors’ composition
The Board of Directors is elected annually at the Annual Gen-
eral Meeting for the period until the end of the next Annual
General Meeting and shall, according to the Articles of Associ-
ation, comprise a minimum of six and a maximum of ten mem-
bers elected by the Meeting. Two of the members are
appointed by the employee organizations in accordance with
Swedish law. The employee organizations also appoint two
deputies. The Board of Directors has consisted of eight elected
members and two employee representatives since the 2018
Annual General Meeting. No board members are included in
the Executive Team.

The diversity policy that ASSA ABLOY applies with respect to

the company’s Board of Directors is based on Rule 4.1 of the
Swedish Corporate Governance Code. The objective is that the
composition of the Board of Directors, taking into account the
company’s operations, phase of development and other cir-
cumstances, shall be appropriate, characterized by versatility
and breadth regarding the qualifications, experience and back-
ground of the elected members, and strive to achieve gender
equality. In 2018 the Nomination Committee has taken the
diversity policy into account when preparing its proposal for
election of members of the Board of Directors prior to the
Annual General Meeting. After the election at the 2018 Annual
General Meeting, four of eight elected board members are
women. In addition, in-depth reviews of operations were con-
ducted during the year at selected divisions in order to broaden
the expertise of the Board of Directors within ASSA ABLOY. The
Board also completed a training at the Group’s common devel-
opment center, Shared Technologies, to gain further under-
standing of ASSA ABLOY’s new technological solutions.

Board of Directors’ work in 2018
The Board of Directors held ten 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 questions that the Board of Directors
addressed during the year include impairment of goodwill
and other intangible assets, as well as operating assets in the
Chinese operation in the Asia Pacific division. In addition, the
Board of Directors addressed a number of acquisitions,
including HKC, Crossmatch and Luxer One, as well as the
divestment of the US wooden door business in the Americas
division, consisting of the two companies Graham Wood
Doors and Maiman Company, to Masonite. During the year,

SUMMARY OF BOARD OF
DIRECTORS’ WORK AND
COMMITTEE MEETINGS IN
2018

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 HID Global

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

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

the Board of Directors also conducted in-depth reviews of
the Group’s operations in Global Technologies division’s HID
Global business unit, the Entrance Systems division and the
Asia Pacific division, and visited the EMEA division’s opera-
tions in Albstadt and Berlin, Germany. The Board of Directors’
work is summarized in the timeline on pages 50–51.

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

5 Remuneration Committee
Lars Renström (Chairman) and Jan Svensson.

In 2018 the Remuneration Committee comprised

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 2019 Annual General Meeting is set out on page 57.

The Remuneration Committee also prepares, negotiates
and evaluates matters regarding salaries, bonus, pension, sever-
ance pay and incentive programs for the CEO and other senior
executives. The Committee has no decision-making powers.
The Committee held two meetings in 2018. Its work
included preparing a proposal for the remuneration of the
Executive Team, evaluating existing incentive programs, and
preparing a proposal for a new long-term incentive program.
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.

6 Audit Committee
(Chairman), Birgitta Klasén and Sofia Schörling Högberg.

In 2018 the Audit Committee comprised Jan Svensson

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 on the focus and scope of the
audit. The Audit Committee is also responsible for evaluating
the audit assignment and obtaining the results of the Swed-
ish Inspectorate of Auditors’ quality control of the auditor, as
well as informing the Board of Directors of the results of the
evaluation. The Audit Committee also has the task of sup-
porting the Nomination Committee in providing a proposal
for the appointment of auditor. Furthermore, the Audit Com-
mittee shall review and monitor the impartiality and inde-
pendence of the auditor, paying particular attention to

whether the auditor provides the company with services
other than auditing services. The Audit Committee sets
guidelines for procurement of services other than audit
services from the company’s auditor, but otherwise, the
Committee has no decision-making powers.

The Committee held four meetings in 2018. The compa-
ny’s auditor and representatives from senior management
also participated at these meetings. More important matters
dealt with by the Audit Committee during the year included
internal control, financial statements and valuation matters,
tax matters, insurance and risk management matters 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 General Meeting passes a resolution on the remunera-
tion to be paid to board members. The 2018 Annual General
Meeting passed a resolution on board fees totaling SEK
6,780,000 (excluding remuneration for committee work)
to be allocated between the members as follows: SEK
2,100,000 to the Chairman, SEK 900,000 to the Vice Chair-
man, and SEK 630,000 to each of the other members elected
by the Annual General Meeting. As remuneration for com-
mittee work, the Chairman of the Audit Committee is to
receive SEK 275,000, 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 employee repre-
sentatives do not receive board fees. For further information
on the remuneration of board members in 2018, see Note 33.

Attendance 2018, Board of Directors and Committees

Board members
Lars Renström
Carl Douglas
Ulf Ewaldsson
Eva Karlsson
Birgitta Klasén
Eva Lindqvist
Johan Molin
Lena Olving
Sofia Schörling Högberg
Jan Svensson
Rune Hjälm
Mats Persson

Board of
Directors
10/10
9/10
10/10
10/10
10/10
3/3
2/3
7/7
9/10
10/10
9/10
9/10

Audit
Committee

Remuneration
Committee
2/2

4/4

3/4
4/4

2/2

The maximum number of meetings varies due to appointment and resignation
in 2018.

Ordinary board meeting and visit
to operations
Visit EMEA
Presentation Entrance Systems
Presentation Shared Technologies
Strategy
Acquisitions

Ordinary board meeting
Interim Report Q3

Ordinary board meeting
Presentation Asia Pacific
Acquisitions
Restructuring program

Ordinary board meeting
Interim Report Q2
Acquisitions

Ordinary board meeting
Acquisitions

July

August

September

October

November

December

Extraordinary board meeting
Impairment China, Asia Pacific

Audit Committee meeting

Remuneration Committee
meeting

Audit Committee meeting

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

Board of Directors

Board members elected by the 2018 Annual General Meeting

Lars Renström

Carl Douglas

Ulf Ewaldsson

Eva Karlsson

Birgitta Klasén

Lena Olving

Sofia Schörling Högberg

Jan Svensson

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. Previ-
ously 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.

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 com panies
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.
Advisor to the President and CEO of Ericsson
1 February–31 December 2018. Senior Vice
President and Head of the Business Area Digi-
tal Services at Ericsson April 2017–January
2018. 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 Technol-
ogy Officer and Head of Group Function Tech-
nology 2012–September 2016, and Head of
Product Area Radio within the Business Unit
Networks 2007–2012.

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 Manufactur-
ing Manager 2011–2013, Director of Industrial
Marketing & Product Development Industrial
Market AB SKF 2005–2010, various positions
within the SKF Group primarily within Manu-
facturing Management.
Other appointments: Board member of
Bräcke diakoni and Valcon A/S.
Shareholdings (including through companies
and related natural parties): –

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 and Benefie Ltd.
Shareholdings (including through companies
and related natural parties):
21,000 Series B shares.

Lena Olving
Board member since 2018.
Born 1956.
Master of Science in Mechanical Engineering.
President and CEO of Mycronic AB (publ) since
2013. COO and Deputy CEO of SAAB AB 2008–
2013. Various positions within Volvo Car Cor-
poration 1980–1991 and 1995–2008 of which
five years as Senior Vice President of Volvo Cars
Asia Pacific and seven years in the Executive
Management Team. CEO of Samhall Högland
AB 1991–1995.

Other appointments: Chairman of the Royal
Swedish Opera. Board member of Investment
AB Latour, Munters Group AB, the Association
of Swedish Engineering Industries
(Teknikföretagen) and the Swedish Corporate
Governance Board (Kollegiet för svensk
bolagsstyrning). Member of the Royal Swedish
Academy of Engineering Sciences (IVA) and
board member of IVA’s Business Executives
Council (IVA:s Näringslivsråd).
Shareholdings (including through companies
and related natural parties): –

Sofia Schörling Högberg
Board member since 2017.
Born 1978.
BSc (Bachelor of Science) in Business Adminis-
tration.
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 21,654,104 Series B shares
through Melker Schörling AB as well as
463,800 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 Fager-
hult, Nederman Holding AB, Troax Group AB,
Alimak Group AB and Tomra Systems ASA.
Board member of Investment AB Latour,
Loomis AB and Oxeon AB.
Shareholdings (including through companies
and related natural parties):
6,000 Series B shares.

Appointments and shareholdings as at
31 December 2018.

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

Board members appointed by employee organizations

Rune Hjälm

Mats Persson

Bjarne Johansson

Nadja Wikström

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): –

Independence of the Board of Directors

Name

Lars Renström
Carl Douglas
Ulf Ewaldsson
Eva Karlsson
Birgitta Klasén
Lena Olving
Sofia Schörling Högberg
Jan Svensson

Position

Chairman
Vice Chairman
Board member
Board member
Board member
Board member
Board member
Board member

The Board of Directors’ composition and shareholdings

Name

Position

Elected

Lars Renström
Carl Douglas
Ulf Ewaldsson
Eva Karlsson
Birgitta Klasén
Lena Olving
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
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
2018
2017
2012
2017
1994
2015
2017

Appointments and shareholdings as at
31 December 2018.

ASSA ABLOY ANNUAL REPORT 2018

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

Independent of the company
and its management

Independent of the company’s
major shareholders

Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes

Born

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

Yes
No
Yes
Yes
Yes
No
No
No

Remuneration
Committee

Audit
Committee

Series A shares1

Series B shares1

Chairman
–
–
–
–
–
–
Member
–
–
–
–

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

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

30,000
63,900,000
–
–
21,000
–
22,117,904
6,000
–
–
–
–

REPORT OF THE BOARD OF DIRECTORS

Executive Team

Nico Delvaux

Erik Pieder

Chris Bone

Lucas Boselli

Mogens Jensen

Nico Delvaux
President and CEO and Head of Global
Technologies division since 2018.
Born 1966.
Master of Engineering in Electromechanics
and MBA.
Previous positions: President and CEO of
Metso Corporation August 2017–February
2018. Previously various positions in the Atlas
Copco Group, including Business Area Presi-
dent Compressor Technique 2014–2017,
Business Area President Construction Tech-
nique 2011–2014, and various positions in
sales, marketing, service, acquisition-integra-
tion management and general manager in
markets including Benelux, Italy, China,
Canada, and the United States 1991–2011.
Shareholdings (including through companies
and related natural parties): 27,248 Series B
shares and 94,787 call options.

Erik Pieder
Executive Vice President and Chief Financial
Officer (CFO) since 2019.
Born 1968.
MBA and Master of Laws.
Previous positions: Various positions in the
Atlas Copco Group 1996–2019, including Vice
President Business Control Compressor
Technique.
Shareholdings: –

Chris Bone
Executive Vice President and Chief Technology
Officer (CTO) since 2018.
Born 1965.
Degree in Industrial Management and
Electrical Engineering.
Previous positions: Vice President of Digital
and Access Solutions, ASSA ABLOY EMEA
2010–2017. Previously various positions in
Honeywell Inc. globally, including District
General Manager Honeywell Building Solu-
tions London and South East UK 2008–2010,
Honeywell Security Systems Group Marketing
Director 2005–2008. Previous to that various
product management and technical roles with
Honeywell and eight years in the Royal Aus-
tralian Army.
Shareholdings: 7,800 Series B shares.

Lucas Boselli
Executive Vice President and Head of
Americas division since 2018.
Born 1976.
Bachelor of Science in Industrial Engineering.
Previous positions: Various positions in the
ASSA ABLOY Group, including President of
ASSA ABLOY Central and South America 2014–
2018 and President of Yale Latin America
2012–2014. Previously various positions in
Ingersoll Rand 2000–2010.
Shareholdings: 12,035 Series B shares.

Mogens Jensen
Executive Vice President and Head of Entrance
Systems division since 2018.
Born 1958.
Master of Science in Mechanical Engineering
and Master of Business Administration.
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 Direc-
tor positions.
Shareholdings: 13,802 Series B shares.

Shareholdings as at 31 December 2018.

CEO and Executive Team

7 Organization
The Executive Team consists of the CEO, the Heads of the
Group’s divisions, the Chief Financial Officer, the Chief
Technology Officer and the Chief Human Resources Officer.
For a presentation of the CEO and the other members of the
Executive Team, see pages 54–55.

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

ASSA ABLOY’s operating structure is designed to create 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 finan-
cial 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-

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

Anders Maltesen

Maria Romberg Ewerth

Christophe Sut

Neil Vann

Stefan Widing

Anders Maltesen
Executive Vice President and Head of Asia
Pacific division since 2017.
Born 1965.
Bachelor’s degree in Marketing and Bachelor’s
degree in Financial and Management
Accounting.
Previous positions: Regional General Manager
and 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: 3,904 Series B shares.

Christophe Sut
Executive Vice President and Head of Global
Technologies business unit ASSA ABLOY
Global Solutions 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 Busi-
ness 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: 6,470 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: 16,209 Series B shares.

Maria Romberg Ewerth
Executive Vice President and Chief Human
Resources Officer (CHRO) since 2019.
Born 1978.
Bachelor’s degree in Human Resources and
MBA.
Previous positions: Senior Vice President
Human Resources ASSA ABLOY AB 2013–
2019, Vice President Human Resources ASSA
ABLOY Entrance Systems 2011–2013. HR-
manager and HR-director ASSA ABLOY
Entrance Systems 2008–2011. Previously to
that HR-positions in various companies:
JELD-WEN Sverige AB, VALEO Engine Cooling
AB and Swedish Meats 2003–2008.
Shareholdings: 9,896 Series B shares.

Neil Vann
Executive Vice President and Head of EMEA
division since 2018.
Born 1971.
Degree in Manufacturing Engineering.
Previous positions: Various positions in the
ASSA ABLOY Group, including Market Region
Manager ASSA ABLOY UK 2014–2018, Market
Region Manager Italy and Greece 2012–2014
and Vice President Operations EMEA 2011–
2012. Previously various positions within ASSA
ABLOY, Yale and Chubb 1987–2001.
Shareholdings: 10,435 Series B shares.

Changes in the Executive Team

Nico Delvaux assumed the position of President and CEO on 15 March 2018.
He succeeded Johan Molin.
Chris Bone assumed the position of Executive Vice President and CTO on 1 March
2018. He succeeded Ulf Södergren.
Lucas Boselli assumed the position of Executive Vice President and Head of
Americas division on 2 April 2018. He succeeded Thanasis Molokotos.
Neil Vann assumed the position of Executive Vice President and Head of the EMEA
division on 12 July 2018. He succeeded Tzachi Wiesenfeld
Erik Pieder was appointed Executive Vice President and CFO with effect from 14 Jan-
uary 2019. He succeeds Carolina Dybeck Happe, who left the Group on 31 December
2018.
Maria Romberg Ewerth joined the Executive Team on 1 February 2019 as Executive
Vice President and Chief Human Resources Officer.

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
auditing SKF, Scania and Investment AB Latour.

ASSA ABLOY had adopted a Code of Conduct for employ-

ees and a separate ASSA ABLOY Code of Conduct for busi-
ness partners. The Codes, which are based on a set of inter-
nationally accepted conventions, define the values and
guidelines that should apply both within the Group and for
ASSA ABLOY’s business partners with regard to matters such
as business ethics, human rights and working conditions, as
well as the environment, health and safety. Moreover, ASSA
ABLOY has adopted policies and guidelines on compliance
with competition, export control, anti-corruption and data
protection legislation applicable to the Group.

At the 2018 Annual General Meeting, Pricewater-

9 Auditor
houseCoopers (PwC) was re-appointed as the company’s
external auditor up to the end of the 2019 Annual General
Meeting. In connection with the 2018 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 Febru-
ary board meeting, at which he reports his observations and
recommendations concerning the Group audit for the year.
The external audit is conducted in accordance with Inter-
national Standards in Auditing (ISA), and generally accepted
auditing standards in Sweden. The audit of the financial
statements for legal entities outside Sweden is conducted in
accordance with statutory requirements and other applica-
ble 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 2017, Note 3.

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

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 pol-
icy, an annual financial evaluation plan etc. Regular meetings
are held with the Audit Committee. The Group has an inter-
nal audit function whose primary objective is ensuring relia-
ble 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 has been regularly reviewed and
updated, and compliance is monitored systematically in
operations.

Risk assessment
Risk assessment includes identifying and evaluating the risk
of material errors in accounting and financial reporting at
Group, division and local levels. A number of previously
established documents govern the procedures to be used
for accounting, finalizing accounts, financial reporting and
review. 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 established and carries out
annual financial evaluations in accordance with the plan

annually adopted by the Audit Committee. The results of the
financial evaluations are submitted to the Audit Committee
and the auditors.

In 2018 ASSA ABLOY further strengthened the internal
audit and internal control functions in terms of staffing and
expanded the number of audits at the local level. Each divi-
sion 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 several years ago to further improve basic pro-
cesses with an impact on the company’s financial position.

ASSA ABLOY ANNUAL REPORT 2018

REPORT OF THE BOARD OF DIRECTORS

Remuneration guidelines for senior
management

The company’s annual cost of variable remuneration for the
Executive Team as above, assuming maximum outcome, can
amount to a total of approximately SEK 55 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 shall
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.

Notice and severance pay
If the CEO is given notice, the company is liable to pay the
equivalent of maximum 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 the guidelines
The Board of Directors shall have the right to deviate from
the guidelines for remuneration to senior management
adopted by the Annual General Meeting, if there are parti-
cular reasons for doing so in an individual case.

The Board of Directors’ proposal for guidelines for
remuneration 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). The proposed guide-
lines below do not involve any material change, compared
with the guidelines adopted by the 2018 Annual General
Meeting. The basic principle is that the remuneration and
other employment conditions shall be in line with market
conditions and be competitive. ASSA ABLOY takes into
account both global remuneration practice and practice in
the home country of each member of the Executive Team.
The total remuneration of the Executive Team shall 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 shall be competitive and reflect responsibil-
ity and performance. The variable part consists of remunera-
tion paid partly in cash and partly in the form of shares. The
Executive Team shall have the opportunity to receive varia-
ble cash remuneration, based on the outcome in relation
to financial targets and, when applicable, individual targets.
This remuneration shall be equivalent to a maximum of 75
percent of the base salary (excluding social security costs).
In addition, the Executive Team shall, 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 2019 – 31 December 2021, 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 2019, one third is measured against the out-
come for 2020 and one third is measured against the out-
come for 2021. The remuneration shall, if the share price is
unchanged, be equivalent to a maximum of 90 per cent of
the base salary (excluding social security costs).

ASSA ABLOY ANNUAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

Sales and income

• Net sales increased by 10 percent to SEK 84,048 M (76,137). Organic growth was 5 percent (4).

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

• Operating income (EBIT) excluding items affecting comparability increased by 5 percent to

SEK 12,909 M (12,341), equivalent to an operating margin of 15.4 percent (16.2).

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

4 percent till SEK 8.09 (7.77).

Sales
The Group’s sales totaled SEK 84,048 M (76,137), repre-
senting a 10 percent increase.

Change in sales

Organic growth
Acquisitions and divestments
Exchange rate effects
Total

2017

2018

4
2
1
7

5
2
3
10

The total change in sales for 2018 was 10 percent (7).
Organic growth was 5 percent (4) and acquired growth and
divestments contributed 4 percent (3) and –2 percent (–1).
The exchange rate impact on sales was 3 percent (1).

Sales by product group
Mechanical locks, lock systems and fittings accounted for 26
percent (27) of total sales. Electromechanical and electronic
locks rose to 30 percent (27) of sales and entrance automa-
tion accounted for 28 percent (28). Security doors and hard-
ware accounted for 16 percent (18) of sales.

Cost structure
Total wage costs, including social security expenses and pen-
sion expenses, amounted to SEK 24,485 M (21,618), equiva-
lent to 29 percent (28) of sales. The average number of
employees was 48,353 (47,426).

The Group’s material costs amounted to SEK 30,461 M

(27,630), equivalent to 36 percent (36) of sales.

Other purchasing costs totaled SEK 15,319 M (13,144),

equivalent to 18 percent (17) of sales.

Depreciation and amortization of non-current assets
amounted to SEK 1,963 M (1,688), equivalent to 2 percent
(2) of sales.

improvements, acquisitions and exchange rate effects. The
operating margin dropped to 15.4 percent (16.2), in part
because of impairment of operating assets for Asia Pacific
of SEK 400 M. The exchange rate effects in operating income
amounted to SEK 304 M (37).

Operating income before amortization of intangible
assets recognized in business combinations (EBITA), exclud-
ing items affecting comparability, was SEK 13,302 M (12,584)
The corresponding margin was 15.8 percent (16.5).

Items affecting comparability
Impairment of goodwill and other intangible assets for Asia
Pacific was SEK 5,595 M (–). A new restructuring program
was launched during the year for a cost of SEK 1,218 M
before tax. The program involves the closure of about fifty
plants and offices over a three-year period for a total esti-
mated cost before tax of about SEK 1,500 M.

Income before tax
Income before tax excluding items affecting comparability
totaled SEK 12,110 M (11,673). The positive exchange rate
effect before taxes amounted to SEK 315 M (17). Net finan-
cial items were SEK –799 M (–668). The profit margin was
14.4 percent (15.3).

The Parent company’s operating income for 2018 contin-
ued to be stable at a high level, totaling SEK 1,801 M (1,701).

Taxes
The Group’s tax expense totaled SEK 2,542 M (3,038), equiv-
alent to an effective tax rate excluding items affecting com-
parability of 25.8 percent (26.0). The new restructuring pro-
gram increased the effective tax rate for 2018 by 0.5 percent-
age points. Impairment of goodwill and other intangible
assets further increased the effective tax rate to a total of
48 percent (26).

Operating income
Operating income (EBIT) excluding items affecting compara-
bility increased by 5 percent to SEK 12,909 M (12,341), pri-
marily due to continued growth in operations, efficiency

Earnings per share
Earnings per share before and after full dilution and exclud-
ing items affecting comparability amounted to SEK 8.09
(7.77), an increase of 4 percent.

SALES AND OPERATING INCOME

SEK M

100,000

80,000

60,000

40,000

20,000

SEK M

15,000

12,000

9,000

6,000

3,000

Sales
Omsättning
Operating income1
Rörelseresultat1

1 Excluding items affecting

comparability 2016 and 2018.

ASSA ABLOY ANNUAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated income statement
and Statement of comprehensive income

Consolidated
income statement

SEK M

Sales
Cost of goods sold
Gross income

Selling expenses
Administrative expenses
Research and development costs
Other operating income and expenses
Impairment of goodwill and other intangible assets
Share of earnings in associates
Operating income

Financial income
Financial expenses
Income before tax

Tax on income
Net income

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

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

Consolidated 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
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

Note

4
14
5
6–9, 24, 33

10
9, 11, 24

13
13

Note

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

8,633
2

7.77
7.77

2017

8,635

26
–77
–51

50
8
15
–1,864
4
–1,788

6,796

6,794
2

2018

84,048
–51,345
32,703

–13,594
–4,395
–2,893
–296
–5,595
167
6,096

20
–819
5,297

–2,542
2,755

2,753
2

2.48
8.09

2018

2,755

39
–34
6

87
2
–8
2,089
–8
2,163

4,923

4,923
1

SALES BY PRODuCT GROuP, 2018

EARNINGS PER SHARE BEFORE AND AFTER DILuTION

Mekaniska lås, låssystem
Mechanical locks, lock systems
och tillbehör, 28% (29)
and fittings, 26% (27)
Entréautomatik, 28% (27)
Entrance automation, 28% (28)
Elektromekaniska och
Electromechanical and
elektroniska lås, 26% (23)
electronic locks, 30% (27)
Säkerhetsdörrar och
Security doors and hardware,
beslag, 18% (20)
16% (18)

SEK

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

1 Excluding items affecting

comparability 2016 and 2018.

ASSA ABLOY ANNUAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

Comments by division

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

EMEA
Sales totaled SEK 20,201 M (18,081), with organic growth of
2 percent (4). Acquired units contributed 5 percent (3) net
to sales. Operating income excluding items affecting compa-
rability amounted to SEK 3,256 M (2,990), with an operating
margin (EBIT) of 16.1 percent (16.5). Return on capital
employed was 20.1 percent (21.4). Operating cash flow
before interest paid was SEK 2,819 M (2,977).

Growth was robust in the EMEA on several markets,
with total organic growth of 2 percent. Sales of electro-
mechanical locks with digital and mobile solutions con-
tinued to increase sharply during the year. Initiatives focused
on innovation and new products continued during the
year, at the same time that initiatives focused on efficiency,
automation of production, and other areas continued to
contribute to the high operating margin for EMEA.

Americas
Sales totaled SEK 19,817 M (17,940), with organic growth of
9 percent (4). Acquired units contributed 1 percent (1) net
to sales. Operating income excluding items affecting compa-
rability amounted to SEK 3,941 M (3,815), with an operating
margin (EBIT) of 19.9 percent (21.3). Return on capital
employed was 22.5 percent (24.2). Operating cash flow
before interest paid was SEK 3,903 M (3,491).

Demand was strong in North America and robust in Latin
America for most markets. Growth was extremely strong in
the US for electromechanical locks in both the commercial
and institutional customer segments, as well as in the private
residential market. Profitability continued to be strong
despite increased material costs.

Asia Pacific
Sales totaled SEK 9,949 M (9,211), with organic growth of
4 percent (0). Acquired units contributed 1 percent (0) to
sales. Operating income excluding items affecting com-
parability amounted to SEK 492 M (934), with an operating
margin (EBIT) of 4.9 percent (10.1). Impairment of operating
assets reduced operating income by a total of SEK 400 M.
Return on capital employed was 4.8 percent (7.8). Operating
cash flow before interest paid was SEK 811 M (859).

Growth was strong in South Korea, Japan and Southeast
Asia, as well as for internal sales to other business areas. Stable
growth in Pacific. Meanwhile, demand remained weak in China.
A new business strategy and organization was implemented in
China to strengthen the market position moving forward.
The operating margin declined because of impairment of
operating assets. A larger impairment loss was reported for
goodwill and other intangible assets during the year.

Global Technologies
Sales totaled SEK 11,951 M (10,373), with organic growth of
8 percent (7). Acquired units contributed 4 percent (0) net
to sales. Operating income excluding items affecting compa-
rability amounted to SEK 2,387 M (1,946), with an operating
margin (EBIT) of 20.0 percent (18.8). Return on capital
employed was 14.0 percent (14.4). Operating cash flow
before interest paid was SEK 2,463 M (1,732).

Growth for the HID Global business unit was generally
strong in the US, while the emerging markets continued to
show good growth. The market position was strengthened
by the Crossmatch acquisition. ASSA ABLOY Global Solutions
showed strong growth and good profitability, driven by con-
tinued increased demand for electromechanical door open-
ing solutions with mobile technology.

Entrance Systems
Sales totaled SEK 23,762 M (21,781), with organic growth of
4 percent (4). Acquired units contributed 1 percent (6) to
sales. Operating income excluding items affecting compara-
bility amounted to SEK 3,358 M (3,087), with an operating
margin (EBIT) of 14.1 percent (14.2). Return on capital
employed was 16.9 percent (16.4). Operating cash flow
before interest paid was SEK 2,772 M (3,065).

Strong growth was seen in North America, as well as for
service in general. Growth in Europe was robust, driven by
a strong trend in central and eastern Europe. Sales were
weaker in the emerging markets. New product launches, a
strong service offering and continued consolidation of the
production structure were contributing factors to the trend
of continued robust growth, and maintained operating
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 525 M (432).
Elimination of sales between the Group’s segments is
included in “Other”.

EXTERNAL SALES, 2018

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

ASSA ABLOY ANNUAL REPORT 2018

Results by division

EMEA

Americas

Asia Pacific

Global
Technologies

Entrance
Systems

Other

Total

CONSOLIDATED FINANCIAL STATEMENTS

SEK M

Sales, external
Sales, internal
Sales

Organic growth
Acquisitions and disposals
Exchange-rate effects

Share of earnings in associates

Operating income (EBIT) excluding
items affecting comparability
Operating margin (EBIT) excluding items
affecting comparability1
Restructuring costs
Impairment goodwill and other intangible
assets

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

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

property, plant and equipment
– of which investments in associates
Return on capital employed excluding
items affecting comparability1

Operating income (EBIT)
Restructuring costs
Impairment of goodwill, etc.
Depreciation and amortization
Net capital expenditure
Change in working capital
Cash flow

Non-cash items
Interest paid and received
Operating cash flow

2017

2018

2017

2018

17,729 19,908 17,873 19,737
79
18,081 20,201 17,940 19,817

351

293

4%
3%
0%

–

2%
5%
5%

4%
1%
0%

–

9%
1%
0%

–

2017

8,553
658
9,211

0%
0%
0%

2018

2017

2018

2017

2018

2017

2018

2017

2018

0
0
8,875 10,301 11,864 21,681 23,665
1,074
97 –1,2492 –1,6312
9,949 10,373 11,951 21,781 23,762 –1,249 –1,630

100

4%
1%
3%

7%
0%
0%

–

8%
4%
3%

4%
6%
0%

4%
1%
4%

104

147

–
–
–

–

–
–
–

–

76,137 84,048
–
76,137 84,048

–

4%
2%
1%

5%
2%
3%

129

167

2,990

3,256

3,815

3,941

934

492

1,946

2,387

3,087

3,358

–432

–525

12,341 12,909

16.5%
–

16.1%
–438

21.3%
–

19.9%
–225

10.1%
–

4.9%
–130

18.8%
–

20.0%
–218

14.2%
–

14.1%
–108

–

–5,595

–

–
–

–

–
–100

16.2%
–

15.4%
–1,218

–

–5,595

2,990
16.5%

2,818
13.9%

3,815
21.3%

3,716
18.8%

934 –5,233
–52.6%

10.1%

1,946
18.8%

2,170
18.2%

3,087
14.2%

3,250
13.7%

–432
–

–625
_

12,341
16.2%
–668
–3,038
8,635

6,096
7.3%
–799
–2,542
2,755

13,865 16,883 16,095 18,506 12,048
7,752

8,571 10,709 11,190 13,327

7,455 15,615 18,511 18,379 20,742
3,892 11,121 13,245 11,696 12,240

3,567
9

4,041
9

3,310
–

3,813
–

3,789
519

2,345
587

4,064
17

4,866
19

4,273
1,699

4,422
1,819

–71
–

140
–

–951
–

75,932 81,146
50,330 53,413

151
–

19,144 19,637
2,434

2,243

21.4%

20.1%

24.2%

22.5%

7.8%

4.8%

14.4%

14.0%

16.4%

16.9%

–

16.6%

16.2%

2,990
–
–
421
–571
136
2,977

2,818
438
–
464
–500
–401
2,819

3,815
–
–
333
–466
–191
3,491

3,716
225
–
367
–327
–78
3,903

934
–
–
310
–337
–48
859

–5,233
130
5,595
292
–6
33
811

1,946
–
–
353
–297
–271
1,732

2,170
218
–
522
–281
–165
2,463

3,087
–
–
255
–273
–4
3,065

3,250
108
–
294
–170
–709
2,772

–432
–
–
15
–30
30
–417

–221
–557

–625
100
–
24
–36
244
–293

–458
–662

12,341
–
–
1,688
–1,975
–347

6,096
1,218
5,595
1,963
–1,319
–1,076
11,706 12,477

–221
–557

–458
–662
10,929 11,357

Average number of employees

11,033 11,717

8,836

8,768 11,756 11,492

4,328

4,624 11,211 11,463

264

288

47,426 48,353

1 Items affecting comparability relate to restructuring costs as well as impairment of goodwill and other intangible assets.
2 Of which eliminations SEK 1,631 M (1,249).

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, 20181, 2

AVERAGE NuMBER OF EMPLOYEES, 2018

Legend
EMEA, 24% (24)
Legend
Americas, 29% (30)
Legend
Asia Pacific, 4% (7)
Legend
Global Technologies, 18% (15)
Legend
Entrance Systems, 25% (24)

1 “Other” is not included in the calcula-

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

2 Excluding items affecting comparability.

Legend
EMEA, 24% (23)
Legend
Americas, 18% (19)
Legend
Asia Pacific, 24% (25)
Legend
Global Technologies, 10% (9)
Legend
Entrance Systems, 24% (24)

ASSA ABLOY ANNUAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

Financial position

• Capital employed amounted to SEK 81,146 M (75,932).

• Return on capital employed remained high at 16.2 percent (16.6).

• The net debt/equity ratio was 0.56 (0.50).

SEK M

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

2017

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

2018

81,146
53,413
29,246
51,900

non-controlling interests

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 81,146 M
(75,932). The return on capital employed excluding items
affecting comparability was 16.2 percent (16.6).

Intangible assets amounted to SEK 64,861 M (61,409).
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 5,753 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 8,189 M

(8,065). Capital expenditure on property, plant and equip-
ment and intangible assets, less sales of property, plant and
equipment and intangible assets, totaled SEK 1,319 M
(1,975). Total depreciation and amortization amounted to
SEK 1,963 M (1,688).

Trade receivables amounted to SEK 14,496 M (13,068)
and inventories totaled SEK 11,316 M (9,430). The average
collection period for trade receivables was 52 days (54).
Material throughput time was 96 days (92). The Group is
making systematic efforts to increase capital efficiency.

Net debt
Net debt amounted to SEK 29,246 M (25,275), of which pen-
sion commitments and other post-employment benefits
accounted for SEK 2,880 M (2,933).

Net debt was increased by acquisitions, the dividend to

shareholders and exchange rate effects during the year,
while it was reduced by a continued strong positive operat-
ing cash flow. 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 320 M,
of which USD 295 M (320) is long-term, a GMTN program
of SEK 14,229 M (10,700), of which SEK 12,996 M (9,329)
is long-term, a loan from the European Investment Bank of
EUR 37 M (55) and USD 121 M (137), and a loan from the
Nordic Investment Bank of EUR 55 M (110). During the year,
ten new issues were made under the GMTN program for a
total amount of SEK 4,445 M. In addition, the company took
out a somewhat smaller long-term loan. 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 increased substantially due to currency fluc-
tuations, especially regarding the USD. A total of SEK 4,492 M
was raised in new long-term loans, while SEK 2,849 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 2,752 M (1,307) of the Commercial Paper Programs had
been utilized. In addition, substantial credit facilities are
available, mainly in the form of a Multi-Currency Revolving
Credit Facility of EUR 900 M (900), which was wholly unuti-
lized at year-end. The interest coverage ratio, defined as
income before tax excluding items affecting comparability
plus net interest, divided by net interest, was 17.1 (19.1).
Fixed interest terms increased during the year, with an
average term of 26 months (25) at year-end.

Cash and cash equivalents amounted to SEK 459 M (552).

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 51,900 M (50,657) at year-end.
The return on equity was 5.4 percent (17.6). The equity ratio
was 48.7 percent (49.6). The debt/equity ratio, defined as
net debt divided by equity, was 0.56 (0.50).

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 ratio
Eget kapital

1.0

0.8

0.6

0.4

0.2

0.0

SEK M

100,000

80,000

60,000

40,000

20,000

Sysselsatt kapital

Capital employed
Avkastning på
Return on capital employed1
sysselsatt kapital1

1 Excluding items affecting

comparability 2016 and 2018.

ASSA ABLOY ANNUAL REPORT 2018

Consolidated balance sheet

CONSOLIDATED FINANCIAL STATEMENTS

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

2017

2018

14
15
17
19
18

20
21

34
34
34

34
18
24
25

34
34

25
26
27

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
2,932
37,670
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

64,861
8,189
2,434
152
1,354
76,991

11,316
14,496
457
1,327
1,256
117
71
538
29,577
106,568

371
9,675
5,096
36,748
51,890
10
51,900

19,489
1,764
2,880
745
1,406
26,283

7,594
116
7,893
1,943
891
3,551
6,396
28,385
106,568

ASSA ABLOY ANNUAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

Cash flow

• Operating cash flow remained strong and amounted to SEK 11,357 M (10,929).

• The total purchase price of investments in subsidiaries was SEK 6,752 M (6,885).

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

2017

9,248
612
–1,975
3,044
10,929

2018

9,225
793
–1,319
2,658
11,357

Investments in subsidiaries
The total purchase price of investments in subsidiaries
amounted to SEK 6,752 M (6,885), of which the cash flow
effect was SEK 5,503 M (6,825). Acquired cash and cash
equivalents totaled SEK 437 M (187).

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

2017

2018

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

23,127
–10,929
612
3,044
6,790
3,332

–26
–675
25,275

25,275
–11,357
793
2,658
6,390
3,666

–39
1,862
29,246

Operating cash flow

SEK M

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

2017

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

2018

6,096
1,218
5,595
1,963
–1,319
–1,076
–662
–458
11,357

Operating cash flow/Income before tax

0.94

0.942

1 Excluding restructuring payments.
2 Excluding restructuring costs and impairment of goodwill and other intangible

assets.

The Group’s operating cash flow amounted to SEK 11,357 M
(10,929), equivalent to 94 percent (94) of income before tax
excluding items affecting comparability.

Net capital expenditure
Net capital expenditure on intangible assets and property,
plant and equipment totaled SEK 1,319 M (1,975), equiva-
lent to 67 percent (117) of amortization and depreciation
on intangible assets and property, plant and equipment. The
lower net capital expenditure compared with the previous
year is mainly due to property sales in Sweden and South
Korea.

Change in working capital

SEK M

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

2017

–158
–696
454
52
–347

2018

–983
–340
–439
686
–1,076

The material throughput time was 96 days (92) at year-end.
Capital tied up in working capital increased during the year,
which had an impact on cash flow of SEK –1,076 M (–347)
overall. The change is mainly attributable to increased
capital tied up in inventories.

INCOME BEFORE TAX AND OPERATING CASH FLOW

CAPITAL EXPENDITuRE

SEK M

15,000

12,000

9,000

6,000

3,000

Resultat före skatt1
Income before tax1
Operativt kassaflöde2
Operating cash flow2

1 Excluding items affecting

comparability 2016 and 2018.

2 Excluding restructuring payments.

Nettoinvesteringar
Net capital expenditure
Avskrivningar
Amortization and depreciation
Nettoinvesteringar
Net capital expenditure
i % av omsättningen
% of sales

SEK M

2,000

1,500

1,000

500

ASSA ABLOY ANNUAL REPORT 2018

Consolidated statement of cash flows

CONSOLIDATED FINANCIAL STATEMENTS

SEK M

OPERATING ACTIVITIES
Operating income
Amortization and depreciation
Impairment of goodwill and other intangible assets
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

2017

2018

8
14

14, 15
14, 15
30

34
34

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

6,096
1,963
5,595
1,218
–793
–458
13,621

–675
14
–2,658
10,302

–1,076
9,225

–1,793
474
–5,503
0
395
0
–6,427

–3,666
4,483
–2,849
–229
–60
–408
–2,728
70

459
70
9
538

ASSA ABLOY ANNUAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

Changes in consolidated equity

SEK M

Opening balance 1 January 2017 accord-
ing to adopted Annual Report
Adjustment, misclassification
New opening balance 31 December 2017
Net income
Other comprehensive income
Total comprehensive income
Dividend
Stock purchase plans
Total contributions by and distributions
to Parent company’s shareholders
Change in non-controlling interest
Total transactions with shareholders
Closing balance 31 December 2017

Opening balance 1 January 2018
Net income
Other comprehensive income
Total comprehensive income
Dividend
Stock purchase plans
Total contributions by and distributions
to Parent company’s shareholders
Change in non-controlling interest
Total transactions with shareholders
Closing balance 31 December 2018

Parent company’s shareholders

Share
capital

Other
contributed
capital

Note

Reserves

Retained
earnings

Non-
controlling
interests

371

9,675

2,540
2,179
4,720

–1,788
–1,788

371

9,675

2,932

371

9,675

2,932

2,164
2,164

371

9,675

5,096

34,634
–2,179
32,455
8,633
–51
8,582
–3,332
–33

–3,366
0
–3,366
37,670

37,670
2,753
6
2,759
–3,666
–15

–3,681
–
–3,681
36,748

5
–
5
2
0
2
–
–

–
3
3
9

9
2
–1
1
–
–

–
–
–
10

Total

47,224
–
47,224
8,635
–1,839
6,796
–3,332
–33

–3,366
3
–3,363
50,657

50,657
2,755
2,168
4,923
–3,666
–15

–3,681
–
–3,681
51,900

EQuITY PER SHARE AFTER DILuTION AND
RETuRN ON EQuITY AFTER TAX

DIVIDEND AND EARNINGS PER SHARE

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 2016 and 2018.

ASSA ABLOY ANNUAL REPORT 2018

PARENT COMPANY FINANCIAL STATEMENTS

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

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

2018

–1,911
–1,119
81
4,750
1,801

2,805
–654
3,951

1,608
–113
–650
4,796

2018

4,796

–
4,796

Note

2017

2018

14
15
16
19

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

2,997
37
34,738
1,782
39,554

17,169
17
9
0
17,195
56,749

371
275
8,905
219

787
13,053
23,610

678

13,771
50
13,821

1,697
198
16,228
94
5
419
18,641
56,749

ASSA ABLOY ANNUAL REPORT 2018

PARENT COMPANY FINANCIAL STATEMENTS

Cash flow statement –
Parent company

SEK M

OPERATING ACTIVITIES
Operating income
Depreciation and amortization
Cash flow before interest and tax

Interest paid and received
Dividends received
Tax paid and received
Cash flow before changes in working capital

Change in working capital
Cash flow from operating activities

INVESTING ACTIVITIES
Investments in tangible and intangible assets
Investments in subsidiaries
Other investments
Cash flow from investing activities

FINANCING ACTIVITES
Dividend
Loans raised
Loans repaid
Cash flow from financing activities
CASH FLOW

CASH AND CASH EQUIVALENTS
Cash and cash equivalents at 1 January
Cash flow
Cash and cash equivalents at 31 December

Note

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

2018

1,801
609
2,410

–287
2,479
–556
4,046

1,326
5,372

–115
–526
0
–641

–3,666
5,249
–6,314
–4,731
0

0
0
0

Change in equity –
Parent company

SEK M

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

Opening balance 1 January 2018
Net income
Total comprehensive income
Dividend for 2017
Stock purchase plans
Reclassifications
Total transactions with shareholders
Closing balance 31 December 2018

Restricted equity

Non-restricted equity

Share
capital

Revaluation
reserve

Statutory
reserve

Fund for
development
expenses

371

275

8,905

–

Share
premium
reserve

787

371

275

8,905

139
139
139

787

371

275

8,905

139

787

371

275

8,905

80
219
219

787

Retained
earnings

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

12,017
4,796
4,796
–3,666
–15
–80
–3,757
13,053

Total

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

22,494
4,796
4,796
–3,666
–15
–
–3,680
23,610

ASSA ABLOY ANNUAL REPORT 2018

Notes

Note 1 Significant accounting and valuation principles
Group
ASSA ABLOY applies International Financial Reporting Stand-
ards (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 2018 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 42–102.

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.

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 assess-
ments also affect valuation of deferred taxes, other provi-
sions and deferred considerations. Estimates and assess-
ments are continually evaluated and are based on both his-
torical experience 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.

NOTES

New and revised standards applied by the Group
The Group has applied the following standards for the first
time for the financial year beginning 1 January 2018:
• IFRS 9 Financial Instruments
• IFRS 15 Revenue from contracts with customers

IFRS 9 addresses classification, measurement and recogni-
tion of financial assets and liabilities and replaces the parts of
IAS 39 that relate to these areas. IFRS 9 entails implementa-
tion of a new impairment model 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, though the Standard have not had any material
impact on the Group’s performance and financial position.
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 new Stand-
ard introduces a five-step process that must be applied
before revenue can be recognized from customer contracts.
The Standard prescribes that an entity shall recognize reve-
nue when the entity satisfies a performance obligation by
transferring a promised good or service to a customer. The
good or service is transferred when the customer acquires
control over the asset, which may happen either over time
or at a particular point in time. In all important respects the
Group’s previous revenue recognition practices conform
with IFRS 15 and the new Standard will therefore have no
impact on the Group’s performance and financial position.
However, additional information about the disaggregation
of revenue, contract assets and contract liabilities, as well as
remaining performance obligations can be found in Note 2.

New and revised IFRS not yet effective
The following new standards and interpretations 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 16 Leases
• IFRIC 23 Accounting for uncertainty over income tax

treatments

The Group has applied IFRS 16 from 1 January 2019. During the
transition, all leases, except short-term leases and leases for
low-value assets, are recognized in the consolidated balance
sheet. Under the standard, an asset (the right to use the leased
item) and a financial liability representing the obligation to
make lease payments are recognized. The Group’s lease liability
as of 1 January 2019 is SEK 3,802 M. Additional information
about the financial effects of the transition to IFRS 16 can be
found in Note 6. The Group has applied the cumulative catch-
up approach as transition method and does not restate any
comparative information. In addition, the Group has chosen
not to recognize right-of-use and lease liability regarding obli-
gations for short-term leases and low-value leases.

IFRIC 23 explains how an entity should determine the
method with which a transaction should be measured and
recognized when there is uncertainty over income tax treat-
ments. The Group applies the new guidance commencing
on 1 January 2019. In conjunction with the application, the
Group reassessed its uncertain tax positions based on the
new guidance, which resulted in an increased provision for
uncertain income taxes of SEK 234 M. The Group has chosen
a modified retrospective approach for initial application of
the interpretation, in which comparative figures is not
restated. The effect of initial application is recognized as an
adjustment to equity in the first quarter of 2019.

ASSA ABLOY ANNUAL REPORT 2018

NOTES

Note 1 cont.

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

The consolidated financial statements have been pre-

pared in accordance with the purchase method, which
means that the cost of shares in subsidiaries was eliminated
against their equity at the acquisition date. In this context,
equity in subsidiaries is determined on the basis of the fair
value of assets, liabilities and contingent liabilities at the
acquisition date. Consequently, only that part of the equity
in subsidiaries that has arisen after the acquisition date is
included in consolidated equity. The Group determines on
an individual basis for each acquisition whether a non-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.

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

Non-controlling interests
Non-controlling interests are based on the subsidiaries’
accounts with application of fair value adjustments resulting
from a completed acquisition analysis. Non-controlling
interests’ share in subsidiaries’ earnings is recognized in the
income statement, in which net income is attributed to the
Parent company’s shareholders and to non-controlling inter-
ests. Non-controlling interests’ share in subsidiaries’ equity
is recognized separately in consolidated equity. Transactions
with non-controlling interests are recognized as transac-
tions with the Group’s shareholders in equity.

Associates
Associates are defined as companies which are not sub sidi-
aries 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 accord-
ance 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 associ-
ates’ earnings after the acquisition date. Dividends from
associates are recognized as a reduction in the carrying
amount of the holdings. The share of associates’ earnings
is recognized in the consolidated income statement in
operating income as the holdings are related to business
operations.

operating segments. The divisions form the operational
structure for internal control and reporting and also consti-
tute the Group’s segments for external financial reporting.
The Group’s business is divided into five divisions. Three divi-
sions are based on products sold in local markets in the
respective division: EMEA, Americas and Asia Pacific. Global
Technologies and Entrance Systems consist of products sold
worldwide.

Foreign currency translation
Functional currency corresponds to local currency in each
country where Group companies operate. Transactions in
foreign currencies are translated to functional currency by
application of the exchange rates prevailing on the transac-
tion date. Foreign exchange gains and losses arising from the
settlement of such transactions are normally recognized in
the income statement, as are those arising from translation
of monetary balance sheet items in foreign currencies at the
year-end rate. Exceptions are transactions relating to qualify-
ing cash flow hedges, which are recognized in other compre-
hensive income. Receivables and liabilities are measured at
the year-end rate.

In translating the accounts of foreign subsidiaries pre-
pared in functional currencies other than the Group’s pres-
entation 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 recog-
nized as translation differences in other comprehensive
income.

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

Country

Currency

2017

2018

2017

2018

Average rate

Closing rate

United Arab
AED
Emirates
ARS
Argentina
AUD
Australia
BRL
Brazil
CAD
Canada
CHF
Switzerland
CLP
Chile
CNY
China
Czech Republic CZK
DKK
Denmark
Euro zone
EUR
United King-
dom
Hong Kong
Hungary
Israel
India
Kenya
South Korea
Mexico
Malaysia
Norway
New Zealand
Poland
Romania
Thailand
Turkey
US
South Africa

GBP
HKD
HUF
ILS
INR
KES
KRW
MXN
MYR
NOK
NZD
PLN
RON
THB
TRY
USD
ZAR

2.33
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
0.0076
0.45
1.99
1.03
6.07
2.26
2.11
0.25
2.36
8.55
0.64

2.37
0.33
6.49
2.39
6.71
8.91
0.014
1.31
0.40
1.38
10.27

2.25
0.43
6.43
2.49
6.57
8.44
0.013
1.27
0.39
1.32
9.86

11.57
1.11
0.032
2.42
0.128
0.086

11.11
1.06
0.032
2.38
0.129
0.080
0.0079 0.0077
0.42
0.4522
2.03
2.15
1.00
1.06
5.86
6.01
2.36
2.41
2.12
2.21
0.25
0.27
2.18
1.88
8.25
8.70
0.67
0.66

2.45
0.23
6.34
2.32
6.60
9.12
0.013
1.31
0.40
1.38
10.29

11.37
1.15
0.032
2.38
0.128
0.088
0.0081
0.4561
2.16
1.03
6.03
2.40
2.21
0.28
1.71
8.98
0.62

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

Revenue
The Group recognizes revenue from contracts with custom-
ers based on the five-step process described in IFRS 15. Reve-
nue is recognized when the entity satisfies a performance
obligation by transferring a promised good or service to a

ASSA ABLOY ANNUAL REPORT 2018

Note 1 cont.

NOTES

customer. The good or service is transferred when the cus-
tomer acquires control over the asset, which may happen
either over time or at a particular point in time.

Under the five-step process an entity must complete the
following steps before revenue can be recognized: Identify
contracts with customers, identify performance obligations,
determine the transaction price, allocate the transaction
price to each of the separate performance obligations, and
finally recognize the revenue attributable to each perfor-
mance obligation.

At the beginning of the customer contract ASSA ABLOY

determines whether the goods and/or services that are
promised in the agreement comprise one performance
obligation or several separate performance obligations.

A performance obligation is defined as a distinct promise

to transfer a good or a service to the customer. A promised
good or service is distinct if both of the following criteria
are met:
a) the customer can benefit from the good or service sepa-
rately or together with other resources that are readily
available to the customer and

b) the Group's promise to transfer the good or service to the
customer is separately identifiable from other promises
in the contract.

When determining the transaction price, which is the
amount of consideration promised in the contract, the
Group takes into account any variable considerations, such
as cash discounts, volume-based discounts, and right of
returns. The transaction price includes variable considera-
tion only if it is highly probable that a significant reversal of
the revenue is not expected to occur in a future period.

ASSA ABLOY receives payment in advance from custom-

ers to a limited extent. No customer contracts within the
Group relating to the sale of goods or services are assessed
to contain a significant financing component. The Group
does not recognize any contract costs since the Group
applies the practical expedient permitted by the standard,
under which incremental costs of obtaining a contract are
recognized as an expense when incurred if the amortization
period of the asset that the Group otherwise would have
recognized is one year or less.

ASSA ABLOY allocates the transaction price for each per-

formance obligation on the basis of a stand-alone selling
price. The stand-alone selling price is the price for which the
Group would sell the good or service separately to a cus-
tomer. In cases where a stand-alone selling price is not
directly observable, it is usually calculated based on the
adjusted market assessment approach or the expected
cost plus a margin approach.

Any discounts are allocated proportionately to all perfor-

mance obligations in the contract, provided there is not
observable evidence that the discount does not relate to all
performance obligations.

ASSA ABLOY recognizes revenue when the Group satisfies
a performance obligation by transferring a good or service to
a customer, i.e. as the customer gains control over the asset.
A performance obligation is met either over time or at a par-
ticular point in time. ASSA ABLOY recognizes revenue over
time if any of the following criteria are met:
a) the customer simultaneously receives and consumes the
benefits provided by the Group’s performance as the
Group performs an obligation

b) the Group’s performance creates or enhances an asset
that the customer controls as the asset is created or
enhanced

c) the Group’s performance does not create an asset with
an alternative use to the Group and the Group has an
enforceable right to payment for performance completed
to date.

Revenue that is not recognized over time is recognized at a
given point in time, i.e. the point in time when the customer
gains control over the asset.

The Group’s revenue mainly consists of product sales.
Service related to products sold represents a limited share
of revenue. Revenue for the sale of the Group’s products is
recognized at a given point in time when the customer gains
control over the product, usually at the time of delivery.
ASSA ABLOY also carries out installation services, which are
recognized over time. For shorter installation jobs, revenue
is recognized in practice upon completion of installation.
Revenue from service contracts is recognized over time.
For product sales, a receivable is recognized when the
goods have been delivered, since this is usually the point in
time when the consideration becomes unconditional. Pay-
ment terms for trade receivables differ among geographic
markets. The average collection period for trade receivables
in 2018 was 52 days.

Intra-Group sales
Transactions between Group companies are carried out at
arm’s length and thus at market prices. Intra-Group sales are
eliminated from the consolidated income statement, and
profits on such transactions have been eliminated in their
entirety.

Government grants
Grants and support from governments, public authorities
and the like are recognized when there is reasonable assur-
ance that the company will comply with the conditions
attaching to the grant and that the grant will be received.
Grants relating to assets are recognized after reducing the
carrying amount of the asset by the amount of the grant.

Research and development
Research expenditure is expensed as incurred. Development
expenditure is recognized in the balance sheet to the extent
that it is expected to generate future economic benefits for
the Group and provided such benefits can be reliably meas-
ured.

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 com-
prehensive income are themselves recognized against equity
or in other comprehensive income. The liability method is
used in accounting for deferred tax. This means that deferred

ASSA ABLOY ANNUAL REPORT 2018

NOTES

Note 1 cont.

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 for-
ward or other future tax allowances are recognized to the
extent that it is probable that the allowance can be offset
against taxable income in future taxation. Deferred tax liabili-
ties for temporary differences relating to investments in sub-
sidiaries are not recognized in the consolidated financial
statements, since the Parent company can control the time at
which the temporary differences are reversed, and it is not
considered likely that such reversal will occur in the foreseea-
ble 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.

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
recognized in the income statement as ‘Other operating
income’ or ‘Other operating expenses’, and consists of the
difference between the selling price and the carrying
amount.

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.

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.

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 proba-
ble that economic benefits associated with the asset will flow
to the Group, and if the cost can be reliably measured. Expend-
iture 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

Impairment
Assets with an indefinite useful life are not amortized but are
tested for impairment on an annual basis. For impairment
testing purposes, assets are grouped at the lowest organiza-
tional level where there are separate identifiable cash flows,
so-called cash generating units (CGU).

For assets that are depreciated/amortized, impairment
testing is carried out when events or circumstances indicate
that the carrying amount may not be recoverable.
Impairment losses are recognized in the amount by which
the carrying 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.

Regarding provisions for expected credit losses on trade

receivables, see the section Impairment of financial assets.
The year’s change in expected credit losses is recognized in
the income statement as selling expenses.

Financial assets
Financial assets include cash and cash equivalents, trade
receivables, short-term investments, derivatives and other
financial assets. The Group applies IFRS 9 from 1 January
2018, but has chosen not to restate comparative figures.
Comparative figures are therefore presented in accordance
with previous accounting principles. Information about
accounting principles for financial assets until 31 December
2017 can be found at the end of Note 1.

Under IFRS 9, the Group classifies financial assets in the
categories financial assets at amortized cost, financial assets
at fair value through profit or loss, or financial assets at fair
value through other comprehensive income.

Financial assets at amortized cost
Financial assets at amortized cost mainly comprise trade
receivables and cash and cash equivalents. A financial asset is
measured at amortized cost if the asset is held within a busi-
ness model whose objective is to hold financial assets to col-

ASSA ABLOY ANNUAL REPORT 2018

Note 1 cont.

lect their contractual cash flows, and the contractual terms
of the financial asset give rise, on specified dates, to cash
flows that are solely payments of principal and interest on
the principal amount outstanding.

Financial assets in this category are initially recognized at

fair value plus transaction costs that are directly related to
the purchase and then at amortized cost.

Financial assets at fair value through other comprehensive
income
A financial asset is measured at fair value through other
comprehensive income if the asset is held within a business
model whose objective is achieved by both collecting con-
tractual cash flows and selling financial assets, and also the
contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.

Financial assets in this category are initially recognized at

fair value plus transaction costs that are directly related to
the purchase and then at fair value through other compre-
hensive income. As of the reporting date the Group has no
financial assets in this category.

Financial assets at fair value through profit or loss
Financial assets that are not recognized in any of the other
categories are measured at fair value through profit or loss.
Financial assets in this category are initially recognized at fair
value. Transaction costs related to financial assets recog-
nized in this category are expensed directly in the income
statement. As of the reporting date, this category comprises
shares and participations.

Impairment of financial assets
From 1 January 2018 the Group has applied the IFRS 9 simpli-
fied approach to measuring expected credit losses for trade
receivables. Under this approach, a provision is made for life-
time expected credit losses for the trade receivable. For cal-
culation of expected credit losses, the trade receivables are
grouped based on the number of days past due. Expected
credit losses on trade receivables that are not past due are
primarily based on actual credit losses from recent years.

Impairment that would be considered for other financial

assets that are within the scope of expected credit losses
have been assessed to be immaterial.

Financial liabilities
Financial liabilities include deferred considerations, loan
liabilities, trade payables and derivative instruments. Recog-
nition depends on how the liability is classified. The Group
classifies financial liabilities in the categories: financial liabili-
ties at amortized cost and financial liabilities at fair value
through profit or loss.

Financial liabilities are initially measured at fair value less,

for a financial liability that is not measured at fair value
through profit or loss, transaction costs that are directly
related to the acquisition or issue of the financial liability.
After initial recognition, financial liabilities are recognized
either at amortized cost or at fair value through profit or loss,
depending on the classification of the financial liability.

Financial liabilities at fair value through profit or loss
This category includes derivatives with a negative fair value
that are not used for hedge accounting and deferred consid-
erations. Liabilities are measured at fair value on a continu-
ous basis and changes in value are recognized in the income
statement.

NOTES

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 sub-
sequently at amortized cost using the effective interest
method.

Recognition and measurement of financial assets and
liabilities
Acquisitions and sales of financial assets are recognized on
the trade date, the date on which the Group commits to pur-
chase or sell the asset. Transaction costs are initially included
in fair value for all financial instruments, except for those rec-
ognized at fair value through profit or loss where the transac-
tion cost is recognized through profit or 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 determine fair
value. These include use of available information on current
arm’s length transactions, comparison with equivalent
assets and analysis of discounted cash flows. 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 bene-
fits 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.

Financial assets and liabilities are offset against each other
and the net amount is recognized in the balance sheet when
there is a legal right of set-off and there is an intention to set-
tle the items by a net amount. See note 34 for disclosures
about offsetting of financial assets and liabilities.

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

The Group designates derivatives as follows:

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

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

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

ASSA ABLOY ANNUAL REPORT 2018

NOTES

Note 1 cont.

For information on the fair value of derivative instruments,
see Note 34, ‘Financial risk management and financial instru-
ments’. Derivatives at fair value, with a maturity of more than
12 months, are classified as non-current interest-bearing lia-
bilities or receivables. Other derivatives are classified as cur-
rent interest-bearing liabilities and investments respectively.

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

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

Net investment hedges
For derivatives that are designated and qualify as net invest-
ment hedges, the portion of value changes in fair value 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
foreign operation, or part thereof, is sold.

Provisions
A provision is recognized when the Group has a legal or con-
structive obligation resulting from a past event and it is prob-
able that an outflow of resources will be required to settle
the obligation, and that a reliable estimate of the amount
can be made. Provisions are recognized at a value equivalent
to the outflow of resources that will probably be required
to settle the obligation. The amount of a provision is dis-
counted to present value where the effect of time value is
considered material.

Assets and liabilities of 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.

are found chiefly in the US, the UK and Germany. Post-employ-
ment medical benefits are also provided, mainly in the US, and
are reported in the same way as defined benefit pension plans.
Calculations relating to the Group’s defined benefit plans are
performed by independent actuaries and are based on a num-
ber of actuarial assumptions such as discount rate, future infla-
tion and salary increases. Obligations are valued on the report-
ing date at their discounted value. For funded plans, obliga-
tions are reduced by the fair value of the plan assets. Actuarial
gains and losses resulting from experience-based adjustments
and changes in actuarial assumptions are recognized in other
comprehensive income during the period they arise. The pen-
sion expense for defined benefit plans is spread over the
employee’s service period. The Group’s payments relating to
defined contribution pension plans are recognized as an
expense in the period to which they relate, based on the ser-
vices 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. Detailed
information about the structure of the various programs can
be found in Note 33 Employees. For the long-term incentive
program, personnel costs during the vesting period are rec-
ognized based on the shares’ fair value on the allotment
date, that is, when the company and the employees entered
into an agreement on the terms and conditions for the pro-
gram. The long-term incentive program through 2017 com-
prised 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. Beginning in 2018, no matching por-
tion is included in the long-term incentive programs.

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
recognized 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.

Remuneration of employees
The Group operates both defined contribution and defined
benefit pension plans. Comprehensive defined benefit plans

Earnings per share
Earnings per share before dilution is calculated by dividing
the net income attributable to the Parent company’s share-

ASSA ABLOY ANNUAL REPORT 2018

Note 1 cont.

NOTES

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.

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

Dividend
Dividend revenue is recognized when the right to receive
payment is considered certain.

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

Research and development costs
Research and development costs are expensed as incurred.

Financial assets – Accounting principles applied through
31 December 2017
Financial assets are classified in the following categories:
financial assets at fair value through profit or loss, available-
for-sale financial assets, and loans and receivables. Manage-
ment determines the classification of financial assets at ini-
tial recognition.

Financial assets at fair value through profit or loss
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 or loss. A financial
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.

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.

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.

Trade receivables
Trade receivables are recognized initially at fair value and
subsequently measured at amortized cost using the effective
interest method. From 1 January 2018 the Parent company
has applied the IFRS 9 simplified approach to measuring the
expected credit loss allowance for trade receivables. How-
ever, the expected credit losses attributable to the Parent
company’s trade receivables have been assessed to be
immaterial.

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.

Leasing
In the Parent company all lease agreements are classified as
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 2018

NOTES

Note 2 Sales revenue

Disaggregation of revenue from contracts with customers

Sales by product group

EMEA

Americas

Asia Pacific

Global
Technologies

Entrance
Systems

Other

Group

SEK M

2017

2018

2017

2018

9,391 10,076
6,605
5,624
3,155
2,760
365
306

7,650
3,876
8,220
70
18,081 20,201 17,940 19,817

7,304
2,659
7,935
42

2017

4,711
1,827
2,662
12
9,211

2018

2017

2018

2017

2018

2017

2018

2017

2018

9
9
4,978
11
891
704
2,332 10,340 11,938
2
2,627
–
–
– 21,068 22,862
12

–678 20,796 22,046
–779 20,717 24,863
–70 13,301 13,933
–103 21,322 23,205
9,949 10,373 11,951 21,781 23,762 –1,249 –1,630 76,137 84,048

–651
–436
–56
–105

–
–

EMEA

Americas

Asia Pacific

Global
Technologies

Entrance
Systems

Other

Group

2017

2018

2017

2018

15,677 17,597

49
43
606 16,160 18,071
1,582
1,619
100
14
23
840
99
83
951
8
6
106
18,081 20,201 17,940 19,817

582
98
686
943
93

2017

485
563
43
9
6,311
1,800
9,211

2018

2017

2018

2017

2018

2017

2018

2017

2018

2,725
4,510
363
349
2,106
319

–663 28,961 31,941
3,016 10,611 11,397
551
–688 30,635 35,036
9,239 10,405
5,718
923
2,278
2,176
89
493
48
1,342
1,099
60
441
15
–126 10,617 10,843
1,302
2,008
6,610
1,802
2,608
2,649
508
275
9,949 10,373 11,951 21,781 23,762 –1,249 –1,630 76,137 84,048

–587
–420
–31
–24
–95
–90

84
57
1,269
521

–35
–28

–91

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

Sales by continent

SEK M

Europe
North America
Central and South America
Africa
Asia
Oceania
Total

Customer sales by country

Group

SEK M

US
China
Sweden
France
United Kingdom
Germany
Canada
Australia
Netherlands
Finland
South Korea
Norway
Belgium
Denmark
Mexico
Spain
Poland
Brazil
Switzerland
Italy
India
United Arab Emirates
Austria
South Africa
New Zealand

2017

26,940
4,853
4,203
3,714
3,134
3,193
2,420
2,145
1,866
1,761
1,556
1,580
1,423
1,308
1,274
1,057
697
922
784
811
621
585
632
488
484

2018

30,970
4,768
4,551
3,960
3,728
3,310
2,659
2,100
2,090
1,964
1,736
1,657
1,550
1,449
1,407
1,223
1,014
945
902
889
624
609
609
592
490

SEK M

Czech Republic
Ireland
Saudi Arabia
Chile
Singapore
Hong Kong
Israel
Turkey
Philippines
Thailand
Colombia
Malaysia
Japan
Hungary
Russia
Portugal
Romania
Tanzania
Estonia
Indonesia
Slovakia
Kazakhstan
Croatia
Vietnam
Other countries
Total

2017

447
278
406
365
300
280
297
362
221
215
243
251
200
182
211
189
166
79
161
158
138
100
113
97
2,224
76,137

2018

451
427
374
373
311
298
294
277
247
239
238
237
220
219
212
208
206
202
182
172
158
126
126
121
2,335
84,048

Contract assets and contract liabilities
The Group recognizes the following revenue-related contract
assets and contract liabilities:

Contract assets

SEK M

Accrued revenue
Total

Contract liabilities

SEK M

Long-term advances from customers
and deferred revenue
Short-term advances from customers
and deferred revenue
Total

Group

2017

231
231

2018

272
272

Group

2017

2018

1,241
1,270

1,722
1,753

Contract liabilities during the year have increased by SEK 483 M.
Acquired companies account for SEK 81 M of this increase.
Divested companies have not had any effect on this item. The
total contract liability as at 31 December 2017 of SEK 1,270 M
has in all important respects been recognized in 2018.

Remaining performance obligations
The total transaction price allocated to unsatisfied perfor-
mance obligations at the reporting date amounts to
SEK 12,282 M. Of this amount, SEK 11,572 M is expected to be
recognized as revenue in 2019, while an estimated SEK 710 M
will be recognized as revenue in 2020 or later.

In accordance with the transition provisions in IFRS 15,

the Group does not disclose information about the total
transaction price allocated to unsatisfied performance
obligations as at 31 December 2017.

ASSA ABLOY ANNUAL REPORT 2018

Note 3 Auditors’ fees

Note 6 Operating leases

Notes

Group

Parent company

Group

Parent company

2017

2018

2017

2018

SEK M

2017

2018

2017

2018

SEK M

Audit assignment
PwC
Others

Audit-related services in
addition to audit assign-
ment
PwC

Tax advice
PwC
Others

Other services
PwC
Others
Total

52
16

10
9

56
16

8
9

32
6
126

17
14
122

5
–

1
1

1
0
8

5
–

0
1

1
0
7

The auditors’ fee for PwC in Sweden during the year was
SEK 8 M (8) and the fee for extra services was SEK 2 M (8).

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
Restructuring costs
Revalued Earnout
Other, net
Total

2017

6
–40
45
–42
–86
–2
–191
–
300
165
156

2018

14
–54
265
11
–107
–51
–400
–142
296
–128
–296

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
PT Jasuindo Arjo Wiggins Security
SARA Loading Bay Ltd
Saudi Crawford Doors Factory Ltd
Others
Total

Group

2017

2018

91
25
–
0
12
0
129

146
17
3
–1
2
–
167

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 2018.

Lease payments
during the year
Total

Nominal value of agreed
future lease payments:
Due for payment in:
(2018) 2019
(2019) 2020
(2020) 2021
(2021) 2022
(2022) 2023
(2023) 2024 or later
Total

1,029
1,029

1,084
1,084

19
19

904
726
542
398
276
373
3,218

1,144
943
727
480
334
517
4,144

23
23
24
25
26
26
147

11
11

13
11
4
0
0
0
28

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.

Effects of the transition to IFRS 16
From 1 January 2019 the Group has applied IFRS 16 Leases.
For the transition to the new standard, the Group’s liability
arising from obligations for operating leases is SEK 3,718 M.
Adjusted for advance lease payments, the liability is
SEK 3,711 M. The Group’s total lease liability at the beginning
of 2019, including financial lease liability recognized in
accordance with IAS 17, is SEK 3,802 M.

The lease liability based on the Group's operating lease
obligations as at 31 December 2018 is derived as shown in
the table below.

SEK M

Obligations, operating leases, as at 31 December 2018
Less: Obligations, short-term leases and low-value
leases
Less: Reclassifications, new assessments, etc.
Adjusted lease obligations as at 31 December 2018

Effect of discount at incremental borrowing rate
Less: Advance lease payments
Plus: Liabilities, financial leases, as at 31 December 2018
Lease liability as at 1 January 2019

Group

2018

4,144

–187
–8
3,950

–231
–7
91
3,802

The carrying amount for right-of-use attributable to operat-
ing leases measured according to IFRS 16 as at 1 January
2019 is SEK 3,718 M. This amount includes SEK 3,043 M for
buildings and land, while the remainder is primarily attribut-
able to cars and other vehicles. The Group has chosen to
measure right of use for an amount equal to the lease liabil-
ity as at the reporting date, adjusted for accrued and advance
lease payments. The value of operating leases recognized in
accordance with IAS 17 as at 31 December 2018 is SEK
119 M. The total value of the Group’s right-of-use assets
as at 1 January 2019 is therefore SEK 3,837 M.

When measuring right-of-use and lease liability, the
Group made estimates and assumptions such as whether
any options to extend or terminate a lease agreement will be
exercised. The discount rate was determined based on the
Group’s incremental borrowing rate in different currencies.
The Group’s assessment is that the new rules will have a
slight positive impact on operating income. No significant
effect on the year´s net income is expected.

ASSA ABLOY ANNUAL REPORT 2018

NOTES

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

2017

21,618
27,630

1,688
13,144
64,081

2018

24,485
30,461

1,963
15,319
72,228

Note 8 Depreciation and amortization

SEK M

Intangible assets
Machinery
Equipment
Buildings
Land improvements
Finance leases
Total

Group

Parent company

2017

598
528
334
210
7
11
1,688

2018

2017

2018

802
549
364
220

10
18
1,963

329
–
10
–
–
–
339

593
–
16
–
–
–
609

Note 12 Tax on income

Group

Parent company

SEK M

2017

2018

2017

Current tax
Tax attributable to prior years
Withholding tax
Deferred tax
Total

–3,025
279
–52
–240

–3,069
82
–34
479
–3,038 –2,542

–484
–
–6
187
–303

2018

–640
18
–2
–26
–650

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

Group

Parent company

Percent

2017

2018

2017

2018

Swedish income tax rate
Effect of foreign tax rates
Non-taxable income/non-
deductible expenses
Exercised/new, not yet meas-
ured tax loss carryforwards
Effect of impairment of intan-
gible assets
Other
Effective tax rate in income
statement

22
8

–1

–
–2

22
3

22
–3

22
–

–16

–

–
–

22
–

–8

–

–
–

Note 9 Exchange differences in the income statement
Parent company

Group

SEK M

2017

2018

2017

2018

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

Group

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

–2

–51

–13

–41

20
18

7
–44

8
–5

–18
–59

SEK M

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

2017

2018

8,633
8,633

2,753
2,753

1,110,776 1,110,776
2.48

7.77

Note 10 Financial income

SEK M

2017

2018

2017

2018

Group

Parent company

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

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

18
19

Note 11 Financial expenses

–

–
–
3

17
20

2,783

2,551

49
123
0

64
190
0

0
2,955

–
2,805

Group

Parent company

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)

Group

2017

2018

8,633
–
8,633

2,753
6,229
8,982

1,110,776 1,110,776

7.77

8.09

SEK M

2017

2018

2017

2018

1 Items affecting comparability relate to restructuring costs and impairment of

goodwill and other intangible assets

Intra-Group interest
expenses
Interest expenses, other
liabilities1
Interest expenses,
interest rate swaps
Interest expenses,
currency derivatives
Exchange rate differences
on financial instruments
Fair value adjustments on
shares and interests
Other financial expenses
Total

–

–263

–284

–584

–633

–132

–194

–111

–169

–
–43
–687

–
–54
–819

–4

–

0
–27
–418

–

–18

–136
–22
–654

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

accounting, for the Group.

ASSA ABLOY ANNUAL REPORT 2018

NOTES

Note 14 Intangible assets

Group

Parent company

2018, SEK M

Goodwill

Brands

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

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

50,394
–
5,455
–100
–
–
1,897
57,646

–64
–
–
–
–4,199
30
–4,233
53,413

6,344
1
300
–
–
–2
281
6,924

–101
–
0
–2
–1,142
6
–1,239
5,685

Other
intangible
assets

8,833
599
1,128
0
–170
114
438
10,942

–3,998
144
–8
–800
–286
–231
–5,179
5,763

Total

65,571
600
6,883
–100
–170
112
2,616
75,512

–4,163
144
–8
–802
–5,627
–195
–10,651
64,861

Intangible
assets

6,775
93
–
–
–
–
–
6,868

–3,278
–
–
–593
–
–
–3,871
2,997

Group

Parent company

2017, SEK M

Goodwill

Brands

Opening accumulated amortization/impairment
Sales, disposals and adjustments
Reclassifications
Amortization
Exchange rate difference
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

Other intangible assets consist mainly of customer relations
and technology. The carrying amount of intangible assets
with an indefinite useful life, excluding goodwill, amounts
to SEK 5,640 M (6,197) and relates to brands.

Useful life has been defined as indefinite where the time
period, during which an asset is deemed to contribute eco-
nomic benefits, cannot be determined.

Because of the continued challenging market in China,

during the year the Group took an impairment charge of
SEK 5,595 M on goodwill and other intangible assets related
to China. The impairment charge is attributable in its
entirety to the Asia Pacific cash-generating unit. Of the total
impairment charge, SEK 4,199 M relates to goodwill impair-
ment, while the remaining SEK 1,396 M is primarily attributa-
ble to brands.

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,
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.

Impairment of goodwill and intangible assets of SEK 5,595 M

• Discount rate after tax used for estimated future

is recognized as a separate line item in the income statement,
while other amortization and impairment of intangible assets
are mainly recognized as cost of goods sold in the income state-
ment. Impairment losses for the year totaled SEK 5,627 M (–),
of which SEK 25 M (–) related to restructuring programs.

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.

cash flows.

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

ASSA ABLOY ANNUAL REPORT 2018

NOTES

Note 14 cont.

2018
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:

2018, SEK M

Goodwill
Intangible assets with indefinite use-
ful life
Total

EMEA

10,709

232
10,941

Americas

Asia Pacific

Global
Technologies

13,327

1,012
14,339

3,892

736
4,628

13,245

815
14,060

Entrance
Systems

12,240

2,846
15,086

Total

53,413

5,640
59,053

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 use-
ful 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

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

2018
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 5 per-
cent, Asia Pacific 10 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 17 percent lower
(EMEA 17 percent, Americas 17 percent, Asia Pacific 14 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.

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 weighted capital cost used for the
Group’s discounted cash flows had been one percentage
point higher than the basic assumption of 8.0–9.0 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).

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
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.

ASSA ABLOY ANNUAL REPORT 2018

Note 15 Property, plant and equipment

2018, SEK M

Buildings

ments Machinery

Equipment

Land and
land
improve-

Construc-
tion in
progress

Finance
leases

Total

Equipment

Group

Parent company

NOTES

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

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

5,811
32
61
–82
–357
139
354

1,191
10
7
–10
–106
2
48

9,503
277
81
–281
–791
583
654

3,763
249
47
–19
–498
36
227

5,958

1,142

10,026

3,805

–7,241
771
232
–72
–549
–80
–519

–2,890
485
15
–33
–364
98
–200

–2,909
289
28
–46
–220
–4
–191

–3,053
2,905

–151
18
2
0
–10
1
–6

–145
997

Land and
land
improve-

2017, SEK M

Buildings

ments Machinery

Equipment

Opening accumulated
depreciation and impairment
Sales and disposals
Divestments of subsidiaries
Impairment incl. reversals
Depreciation and amortization
Reclassifications
Exchange rate difference
Closing accumulated
amortization, 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

–138
0
–
–6
–7
–
–1

–7,399
388
–
–28
–528
16
311

–2,811
137
0
–7
–334
28
96

–2,937
141
–
11
–210
5
82

–2,909
2,902

849
625
2
–3
–2
–844
57

684

–
–
–
–
–
–
–

194
15
15
–
–2
–31
11

21,311
1,208
214
–395
–1,765
–115
1,351

203

21,817

–55 –13,246
1,563
278
–151
–1,160
11
–923

0
–
–
–18
–5
–6

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

–7,458
2,568

–2,889
916

–
684

–84 –13,628
8,189
119

Group

Parent company

Construc-
tion in
progress

Finance
leases

Total

Equipment

63
22
–
–
–
–
–

–31
–
–
–
–16
–
–

–47
37

51
12
–
–
–
–
–

–21
–
–
–
–10
–
–

–31
32

–151
1,040

–7,241
2,261

–2,890
873

–
849

–55 –13,246
8,065
140

Impairment losses for the year totaled SEK 151 M (29), of which SEK 89 M (11) related to restructuring programs.

ASSA ABLOY ANNUAL REPORT 2018

NOTES

Note 16 Shares in subsidiaries

Company name

ASSA Sverige AB
ASSA ABLOY Entrance Systems AB
ASSA ABLOY Global Solutions AB
ASSA ABLOY Kredit AB
ASSA ABLOY Holding 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
ABLOY Canada Inc.
ASSA ABLOY of Canada Ltd
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
ASSA ABLOY Colombia S.A.S
WHAIG Limited
ASSA ABLOY Asia Pacific Ltd
ASSA ABLOY Entrance Systems IDDS 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 AG
ASSA ABLOY East Africa Ltd
Total

1 The Group’s holdings amount to 100 percent.

Note 17 Investments in associates

2018
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
556666-0618, Stockholm
556047-9148, Stockholm
559180-8646, 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
1148165260, Montreal
104722749 RC0003, Ontario
ACN 095354582, Oakleigh, Victoria
CER8805099Y6, Mexico
AAM961204CI1, Mexico
CCP910506LK2, Mexico
860009826-8, Bogota
EC21330, Bermuda
53451, Hong Kong
556071-8149, Landskrona
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
1,306,891
400
6,500
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
1
9,621
48,190,000
4
50,108,549
112
3,115,080
100,100
1,000,000
25,000,000
1
50,000
650,000
2,400
1,000,000
300,000
13,500

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

197
192
475
6,036
0
145
189
4,257
538
376
1,086
771
2,228
1,964
0
47
109
3,091
293
901
217
2,410
0
138
242
0
762
0
203
303
72
5,093
0
25
974
0
679
635
90
34,738

Country of registration

Number of
shares

Share of
equity, %

Carrying
amount, SEK M

Group

Switzerland
Japan
Indonesia
United Kingdom
Spain
Saudi Arabia

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

39
46
49
50
40
40

1,800
587
19
14
9
5
1
2,434

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 2018. For the period January to June, the company’s revenue
totaled SEK 1,817 M (1,682) and income after tax was SEK 136 M (98). The company’s assets totaled SEK 3,622 M (3,199) and
total liabilities amounted to SEK 1,095 M (1,033).

Group

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

Country of registration

Number of
shares

Share of
equity, %

Carrying
amount, SEK M

Switzerland
Japan
Indonesia
United Kingdom
Spain
Saudi Arabia

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

39
46
49
50
40
40

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

ASSA ABLOY ANNUAL REPORT 2018

Note 18 Deferred tax

Trade receivables by currency

SEK M

Deferred tax assets
Non-current assets
Pension provisions
Tax loss carryforwards 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

2017

2018

–
572
191
592
1,355

1,652
566
2,218
–862

–445
–172
–240

–77
71
–862

104
330
149
770
1,354

1,523
242
1,764
–410

–862
52
529

–34
–95
–410

The Group has tax loss carryforwards and other tax credits
of SEK 3,234 M (2,562) for which deferred tax assets have
not been recognized, as it is uncertain whether they can be
offset against taxable income in future taxation.

Note 19 Other financial assets

Group

Parent company

SEK M

2017

2018

2017

2018

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

–
11

171
44
227

–
8

1,621
–

106

37
152

–
187
1,808

–
161
1,782

Note 20 Inventories

SEK M

Materials and supplies
Work in progress
Finished goods
Advances paid
Total

Group

2017

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

2018

3,057
2,291
5,640
328
11,316

Impairment of inventories during the year amounted to
SEK 230 M (269).

Note 21 Trade receivables

SEK M

Trade receivables
Loss allowance
Total

Maturity analysis

Current trade receivables
Trade receivables due:
< 3 months
3–12 months
>12 months

Impaired trade receivables:
Current
Trade receivables due:
< 3 months
3–12 months
>12 months

Total

Group

2017

14,228
–1,160
13,068

2018

15,674
–1,178
14,496

9,316

10,615

3,173
859
880
4,912

3,221
930
908
5,059

–35

–65

–104
–220
–802
–1,160
13,068

–110
–133
–870
–1,178
14,496

NOTES

2018

5,083
3,478
1,216
762
659
448
325
269
2,265
14,496

2018

1,160
15
–262
–85
306
45
1,178

2017

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

2017

959
48
–103
–46
335
–33
1,160

USD
EUR
CNY
GBP
SEK
KRW
CAD
AUD
Other currencies
Total

Change in loss allowance for trade
receivables

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

The closing loss allowance as at 31 December 2017, calcu-
lated under IAS 39, was SEK 1,160 M. Opening loss allowance
as at 1 January 2018 was calculated under IFRS 9. The recal-
culation did not affect the size of the loss allowance.

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

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 2017
Closing balance at
31 December 2017

Number of votes,
thousands

Opening balance at
1 January 2018
Closing balance at
31 December 2018

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
earnings. All shares are entitled to dividends subsequently
determined. Each Series A share carries ten votes and each
Series B share one vote. All issued shares are fully paid.

The weighted average number of shares was 1,110,776
(1,110,776) during the year. None of the Group’s outstand-
ing long-term incentive programs are expected to result in
significant dilution in the future.

The total number of treasury shares as at 31 December
2018 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
3,666 M (3,332), equivalent to SEK 3.30 (3.00) per share.
A dividend for 2018 of SEK 3.50 per share, a total of SEK
3,888 M, will be proposed at the Annual General Meeting
on 25 April 2019.

ASSA ABLOY ANNUAL REPORT 2018

NOTES

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 2018, shares accounted for 43 percent

(45) and fixed income securities for 35 percent (33) of plan
assets, while other assets accounted for 23 percent (22). The
actual return on plan assets in 2018 was SEK –230 M (386).

Amounts recognized in the income statement

Pension costs, SEK M

2017

2018

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

of which, included in:
Operating income
Net financial items

566
147
30
744

658
86

647
175
28
849

771
79

Amounts recognized in the balance sheet

Pension provisions, SEK M

2017

2018

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

2,350

2,296

573

571

10
2,933

12
2,880

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 2018 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
contribution plans. The year’s pension contributions that are
contracted to Alecta total SEK 30 M (33), of which SEK 13 M
(11) relates to the Parent company. Pension contributions
are expected to remain largely unchanged in 2019.

Alecta’s surplus can be distributed to policyholders and/

or the insured. As at 30 September 2018, Alecta’s surplus
expressed as the collective consolidation level amounted
preliminarily to 159 percent (154 percent as at 31 Decem-
ber 2017). The collective consolidation level consists of the
market value of Alecta’s assets as a percentage of its insur-
ance commitments calculated according to Alecta’s actuar-
ial calculation assumptions, which do not comply with IAS
19. The collective consolidation level is normally allowed to
vary between 125 and 155 percent. If the consolidation level
deviates from this range, measures in the form of an adjust-
ment of the premium level should be taken to return to the
normal range.

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

Specification of defined
benifits, SEK M

Present value of funded
obligations

Fair value of plan assets
Net value of funded plans

Present value of unfunded
obligations
Present value of unfunded medical
benefits
Net value of defined benefit
pension plans

Provisions for defined
contribution pension plans
Total

United Kingdom

Germany

Other countries

Total

2017

2018

2017

2018

2017

2018

2017

2018

2017

2018

2,878

2,790

–2,658
220

–2,514
276

–21
75

2,046

1,968

1,179

1,352

6,199

6,209

–21
79

–1,604
443

–1,735
234

–799
380

–958
394

–5,081
1,118

–5,227
982

689

735

–

543

580

1,232

1,314

–

568

220

276

764

813

1,011

–
220

–
276

–
764

–
813

–
1,011

567

800

–
800

573

571

928

978

2,923

2,868

10
938

12
990

10
2,933

12
2,880

ASSA ABLOY ANNUAL REPORT 2018

Note 24 cont.

Movement in obligations

2018, SEK M

Opening balance 1 January 2018

Acquisitions and 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

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
Settlements
Total payments
Closing balance 31 December 2018

2017, SEK M

Opening balance 1 January 2017

Acquisitions and 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

Contributions and payments:
Employer contributions
Employee contributions
Payments
Settlements
Total payments
Closing balance 31 December 2017

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-employment
medical benefits

Defined benefit
pension plans

573

7,431

Plan assets

–5,081

–
64

6
–
–
21
28

–
–112
–
–

48
–63

–
0
–30
–
–30
571

120
–64

118
15
–15
197
315

–
–163
–125
–8

356
59

–
19
–320
–37
–338
7,523

Post-employment
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

91
–

–
–
–
–140
–140

369
–
–
–

–262
107

–296
–19
257
37
–22
–5,227

Plan assets

–5,063

–

–
–
–
–136
–136

–254
–
–
–
–254
214
–40

–161
–17
294
43
158
–5,081

2017

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

NOTES

Total

2,923

29
–

124
15
–15
79
202

369
–275
–125
–8

142
378

–296
0
–94
–
–390
2,868

Total

3,107

115
3
–26
86
178

–254
109
116
2
–26
–92
–118

–161
0
–89
–
–250
2,923

2018

2,244
651
842
312
345
41
65
727
5,227

ASSA ABLOY ANNUAL REPORT 2018

NOTES

Note 24 cont.

Key actuarial assumptions

United Kingdom

Germany

Key actuarial assumptions (weighted average), %

2017

2018

2017

2018

2017

2018

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

2.5
n/a
2.1
n/a
2.4

2.8
n/a
2.0
n/a
2.4

1.8
2.8
1.3
n/a
1.3

1.8
2.8
1.5
n/a
1.5

3.6
n/a
2.0
6.9
3.0

4.3
n/a
2.0
6.4
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

Note 26 Other current liabilities

SEK M

Opening balance at
1 January 2018
Provisions for the year
Acquisitions of subsidiaries
Reversal of non-utilized
amounts
Payments
Utilized during the year,
without cash flow impact
Reclassifications
Exchange rate differences
Closing balance at
31 December 2018

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

Group

Restruc-
turing
reserve

Other

Total

944
1,218
–

–
–793

–209
–
30

1,202
106
7

–14
–53

–
–807
2

2,146
1,324
7

–14
–845

–209
–807
32

1,190

445

1,635

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

2017

1,447
699
2,146

2018

745
891
1,635

The restructuring reserve at year-end relates mainly to the
ongoing restructuring program launched during the year.
The restructuring reserve is expected to be used over the
next two years. The non-current part of the reserve totaled
SEK 339 M. For further information on the restructuring
programs, see the Report of the Board of Directors.

Other provisions mainly relate to legal obligations includ-
ing future environment-related measures. During the year a
provision for taxes was reclassified to the item Current tax
liabilities on the balance sheet.

+1.0%

–15.1%
8.3%

–1.0 %

14.6%
–7.0%

Group

2017

626
110
889

89
1,177
554
3,446

2018

651
145
1,170

111
1,021
454
3,551

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

2017

2018

2017

2018

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

2,728

3,227

279

285

972
352
113
1,358
5,524

1,022
553
138
1,457
6,396

–
–
54
39
372

–
–
82
52
419

Note 28 Contingent liabilities
Group

Parent company

SEK M

Guarantees
Guarantees on behalf of
subsidiaries
Total

2017

2018

2017

2018

113

121

–

–
113

–

11,015 11,522
121 11,015 11,522

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

2017

2018

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

61
16
19
17
113

41
42
13
16
113

Note 29 Assets pledged against liabilities to credit

institutions

Group

Parent company

SEK M

2017

2018

2017

2018

Real estate mortgages
Other mortgages
Total

114
131
244

97
65
162

–
–
–

ASSA ABLOY ANNUAL REPORT 2018

Note 30 Business combinations

SEK M

Purchase prices
Cash paid for acquisitions during the year
Holdbacks and deferred consideration for
acquisitions during the year
Adjustment of purchase prices for
acquisitions in prior years
Total

Acquired assets and liabilities
at fair value
Intangible assets
Property, plant and equipment
Deferred tax assets
Other financial assets
Inventories
Current receivables and investments
Cash and cash equivalents
Non-controlling 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
a cquisitions 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

2017

2018

6,501

5,602

365

1,152

18
6,885

–2
6,752

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

4,962

6,501

1,428
214
221
1
555
643
437
–
–169
–29
–60
–1,521
1,720

5,032

5,602

–187

–437

511

339

6,825

5,503

1,250
150
111

1,450
96
76

The table above includes fair value adjustments of acquired
net assets from acquisitions made in previous years.

Purchase price allocations have been prepared for all
acquisitions in 2018. The net sales of acquired units for 2018
totaled SEK 3,623 M (2,543) and net income amounted to
SEK 331 M (232). Acquisition-related costs for 2018 totaled
SEK 107 M (86) and have been reported as other operating
expenses in the income statement.

See below for an account of some acquisitions completed

in 2018 and 2017. No single acquisition is significant in
terms of size and separate acquisition details are therefore
not provided.

2018
Crossmatch
On 21 September 2018 ASSA ABLOY acquired 100 percent
of the share capital in the US company Crossmatch Inc.,
a leader in biometric identity management and secure
authentication solutions.

The acquisition of Crossmatch strengthens the ability to
offer innovative biometric solutions to hundreds of millions
of users worldwide and expands HID’s market leadership in
secure identity solutions. Crossmatch is headquartered in
Palm Beach Gardens, Florida.

Intangible assets in the form of technology, brands 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.

NOTES

Luxer One
On 12 December 2018, ASSA ABLOY acquired 100 percent
of the share capital of Luxer Holdings Corporation, a leading
provider of advanced package locker solutions in the US.

The acquisition further strengthens ASSA ABLOY’s market

position in home delivery solutions and provides excellent
opportunities for synergies in vertical segments, such as edu-
cation and commercial properties. The company is head-
quartered in Sacramento, California.

On the reporting date the acquisition analysis is prelimi-

nary with respect to valuation of intangible assets.

Other acquisitions
Other noteworthy acquisitions during the year included
Phoniro (Sweden), Brüken (Mexico), HKC (Ireland) and
Planet (Switzerland). Please see the Report of the Board of
Directors for further information on these acquisitions.

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
supplier 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).

ASSA ABLOY ANNUAL REPORT 2018

NOTES

Note 31 Cash flow

SEK M

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 divested
subsidiaries
Change in consolidated cash and cash
equivalents due to divestments

Group

2017

2018

–45
42
92
–129
61

–300
58
–221

–158
–696
454
52
–347

140

–1

139

–265
–11
124
–167
66

–296
92
–458

–983
–340
–439
686
–1,076

406

–11

395

Note 32 Reserves

SEK M

Opening balance 1 January 2017 according
to adopted Annual Report
Adjustment, misclassification
New opening balance 1 January 2017
Share of other comprehensive income
of associates
Cash flow hedges
Net investment hedges
Exchange rate differences
Deferred tax
Closing balance 31 December 2017

Opening balance 1 January 2018
Share of other comprehensive income
of associates
Cash flow hedges
Net investment hedges
Exchange rate differences
Deferred tax
Closing balance 31 December 2018

Hedging reserve

Net investment
hedges

Cash flow
hedges

Exchange rate
difference

–247

–4
–236

–236

–8

1
–243

–7

–2
–2

–2

0
–

Total

2,540
2,179
4,720

50
8
15
–1,864
4
2,932

2,795
2,179
4,974

–1,864
9
3,170

3,170

2,932

2,090
–9
5,339

87
2
–8
2,090
–8
5,096

Of the item Net investment hedges, SEK –28 M relates to current hedge relationships, while the remainder, SEK –215 M,
relates to closed hedge relationships for which hedged objects remain.

During the year a historic misclassification was identified in the Group’s equity involving the item Reserves and the item
Retained earnings. The misclassification has no effect on the total equity in the Group. The Group’s reserves have been cor-
rected through an adjustment of the opening balance established as at 1 January 2017.

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

2017

16,804
4,814
658
21,618

2018

19,200
5,284
771
24,485

Parent company

2017

2018

231
137
36
368

278
132
49
410

ASSA ABLOY ANNUAL REPORT 2018

Note 33 cont.

Fees to Board members in 2018 (including committee work), SEK thousand

Name and post

Lars Renström, Chairman
Carl Douglas, Vice Chairman
Ulf Ewaldsson, Member
Eva Karlsson, Member
Birgitta Klasén, Member
Lena Olving, Member
Sofia Schörling Högberg, Member
Jan Svensson, Member
Employee representatives (4)
Total

Total fees to Board members amounted to SEK 7.3 M in 2017.

Board of
Directors

Remuneration
Committee

Audit
Committee

2,100
900
630
630
630
630
630
630
–
6,780

150
–
–
–
–
–
–
75
–
225

–
–
–
–
200
–
200
275
–
675

Remuneration and other benefits of the Executive Team in 2018, SEK thousands

Name

Fixed salary

Variable
salary

Stock-related
benefits

Other
benefits

Nico Delvaux, President and CEO, 15 March 2018–
Johan Molin, President and CEO, 1 January – 14 March 2018
Other members of the Executive Team (8 positions)
Total remuneration and benefits

12,709
3,938
38,633
55,280

7,233
2,469
16,951
26,652

1,202
1,406
7,960
10,569

189
27
2,926
3,142

Total remuneration and other benefits of the Executive Team amounted to SEK 146.9 M in 2017.

NOTES

Total

2,250
900
630
630
830
630
830
980
–
7,680

Pension
costs

4,433
1,681
10,027
16,141

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 57 M
(68), excluding pension costs and social security costs. Pen-
sion costs amounted to SEK 11 M (12). Pension obligations
for several senior executives are secured through pledged
endowment insurances.

Long-term incentive programs
At the 2010 Annual General Meeting, it was decided to launch
a long-term incentive program (LTI 2010) for senior execu-
tives and other key employees in the Group. The purpose was
to create the prerequisites for retaining and recruiting compe-
tent employees for the Group, providing competitive remu-
neration and aligning the interests of the shareholders with
the interests of the employees concerned.

At the 2011 to 2018 Annual General Meetings, it was
decided to implement further long-term incentive programs
for senior executives and other key employees in the Group.
The new long-term incentive programs were named LTI 2011
to LTI 2018. LTI 2011 to LTI 2017 are based on similar terms to
LTI 2010. LTI 2018 is based on similar principles, but with an
extended measurement period of three years for the perfor-
mance-based condition and removal of matching shares.
For each Series B share acquired by the CEO within the

framework of LTI 2016 and LTI 2017, the company has
awarded 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 has
awarded one matching share award and three performance-
based share awards. For other participants, the company has
awarded one matching share award and one performance-
based share award. For each Series B share acquired by the
CEO within the framework of LTI 2018, the company has
awarded six performance-based share awards. For each
Series B share acquired by other members of the Executive
Team, the company has awarded five performance-based
share awards. For other participants, the company has
awarded four performance-based share awards.

In accordance with the terms of the incentive programs,
employees have acquired a total of 365,018 shares in ASSA
ABLOY AB, of which 110,357 shares were acquired in 2018
within the framework of LTI 2018.

Each matching share award for LTI 2016 and LTI 2017 enti-
tles the holder to receive one Series B share in the company
free of charge three years after allotment, provided that the

holder, with certain exceptions, at the time of the release of
the interim report for the first quarter 2019 (LTI 2016) and
2020 (LTI 2017) still is employed by the Group and has main-
tained the shares acquired within the framework of the long-
term incentive programs. Each performance-based share
award for LTI 2016 and LTI 2017 entitles the holder to receive
one Series B share in the company free of charge three years
after allotment, provided that the above conditions have been
fulfilled. In addition, the maximum level in a range determined
by the Board of Directors for the performance of the compa-
ny’s earnings per share must have been fulfilled during the first
year of each program in order to receive full outcome.

Each performance-based share award for LTI 2018 entitles
the holder to receive one Series B share in the company free of
charge three years after allotment, provided that the holder,
with certain exceptions, at the time of the release of the
interim report for the first quarter 2021, still is employed by
the Group and has maintained the shares acquired within the
framework of the long-term incentive program. The number
of performance-based share awards that entitle the holder to
Series B shares in the company depends on the annual devel-
opment of ASSA ABLOY’s earnings per share based on the tar-
get levels, as defined the Board of Directors, during the meas-
urement 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 performance-based share awards is measured
against the outcome for 2018, one third is measured against
the outcome for 2019 and one third is measured against the
outcome for 2020. The outcome for each year is measured
linearly. Unless the minimum level is achieved for the year,
none of the relevant performance-based share awards will
give the right to Series B shares. If the maximum level is
achieved, each performance-based share award linked to the
relevant year entitles the holder to one Series B share.

The performance-based condition was 67 percent fulfilled

for LTI 2016 and 100 percent for LTI 2017. Fulfilment of the
performance-based condition for LTI 2018 is intended to be
presented in the Annual Report for the financial year 2020.
Outstanding performance-based share awards for LTI
2018 total 449,584. The total number of outstanding match-
ing and performance-based share awards for LTI 2016, LTI
2017 and LTI 2018 amounted to 702,432 on the reporting
date of 31 December 2018.

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-

ASSA ABLOY ANNUAL REPORT 2018

NOTES

Note 33 cont.

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 2018, 25 May 2018, was SEK 191.63. The
fair value of ASSA ABLOY’s Series B share on the allotment
date for LTI 2017, 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 total cost of the Group’s long-term incentive programs
(LTI 2015–LTI 2018) excluding social security costs amounted
to SEK 45 M (40) in 2018. In April 2018 vesting of LTI 2015, as
well as parts of LTI 2016 and LTI 2017, took place and 313,744

shares (395,304) at a total market value at the time of vesting
of SEK 60 M (74) were transferred to the participants of the
program. Parts of the vesting of LTI 2015, LTI 2016 and LTI
2017 were settled through endowment insurances. The
payment as above for the transferred shares in LTI 2015 and
parts of LTI 2016 and LT1 2017 was recognized in equity.

Notice and severance pay
If the CEO is given notice, the company is liable to pay the
equivalent of maximum 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

US
China
Sweden
France
United Kingdom
Mexico
India
Germany
Brazil
Czech Republic
Poland
Finland
Netherlands
Romania
Malaysia
Canada
Belgium
Norway
South Korea
Australia
South Africa
Denmark
Switzerland
Spain
Italy
United Arab Emirates
Hungary
Chile
New Zealand
Israel
Hong Kong
Colombia
Ireland
Others
Total

Sweden
Total

Total

10,188
10,337
2,154
1,939
1,688
1,518
972
1,611
1,435
1,094
692
1,216
1,034
802
873
815
674
710
676
669
581
595
565
538
461
416
321
336
294
303
183
215
193
1,329
47,426

Total

208
208

Group

2017

of which
women

of which
men

2,723
4,552
535
596
508
419
84
471
663
345
131
348
158
320
434
238
132
133
257
204
260
171
183
131
135
32
55
99
101
89
77
145
52
343
15,122

7,464
5,784
1,619
1,343
1,180
1,099
888
1,141
773
749
561
868
876
482
439
577
542
577
418
465
321
424
382
407
326
384
267
237
193
214
106
70
142
986
32,304

2018

of which
women

of which
men

2,742
3,970
580
603
552
504
148
455
419
375
315
329
171
347
437
192
142
145
191
195
306
165
181
133
121
33
52
89
99
99
85
56
50
465
14,746

7,597
5,514
1,672
1,331
1,299
1,156
1,058
997
973
828
867
844
879
531
433
622
556
545
491
479
344
436
402
402
332
365
264
218
194
193
125
143
144
923
33,606

Total

10,339
9,483
2,252
1,934
1,851
1,660
1,655
1,452
1,392
1,203
1,182
1,173
1,050
878
870
814
698
690
681
674
650
601
584
535
453
399
315
307
293
292
210
199
195
1,388
48,353

Parent company

2017

of which
women

of which
men

49
49

159
159

2018

of which
women

of which
men

56
56

175
175

2018

of which
women

of which
men

4
1

1
5

5
8

3
13

Total

231
231

Total

9
9

4
18

Gender distribution of Board of Directors and Executive Team
2017

Board of Directors1
Executive Team
– of which Parent company’s Executive
Team
Total

1 Excluding employee representatives.

Total

9
9

4
18

of which
women

of which
men

4
1

1
5

5
8

3
13

ASSA ABLOY ANNUAL REPORT 2018

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.

less cash and cash equivalents, and other interest-bearing
investments including positive market values of derivatives.
The table ‘Net debt and equity’ shows the position as at
December 31.

Net debt and equity

SEK M

Non-current interest-bearing liabilities
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

Group

2017

–171

–150
–459
2,933
16,859

6,263
25,275
50,657
0.50

2018

–106

–188
–538
2,880
19,489

7,710
29,246
51,900
0.56

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

Net debt is defined as interest-bearing liabilities, including
negative market values of derivatives, plus pension provisions,

Standard & Poor’s
Moody’s

A2
P2

Stable
Stable

A –
n/a

Stable

Maturity profile – financial instruments1

SEK M2

Long-term bank loans
Long-term capital market loans
Short-term bank loans
Commercial papers and short-term
capital market loans
Derivatives (outflow)
Total by period

Cash and cash equivalents incl.
interest- bearing receivables
Non-current interest-bearing liabilities
Derivatives (inflow)
Deferred considerations
Trade receivables
Trade payables
Net total

Confirmed credit facilities
Credit facilities maturing <1 year
Adjusted maturity profile1

<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

December 31, 2017

December 31, 2018

>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

–6,343

–8,874

–3,207

–17,457

–6,343

<1 year

–1,437
–1,844
–2,199

–2,752
–13,656
–21,888

610

13,609
–1,021
14,496
–7,893
–2,087

9,265
–690
6,488

>1 <2
years

–744
–3,000

>2 <5
years

–2,738
–6,621

>5 years

–489
–7,523

–53
–3,798

–152
–9,511

–68
–8,080

108
77
–507

189
–371

110

–4,121

–9,693

–7,970

–9,265

–13,386

–9,693

–7,970

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.

ASSA ABLOY ANNUAL REPORT 2018

NOTES

Note 34 cont.

External financing/net debt

Credit lines/facilities
US Private Placement Program
US Private Placement Program
US Private Placement Program
Multi-Currency RCF
Bank loan EIB
Bank loan EIB
Bank loan NIB
Global MTN Program

Amount,
SEK M
629
1,372
674
9,265
377
1,079
566
24,500

1,773
40,235

1,235

224
8,984

5,000
2,113
2,716
20,272
60,507

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
liabilities
Market value of derivatives
Pension provisions
Net debt

Currency
USD
USD
USD
EUR
EUR
USD
EUR
EUR
AUD
EUR
EUR
EUR
USD
SEK
USD
EUR
USD
EUR
USD
EUR
USD
EUR
EUR
USD
USD
USD
USD
USD
EUR
EUR
EUR
EUR
USD
USD
EUR
EUR
NOK
NOK
EUR
EUR
EUR
EUR

USD
USD
USD
EUR
USD
USD
EUR
SEK

Amount
2017
70
150
75
900
55
137
55
50
20
70
35
30
50

10
15

50
10
10
5

20
30
100
50
30

50
30

300
200
28
26

10
50
20
50
122
25

1,100

Amount
2018
70
150
75
900
37
120
55
50
20
70
35
30
50
500
10
15
20
50
10
10
5
15
20
25
100
100
20
30
100
50
30
50
30
50
30
50
300
200
28
26
30
70

10
50
20
50
25
158
80
500

Of which Parent
company, SEK M

515
127
720

308
450
500
90
154
180
514
90
103
45
156
205

897
898
179
270
1,025
514
342
513
269
449
305
515
307
204
289
266
307
715
1,387
13,771

90
449
180
516

463

1,697
15,468

Maturity
May 2020
Aug 2022
Aug 2024
Jun 2020
May 20202
Apr 20222
Dec 2021
Feb 2020
Jun 2020
Sep 2020
Nov 2020
Dec 2020
Feb 2021
Jul 2021
Aug 2021
Oct 2021
Feb 2022
Mar 2022
Apr 2022
Jun 2022
Jul 2022
Mar 2023
Oct 2023
Nov 2023
Nov 2023
Dec 2023
May 2024
Jul 2024
Sep 2024
Feb 2025
Mar 2025
Jun 2025
Jun 2025
Dec 2025
Feb 2027
Feb 2027
Jun 2027
Oct 2027
Oct 2029
Oct 2029
Mar 2030
Apr 2030

Jan 2019
Aug 2019
Sep 2019
Nov 2019
Aug 2019

Carrying
amount,
SEK M
629
1,372
674
–
377
1,079
566
515
127
720
3721
3181
450
500
90
154
180
514
90
103
45
156
205
2271
9061
898
179
270
1,025
514
3421
513
269
4331
305
515
3051
2041
2891
266
307
715
1,773
19,489

90
449
180
516
224
1,419
824
500
2,113
1,277
7,594
27,083

–538
–71

–106
0
2,880
29,246

1 The loans are subject to hedge accounting, in whole or in part.
2 The loans are amortizing. In the table the average dates of maturity of the loans have been stated.

ASSA ABLOY ANNUAL REPORT 2018

Note 34 cont.

SEK M
Opening balance 1 January 2017

Cash flow from financing activities
Long-term loans raised
Long-term loans repaid
Other changes in cash flow short-term loans
Total

Changes in non-cash items
Acquisitions of subsidiaries
Reclassifications
Unrealized exchange rate differences
Total
Closing balance 31 December 2017

SEK M
Opening balance 1 January 2018

Cash flow from financing activities
Long-term loans raised
Long-term loans repaid
Other changes in cash flow short-term loans
Total

Changes in non-cash items
Acquisitions of subsidiaries
Reclassifications
Unrealized exchange rate differences
Other changes in non-cash items
Total
Closing balance 31 December 2018

Long-term loans
16,901

Short-term
loans
3,929

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

Long-term loans
16,859

Short-term
loans
6,151

4,483
–
–
4,483

23
–2,660
806
–22
–1,853
19,489

–
–2,849
553
–2,296

933
2,660
155
–9
3,739
7,594

NOTES

Total
20,829

3,226
–2,637
2,414
3,003

176
–
–998
–822
23,010

Total
23,010

4,483
–2,849
553
2,187

957
–
960
–31
1,886
27,083

Interest-bearing liabilities
The Group’s long-term loan financing mainly consists of a
Private Placement Program in the US totaling USD 320 M, of
which USD 295 M (320) is long-term, a GMTN program of
SEK 14,229 M (10,700), of which SEK 12,996 M (9,329) is
long-term, a loan from the European Investment Bank of
EUR 37 M (55) and USD 121 M (137), and a loan from the
Nordic Investment Bank of EUR 55 M (110). During the year,
ten new issues were made under the GMTN program for a
total amount of SEK 4,445 M. In addition, the company took
out a smaller long-term loan. 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 increased substantially due to currency fluctuations,
especially regarding the USD. A total of SEK 4,492 M was
raised in new long-term loans, while SEK 2,849 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 2,752 M (1,307) of the Commercial Paper Programs had
been utilized. In addition, substantial credit facilities are
available, mainly in the form of a Multi-Currency Revolving
Credit Facility of EUR 900 M (900). At year-end the average
time to maturity for the Group’s interest-bearing liabilities,
excluding the pension provision, was 42 months (44).

Some of the Group’s main financing agreements contain

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

Cash and cash equivalents and other interest-bearing
receivables
Short-term interest-bearing investments totaled SEK 71 M
(43) at year-end. In addition, ASSA ABLOY has long-term
interest-bearing receivables of SEK 106 M (171) and financial
derivatives with a positive market value of SEK 117 M (107)
which, in addition to cash and cash equivalents, are included
in the definition of net financial debt. Cash and cash equiva-
lents are mainly invested in bank accounts or interest-bear-
ing instruments with high liquidity from issuers with a credit
rating of at least A–, according to Standard & Poor’s or similar
rating agency. The average term for cash and cash equiva-
lents was 22 days (21) at year-end 2018.

The Parent company’s cash and cash equivalents are

held in a sub-account to the Group account.

SEK M

2017

2018

2017

2018

Group

Parent company

Cash and bank balances
Short-term investments
with maturity less than
3 months
Cash and cash equivalents

362

456

97
459

81
538

Short-term investments
with maturity more than
3 months
Non-current interest-
bearing liabilities
Positive market value of
derivatives
Total

171

106

107
321

117
832

–
0

–

–
0

–

–
0

ASSA ABLOY ANNUAL REPORT 2018

NOTES

Note 34 cont.

Net debt by currency

SEK M

USD
EUR
CNY
GBP
NOK
CHF
CZK
PLN
SEK
MXN
AUD
Other
Total

December 31, 2017

December 31, 2018

Net debt excluding
currency swaps

Net debt including
currency swaps

Net debt excluding
currency swaps

Net debt including
currency swaps

8,522
12,074
451
258
565
214
21
50
2,185
–11
134
812
25,275

12,236
7,241
1,764
–157
645
259
449
325
1,171
–36
357
1,021
25,275

10,875
14,150
635
288
563
190
27
49
1,466
5
135
862
29,246

14,442
7,575
1,609
874
688
653
592
472
416
396
336
1,194
29,246

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 210 days (136) at year-end 2018.
A downward change in the yield curve of one percentage
point would reduce the Group’s interest income by around
SEK 1 M (7) and consolidated equity by SEK 0 M (5).

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 cal-
culates 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
28 months (25). An upward change in the yield curve of one
percentage point would increase the Group’s interest
expense by around SEK 126 M (118) and reduce consoli-
dated equity by SEK 93 M (87).

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

2017

535
766
–1,316
160
2,033
438
–373
–2,637
979

2018

557
944
–1,825
244
2,400
571
–445
–3,518
1,410

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

2017

2018

AUD
CHF
CNY
DKK
EUR
GBP
HKD
KRW
USD

43
30
28
11
151
22
76
18
545

41
33
27
9
191
20
95
33
611

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’ above shows the use of
forward exchange contracts in relation to financing in major
currencies. Forward exchange contracts are used to neutral-
ize the exposure arising between external debt and internal
requirements.

ASSA ABLOY ANNUAL REPORT 2018

Note 34 cont.

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 96 per-
cent (93) of the Group’s sales were settled through cash
pools in 2018. Smaller amounts may be held in other local
banks for shorter time periods depending on how customers
choose to pay. The Group can also invest surplus cash in the
short term in banks to match borrowing and cash flow. The
banks in which surplus cash is deposited have a high credit
rating. In light of this and the short terms of the investments
the effect of the calculated credit risk is assessed to be
negligible.

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 high 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
96 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. For more information see Note 21 and
the section “impairment of financial assets” in the informa-
tion on accounting principles.

Commodity risk
The Group is exposed to price risks relating to purchases of
certain commodities (primarily metals) used in production.
Forward contracts are not used to hedge commodity pur-
chases.

Fair value of financial instruments
Derivative financial instruments such as 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 96 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 IFRS 9.
Financial instruments from the comparative year are classi-
fied in accordance with IAS 39. The table ‘Financial instru-
ments’ on page 96 provides an overview of financial assets
and liabilities, measurement category, and carrying amount
and fair value per item.

NOTES

Risk management through hedge accounting
During the year the Group used hedge accounting in its
financial risk management. These can be divided into cash
flow hedges, fair value hedges and net investment hedges.
Changes in these hedges can be seen in the table below. For
information regarding the effects of net investment hedges
and cash flow hedges terminated during the year in other
comprehensive income, see Note 32. Net investment hedges
are used to manage currency risk that arise through invest-
ments in foreign subsidiaries. Fair value hedges are used to
manage interest rate risk that arises when the Group takes
out loans at a fixed interest rate. Cash flow hedges for inter-
est rate risk in loans with variable interest rates have also
been used during the year.

Interest rate risk related to the long-term loans are

hedged through hedge accounting using interest rate swaps.
In cases where the loans are denominated in a currency
other than SEK, they are not included in the applied hedge
accounting. For risks related to net investments in foreign
subsidiaries, hedge accounting is only applied to manage
currency risk; no other related risks are managed by the
hedges that are applied. ASSA ABLOY does not hedge 100%
of its long-term loans or its net investments. Instead, the
decision on when hedge accounting is appropriate is taken
on a case-by-case basis, in accordance with the risk levels
described in the financial policy.

For fair value hedges the Group uses interest rate swaps
with critical terms that are equivalent to the hedged object,
such as reference rate, settlement days, maturity date and
nominal amounts. This approach ensures an economic rela-
tionship between the hedging objects and the hedging
instruments. Hedging relationship effectiveness is tested
through periodic forward-looking evaluation to ensure that
an economic relationship still exists. Examples of identified
sources of ineffectiveness in the hedging relationship
include if a credit risk adjustment in the interest rate swap is
not matched by an equivalent adjustment to the loan, or if
for some reason differences in the critical terms between the
interest rate swap and the loan should arise. All critical terms
matched during the year. For this reason, the economic rela-
tionship has been 100% effective.

Hedging instruments

SEK M

Carrying amount of hedged item
Nominal amount of hedging
instrument
Maturity
Hedge ratio
Total effect of hedging on hedged
item
Accrued remaining amount for
terminated hedges
Change in value, hedging
instruments since 1 January
Change in value, hedge item
Ineffectiveness recognized in profit
or loss

Fair value
2018

Net invest-
ments 2018

2,749

392

2,749
2020 to 2029
1:1

392
2020 to 2022
1:1

–24

–11
11

–28

–215

–8
8

Changes in the value of fair value hedged items are recog-
nized against long-term loans, changes in value of hedging
instruments are recognized against accrued revenue or
expenses, respectively; ineffectiveness, if any, is recognized
against interest income or expenses, respectively. Changes in
value of hedge instruments in net investment hedges are
recognized in the hedging reserve in equity.

ASSA ABLOY ANNUAL REPORT 2018

NOTES

Note 34 cont.

Disclosures of offsetting of financial assets and liabilities

2017

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

2018

Amounts
netted
in the
balance
sheet

Net
amounts
in the
balance
sheet

Amount
covered
by netting
agree-
ment but
not offset

Net
amount

–
–

107
112

39
39

68
73

117
116

–
–

117
116

53
53

64
63

SEK M

Financial assets
Financial liabilities

Gross
amount

107
112

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 swaps1, cash flow hedges
Interest rate swaps1, fair value hedges
Cross currency swaps
Total

December 31, 2017

December 31, 2018

Positive fair
value2

Negative
fair value2

Nominal
value

Positive fair
value2

Negative
fair value2

Nominal
value

39
1
67
–
107

–45
–6
–6
–55
–112

7,076
528
2,182
527
10,313

49
–
68
–
117

–99
–
–18
–
116

8,105
–
2,749
–
10,854

1 For interest rate swaps, only one leg is included in nominal value.
2 Assets are recognized against accrued revenue and liabilities against accrued expenses.

Financial instruments: carrying amounts and fair values by measurement category

SEK M

Financial assets at amortized cost
Trade receivables
Other financial assets at amortized cost
Other loans and receivables
Cash and cash equivalents

Financial assets at fair value through profit or loss
Shares and interests

Available-for-sale financial assets

Derivative financial instruments
Hedge accounting
Held for trading
Total financial assets

Financial liabilities at amortized cost
Trade payables and other liabilities
Long-term loans – hedge accounting
Long-term loans – non-hedge accounting
Short-term loans – non-hedge accounting

Financial liabilities at fair value through profit or loss
Deferred considerations

Derivative financial instruments
Hedge accounting
Held for trading
Total financial liabilities

2017

2018

Carrying
amount

Fair value

Carrying
amount

Fair value

13,068
–
258
459

–

68
39
13,904

7,811
2,237
14,622
6,151

13,068
–
258
459

–

68
39
13,904

7,811
2,237
14,632
6,151

14,496
177
–
538

–

68
49
15,374

7,893
2,790
16,699
7,594

14,496
177
–
538

–

68
49
15,374

7,893
2,790
16,729
7,594

1,559

1,899

11
100
32,491

11
100
32,501

18
99
36,991

18
99
37,021

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.

ASSA ABLOY ANNUAL REPORT 2018

NOTES

Note 34 cont.

Financial instruments: measured at fair value

SEK M

Financial assets
Derivative financial instruments

Financial liabilities
Derivative financial instruments
Deferred considerations

2017

2018

Carrying
amounts

Quoted
prices

Observable
data

Non-
observable
data

Carrying
amounts

Quoted
prices

Observable
data

Non-
observable
data

107

112
1,559

–

–
–

107

112
–

–

117

–
1,559

116
1,899

–

–
–

117

116
–

–

–
1,899

Deferred considerations relate to additional payments for acquired companies. The size of a deferred consideration is usually
linked to the earnings and sales trend in an acquired company during a specific period of time. Deferred consideration is
measured on the day of acquisition based on the best judgment of management regarding future outcomes. Discounting
takes place in the case of significant amounts.

For derivatives, the present value of future cash flows is calculated based on observable yield curves and exchange rates on

the balance sheet date.

ASSA ABLOY ANNUAL REPORT 2018

COMMENTS ON FIVE YEARS IN SuMMARY

Comments on five years in summary

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 inno-

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.

vation 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.

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.

Operating income, excluding items affecting comparability,

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 during the
year, which both strengthened the market position in key
emerging markets such as China, India and Brazil, and comple-
mented 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 unevenly distributed.
Emerging markets showed a slowdown, particularly China.

The focus in recent years on product development, innova-
tion and sustainability yielded positive results during the year.
ASSA ABLOY has established leadership in the ongoing indus-
try shift from mechanical solutions to electronics, digitization
and mobile. Growth remained strong for electromechanical
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 mar-
kets, 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, innova-
tion 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

2017
Sales growth continued to be robust during the year. Organic
growth was 4 percent, driven by growing demand for electro-
mechanical and digital door opening solutions. For ASSA ABLOY,
the mature markets primarily in Europe and the US demon-
strated continued robust growth, while the trend in the emerg-
ing markets was weaker, especially in China, Brazil and the Mid-
dle East. Growth in Asia outside China continued to be robust.
The Group-wide programs to improve efficiency in all pro-
cesses 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 provide
substantial potential for robust profitable growth for some
time to come. ASSA ABLOY also has a growing selection 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 identity
solutions. ASSA ABLOY divested its project operation within
HID Global, AdvanIDe, in its entirety.

2018
Growth was strong during the year, with organic growth of
5 percent driven by continued successes for electromechani-
cal and digital solutions, as well as strong growth in North and
South America. The mature markets continued to demon-
strate a favorable trend, with the US and Europe demonstrat-
ing strong and robust growth, respectively, during the year.
The trend in the emerging markets was weaker, especially in
Asia and the Middle East.

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.

Product development continued at a high level with large
investments in R&D, as reflected by 27 percent of sales for the
year which relate to products that are less than three years old.
Operating income for the year, excluding items affecting
comparability, increased by 5 percent compared with 2017, and
cash flow remained strong. Earnings per share after full dilution,
excluding items affecting comparability, increased 4 percent.
An impairment charge of SEK 6 billion was taken during the year
for goodwill, other intangible assets and operating assets.

A total of 19 acquisitions were consolidated during the

year, which strengthened the market position for HID in
secure identity solutions. ASSA ABLOY sold its wood door
business within the Americas division during the year.

ASSA ABLOY ANNUAL REPORT 2018

FIVE YEARS IN SuMMARY

Five years in summary

Amounts in SEK M unless stated otherwise

2014

2015

2016

2017

2018

Sales and income
Sales
Organic growth, %
Acquisitions and disposals, %
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 shares and interests in associates
Net debt
Non-controlling interests
Shareholders’ equity, excluding non-controlling interest

Data per share, SEK4
Earnings per share before and after dilution
Earnings per share before and after dilution and excluding items
affecting comparability1
Shareholders’ equity per share after dilution
Dividend per share
Price of Series B share at year-end

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

84,048
5
2
14,872
–1,963
12,909
5,297
2,755

9,225
–6,427
–2,728
70
11,357

81,146
53,413
19,637
2,434
29,246
10
51,890

5.79

6.93

5.99

7.77

2.48

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
3.30
170.40

8.09
46.71
3.502
156.55

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, thousands4
Number of outstanding shares, thousands4
Weighted average number of shares issued, before and after
dilution, thousands4
Average number of employees

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

17.7
15.4
6.3
7.6
16.2
5.4
48.7
0.56
8.0
1,112,576
1,110,776

1,110,776
44,269

1,110,776
45,994

1,110,776
46,928

1,110,776
47,426

1,110,776
48,353

1 Excluding items affecting comparability 2016 and 2018.
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 2016 and 2018.

ASSA ABLOY ANNUAL REPORT 2018

QuARTERLY INFORMATION

Quarterly information

THE GROUP IN SUMMARY
Amounts in SEK M unless stated otherwise

Q 1
2017

Q 2
2017

Q 3
2017

Q 4
2017

Full year
2017

Q 1
2018

Q 2
2018

Q 3
2018

Q 4
2018

Full year
2018

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
excluding amortization attributable to
business combinations
Operating income before amortization
(EBITA), excluding items affecting
comparability
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
Net income

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

OPERATING CASH FLOW

Operating income (EBIT)
Restructuring costs
Impairment of goodwill, etc.
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

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
Exchange rate differences, etc.
Net debt at end of period
Net debt/equity ratio

18,142 19,387 18,499 20,109
5%

76,137 18,550 21,140 21,191 23,167
6%

84,048
5%

7,190

7,581

7,293

7,924

29,988

7,372

8,345

8,392

9,134

33,243

39.6%

39.1%

39.4%

39.7%

39.5%

39.6%

39.4%

39.6%

3,208
17.7%

3,543
18.3%

3,488
18.9%

3,789
18.8%

14,029
18.4%

3,297
17.8%

3,407
16.1%

3,912
18.5%

4,256
18.4%

14,872
17.7%

–370

–376

–355

–344

–1,444

–376

–400

–396

–397

–1,570

2,839
15.6%

3,168
16.3%

3,132
16.9%

3,446
17.1%

12,584
16.5%

2,921
15.7%

3,007
14.2%

3,516
16.6%

3,858
16.7%

13,302
15.8%

–52

–54

–52

–87

–244

–92

–97

–91

–113

–393

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

2,829
15.3%
–

2,911
13.8%
–5,595
2,829 –2,685
–12.7%
15.3%
–175
–191
2,654 –2,876
–13.6%
14.3%
–690
–344
1,964 –3,220

3,424
16.2%
–
3,424
16.2%
–203
3,221
15.2%
–838
2,384

3,746
16.2%
–1,218
2,528
10.9%
–230
2,297
9.9%
–670
1,627

12,909
15.4%
–6,813
6,096
7.3%
–799
5,297
6.3%
–2,542
2,755

1,919
0

2,178
1

2,153
1

2,384
1

8,633
2

1,964
0

–3,222
2

2,384
0

1,627
0

2,753
2

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

Q 1
2018

2,829
–
–
468
–356
–2,136
–122
–107
575

Q 2
2018

–2,685
–
5,595
497
–411
127
–220
–49
2,855

Q 3
2018

3,424
–
–
488
–429
–296
–105
–78
3,004

Q 4
2018

Full year
2018

2,528
1,218
–
510
–124
1,229
–215
–224
4,923

6,096
1,218
5,595
1,963
–1,319
–1,076
–662
–458
11,357

0.32

0.87

0.91

1.51

0.94

0.22

1.05

0.93

1.40

0.94

Q 1
2017

Q 2
2017

Q 3
2017

Q 4
2017

Full year
2017

Q 1
2018

Q 2
2018

Q 3
2018

Q 4
2018

Full year
2018

23,127 23,339 24,970 25,180

–824
84
629
461
–

–2,575
136
961
268
3,332

–2,654
106
1,656
1,741
–

–4,876 –10,929
612
3,044
6,790
3,332

23,127 25,275 27,219 31,454 31,372
–2,855
166
986
1,097
3,666

25,275
–4,923 –11,357
793
2,658
6,390
3,666

–3,004
103
576
2,610
–

–575
173
609
986
–

286
–203
4,319
–

351
487
1,697
–

–34
–104

99
–590

–40
608
23,339 24,970 25,180 25,275
0.50

–50
–590

0.48

0.54

0.53

–35
787

–26
–675

–3
20
266
1,157
25,275 27,219 31,454 31,372 29,246
0.56

–21
–348

0.50

0.63

0.65

0.50

–39
1,862
29,246
0.56

NET DEBT

Q 1
2017

Q 2
2017

Q 3
2017

Q 4
2017

–39

–41

–212

Non-current interest-bearing receivables
Current interest-bearing investments
–150
including derivatives
–459
Cash and cash equivalents
2,933
Pension provisions
Other non-current interest-bearing liabilities 16,232 17,450 16,728 16,859
Current interest-bearing liabilities including
derivatives
Total

6,263
23,339 24,970 25,180 25,275

–211
–844
3,109

–161
–440
2,929

–113
–697
3,058

5,505

4,901

6,336

–171

Q 1
2018

–113

Q 2
2018

–120

Q 3
2018

–96

Q 4
2018

–106

–277
–551
2,971

–188
–538
2,880
18,425 20,194 19,067 19,489

–211
–559
2,873

–284
–496
3,102

6,763

9,059 10,297
7,710
27,219 31,454 31,372 29,246

1 Excluding restructuring payments.
2 Items affecting comparability relate to restructuring costs as well as impairment of goodwill and other intangible assets.

100

ASSA ABLOY ANNUAL REPORT 2018

QuARTERLY INFORMATION

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

Q 1
2018

Q 2
2018

Q 3
2018

Q 4
2018

81,139 79,733 81,412 81,146
51,956 50,590 52,169 53,413

2,176

17,595 17,309 17,032 19,144
2,243
23,339 24,970 25,180 25,275
9

2,193

2,147

2,385

20,019 19,011 19,052 19,637
2,434
27,219 31,454 31,372 29,246
10

2,391

2,383

48,989 46,374 47,292 50,648

53,911 48,268 50,030 51,890

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

Q 1
2018

1.77

Q 2
2018

–2.90

Q 3
2018

2.15

Q 4
2018

Full year
2018

1.46

2.48

1.73

1.96

1.94

2.15

7.77

1.77

1.84

2.15

2.33

8.09

44.10

41.75

42.58

45.60

48.53

43.45

45.04

46.71

CAPITAL EMPLOYED AND FINANCING

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

perty, plant and equipment

– of which investments in associates
Net debt
Non-controlling interests
Equity attributable to the Parent
company’s shareholders

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

NUMBER OF SHARES

Total number of shares, millions
Weighted average number of outstanding
shares, before and after dilution, millions

Q 1
2017

Q 2
2017

Q 3
2017

Q 4
2017

Full year
2017

Q 1
2018

Q 2
2018

Q 3
2018

Q 4
2018

Full year
2018

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 relate to restructuring costs as well as impairment of goodwill and other intangible assets.

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 precentage 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 infor-
mation.

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 in relation to
number of outstanding shares after any potential dilution.

ASSA ABLOY ANNUAL REPORT 2018

101

PROPOSED DISTRIBuTION OF EARNINGS

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 8,257 M
Net income for the year: SEK 4,796 M
TOTAL: SEK 13,840 M

The Board of Directors and the President and CEO propose that a dividend of SEK 3.50 per share, a total of SEK 3,888 M, be
distributed to shareholders and that the remainder, SEK 9,952 M, be carried forward to the new financial year. The dividend
amount is calculated on the number of outstanding shares as per 4 February 2019.

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 4 February 2019.

Monday, 29 April 2019 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, 3 May 2019.

The Board of Directors and the President and CEO declare that the consolidated accounts have been prepared in accordance
with International Financial Reporting Standards, IFRS, as adopted by the EU and give a true and fair view of the Group’s
financial position and results. The Parent company’s annual accounts have been prepared in accordance with generally
accepted accounting principles in Sweden and give a true and fair view of the Parent company’s financial position and results.

The Report of the Board of Directors for the Group and the Parent company gives a true and fair view of the development of
the Group’s and the Parent company’s business operations, financial position and results, and describes material risks and
uncertainties to which the Parent company and the other companies in the Group are exposed.

Stockholm, 4 February 2019

Lars Renström
Chairman

Carl Douglas
Vice Chairman

Nico Delvaux
President and CEO

Birgitta Klasén
Board member

Jan Svensson
Board member

Ulf Ewaldsson
Board member

Lena Olving
Board member

Eva Karlsson
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 4 February 2019

PricewaterhouseCoopers AB

Bo Karlsson
Authorized Public Accountant
Auditor in charge

Linda Corneliusson
Authorized Public Accountant

102

ASSA ABLOY ANNUAL REPORT 2018

AuDITOR’S REPORT

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 2018 except
for the corporate governance statement on pages 48–56.
The annual accounts and consolidated accounts of the com-
pany are included on pages 41–97 and 102 in this document.
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 2018 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 2018 and
their financial performance and cash flow for the year then
ended in accordance with Inter national Financial Reporting

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

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
sufficient work to enable us to provide an opinion on the
consolidated financial statements as a whole, taking into
account the structure of the Group, the accounting pro-
cesses 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 the treasury company and some 80 companies spread
across the Group’s five divisions, which are audited according
to a Group-wide audit program. The audit program 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

Standards (IFRS), as adopted by the EU, and the Annual
Accounts Act.

Our opinions do not cover the corporate governance
statement on pages 48–56. 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
shareholders adopts the income statement and statement
of comprehensive income 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.

includes that, based on the best of our knowledge and belief,
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
controlled companies within the EU.

We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinions.

test of details supplemented with analytical procedures
applied to the Group’s significant income statement and
balance sheet items. The majority of the subsidiaries in the
Group are also the subject of statutory audits according to
local requirements. During 2018, we 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 countries 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 consol-
idated financial statements.

Based on our professional judgement, we determined
certain quantitative thresholds for materiality, including the
overall Group materiality for the consolidated financial
statements as a whole. These, together with qualitative con-
siderations, 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 individu-
ally and in aggregate on the financial statements as a whole.

ASSA ABLOY ANNUAL REPORT 2018

103

AuDITOR’S REPORT

Key audit matters
Key audit matters of the audit are those matters that, in our professional judgment, 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 2018 financial year, a total of 19 acquisitions
were consolidated.

ASSA ABLOY’s goodwill of SEK 53 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 prior year as well
as the SEK 5.6 billion impairment recorded during the
current year.

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 calculation of the impairment of goodwill and
indefinite lived intangible assets in the APAC division and its
annual test of goodwill and other intangible assets with indefi-
nite useful lives can be traced to observable market data and to
the company’s own business plans and forecasts on future
development.

Through test of details we have examined whether ASSA
ABLOY’s calculation of the impairment during the second quar-
ter and assessment of whether there is any indication that
assets may be further impaired at 31 December 2018, are
based on the company’s financial budgets approved by man-
agement. We have compared forecasts to the actual business
performance for the current year and 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 sustaina-
ble 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 and general risks found
in the cash generating units. We have reconciled the data in the
calculations and checked it against external. In this part of the
audit, we have utilized PwC’s valuation specialists.

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 during 2018 and the closing
provision balance amounts to SEK 1190 M as of
31 December 2018.

In our audit, we have focused on these restructuring
programs to assess whether a present obligation exists,
and we have assessed the valuation of that obligation
representing future expenditures as it requires judge-
ment and is dependent on management estimates.

We have examined the company’s process for identifying
restructuring projects 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 management’s assessments of remain-

ing cash flows by reviewing their quarterly project updates.

104

ASSA ABLOY ANNUAL REPORT 2018

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
sections Report on Operations, Divisions, Sustainability
Report, Shareholder Information and the sections Com-
ments on five years in summary, Five years in summary, Quar-
terly information and Definitions of key ratios. The Board of
Directors and the Managing Director are responsible for 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.

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.

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 Director’s 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

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 intend to liquidate the com-
pany, 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 report-
ing process.

accounts, The Board of Directors and the Managing Director

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 Revisorsinspektionen’s website: www.revisorsinspek-
tionen.se/revisornsansvar. This description 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 Director’s and the Managing Director of ASSA
ABLOY AB (publ) for the year 2018 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 Director’s 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 suffi-
cient and appropriate to provide a basis for our opinions.

ASSA ABLOY ANNUAL REPORT 2018

105

AuDITOR’S REPORT

Responsibilities of the Board of Director’s 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’ equity, consolidation requirements, liquidity and
position in general.

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.

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

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 Com-
panies 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 lia-
bility 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 Revisorsinspektionen’s
website: www.revisorsinspektionen.se/revisornsansvar.
This description 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 48–56 has been prepared in
accordance with the Annual Accounts Act.

ally accepted auditing standards in Sweden. We believe
that the examination has provided us with sufficient basis
for our opinions.

Our examination of the corporate governance state-
ment is conducted in accordance with FAR’s auditing stand-
ard RevU 16 The auditor’s examination of the corporate
governance statement. This means that our examination of
the corporate governance statement is different and sub-
stantially less in scope than an audit conducted in accord-
ance with International Standards on Auditing and gener-

A corporate governance statement has been prepared.
Disclosures in accordance with chapter 6 section 6 the sec-
ond 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
the shareholders on the 26 April 2018 and has been the company’s auditor since the 1994.

Stockholm, 4 February 2019

PricewaterhouseCoopers AB

Bo Karlsson
Authorized Public Accountant
Auditor in charge

Linda Corneliusson
Authorized Public Accountant

106

ASSA ABLOY ANNUAL REPORT 2018

SHAREHOLDER INFORMATION

Shareholder information

Content

The ASSA ABLOY share

Information for shareholders

108

111

ASSA ABLOY ANNUAL REPORT 2018

107

THE ASSA ABLOY SHARE

The ASSA ABLOY share

Share price trend
2018 turned out to be yet another volatile year for global
stock markets. After a relatively calm first-half of the year
indexes turned weaker over the summer and suffered sharp
declines during the fall. OMX Stockholm index fell 14 per-
cent during the fourth quarter, ending the year with a
decline of –7.7 percent.

The ASSA ABLOY’s Series B share followed the trend, rising
12 percent during the first half-year, but after a decline of 11
percent in the fourth quarter ended the year with a decline
of 7.2 percent, slightly better than OMX Stockholm. The
highest closing price during the year of SEK 193.90 was
recorded on 21 May 2018 and the lowest of SEK 155.85 was
recorded on 27 December 2018.

At year-end, market capitalization amounted to SEK
175,954 M (189,276), 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 1,588 million shares (1,698) in 2018,
equivalent to a turnover rate of 151 percent (161). Turnover

of the Series B share on Nasdaq Stockholm amounted to
578 million shares (583), equivalent to a turnover rate of
55 percent (55).

The trend of declining turnover rates for trading on
Nasdaq Stockholm was slightly reversed in 2018 with an
average turnover rate of 67 percent (63), a slight uptick from
2017. Over the past few years however, turnover rates on
Nasdaq Stockholm have gradually declined from 78 percent
in 2012 to 67 percent in 2018. Even among the most fre-
quently traded shares the trend is the same, average turn-
over rate was 70 percent (65) on the Large Cap list in 2018.
The implementation of the EU’s Markets in Financial
Instruments Directive (MiFID) in late 2007 changed the
structure of equity trading in Europe and trading now takes
place on both regulated markets and other trading plat-
forms. Thus, trading has become more fragmented and an
increasing proportion of trading in shares in Swedish compa-
nies now takes place on markets other than Nasdaq Stock-
holm. In 2018 the ASSA ABLOY share was traded on more
than fifteen different markets, with trading on Nasdaq Stock-
holm accounting for only around 35 percent of share turn-
over, 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 2009–20181

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

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

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

2018 proposed dividend

SHARE PRICE AND TuRNOVER 2018

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

108

ASSA ABLOY ANNUAL REPORT 2018

THE ASSA ABLOY SHARE

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

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
3.30
1.9
42.5
170.40
197.10
163.80
45.60
1,112.6

2018
8.092
3.503
2.2
43.3
158.15
193.90
155.85
46.71
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, 2016 and 2018.
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 2018 was 31,143
(33,811) and the ten largest shareholders accounted for 36.9
percent (40.3) of the share capital and 56.9 percent (59.3) of
the votes. Shareholders with more than 50,000 shares, a total

of 481 shareholders, accounted for 97 percent (97) of the
share capital and 98 percent (98) of the votes.

Investors outside Sweden owned 70.5 percent (66.6)
of the share capital and accounted for 48.1 percent (45.4)
of the votes, and were mainly in the US and the UK.

ASSA ABLOY’s ten largest shareholders
Based on the share register at 31 December 2018.

Shareholders

Latour
Melker Schörling AB
Government of Singapore
Capital Group
BlackRock
Fidelity Investments
Vanguard
Norges Bank
Swedbank Robur Funds
Alecta Pension Insurance
Other shareholders
Total number

Series A shares

Series B shares

Total number of shares Share capital1, %

Votes1, %

41,595,729
15,930,240

57,525,969

63,900,000
21,654,104
51,230,631
42,012,171
36,469,288
33,090,837
29,864,644
26,845,606
23,697,324
23,695,000
702,590,760
1,055,050,365

105,495,729
37,584,344
51,230,631
42,012,171
36,469,288
33,090,837
29,864,644
26,845,606
23,697,324
23,695,000
702,590,760
1,112,576,334

9.5
3.4
4.6
3.8
3.3
3.0
2.7
2.4
2.1
2.1
63.1
100.0

29.5
11.1
3.1
2.6
2.2
2.0
1.8
1.6
1.5
1.5
43.1
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

Government of Singapore, 4.6%

Legend

Capital Group, 3.8%

Legend

Melker Schörling AB, 3.4%

Legend

BlackRock, 3.3%

Latour, 29.5%

Legend

Melker Schörling AB, 11.1%

Government of Singapore, 3.1%

Legend

Capital Group, 2.6%

Legend

BlackRock, 2.2%

Legend

Fidelity Investments, 3.0%

Legend

Vanguard, 2.7%

Norges Bank, 2.4%

Swedbank Robur Funds, 2.1%

Alecta Pension Insurance, 2.1%

Other shareholders, 63.1%

Legend

Fidelity Investments, 2.0%

Legend

Vanguard, 1.8%

Norges Bank, 1.6%

Swedbank Robur Funds 1.5%

Alecta Pension Insurance, 1.5%

Other shareholders, 43.1%

Share capital and voting rights
The share capital amounted to SEK 370,858,778 at year-end
2018, 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 amounted to
1,630,310,055. Each Series A share carries ten votes and each
Series B share one vote.

The 2018 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

ASSA ABLOY ANNUAL REPORT 2018

109

THE ASSA ABLOY SHARE

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 2018.

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 propose
that the dividend to shareholders be raised by 6 percent
to SEK 3.50 per share (3.30) for the 2018 financial year,
equivalent to a dividend yield on the Series B share of 2.2
percent (1.9).

In 2018 the total return on the ASSA ABLOY share, defined

as market price movement plus reinvested dividends, was
5.4 percent, compared with the reinvested SIX Return Index,
which was down 4.6 percent. Over the ten-year period
2008–2018, the total return on ASSA ABLOY’s Series B share
was 745 percent, compared with a 249 percent rise in the
SIX Return Index and a 157 percent rise in OMX Stockholm.

Changes in share capital

Year

1989
1994
1994
1994
1996
1996
1997
1998
1999
1999
1999
1999
1999
2000
2000
2000
2001
2002
2002
2010
2011
2012
2015

Transaction

Split 100:1
Bonus issue
Non-cash issue
New share issue
Conversion of Series C shares into Series A shares
New share issue
Converted debentures
Converted debentures before split
Bonus issue
Split 4:1
New share issue
Converted debentures after split and new share issues
Converted debentures
New share issue
Non-cash issue
Converted debentures
New share issue
Converted debentures
Converted debentures
Converted debentures
Converted debentures
Split 3:1

Series A
shares

Series C
shares

20,000

1,428,550
1,714,260

1,746,005
2,095,206
3,809,466
4,190,412
4,190,412
4,190,412

16,761,648
18,437,812
18,437,812
18,437,812
19,175,323
19,175,323
19,175,323
19,175,323
19,175,323
19,175,323
19,175,323
19,175,323
57,525,969

Series B
shares

Share capital,
SEK1

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

1 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).

Common questions from the capital market to ASSA ABLOY

How will you achieve the 10 percent annual sales
growth target?
The 10 percent growth target is an ambitious, but achievable
target. The target is a combination of organic and acquired
growth over a business cycle. During the last ten years, ASSA
ABLOY has grown by slightly more than 9 percent annually.
In 2018, the organic growth was 5 percent and the gross
acquired growth was 4 percent. Over time this industry is
growing more than GDP and the digitization of the industry
provides further growth opportunities. By investing in prod-
uct development, combined with acquisitions, and growing
in both new and mature markets, the target can be achieved.

In what product segments are you growing the most?
In 2018, sales growth was very strong in electromechanical
products. In particular, the sale of smart locks grew strongly
in the US, driven by Yale, August and new partnerships devel-
oped with Amazon and Nest. The digitization of the locks
provides many opportunities going forward.

Which was the most important acquisition during 2018?
All acquisitions are an important, but in particular, the acqui-
sition of Crossmatch was the largest acquisition ASSA ABLOY
has completed in five years. In total, 19 acquisitions were
completed with annualized sale of about SEK 3.8 billion.
Two businesses were also divested.

ASSA ABLOY wrote down SEK 6bn in China during 2018.
How will you turn around the operation in China?
During 2018, ASSA ABLOY implemented a new strategy
that consolidates the broad range of brands in the Chinese
market as well as production sites. Three sales organizations
have been established around the local brand PanPan, the
international brand Yale and ASSA ABLOY. A key account
organization has also been established to focus on the larg-
est construction developers. The turnaround will take time,
but with the new team in place we are confident we will
start to see the first results already in 2019.

110

ASSA ABLOY ANNUAL REPORT 2018

INFORMATION FOR SHAREHOLDERS

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, Sweden, at 3.30 p.m. on Thursday 25
April 2019. Shareholders who wish to attend the Annual
General Meeting must:
• Be recorded in the share register kept by Euroclear

Sweden AB on Wednesday 17 April 2019.

• Notify ASSA ABLOY AB of their intent to attend no later

than Wednesday 17 April 2019.

Notice of attendance
• Website
www.assaabloy.com
• Telephone +46 (0)8 506 485 14
• Address

ASSA ABLOY AB,
“Annual General Meeting 2019”,
c/o Euroclear Sweden AB
Box 191, 101 23 Stockholm, Sweden

The notice of attendance should state:
• Name
• Personal or corporate identification number
• Address and telephone number (daytime)
• Number of shares
• Any assistants attending

If participation is by proxy, the proxy should be submitted
in connection with the notice of attendance and the
proxy must be presented in original at the latest at the
Annual General Meeting. Proxy forms are available at:
www. assaabloy.com.

Nominee registered shares
Shareholders whose shares are nominee registered must, in
addition of giving notice of attendance, request that their
shares be temporarily registered in their own name in the
share register (so-called voting right registration) in order to
have the right to attend the Annual General Meeting. Such
registration must be effected by Wednesday 17 April 2019,
and shareholders should contact their bank or nominee well
in advance of this date.

Nomination Committee
The Nomination Committee has the task of preparing, on
behalf of the shareholders, proposals regarding the election
of Chairman of the General Meeting, members of the Board
of Directors, Chairman of the Board, Vice Chairman of the
Board, auditor, fees for the board members including divi-
sion between the Chairman, the Vice Chairman, and the
other board members, as well as fees for committee work,
fees to the company’s auditor and changes of the instruc-
tions for the Nomination Committee.

The Nomination Committee prior to the 2019 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 29 April 2019 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 3 May 2019.

Further information
Hedvig Wennerholm
Telephone +46 (0)8 506 485 51
hedvig.wennerholm@assaabloy.com

Reports can be ordered from
ASSA ABLOY AB
www.assaabloy.com
• Website
• 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: 25 April 2019
Second quarter: 17 July 2019
Third quarter: 18 October 2019
Fourth quarter and Year-end report: February 2020
Annual Report 2019: March 2020

ASSA ABLOY ANNUAL REPORT 2018

111

ASSA ABLOY’s access solutions are installed
in all types of buildings all over the world

Securing buildings from the perimeter …

Hotel / retail

Enterprise

Multi-family building

The ASSA ABLOY Group is the global leader in access solutions. Every day, the Group helps billions of people to experience
a more open world. ASSA ABLOY’s innovations enable safe, secure and convenient access to physical and digital places.
The Group has leading positions in areas such as efficient door openings, trusted identities and entrance automation.

1 Bollards and other safety devices protect pedes-

trians from motor vehicles. The various models
can be permanently installed, portable or retractable,
and they can be integrated in security and alarm sys-
tems.

a certain place to ensure that no unauthorized individu-
als, temporary contractors, 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.

Enterprise

6 Mobile keys, physical access control systems

including readers and controllers to manage

access in the building.

7 Security-rated doors and frames. Electromechani-

cal locks and other hardware work together with
physical access control systems, including readers and
controllers to manage access.

10 Revolving doors create spacious and welcoming

entrances with room for luggage carts or wheel-

chairs. 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 sep-
aration of indoor and outdoor climates. Side doors are
added for increased accessibility and rapid evacuation.

11 Complete solutions for hotel rooms, including

door solution, safes and energy management

systems.

12 Garage doors, bars and gates are secure and easy

to connect to the buildings access control system.

Hotel/retail

Multi-family building

8 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.

9 Total door opening solutions for retail

premises.

13 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.

2 High-security fences and gates protect against

unauthorized entry. The doors can be integrated
with security systems, sensors and surveillance cameras.

3 ASSA ABLOY has a complete offering for service,

maintenance and modernization of automatic

entrances and docks.

4 Automatic sliding doors are particularly suitable

for entrances and indoor areas with large pedes-
trian flows. Automatic sliding doors allow you to enter
a building without manually open doors – and conveni-
ently pass through even if you are pushing a shopping
or carrying suitcases.

5 Inside the building, mechanical and electrome-

chanical key systems, software and solutions for
access control. System to integrate access control sys-
tems for e.g. authorization, logistics, personnel, etc.
Solutions for secure issuance and management of identi-
ties 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

… to shell …

Enterprise

… to core …

Enterprise

Door closers

Power supplies

Hinges

Magnetic locks

Key pads, push buttons,
key switches, touch bars

Electric strikes

Mechanical & electro-
mechanical locks & keys

Panic bars

Kick plates

Floor closers

Air louvers

Steel doors & frames

Wireless
locks

Cabinet
locks

… to shell and core …

Hotel / retail

… to shell and core …

Multi-family building

ASSA ABLOY is the global leader in access solutions.

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 2019.

The ASSA ABLOY Group is the global leader
in access solutions. Every day we help
people feel safe, secure and experience
a more open world.

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
www.assaabloy.com