ASSA ABLOY Annual Report 2020

FY2020 Annual Report · ASSA ABLOY

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Annual Report
2020

A
more
open
world

A more open world

Experience a safer
and more open world

ASSA ABLOY is part of people’s everyday life all over the world. Our products and
solutions are found in homes, at workplaces and schools, when you shop or travel.
Some products are very visible – like keys, locks and doors – while others are
embedded in solutions like e-passports and identity solutions. What they all have
in common is creating a safer and more open world.

Who we are
We are the global leader in access
solutions. We are 48,000 employees
in more than 70 countries around the
world. Read more on page 6.

How we create value
In an ever-changing world, we develop
new products and solutions so that
people feel safe and secure and experi-
ence a more open world.
Read more on page 8.

How we operate
Our strategic objectives are growth
through customer relevance, product
leadership through innovation, cost-
efficiency in everything we do and
evolution through people. They lead the
way in how we do business every day.
Read more on page 14.

What we offer
We offer products and services related to
openings: locks, doors, gates and entrance
automation solutions. We are also experts
in trusted identities: keys, cards, tags,
mobile and biometric identity verification
systems. Read more on page 30.

Experience a safer

and more open world

ANNUAL REPORT 2020 | ASSA ABLOYContents

Our strategy serves
us well
Thanks to the strong individual efforts
of our employees, through significant
cost measures and strong operational
execution, we were able to limit the
negative sales effects from the pan-
demic, protect the profitability and
generate strong operational cash flow.

Read more on page 14–15.

The year in brief

In a difficult
environment we
have executed well
and continued to
invest in product
innovation. We have
launched many
new products and
solutions to support
our customers’
demands for touch-
free access solutions.

Goals and
outcomes

The financial and sustain-
ability targets have been
set at challenging but
achievable levels. The
financial targets have been
set to balance growth
with a return level that
will bring substantial value
creation. During the past
ten years, prior to the pan-
demic, we grew by more
than 9% annually with an
adjusted operating margin
of more than 16%. The
sustainability targets were
set in 2015 and by 2020
we exceeded most targets.
New targets have been
set for 2025. Read more
on page 15 and in the
Sustainability report.

• Sales decreased by 7% to SEK 87,649 M (94,029) due to
the negative effects from the outbreak of the Covid-19
pandemic and exchange rates.

Key figures

Sales, SEK M

of which: Organic growth, %

• Twelve acquisitions were completed, contributing to net

of which: Acquired growth, net total, %

acquired growth of 4 % for the year.

of which: Exchange rate effects, %

2019

2020

Change

94,029

87,649

–7%

-8

-3

• Operating income was negatively affected by Covid-19,
while cash flow was strong. Operating margin excluding
items affecting comparability was 13.6 % (15.9).

• Investments in product development continued at a

fast pace. 25% (27) of sales were generated by products
launched during the last three years.

Operating income (EBIT), MSEK1

14,920

11,916

–20%

Operating margin, %1

Income before tax (EBT), SEK M1

Operating cash flow, SEK M

Return on capital employed

Dividend, SEK/share2

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

15.9

13.6

13,883

11,133

14,442

14,560

17.0

3.85

13.0

3.90

–20%

+1%

Sales and operating income (EBIT)1

Earnings per share1, 2

Sales, SEK M

100,000

EBIT, MSEK

15,000

SEK

80,000

60,000

40,000

20,000

Sales

Operating income (EBIT)

1 Excluding items affecting comparability.

12,500

10,000

7,500

5,000

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

Over a business cycle

Target 2020 vs. 2015

10%

Annual growth through a
combination of organic and
acquired growth

SEK M
100,000

80,000

60,000

40,000

20,000

16–17%

Operating margin1

–55%

Injury rate

–20%

Greenhouse gas intensity,
energy

–58%

–27%

%
20

15
1 Excluding items affecting comparability.

Due to the effects from the
pandemic, total sales declined
7%. The organic growth was –8%,
while the completion of agta
record contributed to an net
acquired growth of 4%. During
the last ten years, our average
annual growth was more than 9%
when excluding the year of the
pandemic.

The adjusted operating margin
was 13.6% in 2020. Covid-19 had
a significant negative effect on
the profitability, but the margin
recovered strongly in the second
half of the year. During the last
ten years, prior to the pandemic,
our operating margin has been
more than 16% in most years.

The injury rate was down 7% and
is down 58% since 2015. We have
worked structurally throughout
the organization and in particular
targeted entities that have had
higher incidents. This work has
resulted in significant improve-
ments.

Our greenhouse gas intensity
related to the Group’s energy
consumption decreased by 5%
and is down 27% since 2015,
exceeding our target by 7 points.
This has been achieved through
improvements in efficiency and
industrial processes. Read more
about our new five-year sustain-
ability targets on page 15.

ANNUAL REPORT 2020 | ASSA ABLOYWho we are

The global leader in
access solutions

The ASSA ABLOY Group is the global leader in access solutions. Every day, we help
billions of people to experience a more open world with innovative solutions that
enable safe, secure and convenient access to physical and digital places.

Access solutions for every need
Our offering covers products and services related to openings; such as locks, doors, gates and
entrance automation solutions. We are also experts in trusted identities; with keys, cards, tags,
mobile and biometric identity verification systems. Our offerings are delivered both separately
and together – as full-service access solutions.

Solutions

Service

Openings

Entrance automation

Master key systems

Identities

Access control

Authentications

Data and analytics

A decentralized organization
Our local presence enables us to quickly deliver and respond to customer enquiries with the local business units innovating,
and optimizing resources and products according to the local conditions and demand. At more centralized production sites,
we produce components that can be used in many markets to realize scale advantages. The regional divisions manufacture
and sell mechanical and electromechanical locks, digital door locks, cylinders and security doors, adapted to the local market’s
standards and security requirements. The global divisions manufacture and sell electronic access control, identification pro-
ducts and entrance automation. Read more on page 28–37.

Regional divisions

Global divisions

Opening
Solutions
EMEA

Opening
Solutions
Americas

Opening
Solutions
Asia Pacific

Global
Technologies

Entrance
Systems

Strong brands
Our brands play an important role in creating trust, loyalty and differentia-
tion. We use a combination of master, endorsed and standalone brands to
reach all our audiences. ASSA ABLOY is our employer brand and main
commercial brand, HID covers secure identities and access management,
and Yale covers residential products and services.

Group brand and employer brand

Master brands

ASSA ABLOY | ANNUAL REPORT 2020Global presence

•• Country sites and larger locations

In total, we have about 900 sites,
whereof 101 R&D sites and 109
production facilities. The other
sites are distribution centers and
offices. ASSA ABLOY has operations
in more than 70 countries.

Who we are

45%

North America
Sales

37%

Europe
Sales

South America
Sales

11%

Asia
Sales

Africa
Sales

Oceania
Sales

Electromechanical on the rise
The Group sees fast-growing demand for electrome-
chanical products, as well as electronic and digital
solutions. Since 2010 these have increased from 25%
to 31% of Group sales. Mechanical products continue
to grow, but electromechanical products are growing
considerably faster.

Together we create access

48,000

employees

countries

of our employees
work in R&D

9,000

patents

Sales by product group

Customer split

New construction/Aftermarket

n Mechanical locks, lock

systems and fittings, 24%
n Entrance automation, 29%
n Electromechanical and
electronic locks, 31%
n Security doors and
hardware, 16%

n Commercial, 75%
Commercial, 75%
n Residential, 25%
Residential, 25%

n New constuction, 33%
New construction, 33%
n Aftermarket, 67%
Aftermarket, 67%

ANNUAL REPORT 2020 | ASSA ABLOY

CEO statement

Our strategy served us
well in a challenging year

We have put a year behind us that due to the outbreak of Covid-19 affected most of our daily lives in
one way or the other. For ASSA ABLOY, the pandemic resulted in the most challenging operational situ-
ation in our history and impacted our financial performance strongly, particularly in the first half of the
year. After implementing significant actions, while continuing our investments in product development,
the financial performance improved. Thanks to the strong individual efforts of our employees, through
significant cost measures and strong operational execution, we were able to limit the negative sales
effects from the pandemic, protect the profitability and generate strong operational cash flows.

Due to the outbreak of the Covid-19 pandemic, total sales
decreased by 7% to SEK 87,649 M, the organic growth
decreased by 8%, net acquired growth was 4% and we had
a negative currency effect of 3%. Covid-19 had a significant
impact throughout the year and the organic sales decline
was the strongest during the second quarter when more
than half of the world ´s population was subject to lockdown
measures and one third of our production sites were tem-
porarily closed. Compared to previous recessions, this crisis
has been different for ASSA ABLOY. Initially, the pandemic
affected our supply chain out of China and local demand in
China. From March onwards global demand was strongly
affected. As this crisis was about trust, installers, service
technicians and channel partners were in many instances
prevented from visting customers due to government
restrictions and fear of the virus. When societies gradually
opened up, the aftermarket improved and construction
sites were restarted.

Divisional development
Entrance Systems division was least impacted by the lock-
downs as our sales to distribution centers and warehouse
customers increased due to the rapidly growing global
e-commerce trend. Global Technologies was, on the other
hand, more negatively affected due to lower travel activities
and lower demand in the office segment. Our regional
divisions were also significantly impacted by the lockdowns,
but the magnitude differed between markets. In APAC, it
is encouraging to see that our new strategy for China is
making good progress and is translating into an improved
financial result.

We continued with our successful acquisition strategy and

during the year we welcomed 12 businesses into the ASSA
ABLOY family. We also finalized the acquisition of agta
record, which complements our offering within the
Pedestrian business segment in Entrance Systems.

Our operating result was SEK 11,916 M corresponding to
an operating margin of 13.6%. The margin was lower in the
first half of the year, but was close to our target in the latter
part of the year. This was achieved by implementing signifi-
cant cost measures that reduced our SG&A and conversion
costs in a very important way. We also launched our next
Manufacturing Footprint Program (MFP8) and booked SEK
1,366 M in additional restructuring costs. This program will
improve our operating efficiency, strengthen our competi-
tiveness and will reduce the annual costs by approximately
SEK 1.0 bn when fully implemented.

Operating cash flow was very strong at SEK 14,560 M,
thanks to good improvements in working capital. This resul-
ted in a cash conversion rate of 131%.

Our strategy guided our actions
While the pandemic led to an extraordinary situation, our four
strategic objectives have guided us through the crisis. Our
decentralized organization where decision making is close to
the customer, empowered the people in the local organiza-
tions to act in a swift and agile manner based on local market
conditions. The actions implemented in the first half year were
wider and deeper than ever before. We also developed new
ways of working in many parts of the Group, respecting social
distancing measures and focusing on the health and wellbeing
of our employees. I am very proud of this execution.

From the beginning of the crisis we introduced short-term

work and made temporary and permanent layoffs, that
unfortunately impacted more than 20% of our workforce. We
further reduced costs by renegotiating consultancy contracts
and by lowering travel and other discretionary spending.
These cost actions were critical in protecting our profitability.
We continued to invest in product innovation, speciali-
zed sales and service offerings. For example, a number of
touch-free access solutions and products were introduced
to the market. We also launched a new scalable commercial
digital security ecosystem named Incedo, that connects
different access hardware on the same software platform. In
the residential market we extended our wide offering with
several new digital door locks. In total, 25% of our sales was
generated by products launched in the last three years and
we introduced more than 400 new products to the market
in 2020. This demonstrates that effective innovation is an
enabler for our future growth.

We further rolled out our Group values and strengthe-

ned our common culture. In line with our ambition we
also increased the number of internal recruitments and
promotions significantly. These initiatives facilitate our
continuation as a successful company. Even while working
from home, we further increased collaboration across the
Group through various digital platforms. This will continue
to improve our productivity also post Covid-19 in many
parts of our business.

Increased sustainability ambition level
In 2020 we reached the end of our current five-year sustain-
ability program where we set a number of ambitious targets.
These have focused on improving employees’ safety, energy,

MSEK
600

efficiency savings
from manufacturing
program

MSEK
87,649

total sales

MSEK
11,916

operating result

ASSA ABLOY | ANNUAL REPORT 2020CEO statement

water and materials efficiency, while reducing waste gener-
ated. I am pleased to report that we exceeded most of the
targets, including the reduction of our injury rate with 58%
and our carbon emission intensity from industrial produc-
tion by 99% compared to 2015.

Sustainability will be vital to economic and industrial de-
velopment in the coming decades. Our stakeholders’ expec-
tations in relation to sustainability is increasing constantly.
To ensure that we maintain our long-term competitiveness,
we decided to raise our ambition level. We have set new am-
bitious targets for 2025 under a new five-year sustainability
program. Additionally, we decided to commit to science-
based targets, which demonstrates our willingness to lead
the industry also in this field. We will achieve these targets
through efficiency investments in our operations and supply
chain and this will be enabled by technology improvements.
Our efforts in this field will also lead to development of
more sustainable products and solutions. Our strategic
objectives are well aligned with our higher sustainability
ambitions and will guide us on this journey.

Our financial targets remain intact
ASSA ABLOY is part of an attractive industry with strong
positive long-term drivers. Even though Covid-19 impacted
our industry to a greater extent than previous downturns,

we do not expect that any of the fundamental drivers of our
industry will change. On the contrary, our products and solu-
tions will be even more relevant as they can continue to help
people experience a more open and secure world. With our
innovative solutions we enable safe, secure and convenient
access to physical and digital places.

We therefore reconfirm our long-term financial targets of
10% annual growth over a business cycle with an operating
margin of 16–17%.

Finally, I would like to thank all our employees who have
contributed and ‘together we’ have built a stronger Group.
In addition, I would like to thank all our customers, partners
and shareholders for their trust and loyalty to ASSA ABLOY.
Many will remember 2020 as a challenging year where most
of us had to change our way of living. It has not been easy,
but our fast response and implemented measures have en-
sured that we will come out of this as a stronger Group, well
positioned to continue to lead the industry for sustainable
access solutions.

Stockholm, 5 February 2021.

Thank you!

Nico Delvaux
President and CEO

Sustainability
will be vital to
economic and
industrial develop-
ment in the
coming decades.
We decided to
commit to science-
based targets,
which demon-
strates our willing-
ness to lead the
industry also in this
field.

ANNUAL REPORT 2020 | ASSA ABLOYHow we
create value

Fundamental needs
drive our industry

A person’s basic need to be safe and secure is one of humanity’s most fundamental needs
and this has been driving our industry for hundreds of years. Convenient and secure access
solutions combined with increased focus on energy efficiency in buildings will drive growth
in our industry for the foreseeable future. The Covid-19 pandemic caused a slowdown
around the world in 2020, but industry trends and megatrends are expected to continue to
support long-term growth which we at ASSA ABLOY are well positioned to take part of.

Market overview
The access solution industry is an ever-evolving industry that
today has a global value of above USD 100 billion annually.
It has a history of stable growth, driven by the development
of more secure, innovative access solutions with increased
focus on convenience and ways of improving the sustainabi-
lity performance of buildings.

Through continuous evolution, local standards have
emerged, driven by local needs and lock companies. As a
result, the market for access solutions is very fragmented,
particularly in emerging markets. At ASSA ABLOY, we secure
buildings from the perimeter to their shell and core. We are
the largest provider of access solutions, but due to the frag-
mentation of the market our global market share is still low,
meaning that we still have significant potential for growth.

Growing trends
There are a number of favorable trends that are driving an
increased demand for access solutions, including meeting
the individual’s most basic need for safety and security.
The digitalization of the industry is enabling us to offer
more convenient solutions and also shift to more service-
based solution offerings. Another trend that is becoming
increasingly important is energy efficiency and sustainable
solutions.

Despite the Covid-19 crisis, market studies continue to
forecast that a number of favorable megatrends and indu-
stry trends will contribute to a continued growing demand
for security solutions in the future.

Megatrends
Urbanization
People are moving from rural areas into cities. This creates
demand for new buildings and thereby also new access solu-
tions. This trend is particularly evident in emerging markets,
where an increased need for housing, workplaces and stores
drives demand for access solutions. For example, the United
Nations projects that the population living in urban areas
could increase by another 2.5 billion people by 2050. Rising
prosperity and urbanization are leading to greater invest-
ments in advanced doors and access solutions in homes,
workplaces, and shopping centers.

Demand for security
To be safe and secure is a basic human need. In a world with
a high perception of uncertainty, the demand and need for
secure, convenient and efficient access solutions is increasing
– both in the residential and non-residential segments. The
growth is further supported by the demand for convenient
and time-efficient access solutions to places and things, as
time is a precious asset.

Sustainability
As concerns for the environment grows, customers are
looking for solutions that save energy and reduce green-
house gas emissions. The focus and demand for more green
buildings and access systems is therefore increasing. For
example, about 50% of all new commercial buildings are
now expected to be certified according to ‘green building’
standards. This also requires more transparency regarding
the environmental impact of products, production and
working conditions. There is also an increasing amount of
regulation of standards for more energy-efficient buildings
and access solutions. These are long-term drivers that sup-
port growth in our industry.

Industry trends
New technologies
The industry is transitioning from mechanical to electrome-
chanical products and solutions, providing more convenient
solutions for our customers. The proportion of electrome-
chanical products that we sell has increased from 25% to
31% over the last five years. The change of the product mix
to more electromechanical products will continue and
provide many business opportunities, while supporting
recurring revenues and software monetization.

Local regulations
A changing regulatory environment, with local regulations,
as well as applications and codes, results in an increasing
demand for updated and compliant access solutions. Dif-
ferent standards in different countries require adaptation
of products, which creates hurdles and complexity while
preventing commoditization of these products.

The access solu-
tion industry is
an ever-evolving
industry that today
has a global value
of above USD 100
billion annually.

ASSA ABLOY | ANNUAL REPORT 2020Market and trend | How we create value

Sustainability and the UN’s Sustainable
Development Goals
According to the World Green Building Council, buildings
and the built environment are responsible for 39% of global
energy-related carbon emissions. Door openings are an
important source for this. ASSA ABLOY has an important
role to play in the efforts to reduce emissions and we are
addressing this by developing locks, doors and door opening
solutions that help improve efficiency in buildings. We also
offer Environmental Product Declarations (EPDs).

We are a signatory of the UN Global Compact and we also
support the United Nation’s Sustainable Development Goals
(SDGs), which are taken into consideration in our strategy
work and in our daily operations. Our primary focus is on the
following six targets, where we believe that our industry and
ASSA ABLOY have the biggest impact:

• Clean water and sanitation
• Decent work and economic growth
• Industry, innovation and infrastructure
• Sustainable cities and communities
• Responsible consumption and production
• Climate action

Sustainability will be vital to economic and industrial
development in the coming decades. In 2020, we commit-
ted to science-based targets to demonstrate our willingness
to lead the industry towards a more sustainable future, and
to further improve our competitiveness with sustainable
products, solutions and operations.

During 2015-2020, we have again successfully completed

a sustainability program. We have implemented focused
projects to improve energy, water and materials efficiency
while reducing waste generated. In total, 13 targets were set
and we exceeded nine of the targets by year end 2020.

Our contribution to the SDGs goes beyond these explicit
targets. For example, we support SDG9 (Industry, innovation
and infrastructure) by exploring ways to reduce production
materials, optimize product components and streamline
production and transport methods via the Sustainability
Compass in our innovation processes. We support SDG11
(Sustainable cities and communities) by offering sustainable
products and services related to access solutions, including
offering EPD-rated products that enable our customers to
document the performance of their buildings.

More details on how we align our work with the goals is

provided in the Sustainability Report.

Sustainability
outcomes
2015–2020

–27%

CO2 intensity

(target –20%)

–30%

Energy intensity

(target –20%)

–50%

Water intensity
(target –20%)

–58%

Injury rate

(target –55%)

91%

Portion of spend in
low-cost countries
represented by
sustainability audited

direct material suppliers

(target 90%)

ANNUAL REPORT 2020 | ASSA ABLOYHow we create value | Our value creation business model

We help people feel safe, secure
We help people feel safe, secure
and experience a more open world
and experience a more open world

Every day, we help billions of people to experience a more open world with innovative
solutions that enable safe, secure and convenient access to physical and digital places.
By responsibly using human capital, natural resources and capital, we continuously
create sustainable value, not only for our shareholders, but also for other stakeholders.
Together we create value!

Our resources

How we operate

We use a multi-brand strategy to
leverage on our global and local
strengths and to address different
market segments, customer
seg ments and routes to market.
Acquiring relevant businesses in
order to continue our growth is a
key part of our strategy.

We have a decentralized organiza-
tion and make decisions close to
the customer.

Sustainability is part of everything
we do and is a driver throughout
ASSA ABLOY’s value chain. It is an
important element in innovation,
sourcing, production, employee
development, in applying ASSA
ABLOY’s products and solutions,
and in the Group’s relationships
with external stakeholders.

Our strategic objectives

The Group’s strategic direction is to lead the trend towards the
world’s most innovative and well-designed access solutions.

Growth through customer relevance
We believe that continued profitable growth starts with
understanding our customers.

Product leadership through innovation
Innovation is an enabler for everything we do and is the
most important driver for our organic sales growth.

Cost-efficiency in everything we do
All activities must lead to improved efficiency where
realized savings can be invested in innovation and
activities that accelerate our growth.

Evolution through people
Developing our people, and growing their careers
within ASSA ABLOY, is how we secure the Group’s
future success and growth.

Together we are guided by our core values and beliefs

Empowerment
We have trust in
people

Innovation
We have the
courage to change

Integrity
We stand up for
what’s right

48,000

employees in more than
70 countries around the
world. We are truly global,
uniquely local

2,800

employed in R&D
working with our
sus tain able innovations

190

strong brands and diversi-
fied product portfolio

9,000

patents

109

efficient production and
assembly facilities

~50,000

suppliers for direct mate-
rial and indirect services.
We have strategic and
cost efficient suppliers

SEK 59 bn

in shareholder equity

ASSA ABLOY | ANNUAL REPORT 2020

Our value creation business model | How we create value

A
more
open
world

Value creation to stake holders in 2020

Shareholders and investors
• Dividends and capital

Customers
• Increased security and competiti-

veness for our customers
• Sustainable products with
environmental product
declarations

>400

new products launched

appreciation

SEK 4.3 bn

dividend paid

Employees
• Professional development
• Safe and stable workplace
• Inclusive workplace with

equal opportunities

SEK 27.2 bn

in salaries and other remuneration

Suppliers and partners
• Technological development
• Stable partner

SEK ~42 bn

in supplier payments

Society
• Increased safety and security
• Reduced environmental impact
• Paid taxes and employment

SEK 2.5 bn

in income tax

Our offering

Our aim is to deliver safety, security and convenience. We offer a broad
product portfolio with unique, innovative access solutions and trusted identities services.

31%

29%

16%

24%

Electromechanical products

Entrance automation

Security doors and hardware

Mechanical locks

ANNUAL REPORT 2020 | ASSA ABLOY

How we
operate

Truly global, uniquely local

ASSA ABLOY is a global business, offering access solutions that are
a part of people’s everyday life all over the world. The company
was established in 1994 and more than 300 acquisitions have been
completed since then. Today we have a global leading position with
a diverse and decentralized operation.

From a local to global company
The lock industry is one of the oldest industries in the world
and characterized by local standards and structures that
have evolved during hundreds of years by local businesses.
The global market for access solutions is still fragmented
with no global standards. This also includes the structures
for how ‘to go-to-market’.

The ASSA ABLOY Group reflects the structure of the mar-
ket. Many of the companies in our Group were founded by
entrepreneurs over 100 years ago with products developed
for local markets. Since ASSA ABLOY was founded in 1994,
we have continuously expanded through a combination of
organic growth and acquisitions.

Our first 10 years were characterized by rapid growth
and by acquisitions of strong and leading businesses and
brands in many markets. We built the world’s leading Group
for locks. In the next phase we evolved into a global leader
in door opening solutions by combining the products and
offerings we had acquired during our first phase to offer
customers total solutions.

Today, we are the global leader in access solutions with
a wide offering of products, solutions and services related
to openings. We are also experts in trusted identities, with
keys, cards, tags, and mobile and biometric identity verifica-
tion systems included in our offering.

Combining decentralized and centralized structures
Standards for doors and locks are different between
markets. For these products, our operation is structured
around local assembly lines. Our local presence enables
us to quickly deliver and respond to customer enquiries
with the local business units innovating and optimizing
resources and products according to the local conditions
and demand. At more centralized production sites, we
produce components that can be used in many markets to
realize scale advantages. During the past years, these have
been located in countries with a lower cost profile in Eastern
Europe and Asia. By doing this, we combine global scale
with uniquely developed local products.

Product development takes place in the local markets
as well as in a few centralized units that develop shared
product platforms.

The decentralized structure, combined with local

management accountability, enables the business units to
respond to market and business developments in a speedy
manner.

Within our global divisions, we produce more of our pro-
ducts in centralized production units. For example, most of
HID Global’s RFID tags are produced in two factories and all
hotel locks from Global Solutions are produced in one fac-
tory. Entrance Systems has a more diverse structure, but is in
the process of consolidating more of its production including
the integration of agta record, which was acquired in 2020
and is the largest acquisition in eight years.

Digitalization provides multiple opportunities
Innovation is an enabler in our business and critical for our
success. The digitalization of our industry provides us with
opportunities to add more customer value. For example,
software platforms are used in our products to a greater de-
gree, and our global presence provides us with opportunities
to realize synergies across the Group. At the same time, digi-
talization increases the speed of change in our industry. We
need to ensure that we stay alert and agile and in response to
this, we are working with our internal culture to increase the
collaboration and information sharing between our divisions
and business units. We are also investing more in product
development. The R&D share of sales has increased during
the last two years from 3% to about 4%, corresponding to an
increase of SEK 1,009 M.

One example of how we realize synergies is the foundation
of Smart Residential, which is a cross divisional organization
accountable for smart digital door locks sold to the residen-
tial market. This organization draws on the scale advantages
we realize internally within the regional divisions’, R&D and
production resources, including using one single IT platform
for the customer interface. The regional divisions then
optimize the sales activities in respective regional markets
and secure that the products meet local standards and re-
gulations. In 2020, we launched a new smart lock, Yale Linus
in Europe that is the result of this collaborative approach
between our divisions and Smart Residential. Read more
about innovation opportunities on page 19.

Our strategies and financial targets are based upon this
operating environment. Read more about our strategy and
how we work on pages 13–27.

Innovation is an
enabler in our bu-
siness and critical
for our success.
The digitalization
of our industry
provides us with
opportunities to
add more custo-
mer value.

ASSA ABLOY | ANNUAL REPORT 2020Strategic overview | How we operate

Strategic overview

The Group’s vision is to be the global leader in providing innovative
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 us.

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

Vision
To be the global leader in provi-
ding innovative access solutions
that help people feel safe and se-
cure so that they can experience
a more open world

Mission
• Building sustainable share-

holder value

• Providing added value to

our customers, partners and
end-users

• Being a world leading organi-
zation where people succeed

• Conducting business in an

ethical, compliant and sustai-
nable way

Financial targets

Our strategic objectives

Growth

organic

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
and beliefs

Empowerment
We have trust in
people

Innovation
We have the
courage to change

Integrity
We stand up for
what’s right

ANNUAL REPORT 2020 | ASSA ABLOYHow we operate | Strategic activities

Strategic activities in 2020

We work with a number of business priorities that support our strategic
objectives. A combination of short- and long-term actions were implemented
to address the impact from the Covid-19 pandemic. We also launched a new
five-year sustainability program and committed to science-based targets.

We work with a number of business priorities to accelerate
growth and further strengthen our position as the global leader
in providing innovative access solutions. Through continuous
investments in product innovation, we grow the core business
through upgrades from mechanical to electromechanical
products and solutions. This transition also provides opportu-
nities to generate more recurring revenue as we grow software
licenses, identity management and service agreements.

In Global Technologies and Entrance Systems, we focus on
driving sales in key verticals and increasing the service penetra-
tion. We also work with specific market targets including
growing in emerging markets through a combination of
organic growth and acquisitions. In China, we are consolidating
our operational footprint and prioritizing profitable growth.
Across the Group, we continuously work with cost-efficiency in
everything we do to reduce the cost of goods sold and we con-
tinue to consolidate our manufacturing and optimize logistics,
where savings realized can be used for investing in innovation
activities that further accelerate our growth.

Sales by product group, 2010

Sales by product group, 2020

n Mechanical locks, lock

systems and fittings, 42%
n Entrance automation, 11%
n Electromechanical and
electronic locks, 25%
n Security doors and
hardware, 22%

n Mechanical locks, lock

systems and fittings, 24%
n Entrance automation, 29%
n Electromechanical and
electronic locks, 31%
n Security doors and
hardware, 16%

ASSA ABLOY | ANNUAL REPORT 2020Strategic activities | How we operate

In addition to these business priorities, managing the extra-
ordinary situation raised by the outbreak of the Covid-19
pandemic became the highest priority for the year. We also
decided to raise our ambition level within sustainability and
launched new 2025 targets and committed to science-based
targets. This will further strengthen our competitiveness with
sustainable products, solutions and operations, demonstra-
ting our leadership in the industry and social responsibility.

Our Covid-19 response
During the first half of the year, a majority of the world’s
population was affected by restrictions and lockdowns as
a result of the pandemic. Our supply chain and production
were firstly interupted, resulting in the closure of about one
third of our factories. As a next step, the lockdowns led to
unprecedented drops in demand that, in some countries,
amounted to more than 90% within a few days.

We addressed the situation through a number of actions.

Our first priority is always the health and safety of our em-
ployees. Throughout the pandemic we implemented vari-
ous actions such as working from home, providing personal
protection equipment, introducing more shifts to limit the
number of people on certain sites, and various local actions
in response to local regulations.

To protect business continuity, significant actions

were implemented by local managers that adapted their
respective business entities according to the local market
conditions. All production units gradually became opera-
tional, thanks to the swift actions implemented to address
stringent new regulations.

At the same time, our employees continued to support

customers using innovative new methods to ensure everyone’s
health and safety. The strategic objectives have worked as a
guideline while implementing the following actions:
• Temporarily reduced working hours;
• capacity adjustments in factories to adapt to the lower
demand and then a gradual increase of the production
capacity; and

• continued investments in product development and the
launch of new products, in particular touch-free solutions.

We reduced our costs significantly. Some actions required
difficult decisions resulting in a 5% reduction in the number
of employees during the year, but critical product develop-
ment and certain sales and specification resources were
protected. This will ensure that ASSA ABLOY can further
strengthen its position as the global leader in access solu-
tions and achieve its long-term financial targets.

Increased sustainability ambitions
Sustainability is a prioritized strategic activity that we are
working with long term. In 2020, we took a decision that will
influence our sustainability agenda for many years to come
by committing to science-based targets. This will align our
ambition level for climate-related emissions with the 1.5°C
scenario in the Paris Agreement.

We also closed our 2020 sustainability targets and set new

targets for 2025. The new targets build on our previous five-
year target cycles, which began in 2010. Our new 2025 targets
increase the ambitions to do even more across all of the areas.
To achieve these targets, sustainability will need to be even
more integrated into our functions and everyday processes.
By committing to science-based targets, we are demon-
strating our commitment to address climate change and
maintain our leading commercial competitiveness. The exact
targets will be confirmed by the Science Based Targets initia-
tive in 2021–2022, but as the targets are aligned to the Paris
Agreement, we are already planning to take actions to reduce
our absolute greenhouse gas emissions by approximately
50% between 2019 and 2030 and to being net-zero across
the entire value chain at least by 2050. The new targets and
commitments will further strengthen our competitiveness
through stronger incentives to improve our operations.

More details about our sustainability performance, how
we work with sustainability and our new targets, are availa-
ble in the separate Sustainability Report.

Targets
2020–2025

–25%

absolute carbon
footprint

–25%

energy intensity

–25%

water intensity

–33%

injury rate

95%

portion of spend in
identified risk countries
represented by
sustainability audited
direct material suppliers

ANNUAL REPORT 2020 | ASSA ABLOY

How we operate | Strategic objectives

Strategic objective #1
Growth through
customer relevance

At the core of our “Growth through customer relevance”
strategic objective is the ability to develop an in-depth
understanding of the needs of our customers and end-users
so we can provide relevant solutions. Processes and tools
help us to develop targeted products and solutions that
meet customer demands for safety, security, convenience
and sustainability. Having a local presence is crucial to
maintaining our leadership and continuing to grow.

No. 1

global leader in
access solutions.

15% of sales are in
emerging markets, a
doubling in the last ten
years.

31%

the percentage of
electromechanical
products has increased
from 25 % to 31 % of
sales in ten years.

ASSA ABLOY | ANNUAL REPORT 2020Enhancing the customer experience
We aim to offer a customer experience that is best in class in
all areas. This includes offering seamless platforms that help
customers explore, buy, install and service our products.
Tools such as Net Promoter Score (NPS) help us improve
our customer relevance by measuring customer experience
across different touch points, and it is gradually being
deployed to more business areas. This year we started to
implement a single IT platform for the customer interface to
further improve the customer experience for our smart lock
customers. We also put extra focus on the user experience
by improving interfaces and website navigation.

Dedicated solutions for each segment
We continuously monitor evolving market trends and
gather insights into our customers and our competitors.
These activities help us to identify and prioritize opportuni-
ties that will advance our market position. We have segmen-
ted our markets into end-user verticals to identify specific
needs and create dedicated solutions for each segment. We
believe that growth through customer relevance is best ac-
hieved by delivering differentiated products and solutions,
rather than by taking a one-size-fits-all approach.

Institutional and commercial markets currently represent
about 75% of our total sales. This includes premises used for
education, healthcare, transportation and public and private
offices, among others. Healthcare is an example of a growing
vertical where we are expanding our presence as a result
of the acquisition of FocusCura, a provider of technology
solutions for senior care. The residential market accounts for
the remaining 25% of our sales and this is an area where we
see further growth potential due to the rising smart home
trend.

The aftermarket represents two thirds of our sales, provi-
ding a stable demand through renovations, replacements
and upgrades, as well as services. New construction, which
constitutes about one third of our business, is more cyclical
in nature. We aim to generate more recurring revenues th-
rough new software-related offerings and enhanced service
packages as the demand for electromechanical, digital and

Strategic objectives | How we operate

smart solutions rises. Connected products, new features
and subscription services will continue to drive revenues in
the future.

Sales by product group, 2020

Brand consolidation and consistency
Consistent brand experiences build trust. At ASSA ABLOY,
we use a combination of master, endorsed and standalone
brands to reach all our audiences. ASSA ABLOY is our
employer and main commercial brand, HID covers secure
identities and access management, and residential products
and services are led by Yale. Each has a strong and distinct
identity.

Our customers also know us by a number of well-known

brands, strongly or more softly endorsed by one of these
master brands. For niche audiences, we maintain some
standalone brands, sold mainly through distributors and
installers.

Design is a tool for us to create strong customer

experiences. This year, as part of Yale’s 180th anniversary
celebrations, we launched the award-winning Linus lock
and focused on making the brand’s consumer experience
better than ever.

Seamless collaboration supports sales
Common processes and a structured approach to master
data management support our sales people and our market
strategies. Our Customer Relationship Management (CRM)
systems enable us to deliver more targeted information to
customers. ASSA ABLOY Openings Studio, our own Building
Information Modeling (BIM) software, helps architects and
other partners in the construction process to seamlessly
collaborate with our specification and sales teams to find
the most suitable building solutions. We continue to ex-
pand Openings Studio’s functionality for example through
integrations with leading 3D architectural design tools and
the development of a mobile app.

Dedicated pricing activities
Pricing is a core activity within the Group with a network of
dedicated pricing managers across all divisions to help drive

n Mechanical locks, lock

systems and fittings, 24%
n Entrance automation, 29%
n Electromechanical and
electronic locks, 31%
n Security doors and
hardware, 16%

Sales by region, 2020

n North America, 45%
n South America, 2%
n Europe, 37%
n Asia, 11%
n Oceania, 4%
n Africa, 1%

Legend

Creating a push effect through management
of sales channels and channel partners

ASSA ABLOY

Distributor/
wholesaler

Integrator/
installer (incl.
locksmiths)

End customer

OEM

Sales channels
The majority of our sales go th-
rough distributors. Most markets
are fragmented where we sell our
products to several distributors.
We work proactively with these
distributors in product marketing
and product development, with
the aim to grow our share of their
business. The end-customers are
influenced by specification, and
also by direct relationships with
some key accounts.

Pull effect driven by specifications,
brand loyalty and recurring revenues

ANNUAL REPORT 2020 | ASSA ABLOYHow we operate | Strategic objectives

price realization and margin improvement. We apply value-
based pricing techniques to capture the full value of our
products and services, taking into consideration factors such
as quality, convenience and service. Activities such as price
performance, price optimization and discount management
are constantly reviewed and tracked through key perfor-
mance indicators in a transparent and compliant way. We
proactively manage fluctuations in our cost base and review
prices to protect our profitability.

E-business covers the entire journey
E-business helps us serve our customers in a more persona-
lized and convenient way, making it easier for customers to
buy from us. The need for an established online presence
was clearly exemplified in 2020 as the Covid-19 pandemic
drove more customers online, increasing our e-commerce
sales.

During the year, each of the divisions developed a five-year

e-business strategy as we stepped up the pace of digitaliza-
tion even further. In 2020 we made significant investments,
for example, in a new Group-wide content management
system to make it easier for customers to find and navigate
our solutions online. We worked on increasing B2C and B2B
sales through our own webshops as well as the webshops of
our distributors and third parties, by offering online training
and enhanced product information. Our e-business platform
covers all touchpoints in the customer journey, from digital
marketing to after-sales support.

Helping customers meet sustainability targets
We have the products, solutions and know-how to help
customers meet their environmental targets to construct
or upgrade to environmentally certified buildings. Our
sales teams and specification consultants help customers
reduce their environmental footprint by applying a growing
portfolio of products with green attributes. Sustainability
considerations are a standard part of our product develop-
ment process. Many of our products, such as our automatic
doors and contactless cards, have been particularly relevant
for customers this year in the efforts to reduce the spread of
viruses and bacteria.

Expansion in emerging markets
We continue to expand in emerging markets both through
acquisitions and organic growth. Our share of sales in the
emerging markets was 15%, reflecting weaker markets
caused by the pandemic. During the year we focused
particularly on organic growth in our key markets, for
example by expanding our Entrance Systems presence in
Brazil and China. We traditionally have a strong position in
the premium segments and are expanding our offering in
the mid-range segment to accelerate growth in emerging
markets. We are working with local supply chains to increase
our efficiencies and are developing products and solutions
specifically targeted to these markets.

Breakdown of
ASSA ABLOY’s
sales

75%

Commercial
institutional and
commercial market

25%

Residential
private customers
and residential market

33%

New construction
new buildings

67%

Aftermarket
renovations, remod-
eling and additions,
replacements and
upgrades of existing
access solutions,
as well as ongoing
service

Creating a push effect through management
of sales channels and channel partners

ASSA ABLOY

Distributor/
wholesaler

Integrator/
installer (incl.
locksmiths)

End customer

OEM

Pull effect driven by specifications,
brand loyalty and recurring revenues

ASSA ABLOY | ANNUAL REPORT 2020

Strategic objectives | How we operate

Areas of opportunities

ASSA ABLOY started its remarkable journey as a traditional
Nordic-based lock company and has now evolved into the
global leader in access solutions. This is the result of strong
growth and innovation, customer focus and efficiency improve-
ments. However, the journey has just begun and many growth
opportunities remain.

Security
The demand for safety, security and convenient solu-
tions for locks and doors will continue to increase.
Secure digital and mobile management of iden-
tity and authentication will be broadly used in
order to determine who should have access
when, where and how. Flexible and mo-
dular identification technology platforms
will serve the ecosystems and connect
products and services – such as homes,
devices, cars, robots, shipping containers,
traffic systems and transport systems.

Connected products
Data analysis, enabled from more connected products, will
be broadly used as a tool to develop new customer
functions. With connected products we are able to offer a
higher customer value by improving the customer expe-
rience, cost-efficiency, and as a tool to analyze security and
energy needs. In the aftermarket, remote service will be
used more to improve service access and by cloud-based ‘as
a service’ solutions.

Digitalization
In the future, electromechanical solutions will be
mainstream both in the commercial as well as in the residen-
tial segments. Connected residential and industrial devices
and machines – enabling the identification, communication,
control and monitoring of functions and production of the
things connected – will be broadly used and applied. In the
retail segment, digital access solutions will

enable smart home applications,

efficient home deliveries, home
services, care and other

services.

Mechanical locks
Mechanical locks will remain an important part
of our core business and are also the founda-
tion for our electromechanical products.
Our competence in mechanical locks will
continue to be a valid and competitive
asset as innovation over the next ten
years is expected to cover both the de-
velopment of conventional mechanical
locks as well as highly complex software
platforms for our electromechanical
solutions.

Trusted identities
Using trusted IDs that integrate security, privacy and
convenience will be common. The level of security
and privacy will be high, and the ID in the future is
likely to be the person itself using the access solution
(for example through finger -or face recognition).
We will have solutions and services to manage the
lifecycle of the ID of a person.

ANNUAL REPORT 2020 | ASSA ABLOYHow we operate | Strategic objectives

Strategic objective #2
Product leadership
through innovation

Over the years, ASSA ABLOY has been recognized among the
world’s most innovative companies. Innovation is at the core
of everything we do, and we are accelerating our organic
growth through a constant flow of new, innovative and
sustainable products and solutions that optimize customer
value. Our innovation strategy helps us to deliver on our
“Product leadership through innovation” strategic objective.
By optimizing the three pillars of the innovation strategy
– organization, process and product – we can execute our
innovation activities efficiently.

25%

products launched in the
past three years account
for 25% of total sales.

SEK 4 bn

cost for product
innovation and
research.

>500

filed patents during
the last three years.

ASSA ABLOY | ANNUAL REPORT 2020Organization
We have 101 innovation centers globally and they are
designed to spearhead the Group’s innovation capabilities.
Through these centers we systematically manage knowled-
ge and capacity. Here, diverse teams are brought together
through common ways of working and collaboration tools
that allow us to capture and retain valuable competence
and build a more flexible, agile and resilient organization.
Structured internal collaboration aligns strategic initia-

tives and improves transparency. This in turn helps with
the coordination and prioritization of projects to increase
efficiency. We strive to leverage the Group’s size to exploit
synergies and combine technologies from different business
units.

Process
Accelerating organic sales growth
Product management accelerates organic growth by iden-
tifying the right things to do in order to optimize customer
value. Deep customer insights collected together with our
sales and marketing organizations, enable us to leverage
platforms and prioritize development, resulting in reduced
cost, increased speed and flexibility in the market. Product
management excellence requires an integrated and efficient
flow from strategies and generation plans into concrete
concepts and products. Continuous optimization over the
full lifecycle is critical to secure the best offering at all times,
while reducing complexity and cost.

Efficient execution of innovation
While product management identifies the right things to
do, excellent innovation processes guide us in doing things
right. We are gradually transforming to an iterative way of
working and a “fail fast, learn fast” approach that decreases
our time to market, improves our ability to respond to
change and lowers cost. An agile process for continuous
product innovation increases speed and the digitalization
of products and services. Our innovation process excellence
addresses project execution and the continuous delivery of
hardware and software, and add-on development like cus-
tomization, quality improvements and value engineering.
Structured knowledge management increases speed and
accuracy by offering the right information, in the right form,
to the right people at the right time.

First time right
We always strive to meet or exceed customer requirements.
This includes both clearly defined requirements as well as
unspoken needs. Processes and methodologies for product
safety and security safeguard the competitiveness of our
products and solutions and maintain our position as the
global leader in access solutions. We apply a “first time
right” culture in product development to ensure that each
product meets the highest requirements for quality, safety
and security, as well as design and sustainability. Processes,
tools and governance support this culture. Through our
processes, we can continuously monitor and take action on
deviations to keep quality in check.

Breakthrough innovation
By exploring new technologies and challenging bounda-
ries we disrupt existing markets and value networks. Our
breakthrough innovation agenda is supported by a process
and governance framework that enables us to navigate the
uncertainty that is associated with breakthrough innova-
tion. By emphasizing the value of disruptive innovation, pre
product innovation will enable the Group to take major

Strategic objectives | How we operate

Innovation strategy

Generation
plans

Product quality
Product safety
& security

Process

Product
management
excellence

Innovation process
excellence

Breakthrough
innovation

Strategic
actions

Technology &
platforms

Sustainable
products

Standard Interfaces
& API’s

Collaboration

Innovation
Centers

Organizati o n

The ASSA ABLOY innovation strategy is structured around three strategic pillars - organization, process
and product. For each area we have defined strategic actions which are the core of our strive for product
leadership through innovation. Efficient execution of these strategic actions will secure a constant flow of
new, enhanced, innovative and sustainable products that optimize customer value. Together they will help us
accelerate organic sales growth.

leaps and create new market opportunities. In 2020, new
products (less than three years old) accounted for 25% of
total sales, in line with our target of 25%.

Percentage of sales of products
launched in past three years

Product
Clear future visions
Generation plans ensure that business objectives are con-
nected with innovation and provide direction to product
and technology roadmaps. Our generation plans start from
a solid understanding of the future external environment
and set a clear vision and focus for the future offering. The
plans also outline platform, technology and capability needs
over time. Generation plans drive increased growth and im-
prove the prioritization of strategic innovation investments.

Modular platforms and integration
We are using modular platforms to reduce complexity,
increase speed and maximize the impact of our resources.
We are increasing the interoperability between Group com-
mon products and software to aid the creation of an ASSA
ABLOY product ecosystem where third-party elements
can be integrated to provide complete solutions. An ASSA
ABLOY product ecosystem could potentially create industry
standards allowing us to lead the market. To improve the
user experience we are increasing interoperability between
our products through internal standardization and reducing
complexity through fewer interfaces.

Investments in research
and development

SEK M

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

ANNUAL REPORT 2020 | ASSA ABLOY

Industry awards for innovations
ASSA ABLOY continued to win many design awards in
2020, including both the Pandemic Tech Innovation
Award and the Campus Safety Magazine award for our HID
Location Services for Workplace Safety. The solution helps
prevent workplace exposure to Covid-19 by streamlining
and simplifying employee social distancing and contact
tracing protocols. We were also awarded with the Iconic
Innovation Interior Award for the stylish industrial design
of our Aperio® H100 and the Vercy Architectural Hard-
ware series.

Transitioning to digital solutions
A part of the Group’s product portfolio comprises digital
solutions, software and data. Software development is
moving into the area of cloud services, which are linked to
subscription business models and licenses and we antici-
pate more subscription-based agreements for upgrades,
data and analysis in the coming years. Our digital service
organization supports and provides service to customers
who use our digital solutions. Through a cross-functional
approach that we refer to as “the digital factory,” we create
a seamless link between product development, IT opera-
tions, service operations and the customer.

The situation with Covid-19 has accelerated the market
shift towards digital access solutions, increasing demand
for such things as digital room keys to access hotel rooms
and automatic doors that help limit the spread of bacteria
by reducing the need to touch surfaces or handles. We
have a number of these products in our portfolio and in
addition to launching new products we are adapting ex-
isting products to quickly meet today’s extra demanding
health and safety requirements.

The Sustainability Compass is a tool to increase our efficiency and
decrease the environmental footprint. The Compass includes eight
dimensions:
• Reduce – five areas
• Reuse
• Recycle – two areas
The green leaf indicates sustainable footprint to minimize the
footprint throughout the lifecycle.

How we operate | Strategic objectives

Sustainable innovation
ASSA ABLOY aims to be perceived as the most sustainable
company in our industry, by leading the way towards a
circular economy and more sustainable products. Sustai-
nability is a Group-wide responsibility and all divisions are
working actively to develop products and articulate the
sustainability value proposition. Sustainable innovation
includes our lifecycle assessment-based data to transpa-
rently guide customers in their decision-making and help
them achieve their sustainability objectives. Environmental
Product Declarations and the ASSA ABLOY Sustainability
Compass (see illustration) are central to our continuous
improvement efforts when developing products. Our aim
is for all new product releases to have a sustainability value
proposition.

Sustainability compass
Sustainability Compass

Recycle

R e c y cled content

y
cl

il
i
t

C
o
s
t

w m aterial

R a

Packagin g

Reduc e

Management

Reuse

t
n
i
r
p
t
o
o

f
n
o
b

y i

n u

Innovation system

We look at innovation as a sys-
tem. We believe that efficiency is
maximized by embracing the en-
tire system. For example, strong
product management is neces-
sary to run efficient projects.
Having a mix of pre product, new
product and continuous product
innovation will also help us
achieve long-term success. ASSA
ABLOY’s innovation system is our
engine, and all parts need to work
separately, but also together.
The innovation system sup-
ports the dynamics between
incremental and disruptive inno-
vation, which are both necessary
to develop new solutions for our
short- and long-term success.

Product management

Pre product
innovation (PPI)

New product
innovation (NPI)

Continuous product
innovation (CPI)

Customer and market insights

Innovation culture and knowledge

Innovation Strategy incl. IP and Technology

ASSA ABLOY | ANNUAL REPORT 2020

Strategic objectives | How we operate

Strategic objective #3
Cost-efficiency in
everything we do

By focusing on cost-efficiency in everything we do, we will
further strengthen our competitiveness and continuously
improve our operations. Our new operational excellence
structure is the building block for capturing cost-efficiencies,
sustainability and quality improvements. Our action plan
includes an emphasis on top suppliers, value analysis/value
engineering and productivity improvements through our
manufacturing footprint programs.

49%

share of total purchases
in low-cost countries.

–13%

the number of direct
material suppliers has
been reduced by 13% over
the past three years.

600 MSEK

efficiency savings
from MFP programs
in 2020.

ANNUAL REPORT 2020 | ASSA ABLOY

How we operate |
Strategic objectives

Our new operational
excellence structure
is the building block
for capturing cost-
efficiencies,
sustainability and
quality improve-
ments.

Operational excellence
Through our operational excellence structure and as-
sessment tool, we can target costs for direct labor, direct
material, fixed and variable production costs. The operatio-
nal excellence structure applies key performance indicators
for alignment across the Group on sustainability, quality,
delivery and cost performance. It also includes clearly
defined target stages linked to productivity performance. A
Group-wide best practices library will follow in 2021.

Lean principles are at the core of our operational excel-
lence work. Quality is an integral part of these principles and
we apply this to every stage of the value chain, from concept
and innovation to purchasing, sales and service. Focusing on
the needs of customers, empowering our employees and
continually improving activities are also elements of opera-
tional excellence. Working with these helps us to increase
productivity and reduce costs.

Logistics and supply chain optimization
As part of our operational excellence efforts, we continually
work to improve our global logistics to capture cost savings,
increase flexibility, improve delivery performance and lower
our environmental footprint. We continue to optimize our
warehouse locations and improve our operational perfor-
mance through cross-divisional collaboration and impro-
vement roadmaps. We have a process where we optimize
the use of warehouses and consolidate them for example, in
Scandinavia, Benelux and the UK. By moving more towards a
higher degree of standard materials and components, along
with standardized digital processes, we can consolidate
more, and often faster, for further efficiencies.

Our logistics were impacted in the beginning of the

Covid-19 pandemic, but as the situation required, we were
able to minimize supply chain risk by, for example, sourcing
from Mexico when US suppliers shut down and turning to
Eastern Europe when Western Europe was heavily impac-

ted. With strict safety protocols in place we were able to
keep most of our factories running except when there were
country lockdowns.

Efficient manufacturing footprint
Since 2006, we have been improving cost efficiency by con-
solidating and reducing the number of our factories through
a series of Manufacturing Footprint Programs (MFP). We are
also reducing the amount of offices, warehouses and other
sites, to increase efficiency in our organizational structure
and enhance performance.

Our long-term plan across the divisions is designed to
address closures and mergers in the long term. In the shor-
ter term we have a three-year plan called MFP8 to close ten
production plants and about 30 offices. Our restructuring
programs in 2020 amounted to efficiency improvements of
SEK 600 M and an employee reduction of more than 2,000.

Through the MFP programs we have identified Group sites
where we can concentrate our more strategic components
and production close to customers, primarily in mature
markets. During the year we engaged in more cross-divi-
sional collaboration to further increase our efficiencies. For
example, we revised our strategy for overall cost-efficiencies
in the smart residential area. We also revisited our smart
residential supply base in order to leverage suppliers more
effectively.

Industry 4.0
Our automation council heads up the Group’s efforts to
improve manufacturing efficiencies and reduce our labor
costs through the strategic deployment of automation and
robotics in factories and assembly plants. The operational
excellence structure and assessments help us to identify the
biggest opportunities for automation. In 2020 we conti-
nued to implement robots and automated systems in our
operations. Looking ahead, we see opportunities to use data

ASSA ABLOY | ANNUAL REPORT 2020Strategic objectives | How we operate

Share of total purchases in
low-cost countries

Raw materials, components
and finished goods from
low-cost countries accounted
for 49 % of the Group’s total
purchases in 2020.

analysis and machine learning to improve cost efficiencies in
production, particularly for measuring the effectiveness of
our equipment and monitoring maintenance.

Professional sourcing key to savings
We are guided by the sourcing principles in our Group-wide
sourcing policy and practice multi-tendering, benchmarking
and group-wide contracts. We apply “should-cost” analysis and
e-auctions to ensure the best cost, quality and performance of
our supply base. Professional sourcing and strategic partner-
ships help us to reduce costs and ensure we are more compe-
titive. We also have a majority of our direct material suppliers
located in low-cost countries for further cost savings.
Due in large part to our frequent acquisitions, we

constantly need to review our supply base and streamline
our component assortment to leverage volumes. We took
initiatives towards the end of the first quarter to reduce our
supplier spend through rapid re-pricing and extended pay-
ment terms for as long as the Covid-19 pandemic continues
to affect business.

At the same time, we have also identified and are focusing on

the suppliers that represent 45% of total direct material spend
to ensure they are both price-competitive and innovative. In
the spirit of our “Together we” program, the divisions have
been working together on a top supplier program to capture
synergies through a more structured approach to sourcing by
setting joint targets for the suppliers. We continuously monitor
supplier performance to ensure they meet our criteria.

Value Analysis and Value Engineering
We see great potential to improve our cost efficiency
through Value Analysis (VA), a structured process for opti-
mizing cost and customer value in existing products – and
Value Engineering (VE), which is part of the development
process and focuses on new and existing products. Both
processes take an in-depth look at a product’s design,

components and production methods in order to enhance
customer value with improved quality, as we have defined it.
At the same time, the processes systematically reduce costs.
We have been running a VA/VE program for many years, but
this year we adapted a more strategic operational approach
to selecting products for further analysis. We have also
included VA/VE in our gateway process for every product
that we develop to make sure we are designing products at
the right cost. We will establish Centers of Excellence next
year in order to share VA/VE best practices internally within
the Group, applying these practices in a more strategic and
cost-effective manner.

Reducing our environmental footprint
Improving our operational performance is also about
improving resource efficiency by reducing the consumption
of materials, energy, water, waste, and greenhouse gases in
our production processes. Environmental performance is
integrated into all of our operational processes and we also
conduct sustainability audits among our suppliers.
Within operations we have been focusing on four main
areas: reducing our factory footprint to reduce carbon
dioxide emissions; investing in renewable energy in plants,
such as solar energy; sourcing renewable energy where it
is available; and practicing kaizen methodology in our daily
operations to reduce energy.

We reinforce a culture of health and safety throughout the

organization and proactively identify risks and implement
safety improvements to minimize the risk of injury. Our
health and safety culture has a clear impact on operational
performance and over the past five years (2015 to 2020) we
have been able to reduce the lost time injury rate by 58%.

We exceeded most of our sustainability targets which ran

from 2015 to 2020 and prepared our new science-based
sustainability targets for the coming years.

ANNUAL REPORT 2020 | ASSA ABLOYHow we operate | Strategic objectives

Strategic objective #4
Evolution through
people

Creating a culture where our employees thrive and
feel committed is crucial for the Group’s future
growth and success. We are convinced this is best
achieved by empowering employees, helping them
develop skills and know-how, encouraging collabora-
tion, knowledge sharing, and internal mobility. With
the “Evolution through people” strategic objective, we
provide added value to all of our stakeholders by being
a world-leading organization where people succeed.

different nationalities
in senior management
positions (27 last year).

-58%

reduced injuries per
million hours worked
since 2015.

ASSA ABLOY | ANNUAL REPORT 2020Strategic objectives | How we operate

ABLOY IMD. The IMD program was developed in collabora-
tion with the International Institute for Management
Development (IMD) in Lausanne, Switzerland. Although
most programs were postponed this year, they have now
been adapted and will be carried out during 2021.

Acting responsibly and ethically
A culture of visibility and transparency forms the basis for
our ethical and social responsibility practices. We are good
corporate citizens, act ethically and with integrity, and
always comply with laws and regulations of the countries
in which we operate. We actively promote diversity and
inclusion and do not tolerate any form of discrimination or
harassment in the workplace. Everyone acting on behalf of
ASSA ABLOY, must follow the ASSA ABLOY Code of Conduct.
This is our framework for daily operations and includes gui-
delines on areas such as anti-corruption, human rights and
business ethics. Any concerns or suspected violations of the
Code of Conduct are managed through our whistleblowing
process, as outlined in Our Group Whistleblowing Policy,
to ensure that principles are met and the correct process is
followed.

Together we are safe
We have been working systematically for a long time to
provide a safe work environment. The health and safety of
our employees is always a top priority but the Covid-19
pandemic put extra urgency on the matter. We acted quickly
to secure personal protection equipment for employees
and align our routines and processes in each market in
accordance with shifting local directives.

We have zero tolerance for unsafe behaviors and environ-

ments and safety training and audits are routine practice.
This year we began rolling out new workshops called
Together We Are Safe. The objective with these workshops
is to progress our safety culture by making safety a more
personal and emotional issue for the participants. Among
the topics covered are how culture and behaviors contri-
bute to risk, the influence of social pressure on safety and
the impact our safety habits have on others.

Working digitally and flexibly
This year we rapidly pivoted our organization into a truly
digital workplace, with digital meetings, learning and work
practices that became common ways of working almost
overnight. With non-essential travel restrictions in place since
March, we encouraged employees to work digitally, providing
them with the tools to support their choice of communica-
tion channel.

This year we accelerated the implementation of our global

HR system, which went live in January 2021. With this tool
in place, we will have even better opportunities to drive pe-
ople processes that support our leaders and employees. The
system will enable us to connect everything from recruiting
to onboarding to performance development, learning and
compensation. This will make it easier to follow up on goals
and progress to make career moves within the organization.
At the same time, we continue our efforts to safeguard the
integrity of the data and the user, by following rules and
regulations on how to collaborate and store data.

Our common culture
ASSA ABLOY is a diverse and decentralized Group with
locations all around the world. Having a shared vision, Group
identity (“Together we” program) and common values
(empowerment, innovation and integrity), help unite us to
grow and work together in the same direction. This year we
put our strategy and “Together we” program into valuable
practice, working together within the Group to share best
practices as the Covid-19 pandemic spread to different
regions. Because we empower our people in our decentrali-
zed organization, we were able to adapt quickly to the new
situation. We were also able to complete projects more ef-
ficiently and rapidly thanks to an increase in cross-divisional
efforts, as people collaborated more within new constella-
tions through virtual means.

Individual employee journeys
We believe in an inclusive working environment that encou-
rages engagement, innovative thinking and efficiency. We
aim to always improve the employee experience and enable
a personalized development journey. As the pandemic hit,
we catered to the different needs of individuals, who were
often faced with sudden workplace disruptions. We focused
on improving the workspace both for working at home and
on our sites. We also focused on the physical and emotional
wellbeing of our employees through initiatives to help them
while working remotely.

A long career
We strive to offer interesting roles and give people the
opportunity to grow in their career, develop their skills and
move easily between roles, functions and countries within the
organization. This helps us to be a competitive employer and
attract and retain talent. We aim for longevity when hiring
and focus on talent retention, encouraging our own people
to apply for internal jobs. We have put a lot of emphasis on
using internal resources when it comes to recruitment and
developed our own executive search organization in 2020 to
recruit across divisions. Internal recruitment is something we
highly value as it helps us build consistency with employees
who have a deeper understanding of our organization and
share the ASSA ABLOY culture. The cultural fit is an important
aspect in a complex organization like ours.

As part of our talent management we run several graduate

and trainee programs within the ASSA ABLOY divisions. In
2020 we had to postpone some of those programs, but were
able to run others digitally.

Strengthening our leaders
This year we introduced Leadership Dimensions, which are
guiding principles for our leaders. Leaders are expected
to work collaboratively, embrace our culture, develop our
people, and lead change and innovation, while delivering an
excellent customer experience and results. These princip-
les are derived from our strategy and values and we have
started implementing them in our global people processes,
using them to help with employee development.

We offer leadership programs for our managers at both
Group and divisional levels. These include two development
programs for senior managers: ASSA ABLOY MMT and ASSA

This year we put
our strategy and
“Together we”
program into
valuable practice,
working together
within the Group to
share best practices
as the Covid-19
pandemic spread to
different regions.

ANNUAL REPORT 2020 | ASSA ABLOYWhat we
offer

Divisions overview

Product offering

The regional divisions manufacture and sell mechanical and electromechanical locks, digital door locks and smart home access
solutions, high-security doors, fire doors and hardware adapted to the local market’s standards and security requirements.

Regional divisions

Share of sales

Share of operating income

Sales by product group

21%

18%

Share of sales

Share of operating income

Sales by product group

22%

30%

Share of sales

Share of operating income

Sales by product group

n Mechanical locks, lock systems

and fittings, 47%

n Electromechanical and elec-

tronic, 36%

n Security doors and hardware,

17%

n Mechanical locks, lock systems

and fittings, 41%

n Electromechanical and elec-

tronic, 26%

n Security doors and hardware,

33%

n Mechanical locks, lock systems

and fittings, 49%

n Electromechanical and elec-

tronic, 23%

n Security doors and hardware,

28%

Opening
Solutions
EMEA
Page 30

Opening
Solutions
A mericas
Page 31

Opening
Solutions
Asia Pacific
Page 32

Door openings and access controlASSA ABLOY | ANNUAL REPORT 2020What we offer

Product offering

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

ASSA ABLOY Global Solutions is leading the development within secure ac-
cess solutions for Hospitality, Marine, Education, Senior Care, Key and Asset
Management, Construction and Critical Infrastructure.

Entrance Systems manufactures and sells products, services and compo-
nents for 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,
high security fencing, gates and components.

Global divisions

Share of sales

Share of operating income

Sales by product group

16%

Share of sales

Share of operating income

Sales by product group

32%

33%

n Access solutions, 77%
n Hotel locks, 16%
n Service, 7%

n Products, 75%
n Service, 25%

Global
Technologies
Page 34–35

Entrance
Systems
Page 36

Identification and access managementEntrance automationANNUAL REPORT 2020 | ASSA ABLOYWhat we offer | Divisions

Opening Solutions EMEA
New electromechanical
products and solutions
launched

Overview
EMEA is organized into 12 market regions with divisional
headquarters located in Woking in the UK. The market
regions are responsible for manufacturing and selling
mechanical and electromechanical locks, hardware and
security doors adapted to the standards and requirements
of local markets. The products for the commercial market
are sold under the master brand ASSA ABLOY or brands
endorsed by ASSA ABLOY, while Yale is the master brand for
the residential market and its endorsed brands. The com-
mercial and institutional segments account for around 60%
of sales and the residential segment for about 40%. EMEA has
about 10,300 employees. The largest market region is Scan-
dinavia, followed by the UK and DACH (Germany, Austria
and Switzerland).

Financial development
The first half of the year was strongly impacted by the
Covid-19 lockdowns and factory closures. In the second half
of the year business activities gradually improved as a result of
the eased Covid-19 restrictions. The year ended with an orga-
nic sales growth of -8%. Scandinavia and DACH were the most
stable regions, while South Europe and France were strongly
impacted by the negative effects from Covid-19. Electrome-
chanical products and solutions were less affected and in the
fourth quarter the launch of the Linus Yale smart lock was
well received in the market. Net acquired growth was –1%
due to the transfer of the critical infrastructure businesses
from EMEA to Global Solutions. Operating income declined
and the operating margin was 11.9% (16.1%). Significant cost
actions were implemented to mitigate the negative effects

Financials in brief 2020
• Sales: SEK 18,982 M (21,144) with –8% organic growth.
• Operating income (EBIT): SEK 2,263 M (3,396).1
• Operating margin: 11.9% (16.1).1

Sales, SEK M

22,000

20,000

18,000

16,000

14,000

12,000

10,000

Sales

Operating income1, SEK M

4,000

3,500

3,000

2,500

2,000

1,500

1,000

17
Operating income1

1 Excluding items affecting comparability.

from Covid-19 with headcount reductions of 5%. Cash flow
developed strongly, and the conversion rate increased to
130% of EBIT, driven by collection of receivables and lower
inventory levels. To further strengthen our competitive ad-
vantage, we continued to invest in research and development
and the share of new products introduced over the past three
years accounted for 26% of sales.

Acquisitions
One acquisition, Donimet in Poland was completed.
Doniment is a leading Polish producer of specialized high
security doors. With Doniment we can now address the
growing demand for high security commercial doors and
complement our security door business in Poland.

Comments by
Divisional Head

Neil Vann
Executive Vice President and
Head of EMEA division

What trends have you seen
in the market in 2020?
We have seen an acceleration
in the uptake of electromecha-
nical products and solutions
in both the commercial and
residential segments. The
speed of change is happening
quickly, and we are driving
this with our existing digital
products and with increased
investment in new product
development. This accelerates
our growth potential as
we convert our traditional
mechanical installed base. We
are also seeing online business
activity becoming more
important due to changes in
our distribution landscape and
the shift in consumer demand
towards e-commerce.

Do you expect any long-term
effects from Covid-19 on the
business?
Some operational changes
that we implemented have
resulted in a new more agile
working approach that will
have positive long-term
effects on the business. The
pandemic has also opened up
new market opportunities in
terms of product develop-
ment with innovations around
touchless and antimicrobial
opening solutions. We have
seen a shift from conventional
door openings, to openings
that reduce touchpoints
and manage people flow in
buildings.

Markets
EMEA has a leading
position in Europe, the
Middle East and Africa for
locks, access solutions,
high security doors and
hardware. The region has
unique local standards
and regulations creating
a diverse environment to
operate in. Commercial
and institutional custo-
mers are the largest end-
customer segment and
account for about 60% of
sales, while the residen-
tial segment accounts for
about 40%. Products are
sold primarily through
a number of distribu-
tion channels, but also
directly to end-users.

We have seen an
acceleration in
the uptake of
electromechanical
products and
solutions in both
the commercial
and residential
segments.

ASSA ABLOY | ANNUAL REPORT 2020Divisions | What we offer

Opening Solutions Americas
Stable margin in challenging
environment

To mitigate the
strong negative
effect from Covid-19,
we implemented
significant cost
actions throughout
the year and our
margin remained
stable at 19.4%.

Overview
Americas comprises 14 business areas and market regions,
with divisional headquarters located in New Haven in the US.
Opening Solutions in the US, the largest market, is organized
by product category, while the other regions are organized
in a country structure. The business areas and market regions
are responsible for manufacturing and selling mechanical and
electrometrical locks, hardware, secure lockers, access con-
trol devices and security doors adapted to the standards and
requirements of local markets. ASSA ABLOY and Yale are the
master brands, with a strong portfolio of endorsed brands.
Institutional and commercial customers are the largest end-
customer segments and account for 75% of sales, while the
residential segment accounts for 25% of sales. The Americas
division has about 8,800 employees.

Financial development
The year started with a good sales development, but the
Covid-19 restrictions and lockdowns had a significant
effect on sales and operations from the second quarter.
Sales gradually improved in the second half of the year but
organic sales decreased by 7% for the full year. The recovery
was strongest in Latin America, while restrictions in the
US had a negative impact for a longer period of the year.
Several product launches improved the development, and
electromechanical products and solutions had a relatively
better performance. Our operating margin remained stable
at 19.4% (20.2%) despite Covid-19 and a negative effect from
the transfer of Perimeter Security to the Entrance Systems
division. To mitigate the strong negative effect from
Covid-19 we implemented significant cost actions

Financials in brief 2020
• Sales: SEK 19,013 M (23,172) with –7% organic growth.
• Operating income (EBIT): SEK 3,698 M (4,673).1
• Operating margin: 19.4% (20.2).1

Sales, SEK M

24,000

22,000

20,000

18,000

16,000

14,000

12,000

Sales

Operating income1, SEK M

5,000

4,500

4,000

3,500

3,000

2,500

2,000

17
Operating income1

1 Excluding items affecting comparability.

throughout the year and decreased our headcount by 2%.
Cash flow was strong, and improvements were achieved in
collection and inventory levels. Several new products were
launched during the year. New products introduced in the
past three years accounted for 27% of sales.

Acquisitions
Two acquisitions were closed, Averics in Canada and Olim-
pia Hardware in Costa Rica. Averics develops web-based
access control security management solutions. Olimpia
Hardware is a leading glass hardware and accessories brand
in Latin America and the Caribbean. Olimpia complements
our offering in Latin America, and addresses the growing
market for openings utilizing glass and aluminium products.

Comments by
Divisional Head

Lucas Boselli
Executive Vice President and
Head of Americas division

What trends have you seen
in the market in 2020?
Fully automated touchless so-
lutions gained traction throug-
hout the year as customers
focused on creating a safe and
healthy access for their visitors
and employees. In response
to this, we also launched a
number of seamless access
products. Demand for electro-
nic door hardware was strong
across the entire division, in
both residential and commer-
cial markets, highlighting the
aspiration of many companies,
institutions and consumers
to create seamless access
control. We have also seen a
significant increase in digital
e-commerce.

Do you expect any long-term
effects from Covid-19 on the
business?
One effect of people spending
more time at home was that
home upgrades and sales
increased – for both electronic
and mechanical solutions. I
expect the trend with more
convenient and digital access
solutions to continue. For
those that returned to the of-
fice, there was an accelerated
demand for access control
that minimizes touchpoints.
Our customers also requested
faster response times for
product orders as their plan-
ning cycles became more
time-sensitive. Supporting
regional distribution centers,
like our new Flaship location in
Orlando, Florida, is critical to
meet these expectations.

Markets
Americas has a leading
position in the US
Canada, Mexico, Central
America and South
America for locks, access
solutions, high secu-
rity doors and hardware.
Institutional and com-
mercial customers are
the largest end-customer
segments and account
for about 75% of sales,
while the residential
segment accounts for
25%. Sales in South
America and Mexico are
primarily focused on
the residential segment,
although several verticals
in the commercial area
have grown significantly
in recent years.

ANNUAL REPORT 2020 | ASSA ABLOYWhat we offer | Divisions

Opening Solutions Asia Pacific
New organization for
profitable growth

Despite the nega-
tive effects on our
operations due to
the pandemic, our
strategy in China is
starting to show re-
sults with improved
profitability.

Overview
From 2021, the division is organized in two business units:
Greater China & South East Asia and Pacific & North East
Asia, and the India operations moves to EMEA. The local
organization in China is divided by market segment and the
other regions in Asia and Pacific are organized according to
region or country structure. The business areas and market
regions are responsible for manufacturing and selling me-
chanical and electrometrical locks, hardware and security
doors adapted to the standards and requirements of local
markets. ASSA ABLOY is the master brand for products in
commercial markets and Yale is the master brand for the
residential market and its endorsed brands. The commercial
and institutional segments and the residential segment
each account for about half of the total sales. The Asia Pa-
cific division has about 9,900 employees across the region.
The largest market by sales is China, followed by Australia
and South Korea.

Financial development
The start of the year was interrupted by the Covid-19
lockdowns in China, which is our largest market in Asia.
Sales gradually improved from the second quarter, but
restrictions and lockdowns continued to impact the region.
Organic sales declined by 16% with net acquired growth of
1%. Sales decreased overall, but were mostly stable in the
Pacific region followed by China. Both South East Asia and
India were weak throughout the year. Our business plan
for China, implemented at the end of 2018, developed ac-
cording to plan, resulting in operational stability combi-
ned with margin improvements. The division’s operating

Financials in brief 2020
• Sales: SEK 8,841 M (10,689) with –16% organic growth.
• Operating income (EBIT): SEK 396 M (879).1
• Operating margin: 4.5% (8.2).1

Operating income1, SEK M

Sales, SEK M

12,000

10,000

8,000

6,000

4,000

2,000

1,500

1,250

1,000

750

500

250

Sales

17
Operating income1

1 Excluding items affecting comparability.

income declined and the operating margin was 4.5% (8.2%).
Cash flow developed well and improved by 23%, with a
strong conversion rate of 192%. Several new products were
launched during the year and we saw continued good deve-
lopment in the demand for electromechanical products.

Acquisitions
Following two completed acquisitions in 2019, no acquisi-
tion was completed in 2020. However, parts of AM Group
was consolidated into our Asia Pacific organization. Asia
Pacific continues to actively explore acquisition opportuni-
ties and more acquisitions are expected to be announced in
the future.

Comments by
Divisional Head

Anders Maltesen
Executive Vice President and
Head of Asia Pacific division

In January 2021, the Asia Pacific
organization was divided into
two business units: Pacific &
North East Asia and Greater China
& South East Asia. Anders Malte-
sen will leave the Group during
the first half 2021 when the new
organizational setup is settled.

Do you expect any long-term
effects from Covid-19 on the
business?
The Covid-19 pandemic
has become a strong driver
towards a more digitalized
world for access solutions. In
light of this, the Asia Pacific
organization is also digitalizing
both our own structure and
business processes faster.
I expect the shift towards
e-commerce and online adop-
tion to continue even when
we return to a more normal
situation again.

What trends have you seen
in the market in 2020?
The year was impacted by
lockdowns, social distancing
and other measures that
significantly affected our sales,
in particular for retail. The ne-
gative effects have partly been
offset by a higher conversion
rate amongst customers and
increased online sales.
Despite the negative effects
on our operations due to the
pandemic, our strategy in
China is starting to show
results with improved
profitability. During the year
we also opened a new manu-
facturing facility in Vietnam
for smart locks that will further
improve our cost efficiency.

Markets
APAC has a leading posi-
tion in Australia and New
Zealand as well as in some
Asian countries for locks,
access solutions, high
security doors and hard-
ware. The Pacific region
is a mature market with
established standards
and regulations, while
most Asian countries
are emerging markets.
Urbanization is a driver for
growth in Asia and sales
for new construction are
a majority of the business.
Through a combination
of organic growth and
acquistions we are buil-
ding a stronger position
in the fast-growing Asian
markets.

ASSA ABLOY | ANNUAL REPORT 2020Divisions | What we offer

PRODUCT OFFERING: DOOR OPENINGS AND ACCESS CONTROL

Customer solutions around the world

SMARTair at Hippodrome Cote d‘Azur
Built in the 1950s, the Hippodrome Côted d’Azur is one of the most important racecourses
in France and used for multiple equestrian disciplines. During meetings, it welcomes up
to 1,000 horses, 3,000 participants and 11,300 spectators. The key requirement for the
customer was to secure an electronic access control system to avoid duplicates of keys
and managing lost mechanical keys that compromise security. To solve the problem the
racecourse chose the SMARTair Update for Card access control solution. With this solution,
security staff encodes user credentials directly for convenient access management and can
delete users or lost cards instantly. Managers also plan to trial the SMARTair Openow™ app.
With Openow™, administrators can send virtual “keys” directly to a visitor’s smartphone —
ideal for racecourse guests arriving late at night.

In the long term, SMARTair access control is cheaper than keys to manage.
Bernard Arnaud, Supervisor – Accommodations, Hippodrome Côte d’Azur

ASSA ABLOY delivers complete opening
solutions to airport in Chile
The ‘Nuevo Pudahuel’ is an extensive expansion of the Santiago International Airport, the
largest and busiest airport in Chile. Developed by the concessions and construction com-
pany- VINCI, this expansion features an additional 67 boarding points and state-of-the-art
technology.

For ASSA ABLOY, the key success factors for this project were a rigorous specification

process, product development and implementation, application of ANSI hardware and most
importantly, compliance with Chilean certification standards, guaranteeing the quality of
the products and solutions offered.

Coordinated by the ASSA ABLOY Group brand, ODIS, our fully integrated solutions compri-

sed over 1,200 metal doors, (including firewall, acoustic and armored), all equipped with
Yale door locks, Sargent closing systems, Yale and Securitron anti-panic bars, Pemko seals
and, Medeco’s master key cylinders.

The main strength of ODIS was to combine its worldwide technical know-how
and experience; essential understanding of the project; door expertise; produc-
tion control; and, their personnel’s ability to engage with us on the construction
site, bringing that experience to a local level.
Arthur Gaufre, Director of Large Projects, VINCI

Medical doors for hospital in Jinan, China
In the beginning of the Covid-19 pandemic, Jinan Infectious Disease Hospital in Shandong
province was appointed as a designated medical institution for receiving and treating local
coronavirus patients. To ensure the supply of sufficient medical resources, an urgent expan-
sion project was started.

ASSA ABLOY was invited to provide the project with 1,900 steel medical doors for wards,
diagnosis rooms, passageways and bathrooms. In the urgency to handle a growing number
of patients, the customer requested very short lead times for products as well as high quality.
With nationwide restrictions to curb the spread of Covid-19, ASSA ABLOY´s Huasheng door

plant had to manage challenges with the supply chain, transportation as well as limited ope-
ration with staff shortages. To meet the customer requirements for the product significant
adjustments were made on the standard doorframes and windows to bolster the durability
of the doors and hardware.

Throughout the project, ASSA ABLOY demonstrated both professionalism and
social responsibility. It is a great company that truly impressed us with their
rigorous approach, excellent production capacity, and quality products.
Mr Sun, department head at Shandong Public Health Clinic Center

ANNUAL REPORT 2020 | ASSA ABLOYWhat we offer | Divisions

Global Technologies – HID Global
Increased R&D investments
will enable future growth

Financials in brief 2020 – Global Technologies
• Sales: SEK 14,158 M (15,423) with –15% organic growth.
• Operating income (EBIT): SEK 2,023 M (2,890).1
• Operating margin: 14.3% (18.7).1

Operating income1, SEK M

Sales, SEK M

18,000

15,000

12,000

9,000

6,000

3,000

The evolution of
technologies like
ultra-wideband
(UWB) alongside
NFC and Bluetooth
will contribute to
creating more
intuitive and
convenient access
solutions, while also
delivering building
management and
utilization benefits.

Overview
HID Global is organized into six business areas with the
business unit headquarters located in Austin, Texas in the
US. The business areas are responsible for global sales and
product development in their product area. HID Global po-
wers the trusted identities of the world’s people, places and
things. Our trusted identity solutions give people secure
and convenient access to physical and digital places and
connect things that can be accurately identified, verified
and tracked digitally. The products and solutions are sold
under the master HID brand or by brands endorsed by HID.
Institutional and commercial customers are the main end-
customer segments. HID Global has about 4,400 employees
worldwide. The largest business area is Physical Access
Control Solutions.

Financial development
After a good start to the year, sales were strongly impacted
by the negative business effects from Covid-19. Sales decli-
ned in all business areas but the greatest impact was in Citi-
zen ID, as a result of low demand for passports in the world.
Our largest business area, Physical Access Control Solutions,
was negatively impacted by the closure of offices around
the world, but sales improved gradually in the second half of
the year when offices began to reopen. Efficiency activities
continued and significant cost actions were implemented
to mitigate the negative effects from Covid-19, along with
a headcount reduction of 6%. To strengthen our position in
the market, we continued to invest in research and deve-
lopment and several new products and solutions were laun-

3,000

2,500

2,000

1,500

1,000

500

Sales

17
Operating income1

1 Excluding items affecting comparability.

ched during the year including solutions for our customers
to improve health and safety at workplaces. New products
introduced over the past three years was 22% of sales.

Acquisitions
The acquisition of Access-IS, located in the UK, was comple-
ted. Access-IS is a leading provider of electronic RFID, NFC
and barcode devices enabling the authentication of travel
and identity documents, ticket reading and contactless
payments. The acquisition will add complementary growth
opportunities in our extended access offering.

Comments by
HID Global

Björn Lidefelt
Executive Vice President and
Head of Global Technologies
business unit HID Global

What trends have you seen
in the market in 2020?
The evolution of technologies
like ultra-wideband (UWB)
alongside NFC and Bluetooth
will contribute to creating
more intuitive and convenient
access solutions, while also de-
livering building management
and utilization benefits. Pro-
ven Bluetooth technologies
and cloud-based IoT platforms
drove new innovations such
as automated physical-
distancing and contact-tracing
solutions and other novel
location-based applications
well beyond the challenges
faced before the pandemic.

Do you expect any long-term
effects from Covid-19 on the
business?
During the year we continued
to launch several new pro-
ducts and solutions and have
more in the pipeline. Conti-
nued evolution in biometrics
will enable us to develop
even more secure and truly
seamless experiences. While
there remains a level of unpre-
dictability as to when markets
will fully recover, we are well
positioned continuing our
growth strategy and I expect
that our innovation efforts will
result in a re-acceleration of
the growth of access control
products and solutions.

Markets
HID Global has a
market presence in all
continents, with a global
leading market position
in access control solu-
tions. Every day millions
of people worldwide use
our products, for billions
of things that need to be
identified, verified and
tracked. We work with
governments, universi-
ties, hospitals, financial
institutions and some
of the most innovative
companies on the planet.
Through a combina-
tion of innovative new
products and solutions
as well as acquistions we
have a leading position in
trusted identities.

ASSA ABLOY | ANNUAL REPORT 2020Divisions | What we offer

Global Technologies – Global Solutions
Keeping up momentum on
our digital offering across
verticals

Our investments in
new, innovative solu-
tions continued and
further strengthened
our product and
technology leader-
ship.

Overview
Global Solutions is a global organization comprising seven
verticals. The verticals are Hospitality, Marine, Senior Care,
Education, Critical Infrastructure, Construction and Key and
Asset Management. Each vertical is responsible for its own
manufacturing, sales and solution developments. Global
Solutions’ products include electronic locks, safes, creden-
tials and software service. Its innovative solutions are sold
under the ASSA ABLOY master brand and the Traka and Abloy
brands. Global Solutions has about 1,900 employees world-
wide. The largest vertical is Hospitality, offering advanced
electronic locking solutions in combination with a range of
tailored services for guest convenience.

Financial development
Covid-19 caused a strong decline in Global Solutions’ organic
sales in the end-customer segment. Sales growth was overall
negative for Hospitality and Marine, while other verticals
showed signs of recovery at different levels during the latter
part of the year. The trend of upgrading hotels to mobile
key solutions continued, while the aftermarket was weak
due to low occupancy rates in hotels as a result of travel
restrictions in 2020. Our investments in new, innovative
solutions continued with unchanged ambitions to continue
our product and technology leadership. Among the new
solutions launched was ABLOY BEAT Bluetooth padlock for
critical infrastructure protection, TrakaMEC and video visits
for Senior Care. The ratio of new products introduced over
the past three years was at a high level, accounting for 27% of
the total sales.

Acquisitions
Three acquisitions were closed, Biosite in the UK, FocusCura
in the Netherlands and LongMy in Vietnam. Biosite is the
leading solutions provider of biometric access control to the
UK construction industry and has formed the Construction
vertical within Global Solutions. FocusCura is a strategic tech-
nological addition that will reinforce our current offering
within Senior Care and will provide complementary growth
opportunities. LongMy is a distributor for Hospitality in the
fast-growing Vietnamese market and by having our own dist-
ributor we will strengthen our presence in South Vietnam.

Comments by
Global Solutions

Christophe Sut
Executive Vice President and
Head of Global Technolo-
gies business unit ASSA ABLOY
Global Solutions

What trends have you seen
in the market in 2020?
The transition towards a more
digital world has accelerated.
Several of our verticals have
been part of both driving and
benefiting from this transi-
tion. Hospitality has seen an
increased momentum for our
mobile access solutions. This
technology has proven critical
for our customers on their
journeys to meet hotel guest
expectations for touchless so-
lutions. Our new solutions in
the Construction vertical ena-
ble more efficiency through
digitalization and in Senior
Care we have re-prioritized
the product roadmap and fast-
tracked the launch of video
care solutions enabling care
providers to deliver safe digital
home visits.

Do you expect any long-term
effects from Covid-19 on the
business?
The travel industry was
negatively impacted for
most of the year and we
anticipate a mid-term impact
before the sector recovers.
Meanwhile, we will drive the
development of new solutions
with enhanced capabilities,
and contactless technology
to shape the future of the
hospitality and marine sectors
together with our customers.
Other verticals are gaining
momentum. For instance, in
the Senior Care vertical the
Covid-19 pandemic has been
a driver to improve efficiency
through technology.

Markets
ASSA ABLOY Global Solu-
tions has a presence in all
continents, with a leading
market position in the
hospitality segment for
access solutions. Our
systems and products
are installed in hotel
rooms and cruise ships
worldwide. Through
a combination of ac-
quisitions and innovative
solutions utilizing Group
technology, we continue
to increase our footprint
in verticals like senior
care facilities, education,
construction sites, key
and asset management
and critical infrastructure.

ANNUAL REPORT 2020 | ASSA ABLOYWhat we offer | Divisions

Entrance Systems
Solid performance and
completion of agta record
acquisition

The strongest seg-
ment for us has been
our offering to the
distribution and
logistics vertical,
driven by the trend
of consumers buying
more online which
accelerated due to
the Covid-19
pandemic.

Overview
Entrance Systems is a global organization with four business
segments: Pedestrian, Industrial, Residential and Perime-
ter Security. The divisional headquarters are located in
Switzerland. The business segments are responsible for sales,
manufacturing and product development in their specific
product areas. Entrance Systems manufactures and sells en-
trance automation products, services and perimeter security.
The route to the market is both direct and indirect, with the
master brand ASSA ABLOY and the brand record in the direct
channel, and a number of brands in the indirect channel. The
commercial and institutional segments account for around
80% of sales and the residential segment for about 20%. En-
trance Systems has about 12,900 employees worldwide. The
largest business segment is Industrial followed by Pedestrian.

Financial development
Sales growth was stable with an organic growth of –2% and
a strong growth through acquisitions of 15%. Development
was stable in the Residential segment and in the Industrial
segment, which was supported by strong growth in logistics
and warehouses. Perimeter had good growth, while the Pe-
destrian segment had a negative development due to Covid-
19’s negative impact on the retail segment. The operating
margin was improved to 14.4% (14.3) and operating income
increased with 12% to SEK 4,083 M. We continued to invest in
growing the service organization and despite negative effects
from lockdowns in important markets, sales development
was stable. Investments in IoT resulted in the launch of two
software solutions for connected doors, Insight and 4SIGHT

Financials in brief 2020
• Sales: SEK 28,323 M (25,553) with –2% organic growth.
• Operating income (EBIT): SEK 4,083 M (3,652).1
• Operating margin: 14.4% (14.3).1

Sales, SEK M

Operating income1, SEK M

30,000

26,000

22,000

18,000

14,000

10,000

6,000

2,000

Sales

17
Operating income1

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

1 Excluding items affecting comparability.

Connect. Cash flow increased strongly by 36%, driven by the
improved earnings and working capital improvements, and
the cash conversion was 122%. Our share of new products
introduced over the past three years was 23% of total sales.

Acquisitions
Four acquisitions were closed: agta record in Switzerland, AM
Group in Australia, Doorway and Letherneck in the US. The
acquisition of agta record, a Swiss pedestrian door company
is the largest acquisition for ASSA ABLOY since 2011. AM
Group in Australia is a leading company making roller shut-
ters and security doors. We completed the divestment of
Cedes in Switzerland at the end of the year.

Comments by
Divisional Head

Christopher Norbye
Executive Vice President and
Head of Entrance Systems
division

What trends have you seen
in the market in 2020?
The strongest segment for
us has been our offering to
the distribution and logistics
verticals, driven by the trend
of consumers buying more
online which accelerated due
to the Covid-19 pandemic.
Also, due to Covid-19, there is
a trend of increased hygiene
practices, and controlling
the flow of people. This is
particularly relevant in the
healthcare industry resulting
in higher demand for our
touchless solutions.

Do you expect any long-term
effects from Covid-19 on the
business?
We see some customer seg-
ments having an acute aware-
ness of the need for increased
hygiene and social distancing
that drives a demand for
upgrading manual doors to
automated doors. This trend is
positive for us also long-term
and it has driven us to develop
new products with touchless
activators for pedestrian
doors, and FlowControl solu-
tions to regulate the number
of customers in, for example
a retail store. We also expect
that e-business will continue
to grow and create opportu-
nities for our distribution and
logistics vertical.

Markets
Entrance Systems is a glo-
bal leader in automated
entrance solutions. The
product portfolio inclu-
des automatic, industrial
and commercial, high
performance, residential
garage and hangar doors.
It also includes loading
dock equipment, perime-
ter security, maintenance
and service. The entrance
solutions are sold both
directly to end-users as
well as through a number
of distribution channels.
About 20% of sales are
in the residential sector
and 80% in the com-
mercial and institutional
segments.

ASSA ABLOY | ANNUAL REPORT 2020Divisions | What we offer

PRODUCT OFFERING: IDENTIFICATION AND ACCESS MANAGEMENT, ENTRANCE AUTOMATION

Solutions for unique customer needs

Solutions for United States Cold Storage
United States Cold Storage is a premier provider of public refrigerated warehousing and related
logistics services throughout the US. The company offers more than 355 million cubic feet of
temperature-controlled warehouse and distribution space in 42 facilities located in 13 states. As
the third largest refrigerated warehousing logistics provider in North America, United States Cold
Storage selected our product 4SIGHT™ Connect to provide gate access solutions and automate
dock equipment operations. In addition, 4SIGHT™ Connect enables United States Cold Storage
to gather data intelligence for its diverse customer base with requirements ranging from primary
storage to fully integrated third-party logistics. The 4SIGHT™ Connect solution was also selected
based on the relationships and expertise demonstrated by the ASSA ABLOY team.

United States Cold Storage is a data-driven company. We performed our due
diligence and interviewed several providers on the best way to harness data to
improve our business. We felt that ASSA ABLOY would be a partner as our business
evolves, and we have the confidence that they will support their product as we
reach our goals together.
Mike Adkins, Engineering Manager, United States Cold Storage.

E-visits boost senior care in Bollnäs municipality
Bollnäs municipality in Sweden has the ambition to create best-in-class senior care and to
achieve the target they are convinced that technology and digital tools are necessary. One of the
challenges was nighttime checkups, which are very time and resource consuming creating stress
for the staff, as well as inconvenience to patients or service users being woken up at night. With
e-visits from ASSA ABLOY Global Solutions Senior Care, a digital monitoring by camera, it is now
possible to plan the nightly visits to when they are truly needed. In addition, the service users feel
safe and secure that the staff is available when needed. Together with ASSA ABLOY’s digital lock,
it is also possible to issue access into the service user’s home in a safe and secure way.

The most important advantage is a continued user experience with good safety
and the possibility to feel more self-sufficient, at the same time as the e-visits also
mean that our staff no longer has to disturb and wake up those receiving care.
Ingela Hedblom, Business Developer within the Social Administration, Bollnäs municipality

A one card ecosystem for Connecticut university
The University of Connecticut (UConn) is a public research university with more than
32,000 students, 9,000 faculty staff and five campus areas across the state. Securing a
campus is a top priority and a challenge for UConn administrators. Students need to access
spaces such as dormitories, labs and research facilities. Previously, the university’s card
solution utilized proximity and magstripe technologies. However, this card solution could
easily be cloned. UConn was seeking a solution capable of increasing security and a phased,
university-wide transition to an updated one-card ecosystem. UConn selected HID Global’s
Seos credential technology to re-card the entire university. To manage credential issuance,
they selected the HID FARGO Connect paired with the HPD5600 printer.

The University of Connecticut already had numerous HID card readers installed
for door access. We needed a card that would capitalize on all the components
of these existing readers, but also be compatible with other readers on the
University campuses. In conjunction with this, we also needed printers capable of
seamlessly printing and capturing all three credentials on the one card. HID was
the only company able to meet all these requirements.
Stephanie Kernozicky, Director of UConn’s One Card Office

ANNUAL REPORT 2020 | ASSA ABLOYWhat we offer | Divisions

ASSA ABLOY in your daily life

Securing buildings from the perimeter …

Enterprise

Hotel/retail

Multi-family building

We are part of people’s everyday life all over the world! We provide access solutions from the perimeter
to the core of buildings. You will find ASSA ABLOY’s products and solutions in your home, at work or
school, when you shop or travel. Some products are very visible to you like keys, locks and doors, while
other products are embedded in solutions like e-passports and identity solutions.

Bollards and other safety devices protect pedestrians
from motor vehicles. The various models can be

permanently installed, portable or retractable, and they
can be integrated in security and alarm systems.

security system about who is at a certain place to ensure
that no unauthorized individuals, 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.

Multi-family building

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.

Enterprise

Mobile keys, physical access control systems
including readers and controllers to manage access

in the building.

Hotel/retail

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.

10 Total door opening solutions for retail premises.

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 conveniently controlling safe
traffic flows and providing superior separation of indoor
and outdoor climates. Side doors are added for increased
accessibility and rapid evacuation.

Complete solutions for hotel rooms, including
door solution, safes and energy management

Security-rated doors and frames. Electromechanical
locks and other hardware work together with

systems.

physical access control systems, including readers and
controllers to manage access.

Garage doors, bars and gates are secure and easy
to connect to the buildings access control system.

High-security fences and gates protect against
unauthorized entry. The doors can be integrated

with security systems, sensors and surveillance cameras.

ASSA ABLOY has a complete offering for
service, maintenance and modernization of

automatic entrances and docks.

Automatic sliding doors are particularly suitable for
entrances and indoor areas with large pedestrian

flows. Automatic sliding doors allow you to enter a
building without manually open doors – and conveniently
pass through even if you are pushing a shopping or
carrying suitcases.

Inside the building, mechanical and electromechani-
cal key systems, software and solutions for access

control. System to integrate access control systems for e.g.
authorization, logistics, personnel, etc. Solutions for secure
issuance and management of identities for access to
various systems with Specific security requirements, such
as staff ID cards. Positioning solutions inform the building

ASSA ABLOY | ANNUAL REPORT 2020… to shell …

Enterprise

Divisions | What we offer

… to core …

Enterprise

Door closers

Power supplies

Hinges

Key pads, push buttons,
key switches, touch bars

Electric strikes

Mechanical & electro-
mechanical locks & keys

Magnetic locks

Panic bars

Air louvers

Steel doors & frames

Floor closers

Wireless
locks

Cabinet
locks

… to shell and core.

Hotel/retail

ANNUAL REPORT 2020 | ASSA ABLOYReport of the Board of Directors
and Financial statements

Contents

Report of the Board of Directors

Notes

Significant risks and risk management

Corporate governance

Board of Directors

Executive Team

Internal control – financial reporting

Consolidated financial statements

Sales and income

Consolidated income statement

Consolidated 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

Income statement – Parent company

Statement of comprehensive income – Parent company

Balance sheet – Parent company

Cash flow statement – Parent company

Change in equity – Parent company

Significant accounting and valuation principles

Sales

Auditors’ fees

Other operating income and expenses

Share of earnings in associates

Accounting of leases for the Parent company

Expenses by nature

Depreciation and amortization

Exchange differences in the income statement

Financial income

Financial expenses

Tax on income

Earnings per share

Intangible assets

Property, plant and equipment

Right-of-use assets

Shares in subsidiaries

Investments in associates

19 Deferred tax

20 Other financial assets

Inventories

Trade receivables

Parent company’s equity

Share capital, number of shares and dividend per share

Post-employment employee benefits

26 Other provisions

27 Other current liabilities

Accrued expenses and deferred income

Assets pledged against liabilities to credit institutions

Contingent liabilities

Cash flow items

Reserves

Business combinations

Employees

Financial risk management and financial instruments

Five years in summary

Comments on five years in summary

Definitions of key ratios

Proposed distribution of earnings

Auditor’s report

ASSA ABLOY | ANNUAL REPORT 2020

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 1 January through 31 December 2020, including the nature and focus
of the business. ASSA ABLOY is the global leader in access solutions, dedi-
cated to satisfying end-user needs for security, safety and convenience.

Significant events
Sales and income
Business operations were negatively impacted during the
year by the global Covid-19 pandemic, especially during the
spring of 2020 in conjunction with the lockdowns in many
countries around the world. Sales declined by 7 percent for
the full year and amounted to SEK 87,649 M (94,029). The
decrease in sales consisted of organic growth of –8 percent
(3) and net acquired and divested growth of 4 percent (3).
The exchange rate impact on sales was –3 percent (6).
Operating income (EBIT) excluding items affecting
comparability decreased by 20 percent to SEK 11,916 M
(14,920), equivalent to an operating margin of 13.6 percent
(15.9). Items affecting comparability relate to revalua-
tion to fair value of previous shareholdings in agta record
(shareholding in associates) in 2020 of SEK 1,909 M, as well
as costs for the restructuring program totaling SEK 1,366 M
before taxes in 2020 and SEK 312 M expensed in 2019.

Net financial items were SEK –782 M (–1,037). Income be-
fore tax excluding items affecting comparability totaled SEK
11,133 M (13,883), a decrease of 20 percent. Tax on income
excluding items affecting comparability was 24.8 percent
(26.2). Earnings per share after full dilution, excluding items
affecting comparability, decreased by 18 percent to SEK 7.54
(9.22). Operating cash flow was maintained at a continued
high level, totaling SEK 14,560 M (14,442), an increase of
one percent compared with the previous year.

Restructuring
A new restructuring program was launched at year-end
2020 as part of ASSA ABLOY’s continual cost-saving and
streamlining initiative. Plans are in place to close ten
factories and about thirty offices over a two-year period,
supplemented by external outsourcing of certain aspects
of production, as well as continued automation. The total
cost of the program, which is estimated at SEK 1,366 M
before tax, was fully expensed in 2020. The payback period
is expected to be about two years. Activities related to the
previous programs also continued with effective cost-cut-
ting measures during the year.

In 2020, 2,135 employees left the Group in conjunction

with changes in the production and office organization.
Three plant closures were implemented during the year,
along with a number of other restructuring activities,
including conversion from production to final assembly in
production units.

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 747 M (726) for the year. At year-end 2020, the remain-
ing provisions for restructuring measures amounted to
SEK 1,224 M (778).

Organization
A new organizational structure was implemented begin-
ning in 2021 in the Asia Pacific division aimed at facilitating
improved opportunities for long-term robust sales growth.
Two new business units are being organized within the divi-
sion: Opening Solutions Greater China and South East Asia
and Opening Solutions Pacific and North East Asia. Begin-
ning in 2021, operations in India, which was previously part
of the Asia Pacific division, are being moved to the EMEA
division with the aim of creating new growth opportunities.

Operations were transferred between divisions in
2020, mainly relating to the Perimeter Security business
unit, which was moved from the Americas division to the
Entrance Systems division. Sales on an annual basis for the
operations that were transferred to Entrance Systems from
Americas during the year totaled about SEK 2,400 M. The
transfer of operations has been recognized, from the time of
the transfer, as internal acquisitions/divestments between
the divisions without any retroactive financial translation.

Acquisitions
In August 2020 ASSA ABLOY completed the acquisition
of 54 percent of shares in agta record, a well-established
manufacturer and service organization for entrance
automation. The acquisition was conditional on regulatory
approval, which was obtained only after certain operations
within both ASSA ABLOY and agta record had first been
divested. An official offer for the remaining shares was then
completed, with closing on September 30, 2020. At the end
of 2020, ASSA ABLOY owned 99.7 percent of the votes and
share capital in the group company. The purchase price for
the shares acquired during the year was just over SEK 6 bil-
lion.

As part of the transaction, ASSA ABLOY’s previous holdings
in agta record of 39 percent, a shareholding in an associated
company, were revalued at market value through profit or
loss. The operating income, which did not affect cash flow,
amounted to SEK 1,909 M.

In February 2020 ASSA ABLOY completed the acquisition
of AM Group, an Australian manufacturer of industrial doors
within entrance automation. The company, which special-
izes in innovative entrance automation, is a good comple-
ment to ASSA ABLOY’s geographic coverage in Australia. The
company is headquartered in Sydney, Australia. The agree-
ment was signed at the end of 2019 and was completed
after regulatory approval was obtained.

ANNUAL REPORT 2020 | ASSA ABLOYReport of the Board of Directors

In February 2020, ASSA ABLOY acquired Biosite, a leading
provider of Biometric access control for construction site in
the UK. The acquisition strengthens the offering in access
control solutions and offers additional growth opportuni-
ties. The operation has its headquarters in Solihull, UK.

In August 2020, ASSA ABLOY acquired FocusCura, a lead-

ing provider of technical solutions for senior care in the
Dutch market. The acquisition strengthens ASSA ABLOY’s
offering in the healthcare and long-term care market. The
operation has its headquarters in Driebergen-Rijsenburg,
Netherlands.

In August 2020, ASSA ABLOY acquired Access-IS, a leading

provider of RFID, NFC and barcode devices enabling the au-
thentication of travel and identity documents, ticket reading
and contactless payments. The acquisition strengthens the
offering in expanded access technologies and allows growth
in several attractive markets for HID Global. The operation
has its headquarters in Reading, UK.

In October 2020, ASSA ABLOY acquired Olimpia Hard-
ware, a leading glass hardware and accessories brand in
Latin America and the Caribbean. The acquisition comple-
ments the business in Latin America, further supporting
the growing trend of openings utilizing glass and aluminum
products. The operation has its headquarters in Costa Rica.
The total purchase price of the 12 businesses acquired
during the year, including adjustments for acquisitions from
previous years, was SEK 12,134 M. The acquisition price
includes SEK 3,752 M related to fair value measurement of
previously owned shareholding in associated companies,
which does not affect cash flow. The preliminary acquisi-
tion analyses indicate that goodwill and other intangible
assets with an indefinite useful life amount to SEK 8,325 M.
Estimated deferred considerations relating to acquisitions
for the year totaled SEK 318 M.

Additional acquisitions of non-controlling interests

occurred during the year for SEK 16 M (19).

Disposals
In August 2020 the sale of certain operations from agta
record and ASSA ABLOY to the Italian FAAC Group was com-
pleted, as part of the commitments to address the competi-
tion concerns of the EU Commission in connection with the
acquisition of agta record. The divested business, which had
a turnover in 2019 of approximately EUR 1,000 M, mainly
included the agta record operations in the Netherlands,
Austria, Hungary and Slovenia, as well as the ASSA ABLOY
automatic pedestrian door business in France and the
UK. The divestiture gave rise to a non-recurring operating
income of just over SEK 230 M.

In November 2020 ASSA ABLOY sold its Swiss sensor tech-

nology business CEDES to capiton AG. CEDES is a leading
sensor technology company in the elevator and door indus-
try. Sales in 2019 totaled about SEK 525 M. The divestiture,
which resulted in a small capital gain, will have a neutral
effect on ASSA ABLOY’s operating margin going forward.
At the end of 2020, ASSA ABLOY sold its Italian residen-
tial door business in Gardesa. The company’s sales in 2020
totaled about SEK 100 M. The transaction will have a positive
effect on ASSA ABLOY’s operating margin going forward. In
its entirety, the divestment gives rise to a capital loss and
related divestment costs of approximately SEK 185 M.

Research and development
ASSA ABLOY’s expenditure on research and development
during the year totaled SEK 3,902 M (3,566), equivalent to
4.5 percent (3.8) of sales.

The pace of innovation remained high during the year
thanks to the continued commitment to invest in research
and development. The number of employees in research
and development at year-end was 2,800, which is un-
changed compared with the beginning of the year.

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
systematically and purposefully to reduce their environmen-
tal 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 2020 Sustainability Report, reporting on the Group’s

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

Internal control and financial reporting
ASSA ABLOY’s internal audit and internal control functions
have dedicated internal auditors employed in all divisions.
More reviews were conducted in recent years, and work con-
tinued during the year to strengthen internal control and
compliance in the business in general. Special emphasis has
been placed on financial reporting, including with respect to
continuous reconciliation of balance sheets. Measures to ad-
dress internal control compliance issues were implemented
during the year following a revision of the internal control
framework that has been in effect for some time.

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 proposes that the Annual General
Meeting 2021 should approve a dividend of SEK 3.90 (3.85)
per share, representing an increase of 1 percent. In order to
facilitate a more efficient cash management, the dividend
is proposed to be paid in two equal installments, the first
with the record date 30 April 2021 and the second with the
record date 23 November 2021. If the proposal is adopted
by the Annual General Meeting, the first installment is esti-
mated to be paid on 5 May 2021 and the second installment
on 26 November 2021. The proposal for profit distribution
can be found in its entirety on page 98 of the Annual Report.

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

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

ASSA ABLOY | ANNUAL REPORT 2020Significant risks and risk management | 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

geographical 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
continuously 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,
financial cash management, currency risk and other financial
risk management.

ANNUAL REPORT 2020 | ASSA ABLOYReport of the Board of Directors | Significant risks and risk management

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, brand positioning and coun-
try-specific risks. In 2020, it was also clarified that worldwide
health risks posed by pandemics (Covid-19) can significantly
impact societies and global demand around the world. ASSA
ABLOY has therefore dedicated great effort to protect the
health of its employees during the year. The business has
also been negatively impacted. While it is difficult to predict
the continued impact of the pandemic on business in 2021
due to the uncertainty in market conditions, the health and
safety of ASSA ABLOY employees continues to be our high-
est priority.

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 propor-
tion of sales in Asia and in central and eastern Europe has
increased in recent years. Consequently, the Group has
increased exposure to the emerging markets, which may en-
tail 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 with regard to
matters such as business ethics, human rights and working
conditions, as well as the environment, health and safety.

ASSA ABLOY’s risks

Strategic risks

Operational risks

Financial risks

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

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

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

• Country-specific risks
• Customer behavior
• Competitors
• Brand positioning
• Reputational risk
• Pandemics and other global health risks

• Legal and 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
• Risks relating to IT

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

obligations

ASSA ABLOY | ANNUAL REPORT 2020Significant risks and risk management | Report of the Board of Directors

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 29,755 M (33,050) at year-end 2020. 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 2020, ASSA ABLOY had obligations for pen-
sions and other post-employment benefits of SEK 9,549 M
(9,530). The Group manages pension assets valued at
SEK 6,035 M (6,184). Provisions in the balance sheet for
defined benefit and defined contribution plans and post-
employment medical benefits totaled SEK 3,514 M (3,346).
Changes in the value of assets and liabilities from year to
year are due partly to the development of equity and inter-
est rate 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 comprehensive income. The assumptions made
include discount rates and anticipated inflation and salary
increases.

Operational risks
Operational risks comprise risks directly attributable to
business operations, with a potential impact on the Group’s
financial position and performance. They include legal and
environmental risks, tax risks, acquisition of new businesses,
restructuring measures, availability and price fluctuations of
raw materials, and credit losses. This category also includes
risks relating to compliance with laws and regulations, as
well as to information technology (IT), internal control and
financial reporting. See page 46 for a more detailed descrip-
tion of the management of these risks.

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. Ac-
counting principles, risk management and risk exposure are
described in more detail in Notes 1 and 35, as well as Note
25, 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 fluctua-
tions. These fluctuations affect Group earnings when the
income statements of foreign subsidiaries are translated to
Swedish kronor (translation exposure), and when products
are exported and sold in countries outside the country of
production (transaction exposure). Translation exposure
is primarily related to earnings in USD and EUR. This type
of exposure is not hedged. Currency risk in the form of
transaction exposure, 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 currency flows in 2020. As a result, currency
fluctuations had a direct impact on business operations.
Exchange rate fluctuations also affect the Group’s debt-
equity ratio and equity. The difference between the assets
and liabilities of foreign subsidiaries in the respective foreign
currency is affected by exchange rate fluctuations and
causes a translation difference, which affects the Group’s
comprehensive income. A general weakening of the Swed-
ish krona leads to an increase in net debt, but at the same
time increases the Group’s equity. At year-end, the largest
foreign net assets were denominated in USD and EUR.

ANNUAL REPORT 2020 | ASSA ABLOYReport 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

Environmental risks

Tax risks

Acquisition of new businesses

At year-end 2020, there are considered to be
no outstanding legal disputes that may lead to
significant costs for the Group.

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

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

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

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

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

At year-end 2020, there are considered to be no
ongoing tax cases with a significant impact on the
Group’s earnings.

Acquisitions are carried out by a number of people
with considerable acquisition experience and with
the support of, for example, legal and financial
consultants. Acquisitions are carried out according
to a uniform and predefined Group-wide process.
This consists of four documented phases: strategy,
evaluation, implementation and integration.

During the year, acquisition activity continued to
be high at ASSA ABLOY, with acquisitions of several
businesses, of which the acquisition of agta record
was the largest in the last decade. The Group’s
acquisitions in 2020 are reported in greater detail
in the Report of the Board of Directors and in Note
33, Business combinations.

Restructuring measures

The restructuring programs mainly entail some
production units changing direction principally
to final assembly, while certain units will be
closed.

The restructuring programs are carried on as a
series of projects with stipulated activities and
schedules. The various projects in the respective
restructuring program are systematically moni-
tored on a regular basis.

Price fluctuations and availability
of raw materials

Credit losses

Risks relating to internal control

A new restructuring program was launched at the
end of 2020 involving the closure of about ten
factories and about thirty offices. The program
was fully expensed in 2020. 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.

Raw materials are purchased and handled primar-
ily at division and business unit level. Regional
committees coordinate these activities with the
help of senior coordinators for selected material
components.

Trade receivables are spread across a large number
of customers in many markets. No individual
customer in the Group accounts for more than
one percent of sales.

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

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 credit risk has
been assessed to have increased in 2020, given
the global Covid-19 pandemic and its impact on
global demand.

A Group-wide insurance program is in place,
mainly relating to property, business interruption
and liability risks. This program covers all business
units. The Group’s exposure to the risk areas listed
above is regulated by means of its own captive
insurance company.

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

Instructions on the allocation of responsibilities,
authorization and procedures for orders, sourcing,
etc., are laid out in an internal control guide with
rules and regulations that were updated during
the year. Compliance is evaluated annually for all
operating companies. An annual internal audit
of financial reporting is performed for selected
Group companies on a rotating basis.

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

ASSA ABLOY’s internal audit and internal control
functions have dedicated internal auditors
employed in all divisions. More reviews were
conducted in recent years. 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 prepara-
tion’ in Note 1.

Risks relating to Information and data security

Preventive measures are in place to protect
business-critical information from unauthorized
individuals and organizations.

IT security is a prioritized area at ASSA ABLOY
through constant efforts to maintain and
strengthen the level of security for the Group’s
business information.

ASSA ABLOY | ANNUAL REPORT 2020Corporate governance | Report of the Board of Directors

Corporate governance

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

ASSA ABLOY’s corporate governance is based on the
Swedish Companies Act, the Annual Accounts Act, Nas-
daq Stockholm’s Rule Book for Issuers and the Swedish
Corporate Governance Code (the 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 Code. ASSA
ABLOY follows the Code’s principle to “comply or explain”
and in 2020 ASSA ABLOY has one deviation to explain. The
Nomination Committee deviates from Rule 2.4 of the Code

Corporate governance structure

in that the Vice Chairman of the Board of Directors, Carl
Douglas (Investment AB Latour), is also the Chairman of the
Nomination Committee. The reason for this deviation is that
the major shareholders consider it to be important to have
the representative from the largest shareholder as Chairman
of the Nomination Committee.

The Corporate Governance Report is examined by ASSA

ABLOY’s auditor.

ASSA ABLOY’s objective is that its operations should gen-
erate good long-term returns for its shareholders and other
stakeholders. An effective scheme of corporate governance
for ASSA ABLOY can be summarized in a number of interact-
ing components, which are described below.

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-Corruption Policy

At year-end 2020, ASSA ABLOY had 43,734 share-

1 Shareholders
holders (29,784). ASSA ABLOY’s principal shareholders are
Investment AB Latour (9.5 percent of the share capital and
29.4 percent of the votes) and Melker Schörling AB (3.1
percent of the share capital and 10.9 percent of the votes).
Foreign shareholders accounted for 66.8 percent (69.5) of
the share capital and 45.6 percent (47.5) of the votes. The
ten largest shareholders accounted for 34.9 percent (36.5)
of the share capital and 55.5 percent (56.7) of the votes. For
further information on shareholders, see page 106.

ASSA ABLOY’s Articles of Association contains a pre-emp-

tion clause for owners of Series A shares regarding shares
of Series A. A shareholders’ agreement exists between the
Douglas and the Schörling families and their related com-
panies that includes an agreement on right of first refusal if
any party disposes of Series A shares. The Board of Direc-
tors of ASSA ABLOY is not aware of any other shareholders’
agreements or other agreements between shareholders in
ASSA ABLOY.

ANNUAL REPORT 2020 | ASSA ABLOYReport of the Board of Directors | Corporate governance

Share capital and voting rights
ASSA ABLOY’s share capital at the end of 2020 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 Annual General Meeting 2020 author-
ized the Board of Directors to acquire, during the period
until the next Annual General Meeting, a maximum number
of Series B shares so that after each repurchase ASSA ABLOY
holds a maximum 10 percent of the total number of shares
in the company.

ASSA ABLOY holds a total of 1,800,000 (1,800,000) Series
B shares after repurchases. 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 2020.

Share and dividend policy
ASSA ABLOY’s Series B share is listed on the Nasdaq Stock-
holm Large Cap. At the end of 2020, ASSA ABLOY’s market
capitalization amounted to SEK 225,297 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 Gen-
eral 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. Mat-
ters considered at the Annual General Meeting include:
dividend; adoption of the income statement and balance
sheet; discharge of the members of the Board of Direc-
tors and the CEO from liability; election of members of the

Board of Directors, Chairman of the Board of Directors and
auditor; and fees for the Board of Directors and auditor. An
Extraordinary General Meeting may be held if the Board of
Directors considers this necessary or if ASSA ABLOY’s audi-
tor or shareholders holding at least 10 percent of the shares
so request.

Annual General Meeting 2020
The Annual General Meeting was held in April 2020 in Stock-
holm, and shareholders representing 52.3 percent of the
share capital and 67.5 percent of the votes participated. In
light of the Covid-19 pandemic and pursuant to temporary
legislation, shareholders were able to exercise their voting
rights at the Annual General Meeting through advance vot-
ing (postal voting).
The Annual General Meeting’s resolutions included the
following.
• Dividend of SEK 2.00 per share.
• Lars Renström, Carl Douglas, Eva Karlsson, Birgitta Klasén,
Lena Olving, Sofia Schörling Högberg and Jan Svensson
were re-elected as members of the Board of Directors,
and Joakim Weidemanis was elected as new member
of the Board. Further, Lars Renström was re-elected as
Chairman of the Board of Directors, and Carl Douglas was
re-elected as Vice Chairman.

• The audit firm Ernst & Young AB was appointed as the

company’s new auditor.

• Remuneration of the Board of Directors.
• Guidelines for remuneration to senior executives.
• Authorization to the Board of Directors regarding repur-

chase and transfers of own Series B shares.

• A long-term incentive program for senior executives and

other key employees in the Group (LTI 2020).
• Formal changes of the Articles of Association.

For more information about the Annual General Meeting, in-
cluding the minutes, see ASSA ABLOY’s website assaabloy.com.

Extraordinary General Meeting 2020
Due to the uncertainty about the market situation caused
by the Covid-19 pandemic, the Annual General Meeting in
April 2020 decided on a dividend of SEK 2.00 per share in
accordance with a revised dividend proposal by the Board.
The Board’s original proposal was a dividend of SEK 3.85 per
share. The Extraordinary General Meeting on 24 November
2020 resolved, in accordance with the Board’s proposal,
on a second dividend of SEK 1.85 per share. At the General
Meeting shareholders representing 53.8 percent of the
share capital and 68.5 percent of the votes participated. In
light of the Covid-19 pandemic, the General Meeting was
carried out solely through advance voting (postal voting)
pursuant to temporary legislation. For more information
about the General Meeting, including the minutes, see ASSA
ABLOY’s website assaabloy.com.

Annual General Meeting 2021
ASSA ABLOY’s next Annual General Meeting will be held on
28 April 2021.

ASSA ABLOY | ANNUAL REPORT 2020Corporate governance | Report of the Board of Directors

According to the instructions for the Nomination

3 Nomination Committee
Committee adopted at the Annual General Meeting 2018,
the Nomination Committee shall be composed of repre-
sentatives of the five largest shareholders in terms of voting
rights registered in the shareholders register maintained
by Euroclear 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 Annual General

Meeting 2021 comprises Carl Douglas (Investment AB
Latour), Mikael Ekdahl (Melker Schörling AB), Marianne Nils-
son (Swedbank Robur fonder), Liselott Ledin (Alecta) and
Yvonne Sörberg (Handelsbanken Fonder). Carl Douglas is
Chairman of the Nomination Committee. Should the owner-
ship 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, Vice Chairman and the other
board members, as well as fees for committee work; fees
to the company’s auditor, and any 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 external auditor.

Prior to the Annual General Meeting 2021, the Nomi-
nation 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 company’s present situation and future direction. The
annual evaluation of the Board of Directors and its work is
part of the basis for this assessment. Moreover, the Nomina-
tion Committee applies ASSA ABLOY’s diversity policy for
the Board of Directors, which is based on Rule 4.1 of the
Code, when preparing its proposal for election of members
of the Board of Directors. The search for suitable board
members is carried on throughout the year and proposals
for new board members are based in each individual case
on a profile of requirements established by the Nomination
Committee.

Shareholders wishing to submit proposals to the Nomina-

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

The Nomination Committee’s proposals for the Annual
General Meeting 2021 are published, at the latest, in con-
junction with the formal notification of the Annual General
Meeting, which is expected to be issued around 24 March
2021.

In accordance with the Swedish Companies Act,

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

jor importance. Acquisitions and divestments with a value
(on a debt-free basis) exceeding SEK 200 M are decided by
the Board of Directors. The threshold amount presumes that
the matter relates to acquisitions or divestments in accord-
ance with the strategy agreed by the Board of Directors. The
Board of Directors approves documents such as the Annual
Report and Interim Reports, proposes a dividend to the An-
nual 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,

• identifying how sustainability issues impact risks to, and

business opportunities for, 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 follow-
ing-up and controlling the company’s operations and the
risks for the company associated with its operations,
• ensuring that there is satisfactory control of the compa-

ny’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 docu-
ment that governs the work of the Board and the distribu-
tion of duties between the Board of Directors and the CEO.
The rules of procedure include instructions for the CEO,
instructions relating to financial reporting and internal
control, and instructions to the Remuneration Committee
and the Audit Committee.

Included in the rules of procedure is a description of the
role of 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 continu-
ously monitor the Group’s operations and development,
consulting with the CEO on strategic issues, representing
the company in matters concerning the ownership struc-
ture, ensuring that the Board receives satisfactory informa-
tion and data on which to base decisions and ensuring that
Board decisions are implemented. In addition, the Chairman
should ensure that the work of the Board of Directors is
evaluated annually.

The Board of Directors has at least four ordinary meetings

and one statutory meeting per year. An ordinary meeting
is always held in connection with the company’s publica-
tion of its Year-end Report and Interim Reports. At least
once a year the Board of Directors visits one of the Group’s
operations, combined with a board meeting. In addition,
extraordinary board meetings are held when necessary. All
meetings follow an approved agenda. Prior to each meeting,
a draft agenda, including documentation, is provided to all
members of the Board of Directors.

The Board of Directors has a Remuneration Committee
and an Audit Committee. The purpose of these Committees

ANNUAL REPORT 2020 | ASSA ABLOYReport of the Board of Directors | Corporate governance

is to deepen and streamline the work of the Board of Direc-
tors 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, including the Chairman and Vice
Chairman of the Board, is elected annually at the Annual
General Meeting for the period until the end of the next An-
nual General Meeting and shall, according to the Articles of
Association, comprise a minimum of six and a maximum of
ten members elected by the Meeting. Two of the members
are appointed by the employee organizations in accordance
with Swedish law. The employee organizations also appoint
two deputies. The Board of Directors has consisted of eight
elected members and two employee representatives since
the Annual General Meeting 2020. 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 Code. The objective is that the composition of the Board
of Directors, taking into account the company’s opera-
tions, stage of development and other circumstances, shall
be appropriate, characterized by versatility and breadth
regarding qualifications, experience and background of the
elected members, and strive to achieve gender equality. In
2020 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 Annual General
Meeting 2020, the composition of the Board of Directors is
such that 50 percent are women and 50 percent are men,
which is in line with the Swedish Corporate Governance
Board’s aspiration for each gender to represent a share of
at least 40 percent of the Board of Directors. In addition,
in-depth reviews of operations were conducted during the
year at selected divisions in order to broaden the expertise
of the Board of Directors within ASSA ABLOY.

Group’s performance and financial position, including the
outlook for the coming quarters. Acquisitions and divest-
ments were also discussed to the extent they arose.

More important matters dealt with by the Board of Direc-

tors during the year comprised the effects of Covid-19, as
well as a new sustainability program and Science-Based Tar-
gets climate initiative. In addition, the Board has addressed
a number of acquisitions, including agta record, Biosite and
Access ID, as well as the divestment of certain operations
in conjunction with the acquisition of agta record to the
Italian FAAC Group and the divestment of the Swiss sensor
technology business CEDES to capiton AG. During the year,
the Board of Directors also conducted in-depth reviews of
the Group’s operations in the Americas division and visited
the Entrance Systems division’s operations in Fehraltorf,
Switzerland. The Board of Directors’ work is summarized in
the timeline on pages 50–51.

An evaluation of the Board of Directors’ work is con-
ducted 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 2020 the Remuneration Committee comprised

The Remuneration Committee has the task of drawing
up guidelines for remuneration to senior executives, which
the Board of Directors proposes to the Annual General
Meeting for resolution. The Board of Directors shall prepare
a proposal for new guidelines at least every fourth year. For
information about ASSA ABLOY’s guidelines for remunera-
tion to senior executives that were adopted at the Annual
General Meeting 2020, see Note 34.

The Remuneration Committee also prepares, monitors and

Board of Directors’ work in 2020
The Board of Directors held nine meetings during the year.
At the ordinary board meetings the CEO reported on the

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.

Summary of
Board of Directors’
work and committee
meetings in 2020

Ordinary board meeting
Year-end results
Proposal dividend
Annual Report
Audit Report
Sustainability Report
Proposals to Annual General
Meeting
Evaluation Executive Team
Acquisitions

Ordinary board meeting
Interim Report Q1
Acquisitions

January

February

March

April

May

June

Remuneration
Committee meeting
Audit Committee meeting

Extraordinary
board meeting
Proposal revised dividend
Notice Annual
General Meeting

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

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

ASSA ABLOY | ANNUAL REPORT 2020
Corporate governance | Report of the Board of Directors

The Committee held one meeting in 2020. Its work in-
cluded preparing a proposal of guidelines for remuneration
to senior executives, preparing a proposal for remunera-
tion 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
In 2020 the Audit Committee comprised Jan
Svensson (Chairman), Birgitta Klasén and Sofia Schörling
Högberg.

The duties of the Audit Committee include continuous
monitoring and quality assurance of ASSA ABLOY’s financial
reporting. Regular communication is maintained with the
company’s external auditor, including on the focus and
scope of the audit. The Audit Committee is also responsible
for evaluating the audit assignment and obtaining the re-
sults of the Swedish 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 supporting the Nomination Committee in
providing a proposal for the appointment of external audi-
tor. Furthermore, the Audit Committee shall review and
monitor the impartiality and independence of the auditor,
paying particular attention to whether the auditor provides
the company with services other than auditing services. The
Audit Committee establishes guidelines for procurement of
services other than audit services from the company’s audi-
tor, but otherwise, the Committee has no decision-making
powers.

The Committee held four meetings in 2020. The com-
pany’s external auditor and representatives from senior
management also participated at these meetings. More
important matters dealt with by the Audit Committee
during the year included the effects of Covid-19, 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 Annual General
Meeting 2020 resolved that board fees would remain
unchanged compared with 2019 and amount to total
SEK 7,360,000 (excluding remuneration for committee
work) to be allocated between the members as follows:
SEK 2,350,000 to the Chairman, SEK 900,000 to the Vice
Chairman, and SEK 685,000 to each of the other members
elected by the Annual General Meeting. As remuneration for
committee 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 member of
the Remuneration Committee (except the Chairman)
SEK 75,000.

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 2020, see Note 34.

Attendance 2020, Board of Directors and Committees

Board members

Lars Renström

Carl Douglas

Eva Karlsson

Birgitta Klasén

Lena Olving

Sofia Schörling Högberg

Jan Svensson

Joakim Weidemanis

Rune Hjälm

Mats Persson

Board of
Directors

Audit
Committee

Remuneration
Committee

1/1

4/4

9/9

6/6

9/9

The maximum number of meetings varies due to appointment in 2020.

Ordinary board meeting
Interim Report Q2
Acquisitions

Ordinary board meeting
Strategy

Ordinary board meeting
and visit to operations
Visit Entrance Systems

Ordinary board meeting
Interim Report Q3
Proposal second dividend
Notice Extraordinary General
Meeting

Ordinary board meeting
Presentation Americas
Acquisitions
Sustainability program

July

August

September

October

November

December

Audit Committee meeting

ANNUAL REPORT 2020 | ASSA ABLOYReport of the Board of Directors | Corporate governance

Board of Directors

Board members elected by the Annual General Meeting 2020

Lars Renström

Carl Douglas

Eva Karlsson

Birgitta Klasén

Lena Olving

Sofia Schörling Högberg

Jan Svensson

Joakim Weidemanis

Lars Renström
Chairman.
Board member since 2008.
Born 1951.
Master of Science in Engineering and Master of
Science in Business and Economics.
President and CEO of Alfa Laval AB 2004–
2016. President and CEO of Seco Tools AB
2000–2004. President and Head of Division of
Atlas Copco Rock Drilling Tools 1997–2000.
Previously a number of senior positions at ABB
and Ericsson.
Other appointments: Chairman of Tetra Laval
Group.
Shareholdings (including through
companies and related natural parties):
30,000 Series B shares.

Carl Douglas
Vice Chairman.
Board member since 2004.
Born 1965.
BA (Bachelor of Arts) and D. Litt (h.c.) (Doctor
of Letters).
Self-employed.
Other appointments: Vice Chairman of
Securitas AB. Board member of Investment
AB Latour.
Shareholdings (including through
companies and related natural parties):
41,595,729 Series A shares and 63,900,000
Series B shares through Investment AB Latour.

Eva Karlsson
Board member since 2015.
Born 1966.
Master of Science in Engineering.
CEO and Vice President Product Supply Arcam
EBM since 2020. President and CEO of Armatec
AB 2014-2019. CEO of SKF Sverige AB and
Global Manufacturing Manager 2011–2013,
Director of Industrial Marketing & Product
Development Industrial Market AB SKF
2005–2010, various positions in the SKF Group
primarily within Manufacturing Management.

Other appointments: Board member of
Valcon A/S and Ratos AB.
Shareholdings (including through
companies and related natural parties):
500 Series B shares.

Birgitta Klasén
Board member since 2008.
Born 1949.
Master of Science in Engineering and degree in
Business and Economics.
Independent IT consultant (Senior IT Advisor).
CIO and Head of Information Management
at EADS (European Aeronautics Defence and
Space Company) 2004–2005. CIO and Senior
Vice President of 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 2013–2019.
COO and Deputy CEO of Saab AB 2008–2013.
Various positions within Volvo Car Corporation
1980–1991 and 1995–2008 of which seven
years in the Executive Management Team. CEO
of Samhall Högland AB 1991–1994.
Other appointments: Chairman of the Royal
Swedish Opera, ScandiNova Systems AB and
Academic Work. Board member of Investment
AB Latour, Munters Group AB, NXP Semicon-
ductor N.V. and Stena Metall AB. Fellow of
the Royal Swedish Academy of Engineering
Sciences (IVA) and board member of IVA’s Busi-
ness Executives Council (IVA:s Näringslivsråd).
Shareholdings (including through
companies and related natural parties):
600 Series B shares.

Sofia Schörling Högberg
Board member since 2017.
Born 1978.
BSc (Bachelor of Science) in Business Admin-
istration.
Other appointments: Board member of Mel-
ker Schörling AB, Securitas AB and Hexagon AB.
Shareholdings (including through
companies and related natural parties):
15,930,240 Series A shares and 18,027,992
Series B shares through Melker Schörling AB as
well as 418,800 Series B shares through Edeby-
Ripsa Skogsförvaltning AB.

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
2003–2019. Previously CEO of AB Sigfrid Sten-
berg 1986–2002.
Other appointments: Chairman of AB Fager-
hult and Tomra Systems ASA. Board member
of Loomis AB, Nobia AB, BillerudKorsnäs AB,
Stena Metall AB, Herenco Holding AB and
Climeon AB.
Shareholdings (including through
companies and related natural parties):
10,000 Series B shares.

Joakim Weidemanis
Board member since 2020.
Born 1969.
Master of Science in Business and Economics.
Executive Vice President and Corporate Officer
of Danaher Corporation since 2017.
Previously various management positions
within Danaher 2011–2017. Head of Product
Inspection and Corporate Officer of Mettler
Toledo 2005–2011. Previously various operat-
ing and corporate development roles within
ABB 1995–2005.
Other appointments: –
Shareholdings (including through compa-
nies and related natural parties): –

Appointments and shareholdings as at 31 December 2020 unless stated otherwise.

ASSA ABLOY | ANNUAL REPORT 2020Board of Directors | 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): –

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

Independence of the Board of Directors

Name

Lars Renström

Carl Douglas

Eva Karlsson

Birgitta Klasén

Lena Olving

Sofia Schörling Högberg

Jan Svensson

Joakim Weidemanis

Position

Chairman

Vice Chairman

Board member

The Board of Directors’ composition and shareholdings

Independent of the company and its
management

Independent of the company’s major
shareholders

Yes

Name

Lars Renström

Carl Douglas

Eva Karlsson

Birgitta Klasén

Lena Olving

Position

Chairman

Vice Chairman

Board member

Sofia Schörling Högberg

Board member

Jan Svensson

Board member

Joakim Weidemanis

Board member

Elected

2008

2004

2015

2008

2018

2017

2012

2020

Rune Hjälm

Mats Persson

Board member, employee representative

2017

Board member, employee representative

1994

Bjarne Johansson

Deputy, employee representative

Nadja Wikström

Deputy, employee representative

2015

2017

1 Shareholdings through companies and related natural parties.

Born

1951

1965

1966

1949

1956

1978

1956

1969

1964

1955

1966

1959

Remuneration
Committee

Chairman

–

Member

–

Appointments and shareholdings as at 31 December 2020 unless stated otherwise.

Audit Committee

Series A shares1

Series B shares1

–

Member

–

Member

Chairman

–

41,595,729

–

15,930,240

–

30,000

63,900,000

500

21,000

600

18,446,792

10,000

–

ANNUAL REPORT 2020 | ASSA ABLOYReport of the Board of Directors | Executive Team

Executive Team

Nico Delvaux

Erik Pieder

Lucas Boselli

Maria Romberg Ewerth

Mogens Jensen

Nico Delvaux
President and CEO and Head of Global
Technologies division since 2018.
Born 1966.
Master of Engineering in Electromechanics
and executive MBA.
Previous positions: President and CEO of
Metso Corporation August 2017–February
2018. Previously various positions in the
Atlas Copco Group, including Business Area
President Compressor Technique
2014–2017, Business Area President
Construction Technique 2011–2014, and
various positions in sales, marketing, service,
acquisition-integration 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):
59,623 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: 2,913 Series B shares.

Lucas Boselli
Executive Vice President and Head of Ameri-
cas 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 posi-
tions in Ingersoll Rand 2000–2010.
Shareholdings: 29,930 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 Hu-
man 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 HR-positions
in various companies: JELD-WEN Sverige AB,
VALEO Engine Cooling AB and Swedish Meats
2003–2008.
Shareholdings: 13,010 Series B shares.

Mogens Jensen
Executive Vice President and Head of business
segment Residential within Entrance Systems
division since 2020.
Born 1958.
Master of Science in Mechanical Engineering
and MBA.
Previous positions: Various positions in the
ASSA ABLOY Group, including Executive Vice
President and Head of Entrance Systems divi-
sion 2018–2020, 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. Previ-
ously various Managing Director positions.
Shareholdings: 27,300 Series B shares.

Changes in the Executive Team
Martin Poxton has been appointed
Executive Vice President and Head of
the business unit ASSA ABLOY Open-
ing Solutions Greater China and South
East Asia within Asia Pacific division
with effect from 1 January 2021.

Simon Ellis has been appointed Ex-
ecutive Vice President and Head of the
business unit ASSA ABLOY Opening
Solutions Pacific and North East Asia
within Asia Pacific division with effect
from 1 January 2021.

The Head of Asia Pacific division,

Anders Maltesen, will leave ASSA
ABLOY during the first half of 2021.
Nico Delvaux, President and CEO,
will take over as the Head of the Asia
Pacific division.

Martin Poxton

Martin Poxton
Executive Vice President and Head of Asia Pacific business unit
ASSA ABLOY Opening Solutions Greater China and South East Asia
since 2021.
Born 1972.
HND in Mechanical and Manufacturing Engineering.
Previous positions: Vice President Operations ASSA ABLOY
Opening Solutions Asia Pacific 2017-2020, Operations Director
Adient China, 2013–2017, Business Unit General Manager and
Launch Director Johnsons Controls China 2008-2012. Various po-
sitions in Faurecia China 2004-2008. Previously various positions
in Keiper, Johnsons Controls and Flowform B’ham UK, 1992-2004.
Shareholdings: –

Appointments and shareholdings as at 31 December 2020 unless stated otherwise.

ASSA ABLOY | ANNUAL REPORT 2020Executive Team | Report of the Board of Directors

Björn Lidefelt

Anders Maltesen

Christopher Norbye

Christophe Sut

Neil Vann

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: 16,256 Series B shares.

Björn Lidefelt
Executive Vice President and Head of Global
Technologies business unit HID Global since
2020.
Born 1981.
Master of Science in Industrial Engineering
and Management.
Previous positions: Various positions in the
ASSA ABLOY Group, including Chief Com-
mercial Officer 2017–2020, and General Man-
ager ASSA ABLOY China (security products)
2013–2016.
Shareholdings: 6,538 Series B shares.

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 Direc-
tor, Asia Pacific, Alstom Thermal Services
2014–2015, Vice President, East Asia, Alstom
Thermal Services 2011–2014, General Man-
ager, board member, Tianjin Alstom Hydro Co.
Ltd 2003–2011. Previously various positions
within Alstom.
Shareholdings: 12,970 Series B shares.

Christopher Norbye
Executive Vice President and Head of Entrance
Systems division since 2020.
Born 1973.
Master of Business Administration and
Bachelor of Science.
Previous positions: President of Industrial
Door Solutions within Entrance Systems
division 2017–2020, Executive Vice President
Orchid Orthopedics 2013–2016, President
Sandvik Medical Solutions 2011–2013, COO
Sandvik Medical Solutions 2009–2011,
Manager for Sandvik M&A and business de-
velopment 2005–2008, Andersen Consulting
2001–2004, American Express 1999–2001.
Shareholdings: 5,371 Series B shares.

Christophe Sut
Executive Vice President and Head of Global
Technologies business unit 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
Business Development ASSA ABLOY
Hospitality and Platform Director for
ASSA ABLOY AB. Niscayah Group 2010-2012.
SPIT France (ITW group) 1999–2001 and SAM
Outillage 1997-1999.
Shareholdings: 4,888 Series B shares.

Simon Ellis
Executive Vice President and Head of Asia Pacific business unit ASSA
ABLOY Opening Solutions Pacific and North East Asia since 2021.
Born 1974.
MBA.
Previous positions: Various positions in the ASSA ABLOY Group,
including President of Opening Solutions Pacific Region and Japan
2016–2020 and President of Opening Solutions New Zealand 2013-
2016, General Manager Security Merchants Australia 2010–2013.
Previously various positions in the ASSA ABLOY Group 1997–2010.
Shareholdings: 3,039 Series B shares.

Simon Ellis

Appointments and shareholdings as at 31 December 2020 unless stated otherwise.

ANNUAL REPORT 2020 | ASSA ABLOYReport of the Board of Directors | Corporate governance

business partners. The Codes, which are based on a set of
internationally accepted conventions, define the values and
guidelines that should apply both within the Group and for
ASSA ABLOY’s business partners with regard to 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 guide-

lines on compliance with competition, export control,
anti-corruption and data protection legislation applicable
to the Group.

9 Auditor
At the Annual General Meeting 2020, Ernst & Young
AB (EY) was elected as new external auditor up to the end
of the Annual General Meeting 2021. Authorized public
accountant Hamish Mabon is the auditor in charge. Hamish
Mabon is born 1965 and holds other significant audit as-
signments for Skanska AB, Essity AB and SEB. He has been a
member of FAR, the institute for the accountancy profession
in Sweden, since 1992 and is a FAR Certified Financial Institu-
tion Auditor. He holds no shares in ASSA ABLOY AB.

EY 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 at-
tends the Audit Committee meetings as well as the February
board meeting, at which he reports his observations and
recommendations concerning the Group audit for the year.
The external audit is conducted in accordance with 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 appli-
cable 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 2019, Note 3.

CEO and Executive Team

7 Organization
The Executive Team consists of the CEO, the Heads of the
Group’s divisions, as well as the business units HID Global
and Global Solutions, the Head of the business segment
Residential within the Entrance Systems division, the Chief
Financial Officer and the Chief Human Resources Officer.
As of 1 January 2021, the Heads of the business units ASSA
ABLOY Opening Solutions Greater China and South East Asia
as well as ASSA ABLOY Opening Solutions Pacific and North
East Asia are also part of the Executive Team. For a presenta-
tion 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

maximum transparency, to facilitate financial and opera-
tional monitoring, and to promote the flow of information
and communication across the Group. The five divisions are
divided into around 50 business units. These consist in turn
of a large number of sales and production units, depending
on the structure of the business unit concerned. Apart from
monitoring by unit, monitoring of products and markets is
also carried out.

Policies and guidelines
Significant policies and guidelines in the Group include
financial control, communication issues, insider issues, the
Group’s brands, sustainability issues, business ethics, data
protection and export control. ASSA ABLOY’s financial policy
and accounting manual provide the framework for financial
control and monitoring. ASSA ABLOY’s communication
policy aims to ensure that information is provided at the
right time and in compliance with applicable rules and regu-
lations. ASSA ABLOY has adopted an insider policy to com-
plement applicable insider legislation. This policy applies
to individuals in managerial positions at ASSA ABLOY AB
(including subsidiaries) as well as certain other categories of
employees. Brand guidelines aim to protect and develop the
major assets that the Group’s brands represent.

ASSA ABLOY had adopted a Code of Conduct for em-
ployees and a separate ASSA ABLOY Code of Conduct for

ASSA ABLOY | ANNUAL REPORT 2020Internal control – financial reporting | Report of the Board of Directors

Internal control – financial reporting

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

Review process
The Board of Directors and the Audit Committee evaluate
and review the Annual Report and Interim Reports prior to
publication. The Audit Committee monitors the financial
reporting and other related issues, and regularly discusses
these issues with the external auditors. All business units
report their financial results monthly in accordance with the
Group’s accounting principles. This reporting serves as the
basis for quarterly reports and a monthly legal and operating
review. Operating reviews conform to a structure in which
sales, earnings, cash flow, capital employed and other im-
portant key figures and trends for the Group are compiled,
and form the basis for analysis and actions by management
and controllers at different levels.

Financial reviews take place quarterly at divisional board
meetings, monthly in the form of performance reviews and
through more informal analysis. Other important Group-
wide components of internal control are the annual busi-
ness planning process and regular forecasts.

The Group-wide internal control guidelines are reviewed
during the year through self-assessment regarding internal
control and continuous follow-up of internal audit reports.

ASSA ABLOY’s internal control process for financial report-
ing is designed to provide reasonable assurance of reliable
financial reporting, which is in compliance with generally
accepted accounting principles, applicable laws and regula-
tions, and other requirements for listed companies.

Control environment
The Board of Directors is responsible for effective internal
control and has therefore established fundamental docu-
ments of significance for financial reporting. These docu-
ments include the Board of Directors’ rules of procedure
and instructions to the CEO, the Code of Conduct, financial
policy, an annual financial evaluation plan etc. Regular meet-
ings are held with the Audit Committee. The Group has an
internal audit function whose primary objective is to ensure
reliable financial reporting and good internal control.
All units in the Group apply uniform accounting and
reporting instructions. Internal control guidelines have
been established and are reviewed annually through a
self-assessment regarding internal controls. These Group-
wide guidelines have a relatively broad scope and concern
business-critical processes.

A major focus has been on auditing the reconciliation
between various accounts and consolidated reporting in
recent years. The entire Group uses a financial reporting
system with pre-defined report templates.

Risk assessment
Risk assessment is built in to the processes in question and
a variety of methods are used to assess and limit risk, as
well as to ensure that risks are managed in compliance with
established policies and guidelines. A number of previously
established documents govern the procedures to be used
for accounting, finalizing accounts, financial reporting and
review. Risk assessment includes identifying and evaluating
the risk of material errors in accounting and financial report-
ing at Group, division and local levels. The specific material
risks that ASSA ABLOY has identified associated with finan-
cial reporting are errors in business-critical processes such
as sales, purchases, financial statements, inventories, facili-
ties management, taxes, legal issues, occupational injuries
and the risk of fraud, loss or embezzlement of assets.

Control activities
The Group’s controller and accounting organization at both
central and division levels plays a significant role in ensuring
reliable financial information. It is responsible for complete,
accurate and timely financial reporting.

A global financial internal audit function has been estab-
lished and carries out annual financial evaluations in accord-
ance with the plan annually adopted by the Audit Commit-
tee. The results of the financial evaluations are submitted to
the Audit Committee and the auditors.

Each division has employed full-time internal auditors
who audit the companies and monitor internal control.

ANNUAL REPORT 2020 | ASSA ABLOYConsolidated financial statements

Sales and income

• Net sales decreased by a total of 7 percent to SEK

87,649 M (94,029). Organic growth was –8 percent (3),
while growth from acquisitions and divestments
amounted to 4 percent (3).

• Operating income (EBIT) excluding items affecting

comparability decreased by 20 percent to SEK 11,916 M
(14,920), equivalent to an operating margin of 13.6
percent (15.9).

• Earnings per share after full dilution and excluding

items affecting comparability decreased by 18 percent
to SEK 7.54 (9.22).

Sales
The Group’s sales for 2020 amounted to SEK 87,649 M (94,029), cor-
responding to a change in sales of –7 percent (12). Organic growth
was –8 percent (3), while the net contribution from acquisitions and
divestments was 4 percent (3). The exchange rate impact on sales
was –3 percent (6).

Change in sales

Organic growth

Acquisitions and disposals

Exchange rate effects

Total

2019

2020

–8

–3

–7

Sales by product group
Mechanical locks, lock systems and fittings accounted for 24 percent
(25) of total sales. Electromechanical and electronic locks accounted
for 31 percent (31) of sales and entrance automation increased to 29
percent (27). Security doors and hardware accounted for 16 percent
(17) of sales.

Cost structure
Total wage costs, including social security expenses and pension
expenses, amounted to SEK 27,170 M (27,001), equivalent to 31 per-
cent (29) of sales. The average number of employees was 48,471
(48,992).

The Group’s material costs amounted to SEK 30,830 M (33,885),

equivalent to 35 percent (36) of sales and other purchasing costs
totaled SEK 15,087 M (15,345), equivalent to 17 percent (16) of sales.
Depreciation and amortization of non-current assets amounted to

SEK 3,776 M (3,387), equivalent to 4 percent (4) of sales.

Sales by product group, 2020

Mechanical locks, lock systems
and fittings, 24% (25)
Entrance automation, 29% (27)
Electromechanical and
electronic locks, 31% (31)
Security doors and hardware,
16% (17)

Operating income
Operating income (EBIT) for 2020 amounted to SEK 12,458 M
(14,608). Operating income (EBIT) excluding items affecting compa-
rability decreased by 20 percent to SEK 11,916 M (14,920) because of
weak global demand related to the Covid-19 pandemic. The negative
impact on earnings was offset in part by cost-saving measures and
staff cuts. The equivalent operating margin was 13.6 percent (15.9).

Items affecting comparability
The Group launched a new restructuring program in 2020 with a total
estimated cost before taxes of SEK 1,366 M (312), which was
expensed in its entirety in 2020. The restructuring program involves
the expected closure of ten plants and about thirty offices over a two-
year period. In conjunction with the acquisition of agta record, the
previous shareholding in the associate company was remeasured at
fair value through profit or loss. The operating income, which did not
affect cash flow, amounted to SEK 1,909 M, with no effect on taxes.

Income before tax
Income before tax totaled SEK 11,676 M (13,571). The exchange rate
effect before taxes amounted to SEK –510 M (627). Net financial
items totaled SEK –782 M (–1,037), mainly because of lower net inter-
est. The profit margin was 13.3 percent (14.8).

The Parent company’s operating income for 2020 totaled

SEK 868 M (1,523), impacted by lower intragroup operating income
compared with the previous year.

Tax on income
The Group’s tax expense totaled SEK 2,504 M (3,574), equivalent to
an effective tax rate excluding items affecting comparability of 24.8
percent (26.2). Remeasurement of shareholdings in associated com-
pany to fair value through profit or loss had no effect on taxes and
thereby reduced the effective tax rate by 4.2 percentage points. The
most recent restructuring program, launched in 2020, increased the
effective tax rate for 2020 with the equivalent of 0.8 percentage
points. The reported effective tax rate overall amounted to 21.4 per-
cent (26.3).

Earnings per share
Earnings per share before and after full dilution and excluding items
affecting comparability amounted to SEK 7.54 (9.22), a decrease of
18 percent.

Sales and operating income

Earnings per share before and after dilution

MSEK

15,000

12,000

9,000

6,000

3,000

Sales
Omsättning
Operating income1
Rörelseresultat1

1 Excluding items affecting

comparability.

SEK

Earnings per share before
and after dilution1

1 Excluding items affecting

comparability.

MSEK

100,000

80,000

60,000

40,000

20,000

ASSA ABLOY | ANNUAL REPORT 2020Consolidated income statement

Consolidated financial statements

Note

7–9, 25, 34

9, 11, 25

Note

SEK M

Sales

Cost of goods sold

Gross income

Selling expenses

Administrative expenses

Research and development costs

Other operating income and expenses

Share of earnings in associates

Operating income

Financial income

Financial expenses

Income before tax

Tax on income

Net income

Net income attributable to:

Parent company’s shareholders

Non-controlling 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 reclassified to profit or loss

Exchange rate difference

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

2019

94,029

–56,499

37,530

–14,768

–4,786

–3,566

147

14,608

–1,052

13,571

–3,574

9,997

9,993

9.00

9.22

2019

9,997

–362

–281

–

–5

–

1,556

–4

1,632

11,348

11,343

2020

87,649

–53,336

34,313

–14,743

–4,882

–3,902

1,415

257

12,458

–792

11,676

–2,504

9,172

9,171

8.26

7.54

2020

9,172

–319

–262

–70

–3

–318

–4,560

–4,935

3,975

ANNUAL REPORT 2020 | ASSA ABLOY

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) manu-
facture and sell mechanical and electromechanical locks,
security doors and hardware in their respective geograph-
ical 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 automa-
tion products and service.

EMEA
Sales totaled SEK 18,982 M (21,144), with organic growth of -8 per-
cent (2). Growth from acquisitions, divestments and internal seg-
ment transfers was 1 percent, net (0). Operating income excluding
items affecting comparability amounted to SEK 2,263 M (3,396), with
an operating margin (EBIT) of 11.9 percent (16.1). Return on capital
employed was 12.2 percent (18.4). Operating cash flow before non-
cash items and interest paid was SEK 2,939 M (3,515).

Demand was negatively affected by the Covid-19 pandemic, but a

recovery gradually took place during the year. Scandinavia and Ger-
many demonstrated a more stable trend, while demand in Southern
Europe and France was softer. Sales of electromechanical locks con-
tinued to increase their share of sales. Major investments in innova-
tion and new products have taken place at the same time, in parallel
with continued streamlining measures in the business.

Americas
Sales totaled SEK 19,013 M (23,172), with organic growth of –7 per-
cent (7). Growth from acquisitions, divestments and internal seg-
ment transfers was –9 percent, net (2). Operating income excluding
items affecting comparability amounted to SEK 3,698 M (4,673), with
an operating margin (EBIT) of 19.4 percent (20.2). Return on capital
employed was 21.6 percent (23.6). Operating cash flow before non-
cash items and interest paid was SEK 4,837 M (5,263).

Demand was negatively affected by the pandemic, but a recovery

gradually took place during the year, mainly in Latin America. New
product launches and relatively improved trend for electromechani-
cal products contributed to the recovery. Profitability was main-
tained at a good level thanks to cost-saving and streamlining meas-
ures, at the same time that cash flow continued to be strong.

Asia Pacific
Sales totaled SEK 8,841 M (10,689), with organic growth of –16 per-
cent (–1). Growth from acquisitions, divestments and internal seg-
ment transfers was -1 percent, net (5). Operating income excluding
items affecting comparability amounted to SEK 396 M (879), with an
operating margin (EBIT) of 4.5 percent (8.2). Return on capital
employed was 4.4 percent (10.3). Operating cash flow before non-
cash items and interest paid was SEK 762 M (622).

The pandemic caused a weak sales trend for Asia Pacific, primarily
for India, Southeast Asia and South Korea. Demand was more stable
in Pacific and gradually recovered in China. Implementation of a new
business strategy and organization in China contributed to a more
stable trend and improved profitability. The division’s operating mar-
gin excluding items affecting comparability declined, but the effect
was offset in part by continued streamlining initiatives and staff cuts.

Global Technologies
Sales totaled SEK 14,158 M (15,423), with organic growth of -15 per-
cent (5). Growth from acquisitions, divestments and internal seg-
ment transfers was 10 percent, net (16). Operating income excluding
items affecting comparability amounted to SEK 2,023 M (2,890), with
an operating margin (EBIT) of 14.3 percent (18.7). Return on capital
employed was 9.3 percent (14.0). Operating cash flow before non-
cash items and interest paid was SEK 2,509 M (3,183).

The division was negatively impacted by the pandemic in all busi-
ness units. Investments in R&D continued in during the year, at the
same time that several acquisitions strengthened the market position

in all areas. Implemented streamlining and cost-saving measures
effectively maintained profitability and cash flow at a high level.

Entrance Systems
Sales totaled SEK 28,323 M (25,553), with organic growth of –2 per-
cent (2). Growth from acquisitions, divestments and internal seg-
ment transfers was 15 percent, net (1). Operating income excluding
items affecting comparability amounted to SEK 4,083 M (3,652), with
an operating margin (EBIT) of 14.4 percent (14.3). Return on capital
employed was 14.8 percent (16.2). Operating cash flow before non-
cash items and interest paid was SEK 4,974 M (3,655).

Demand was relatively stable in the Residential and Industrial busi-

ness segments. Perimeter Security showed growth, while the Covid-
19 pandemic had a more negative impact on Pedestrian. Several
acquisitions were carried out during the year, including agta record.
The division’s operating margin was strengthened somewhat com-
pared with the previous year and cash flow was further improved.

Other
The costs of Group-wide functions, such as the Executive Team,
accounting and finance, supply management and Group-wide prod-
uct development, totaled SEK 547 M (570). Elimination of sales
between the Group’s segments is included in “Other”.

External sales, 2020

Operating income, 20201, 2

EMEA, 21% (22)
Americas, 22% (25)
Asia Pacific, 9% (10)
Global Technologies, 16% (16)
Entrance Systems, 32% (27)

EMEA, 18% (22)
Americas, 30% (30)
Asia Pacific, 3% (6)
Global Technologies, 16% (19)
Entrance Systems, 33% (23)

1 “Other” is not included in the calculation. See section Comments

by division for what is included in “Other”.

2 Excluding items affecting comparability.

Average number of employees, 2020

EMEA, 21% (24)
Americas, 18% (19)
Asia Pacific, 21% (23)
Global Technologies, 13% (11)
Entrance Systems, 27% (23)

ASSA ABLOY | ANNUAL REPORT 2020Reporting by division

Consolidated financial statements

SEK M

Sales, external

Sales, internal

Sales

Organic growth

Acquisitions and divestments

Exchange rate effects

Share of earnings in associates

Operating income (EBIT) excluding items
affecting comparability1
Operating margin (EBIT) excluding
items affecting comparability1
Restructuring costs

Revaluation of associate shareholding

Operating income (EBIT)

Operating margin (EBIT)

Net financial items

Tax on income

Net income

Capital employed

– of which goodwill

EMEA

Americas

Asia Pacific

Global
Technologies

Entrance Systems

Other

Total

2019

2020

2019

2020

20,707 18,563 23,082 18,907

438

418

107

2019

9,477

1,213

2020

2019

2020

2019

2020

2019

2020

2019

2020

7,916 15,321 14,054 25,442 28,210

–

– 94,029 87,649

926

102

105

110

113 –1 9532 –1,6682

–

21,144 18,982 23,172 19,013 10,689

8,841 15,423 14,158 25,553 28,323 –1,953 –1,668 94,029 87,649

–

–8%

–1%

–

–7%

–9%

–2%

–

–1%

–16%

–2%

16%

–15%

10%

–3%

124

–2%

15%

–2%

239

–

147

–8%

–3%

257

3,396

2,263

4,673

3,698

879

396

2,890

2,023

3,652

4,083

–570

–547 14,920 11,916

16.1%

–185

–

3,211

15.2%

11.9%

–448

–

1,815

9.6%

20.2%

19.4%

8.2%

–

–51

–

4,673

20.2%

3,647

19.2%

–6

–

873

8.2%

4.5%

–303

–

1.1%

18.7%

–4

–

2,885

18.7%

14.3%

–195

–

1,828

12.9%

14.3%

–116

–

3,535

13.8%

14.4%

–220

1,909

5,772

20.4%

–

15.9%

13.6%

–150

–312

–1,366

–

1,909

–570

–697 14,608 12,458

–

15.5%

–1,037

14.2%

–782

–3,574

–2,504

9,997

9,172

18,659 16,849 19,678 13,201

11,121 10,475 14,105 10,444

9,053

4,168

8,191 22,329 21,044 23,024 30,231

–539

–883 92,204 88,634

3,884 15,459 14,881 12,809 18,660

–

– 57,662 58,344

– of which other intangible assets and

property, plant and equipment

4,092

3,485

4,423

2,713

2,469

2,375

5,632

5,100

– of which right-of-use assets

990

998

499

387

– of which investments in associates

–

Return on capital employed excluding
items affecting comparability1
Operating income (EBIT)

Restructuring costs

Revaluation of associate shareholding

Depreciation and amortization

Net capital expenditure

Amortization of lease liabilities

Change in working capital

18.4%

3,211

185

–

813

–454

–295

12.2%

1815

448

–

925

–407

–318

476

23.6%

4,673

–

569

–348

–149

517

21.6%

3,647

–

471

–267

–132

1067

Operating cash flow by division

3,515

2,939

5,263

4,837

260

637

10.3%

873

–

381

–220

–100

–319

622

264

589

4.4%

303

–

355

–192

–108

311

762

Non-cash items

Interest paid and received

Operating cash flow

463

457

4,451

1,499

8,362

1,390

124

99 21,191 22,134

3,731

3,513

1,935

14.0%

2,885

–

793

–366

–129

–5

9.3%

1,828

195

–

917

–430

–144

144

16.2%

3,535

116

14.8%

5,772

220

–

–1,909

794

–276

–477

–38

1,078

–330

–559

702

3,183

2,509

3,655

4,974

–

2,595

637

17.0%

13.0%

–570

–697 14,608 12,458

–

–9

–61

–602

–324

–869

150

–

–47

–14

–94

312

1,366

–

–1,909

3,387

3,776

–1,662

–1,674

–1,159

–1,275

148

2,606

–673 15,635 15,349

–95

–694

–324

–869

–95

–694

14,442 14,560

Average number of employees

11,373 10,281

9,360

8,787 11,016

9,892

5,594

6,374 11,313 12,883

336

254 48,992 48,471

1 Items affecting comparability relate to restructuring costs as well as revaluation of previously owned associate shareholding.
2 Of which eliminations SEK –1,668 M (–1,953).

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

The different segments generate their revenue from the manufac-

ture and the sale of mechanical, electromechanical and electronic
locks, lock systems and fittings, and security doors and hardware.

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

For further information on sales, see Note 2.

ANNUAL REPORT 2020 | ASSA ABLOYConsolidated financial statements

Financial position

• Capital employed amounted to SEK 88,634 M (92,204).

• The return on capital employed excluding items affect-

ing comparability was 13.0 percent (17.0).

• The net debt/equity ratio was 0.51 (0.56).

SEK M

Capital employed

– of which goodwill

Net debt

Equity

– of which non-controlling interests

2019

92,204

57,662

33,050

59,154

2020

88,634

58,344

29,755

58,879

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 88,634 M (92,204). The return on
capital employed excluding items affecting comparability was 13.0
percent (17.0).

Intangible assets amounted to SEK 72,452 M (70,355). The

increase is mainly due to the effects of completed acquisitions. Dur-
ing the year, goodwill and other intangible assets with an indefinite
useful life have arisen to a preliminary value of SEK 8,325 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 8,026 M (8,498).
Capital expenditure on property, plant and equipment and intangible
assets, less sales of property, plant and equipment and intangible
assets, totaled SEK 1,674 M (1,662). Total depreciation and amortiza-
tion amounted to SEK 3,776 M (3,387).

Trade receivables amounted to SEK 13,665 M (15,701) and inven-
tories totaled SEK 10,079 M (11,276) on the reporting date. The aver-
age collection period for trade receivables was 55 days (52). Material
throughput time was 94 days (90). The Group is making systematic
efforts to increase capital efficiency.

Net debt
Net debt amounted to SEK 29,755 M (33,050), of which pension
commitments and other post-employment benefits accounted for
SEK 3,514 M (3,346).

Net debt decreased during the year because of the strong operat-

ing cash flow in combination with exchange rate effects.

External financing
The Group’s long-term loan financing mainly consists of a GMTN Pro-
gram of SEK 16,189 M (17,886), of which SEK 15,047 M (15,814) is
long-term, Private Placement Program in the US totaling USD 225 M,
of which USD 225M (225) is long-term, and loans from financial insti-
tutions such as the European Investment Bank (EIB) of EUR 18 M (37)
and USD 366 M (120), and loans from the Nordic Investment Bank of
EUR 190 M (55). During the year, three new issues were made under
the GMTN program for a total amount of SEK 1,570 M. Other changes
in long-term loans are mainly due to some of the originally long-term
loans now having less than 1 year to maturity. The size of the loans
decreased because of currency fluctuations, in particular regarding
the USD. A total of SEK 5,806 M was raised in new long-term loans,
while SEK 3,252 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, however, the out-
standing balance under the Commercial Paper programs was SEK 0 M
(0). In addition, substantial credit facilities are available, mainly in the
form of a Multi-Currency Revolving Credit Facility of EUR 1,200 M
(1,200).

The interest coverage ratio, defined as income before tax exclud-

ing items affecting comparability plus net interest, divided by net
interest, was 16.0 (15.2). Fixed interest terms decreased somewhat
during the year, with an average term of 32 months (34) at year-end.

Cash and cash equivalents amounted to SEK 2,756 M (442) and are

invested in banks with high credit ratings.

Some of the Group’s main financing agreements contain a cus-
tomary 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 totaled SEK 58,879 M (59,154) at year-end. The
return on equity was 15.5 percent (18.0). The equity ratio was 50.1
percent (50.1). The debt/equity ratio, defined as net debt divided by
equity, was 0.51 (0.56).

Net debt

Capital employed and return on capital employed

Net debt
Net debt/equity ratio

MSEK

40,000

30,000

20,000

10,000

0.8

0.6

0.4

0.2

0.0

MSEK

100,000

80,000

60,000

40,000

20,000

Capital employed
Return on capital
employed1

1 Excluding items affecting

comparability.

ASSA ABLOY | ANNUAL REPORT 2020Consolidated balance sheet

Consolidated financial statements

SEK M

ASSETS

Non-current assets

Intangible assets

Property, plant and equipment

Right-of-use assets

Investments in associates

Other financial assets

Deferred tax assets

Total non-current assets

Current assets

Inventories

Trade receivables

Current tax receivables

Other current receivables

Prepaid expenses and accrued income

Derivative financial instruments

Short-term investments

Cash and cash equivalents

Total current assets

TOTAL ASSETS

EQUITY AND LIABILITIES

Equity

Parent company’s shareholders

Share capital

Other contributed capital

Reserves

Retained earnings

Equity attributable to the Parent company’s shareholders

Non-controlling interests

Total equity

Non-current liabilities

Long-term loans

Non-current lease liabilities

Deferred tax liabilities

Pension provisions

Other non-current provisions

Other non-current liabilities

Total non-current liabilities

Current liabilities

Short-term loans

Current lease liabilities

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

2019

2020

70,355

8,498

3,731

2,595

104

1,205

86,487

11,276

15,701

704

1,510

1,673

202

442

31,563

118,050

371

9,675

6,728

42,369

59,143

59,154

72,452

8,026

3,513

637

212

1,338

86,178

10,079

13,665

1,060

1,542

1,675

426

2,756

31,250

117,428

371

9,675

1,794

47,030

58,870

58,879

21,100

22,381

2,588

2,368

3,346

722

1,002

2,477

2,868

3,514

616

828

31,127

32,683

5,460

1,151

150

7,908

1,536

630

3,765

7,170

3,514

1,085

172

7,027

1,341

1,159

3,880

7,687

27,769

118,050

25,865

117,428

ANNUAL REPORT 2020 | ASSA ABLOY

Consolidated financial statements

Cash flow

• Operating cash flow remained strong and amounted to

SEK 14,560 M (14,442).

Relationship between cash flow from operating activities and
operating cash flow

• Cash flow from acquisitions and divestments of subsidi-

aries totaled SEK –5,068 M (–3,819).

Operating cash flow

SEK M

Operating income (EBIT)

Restructuring costs

Revaluation of previously owned shares in associates

Depreciation and amortization

Net capital expenditure

Change in working capital

Amortization of lease liabilities

Interest paid and received

Non-cash items

Operating cash flow

Operating cash flow/Income before tax

1 Excluding items affecting comparability.

2019

14,608

312

–

3,387

–1,662

148

–1,159

–869

–324

14,442

1,041

2020

12,458

1,366

–1,909

3,776

–1,674

2,606

–1,275

–694

–95

14,560

1,311

SEK M

Cash flow from operating activities

Restructuring payments

Net capital expenditure

Amortization of lease liabilities

Reversal of tax paid

Operating cash flow

2019

12,665

726

–1,662

–1,159

3,872

2020

13,658

747

–1,674

–1,275

3,104

14,442

14,560

Investments in subsidiaries
Cash flow from investments in subsidiaries totaled SEK–6,238 M
(–3,903), while divestments of subsidiaries generated a positive cash
flow of SEK 1,170 M (84). The cash flow effect from acquisitions and
divestments was therefore SEK -5,068 M (–3,819). Acquired cash and
cash equivalents totaled SEK 2,239 M (120).

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

The Group’s operating cash flow amounted to SEK 14,560 M
(14,442), equivalent to 131 percent (104) of income before tax
excluding items affecting comparability.

Net capital expenditure
Net capital expenditure on intangible assets and property, plant and
equipment totaled SEK 1,674 M (1,662), equivalent to 68 percent
(76) of depreciation and amortization on intangible assets and prop-
erty, plant and equipment.

SEK M

Net debt at 1 January

Effects of the transition to IFRS 16

Operating cash flow

Restructuring payments

Tax paid on income

Acquisitions and divestments

Dividend

Actuarial gain/loss on post-employment benefit
obligations

Change in lease liabilities

Exchange rate differences, etc.

Net debt at 31 December

Change in working capital

SEK M

Inventories

Trade receivables

Trade payables

Other working capital

Change in working capital

2019

572

–229

–443

248

148

2020

687

1,331

–370

958

2,606

The material throughput time was 94 days (90) at year-end. Capital
tied up in working capital decreased during the year, which had an
impact on cash flow of SEK 2,606 M (148) overall.

2019

29,246

3,711

2020

33,050

–

–14,442

–14,560

726

3,872

4,764

3,888

362

–242

1,165

33,050

747

3,104

5,504

4,277

319

–106

–2,580

29,755

Income before tax and operating cash flow

Capital expenditure

MSEK

15,000

12,000

9,000

6,000

3,000

Income before tax1
Operating cash flow

1 Excluding items affecting

comparability.

MSEK

4,000

3,000

2,000

1,000

Net capital expenditure
Depreciation and amorti-
zation
Net capital expenditure %
of sales

ASSA ABLOY | ANNUAL REPORT 2020Consolidated statement of cash flows

Consolidated financial statements

SEK M

OPERATING ACTIVITIES

Operating income

Depreciation and amortization

Revaluation of previously owned associate shareholding

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

Divestments of subsidiaries

Divestments of associates

Other investments and divestments

Cash flow from investing activities

FINANCING ACTIVITES

Dividend

Long-term loans raised

Long-term loans repaid

Amortization of lease liabilities

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 in cash and cash equivalents

Cash and cash equivalents at 31 December

Note

2019

2020

14, 15

14,608

3,387

–

312

–726

–324

17,257

–885

–3,872

12,516

148

12,665

–1,842

181

–3,903

12,458

3,776

–1,909

1,366

–747

–95

14,850

–699

–3,104

11,052

2,606

13,658

–1,806

133

–6,238

1,170

–

–5,464

–6,741

–3,888

4,615

–2,903

–1,159

–19

–21

–3,926

–7,301

–100

538

–100

442

–4,277

5,806

–3,252

–1,275

–16

–22

–1,522

–4,558

2,359

442

2,359

–45

2,756

ANNUAL REPORT 2020 | ASSA ABLOY

Consolidated financial statements

Changes in consolidated equity

SEK M

Opening balance 1 January 2019 according to
adopted Annual Report

Changed accounting principle

New opening balance 1 January 2019

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 2019

Parent company’s shareholders

Other
contributed

capital Reserves

Retained
earnings

Non-
controlling
interests

Share
capital

371

9,675

5,096

9,675

5,096

1,631

36,748

–234

36,514

9,993

–281

9,713

–3,888

–3,861

–3,856

42,369

371

9,675

6,728

Opening balance 1 January 2020

371

9,675

6,728

42,369

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 2020

–4,934

371

9,675

1,794

9,171

–262

8,909

–4,276

–4,249

–4,248

47,030

Total

51,900

–234

51,666

9,997

1,351

11,348

–3,888

–3,861

–3,860

59,154

9,172

–5,197

3,975

–4,277

–4,249

58,879

–

–4

–1

–

–1

–2

Equity per share after dilution and return on equity after tax

Dividend and earnings per share

Equity per share
after dilution, SEK
Return on equity
after tax, %

SEK

Dividend per share
Earnings per share
after dilution1

1 Excluding items affecting
comparability.

ASSA ABLOY | ANNUAL REPORT 2020Parent 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

Note

3, 6, 8, 9

6, 8, 9

9, 34

9, 11

2019

–2,188

–1,480

5,172

1,523

4,910

–1,471

4,962

851

–233

–446

5,134

2020

–2,279

–1,441

4,580

868

5,197

–703

5,363

663

–214

–259

5,552

Statement of comprehensive income
– Parent company

SEK M

Net income

Other comprehensive income

Total comprehensive income

2019

5,134

–

5,134

2020

5,552

–

5,552

ANNUAL REPORT 2020 | ASSA ABLOY

Parent company financial statements

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

Total non-current liabilities

Current liabilities

Short-term loans

Trade payables

Current liabilities to subsidiaries

Other current liabilities

Accrued expenses and deferred income

Total current liabilities

TOTAL EQUITY AND LIABILITIES

Note

2019

2020

3,108

34,541

1,774

39,443

2,498

35,821

592

38,961

19,475

20,534

224

19,722

59,165

371

275

8,905

219

787

14,326

24,883

911

16,877

1,696

190

14,098

502

16,494

59,165

514

21,069

60,030

371

275

8,905

184

787

15,664

26,186

1,125

15,677

1,594

154

14,862

425

17,042

60,030

ASSA ABLOY | ANNUAL REPORT 2020

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 property, plant and equipment and intangible assets

Investments in subsidiaries

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

2019

2020

1,523

643

2,166

–278

4,623

–701

5,810

1,724

7,534

–740

–728

–1,468

–3,888

4,615

–6,793

–6,066

868

745

1,613

–258

3,704

–505

4,553

801

5,355

–164

–1,472

–1,636

–4,276

3,058

–2,500

–3,718

Change in equity – Parent company

SEK M

Restricted equity

Non-restricted equity

Share
capital

Reval-
uation
reserve

Statutory
reserve

Fund for
development
expenses

Share
premium
reserve

Retained
earnings

Total

Opening balance 1 January 2019

371

275

8,905

219

787

13,053

23,610

Net income

Total comprehensive income

Dividend

Stock purchase plans

Total transactions with shareholders

Closing balance 31 December 2019

Opening balance 1 January 2020

Net income

Total comprehensive income

Dividend

Stock purchase plans

Reclassifications

Total transactions with shareholders

Closing balance 31 December 2020

371

275

8,905

–35

184

371

275

8,905

219

787

5,134

–3,888

–3,861

14,326

–3,861

24,883

14,326

24,883

5,552

–4,276

787

–4,213

15,664

–4,249

26,186

ANNUAL REPORT 2020 | ASSA ABLOYNotes

Notes

NOTE 1 Significant accounting and valuation principles

Group
ASSA ABLOY applies International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU), the Swedish Annual Accounts Act and the Swedish Financial
Reporting Board’s RFR 1 Supplementary Accounting Rules for Corporate Groups. The
accounting principles are based on IFRS as endorsed by 31 December 2020 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 41–98.

Basis of preparation
ASSA ABLOY’s consolidated financial statements have been prepared in accordance
with IFRS as endorsed by the EU. The consolidated financial statements have been pre-
pared 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 state-
ment and balance sheet as well as the supplementary information provided in the finan-
cial statements. Consequently, changes in estimates and assessments may lead to
changes in the financial statements.

Estimates and assessments play an important part in the measurement of items such
as identifiable assets and liabilities in acquisitions, in impairment testing of goodwill and
other assets, as well as in determining actuarial assumptions for calculating employee
benefits. Estimates and assessments also affect valuation of deferred taxes, other provi-
sions and deferred considerations, as well as valuation of right-of-use assets and lease
liabilities where the Group, when estimating the term of a lease, assesses the likelihood
that any extension options will be exercised. Estimates and assessments are continually
evaluated and are based on both historical experience and reasonable expectations
about the future.

The Group considers that estimates and assessments relating to impairment testing
of goodwill and other intangible 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
determined 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 mate-
rial adjustments in carrying amounts during the next financial year. Material assump-
tions and the effects of reasonable changes in them are described in Note 14.

The actuarial assumptions made when calculating post-employment employee ben-
efits also have material importance for the consolidated financial statements. For infor-
mation on these actuarial assumptions, see Note 25.

New and revised standards applied by the Group
No new or amended standards with material impact on the Group’s financial reports
were applied for the first time in 2020.

New and revised IFRS not yet effective
No new standards or interpretations that have been published but have not come into force
as of the closing date are expected to have a material impact on future financial reports.

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.
Companies acquired during the year are included in the consolidated financial state-
ments 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 prepared 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 deter-
mines on an individual basis for each acquisition whether a non-controlling 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, negative goodwill,
is recognized as revenue immediately after determination.

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

Intra-Group transactions and balance sheet items, and unrealized profits on transac-

tions between Group companies are eliminated in the consolidated financial state-
ments.

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
interests. Non-controlling interests’ share in subsidiaries’ equity is recognized sepa-
rately in consolidated equity. Transactions with non-controlling interests are recog-
nized as transactions with the Group’s shareholders in equity.

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

Investments in associates are accounted for in accordance with the equity method.
In the consolidated balance sheet, shareholdings in associates are recognized at cost,
and the carrying amount is adjusted for the share of associates’ earnings after the acqui-
sition 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 consoli-
dated income statement in operating income as the holdings are related to business
operations.

Segment reporting
Operating segments are reported in accordance with internal reporting to the chief
operating decision maker. Chief operating decision maker is the function that is respon-
sible for allocation of resources and assessing performance of the operating segments.
The divisions form the operational structure for internal control and reporting and also
constitute the Group’s segments for external financial reporting. The Group’s business
is divided into five divisions. Three divisions are based on products sold in local markets
in the respective division: EMEA, Americas and Asia Pacific. Global Technologies and
Entrance Systems consist of products sold worldwide.

Foreign currency translation
Functional currency corresponds to local currency in each country where Group com-
panies operate. Transactions in foreign currencies are translated to functional currency
by application of the exchange rates prevailing on the transaction 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 transac-
tions relating to qualifying cash flow hedges, which are recognized in other comprehen-
sive income. Receivables and liabilities are measured at the year-end rate.

In translating the accounts of foreign subsidiaries prepared in functional currencies

other than the Group’s presentation currency, all balance sheet items except net
income are translated at the year-end rate and net income is translated at the average
rate. The income statement is translated at the average rate for the period. Exchange dif-
ferences arising from the translation of foreign subsidiaries are recognized 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

2019

2020

2019

2020

Average rate

Closing rate

United Arab Emirates

Argentina

Australia

Brazil

Canada

Switzerland

Chile

China

Czech Republic

Denmark

Euro zone

United Kingdom

Hong Kong

Hungary

Israel

AED

ARS

AUD

BRL

CAD

CHF

CLP

CNY

CZK

DKK

EUR

GBP

HKD

HUF

ILS

2.57

0.20

6.56

2.39

7.10

9.50

2.50

0.13

6.35

1.81

6.84

9.78

2.54

0.16

6.51

2.30

7.13

9.58

2.23

0.10

6.27

1.57

6.40

9.27

0,013

0,012

1.37

0.41

1.42

10.57

12.02

1.20

0,032

2.64

1.33

0.40

1.41

10.49

11.82

1.18

0,030

2.67

1.33

0.41

1.40

10.44

12.23

1.20

0,032

2.69

1.25

0.38

1.35

10.05

11.08

1.06

0,028

2.55

ASSA ABLOY | ANNUAL REPORT 2020Note 1 continued

Country

India

Kenya

South Korea

Mexico

Malaysia

Norway

New Zealand

Poland

Romania

Thailand

Turkey

South Africa

Currency

INR

KES

KRW

MXN

MYR

NOK

NZD

PLN

RON

THB

TRY

USD

ZAR

Average rate

Closing rate

2019

0,134

0,092

0.0081

0.4872

2.27

1.07

6.22

2.46

2.23

0.30

1.67

9.43

0.65

2020

0,124

0,087

0.0078

0.4317

2.19

0.98

5.99

2.36

2.17

0.29

1.33

9.18

0.57

2019

0,131

0,092

0.0081

0.4954

2.27

1.06

6.26

2.45

2.18

0.31

1.57

9.32

0.67

2020

0,112

0,075

0.0075

0.4124

2.03

0.95

5.88

2.21

2.06

0.27

1.12

8.19

0.56

Revenue
The Group recognizes revenue from contracts with customers based on the five-step
model described in IFRS 15. Revenue is recognized when the entity satisfies a perfor-
mance 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.

Under the five-step model an entity must complete the following steps before reve-
nue can be recognized: Identify contracts with customers, identify performance obliga-
tions, determine the transaction price, allocate the transaction price to each of the sep-
arate performance obligations, and finally recognize the revenue attributable to each
performance 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 ser-
vice to the customer. A promised good or service is distinct if both of the following crite-
ria are met:
a) the customer can benefit from the good or service separately 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 prom-
ised 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 consideration 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 customers 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 performance 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 customer. 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 performance 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 particular 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 com-
pleted 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.

Notes

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.
Payment terms for trade receivables differ among geographic markets. The average col-
lection period for trade receivables in 2020 was 55 days.

Intra-Group sales
Transactions between Group companies are carried out at arm’s length and thus at mar-
ket 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 assurance 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 bene-
fits for the Group and provided such benefits can be reliably measured.

Capitalized development expenditure is amortized over the expected useful life.
Such intangible assets, which are not yet in use, are tested annually for impairment.
Expenditure on the further development of existing products is expensed as incurred.

Borrowing costs
Borrowing costs are interest expenses and other expenses directly related to borrowing.
Borrowing costs directly attributable to the acquisition, construction or production of a
qualifying asset (an asset that necessarily takes a substantial period of time to get ready
for its intended use or sale) are included in the cost of the asset. Other borrowing costs
are recognized as an expense in the period in which they are incurred.

Tax on income
The income statement includes all tax that is to be paid or received for the current year,
adjustments relating to tax due for previous years, and changes in deferred tax. These
taxes have been calculated at nominal amounts, in accordance with the tax regulations
in each country, and in accordance with tax rates that have either been decided or have
been notified and can confidently be expected to be confirmed. For items recognized in
the income statement, associated tax effects are also recognized in the income state-
ment. The tax effects of items recognized directly against equity or in other comprehen-
sive 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 tax is recognized on all temporary differences between the carrying amounts
of assets and liabilities and their respective tax bases. Deferred tax assets relating to tax
losses carried forward or other future tax allowances are recognized to the extent that it
is probable that the allowance can be offset against taxable income in future taxation.
Deferred tax liabilities for temporary differences relating to investments in subsidiaries
are not recognized in the consolidated financial statements, since the Parent company
can control the time at which the temporary differences are reversed, and it is not con-
sidered likely that such reversal will occur in the foreseeable future. Deferred tax assets
and deferred tax liabilities are offset when there is a legal right to do so and when
deferred taxes relate to the same tax authority.

The Group applies IFRIC 23 from 1 January 2019 and measures each uncertain tax

position using either the most likely amount or the expected value, based on the
method expected to reflect the outcome in the best way. Assessments are reconsidered
when there is new information that affects earlier judgments.

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

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

Goodwill and acquisition-related intangible assets
Goodwill represents the positive difference between the acquisition cost and the fair
value of the Group’s share of the acquired company’s identifiable net assets at the

ANNUAL REPORT 2020 | ASSA ABLOYNotes

Note 1 continued

acquisition date, and is recognized at cost less accumulated impairment losses. Good-
will is allocated to cash generating units and is tested annually to identify any impair-
ment loss. Cash generating units are subject to systematic annual impairment 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 corre-
sponding reduction of the goodwill value). Such deferred tax assets are expensed as the
tax deduction is utilized. Other acquisition-related intangible assets consist chiefly of
various types of intellectual property rights, such as brands, technology and customer
relationships. Identifiable acquisition-related intellectual property rights are initially
recognized at fair value at the acquisition date and subsequently at cost less accumu-
lated amortization and impairment losses. Amortization is on a straight-line basis over
the estimated useful life and amounts to 5–12 years for technology 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 recognized 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 estimated useful life, usually between three and five years. The carry-
ing 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 probable that economic benefits
associated with the asset will flow to the Group, and if the cost can be reliably measured.
Expenditure on repairs and maintenance is expensed as incurred. Depreciable amount
is the cost of an asset less its estimated residual value. Land is not depreciated. For other
assets, cost is depreciated over the estimated useful life, which for the Group results in
the following average depreciation periods:
• Buildings 25–50 years
• Land improvements 10–25 years.
• Machinery 7–10 years
• Equipment 3–6 years

The residual value and useful life of assets are reviewed at each reporting date and
adjusted when necessary. Gain or loss on the disposal of property, plant and equipment
is 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.

Leases
Within the Group there are a large number of current leases, mostly relating to offices,
premises and vehicles. From 1 January 2019 the Group applies IFRS 16 Leases and recog-
nizes a right-of-use asset and a lease liability corresponding to the present value of
future lease payments in the balance sheet on the day the leased asset is made available
for use. In calculating the present value, the Group’s incremental borrowing rate by cur-
rency is used. When measuring right-of-use and lease liability, the Group made esti-
mates and assumptions such as whether any options to extend or terminate a lease
agreement will be exercised.

The right-of-use asset is depreciated on a straight-line basis over the lease term, or

over the period of use of the underlying asset if the lease transfers ownership of the
underlying asset to the Group by the end of the lease term. Depreciation is recognized
as an expense in profit or loss, while interest expense attributable to the lease liability is
recognized in net financial items.

In the statement of cash flows the lease payments are split between interest paid in
cash flow from operating activities and amortization of lease liabilities in financing activ-
ities. In operating cash flow, the Group has chosen to include amortization of lease lia-
bilities as an operating component from 1 January 2019. The Group’s operating cash
flow is therefore comparable with periods prior to 2019.

The Group has chosen not to recognize any right-of-use or lease liability regarding
obligations for short-term leases and low-value leases. Lease payments relating to such
leases are reported as operating expenses over the lease term.

For periods before 2019 the Group recognizes leases in accordance with IAS 17
which means that lease payments are expensed on a straight-line basis over the term of
the lease and are recognized as operating expenses.

Impairment
Assets with an indefinite useful life are not amortized but are tested for impairment on
an annual basis. For impairment testing purposes, assets are grouped at the lowest
organizational level where there are separate identifiable cash flows, so-called cash gen-
erating 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 invest-
ments, derivatives and other financial assets.

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
business model whose objective is to hold financial assets to collect 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
contractual 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 prin-
cipal 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 com-
prehensive income. As of the reporting date the Group has no financial assets in this cat-
egory.

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 recognized in this category are
expensed directly in the income statement. As of the reporting date, this category com-
prises shares and participations.

Impairment of financial assets
The Group applies the IFRS 9 simplified approach to measuring expected credit losses
for trade receivables. Under this approach, a provision is made for lifetime expected
credit losses for the trade receivable. For calculation 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. Recognition depends on how the liability is classified. The
Group classifies financial liabilities in the categories: financial liabilities 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, finan-
cial liabilities are recognized either at amortized cost or at fair value through profit or
loss, depending on the classification of the financial liability.

ASSA ABLOY | ANNUAL REPORT 2020Notes

Note 1 continued

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 considerations. Liabilities are measured at fair value on a con-
tinuous basis and changes in value are recognized in the income statement.

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

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

Recognition and measurement of financial assets and liabilities
Acquisitions and sales of financial assets are recognized on the trade date, the date on
which the Group commits to purchase or sell the asset. Transaction costs are initially
included in fair value for all financial instruments, except for those recognized at fair
value through profit or loss where the transaction 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 tech-
niques 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 benefits associated with the asset to the other party. A finan-
cial liability is derecognized from the balance sheet when the obligation is fulfilled, can-
celled or expires, see above.

Financial assets and liabilities are offset against each other and the net amount is rec-

ognized in the balance sheet when there is a legal right of set-off and there is an inten-
tion to settle the items by a net amount. See note 35 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
recognizing 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
designated as hedging instruments, changes in value are recognized on a continuous
basis through profit or loss under financial items, either as income or expense.

The Group designates derivatives as follows:

i) Fair value hedge: a hedge of the fair value of an identified liability;
ii) Cash flow hedge: a hedge of a certain risk associated with a forecast cash flow for a

certain transaction; or

iii) Net investment hedge: a hedge of a net investment in a foreign subsidiary.

When entering into the hedge transaction, the Group documents the relationship
between the hedging 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 offsetting changes in fair value attributable to the hedged items.

The fair value of forward exchange contracts is calculated at net present value based

on prevailing forward rates on the reporting date, while interest rate swaps are meas-
ured by estimating future discounted cash flows.

For information on the fair value of derivative instruments, see Note 35, ‘Financial risk

management and financial instruments’. Derivatives at fair value, with a maturity of
more than 12 months, are classified as non-current interest-bearing liabilities or receiv-
ables. Other derivatives are classified as current interest-bearing liabilities and invest-
ments 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 recognized on a continuous basis in other comprehensive
income for the part relating to the effective portion of the hedges. Gain or loss arising

from ineffective portions of derivatives is recognized directly in the income statement
under financial items. When a hedging instrument expires, is sold or no longer qualifies
for hedge accounting, and accumulated gains or losses relating to the hedge are recog-
nized in equity, these gains/losses remain in equity and are taken to income, while the
forecast transaction is finally recognized 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 state-
ment. When a forecast transaction is no longer expected to occur, the gain or loss recog-
nized in Other comprehensive income is recognized directly under financial items.

Net investment hedges
For derivatives that are designated and qualify as net investment hedges, the portion of
value changes in fair value designated as effective is recognized in other comprehensive
income. The ineffective portion of the gain or loss is recognized 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 constructive obligation result-
ing from a past event and it is probable that an outflow of resources will be required to
settle the obligation, and that a reliable estimate of the amount can be made. Provisions
are recognized at a value equivalent to the outflow of resources that will probably be
required to settle the obligation. The amount of a provision is discounted to present
value where the effect of time value is considered material.

Assets and liabilities of disposal group classified as held for sale
Assets and liabilities are classified as held for sale when their carrying amounts will prin-
cipally 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.
As of the reporting date the Group had no assets or liabilities classified as held for sale.

Remuneration of employees
The Group operates both defined contribution and defined benefit pension plans. Com-
prehensive defined benefit plans are found chiefly in the US, the UK and Germany.
Post-employment medical benefits are also provided, mainly in the US, and are reported
in the same way as defined 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 inflation and salary increases.
Obligations are valued on the reporting date at their discounted value. For funded plans,
obligations are reduced by the fair value of the plan assets. Actuarial gains and losses
resulting from experience-based adjustments and changes in actuarial assumptions are
recognized in other comprehensive income during the period they arise. The pension
expense for defined benefit plans is spread over the employee’s service period. The
Group’s payments relating to defined contribution pension plans are recognized as an
expense in the period to which they relate, based on the services performed by the
employee. Swedish Group companies calculate tax on pension costs based on the dif-
ference 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 Annual General Meeting 2010.
Detailed information about the structure of the various programs can be found in Note
34 Employees. For the long-term incentive program, personnel costs during the vesting
period are recognized based on the shares’ fair value on the allotment date, that is,
when the company and the employees entered into an agreement on the terms and
conditions for the program. The long-term incentive program through 2017 comprised
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 pro-
gram and that the latter remains employed in the ASSA ABLOY Group. Beginning in
2018, no matching portion 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 dividend 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 personnel costs are immediately recognized in the income
statement. Personnel costs for shares relating to the performance-based program are
calculated on each accounting date based on an assessment of the probability of the
performance targets being achieved. The costs are calculated based on the number of
shares that ASSA ABLOY expects to need to settle at the end of the vesting period. When
allocating shares, social security contributions must be paid in some countries to the

ANNUAL REPORT 2020 | ASSA ABLOYNotes

Note 1 continued

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

Leases
The Parent company recognizes all lease agreements in accordance with RFR2 and has
chosen to recognize all leases 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. Impairment 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 recognized in accordance with IAS
12 in the income statement.

Contingent liabilities
The Parent company has guarantees on behalf of its subsidiaries. Such an obligation is
classified as a financial guarantee in accordance with IFRS. For these guarantees, the Par-
ent company applies the alternative rule in RFR 2, reporting these guarantees as a con-
tingent liability.

equivalent to the personnel cost is recognized against retained earnings in equity. In the
income statement, the personnel cost is allocated to the respective function.

Earnings per share
Earnings per share before dilution is calculated by dividing the net income attributable
to the Parent company’s shareholders 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 recog-
nized if their conversion to ordinary shares would lead to a reduction in earnings per
share after dilution.

Dividend
Dividend is recognized as a liability after the General Meeting has approved the divi-
dend.

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 franchise and royalty revenues. The significant balance sheet items consist of
shares in subsidiaries, intra-Group receivables and liabilities, and external borrowing.
The Parent company has prepared its annual accounts in accordance with the Swedish
Annual Accounts Act (1995:1554) and the Swedish Financial Reporting Board’s RFR 2
Accounting for Legal Entities. RFR 2 requires the Parent company, in its annual accounts,
to apply all the International Financial Reporting Standards (IFRS) adopted by the EU in
so far as this is possible within the framework of the Annual Accounts Act and with
regard to the relationship between accounting and taxation. The recommendation
states which exceptions from and additions to IFRS should be made.

Revenue
The Parent company’s revenue consists of intra-Group 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.

Research and development costs
Research and development costs are expensed as incurred, with the exception of large
product development projects, which have been capitalized.

Intangible assets
Intangible assets comprise patented technology and other intangible assets. They are
amortized over 5–10 years.

Property, plant and equipment
Property, plant and equipment owned by the Parent company 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 entails 5–10 years for
equipment and 3–5 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. However, 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 1 and are covered by taking out insurance with an insurance company.

ASSA ABLOY | ANNUAL REPORT 2020Sales by product group

SEK M

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

SEK M

Sweden

China

France

United Kingdom

Germany

Australia

Canada

Netherlands

Finland

Norway

Belgium

Denmark

Mexico

South Korea

Switzerland

Spain

Poland

Italy

Brazil

New Zealand

Austria

Ireland

South Africa

Czech Republic

India

Notes

NOTE 2 Sales

Disaggregation of revenue from contracts with customers

EMEA

Americas

Asia Pacific

Global Technologies

Entrance Systems

Other

Group

2019

10,232

6,727

3,678

508

2020

9,012

6,335

3,131

504

2019

8,734

5,339

8,985

114

2020

7,892

4,860

6,224

2019

5,035

2,492

3,143

2020

4,357

2019

186

2020

291

1,916

15,089

13,844

747

2019

–710

738

–1,018

2019

2020

2,497

147

–

2,364

24,798

25,214

–104

–121

2020

–638

–800

–101

–129

2019

2020

23,486

20,921

29,376

26,892

15,849

14,139

25,318

25,697

21,144

18,982

23,172

19,013

10,689

8,841

15,423

14,158

25,553

28,323

–1,953

–1,668

94,029

87,649

EMEA

Americas

Asia Pacific

Global Technologies

Entrance Systems

Other

Group

2019

2020

2019

2020

18,435

16,881

593

102

827

1,053

134

426

21,358

17,354

665

835

111

1,629

1,436

110

109

2019

552

1,082

6,633

2,355

2020

506

797

5,155

2,326

2019

3,863

7,657

562

410

2020

2019

2020

3,759

11,937

12,126

6,795

11,650

14,160

424

386

2,471

2,070

1,333

1,126

459

724

495

794

2019

–733

–850

–37

–24

–177

–132

2020

–751

–593

–41

–23

–146

–113

2019

2020

34,097

32,584

41,490

38,939

2,392

1,308

11,422

3,319

1,986

1,139

9,149

3,852

21,144

18,982

23,172

19,013

10,689

8,841

15,423

14,158

25,553

28,323

–1,953

–1,668

94,029

87,649

Group

2019

2020

SEK M

36,972

34,659

Saudi Arabia

United Arab Emirates

Chile

Japan

Hong Kong

Israel

Singapore

Hungary

Estonia

Portugal

Turkey

Romania

Thailand

Colombia

Russia

Malta

Philippines

Kenya

Indonesia

Malaysia

Guatemala

Croatia

Slovakia

4,739

4,919

4,087

4,135

3,678

2,625

2,882

2,279

2,045

1,776

1,597

1,450

1,636

1,616

971

1,294

1,056

986

1,018

672

673

530

612

494

711

4,767

4,077

4,046

3,843

3,616

3,124

2,885

2,179

1,999

1,541

1,424

1,400

1,395

1,355

1,064

1,052

974

811

788

695

663

483

480

440

418

Group

2019

2020

457

553

357

294

374

300

387

231

191

240

230

196

278

262

219

315

163

217

117

134

155

414

399

355

303

281

268

263

243

229

224

221

199

198

171

169

164

159

142

141

134

125

119

Other countries

Total

2,556

2,424

94,029

87,649

ANNUAL REPORT 2020 | ASSA ABLOYNotes

Note 2 continued

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

Contract assets

SEK M

Accrued revenue

Total

Contract liabilities

SEK M

Non-current advances from customers and deferred revenue

Current advances from customers and deferred revenue

Total

Group

2019

607

2020

679

Group

2019

1,836

1,888

2020

1,789

1,833

Contract assets during the year have increased by SEK 72 M, primarily as a result of
acquired companies which added SEK 172 M. Contract liabilities decreased by SEK 55 M.
Acquired and discontinued companies resulted in a net increase in contract liabilities of
SEK 270 M during the year. The total contract liability as at 31 December 2019 of SEK
1,888 M has in all important respects been recognized in 2020.

Remaining performance obligations
The total transaction price allocated to unsatisfied performance obligations at the
reporting date amounts to SEK 14,505 M. Of this amount, SEK 13,290 M is expected to
be recognized as revenue in 2021, while an estimated SEK 1,216 M will be recognized as
revenue in 2022 or later.

As of 31 December 2019 the total transaction price allocated to unsatisfied perfor-

mance obligations was SEK 12,760 M.

NOTE 4 Other operating income and expenses

SEK M

Restructuring costs

Revaluation of previously owned shares in associates

Remeasurement of deferred considerations

Profit on sales of non-current assets

Profit/loss on sales of subsidiaries

Business-related taxes

Transaction expenses from acquisitions

Exchange rate differences

Other, net

Total

Group

2019

–47

–

358

–

–52

–169

–58

–44

2020

–54

1,909

203

–46

–22

–233

–97

–248

1,415

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 Ltd

Others

Total

Group

2019

121

2020

231

–1

–

147

257

NOTE 3 Auditors’ fees

SEK M

Audit assignment

PwC

Others

Audit-related services in addition to
audit assignment

PwC

Tax advice

PwC

Others

Other services

PwC

Others

Total

Group

Parent company

2019

2020

2019

2020

On 20 August 2020 a majority stake was acquired in agta record AG and the company
transitioned from associate to subsidiary. The share of earnings in agta record AG thus
relates to the period 1 January to 20 August. Agta Record AG is consolidated beginning
on 20 August 2020.

–

141

121

–

NOTE 6 Accounting of leases for the Parent company

The Parent company recognizes all lease agreements in accordance with RFR2 and has
chosen to recognize all leases as operating leases. Operating leases in the Parent com-
pany mainly relate to rented premises and cars.

SEK M

Lease payments during the year

Total

Nominal value of agreed future lease payments:

Due for payment in:

(2020) 2021

(2021) 2022

(2022) 2023

(2023) 2024

(2024) 2025

Total

Parent company

2019

2020

The auditors’ fee for EY in Sweden during the year was SEK 11 M (–) and the fee for extra
services was SEK 1 M (1).

ASSA ABLOY | ANNUAL REPORT 2020Notes

NOTE 7 Expenses by nature

NOTE 12 Tax on income

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 34)

Direct material costs

Depreciation and amortization (notes 8, 14, 15)

Other purchase expenses

Total

Group

2019

27,001

33,885

3,387

15,345

79,619

2020

27,170

30,830

3,776

15,087

76,863

SEK M

Current tax

Tax attributable to prior years

Withholding tax

Deferred tax

Total

Group

Parent company

2019

–2,175

–701

–59

–638

2020

–2,713

220

–28

2019

–405

–19

–14

–8

2020

–219

–8

–11

–22

–3,574

–2,504

–446

–259

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

NOTE 8 Depreciation and amortization

Percent

Group

Parent company

Swedish income tax rate

SEK M

Intangible assets

Machinery

Equipment

Buildings

Land improvements

Right-of-use assets

Total

2019

956

616

381

224

1,201

3,387

2020

1,201

617

420

221

1,307

3,776

2019

625

2020

733

–

643

745

Effect of foreign tax rates

Non-taxable income/non-deductible expenses

Exercised/new, not yet measured tax loss carry-
forwards

Non-taxable revaluation of associate shareholding

Other

Effective tax rate in income statement

NOTE 13 Earnings per share

NOTE 9 Exchange differences in the income statement

Earnings per share before and after dilution

SEK M

2019

2020

2019

2020

SEK M

Group

Parent company

Group

Parent company

2019

2020

–

–1

–4

–3

2019

2020

–

–13

–

–17

–

Group

2019

9,993

2020

9,171

9,993

9,171

Earnings attributable to the Parent company’s shareholders

Net profit

Weighted average number of outstanding shares (thousands)

1,110,776

Earnings per share (SEK)

9.00

8.26

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

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

Exchange differences recognized in operating
income

Exchange differences recognized in financial
expenses

Total

–58

–4

–63

–97

–95

–15

–5

–20

–17

–128

–145

NOTE 10 Financial income

Group

Parent company

SEK M

2019

2020

Earnings from investments in subsidiaries

Earnings from investments in associates

Intra-Group interest income

Other financial income

Fair value adjustments shares and interests

External interest income and similar items

Total

–

2019

4,564

287

–

2020

3,667

292

–

1,201

–

SEK M

Earnings attributable to the Parent company’s shareholders

Items affecting comparability

4,910

5,197

Revaluation of shares in associates

Restructuring costs

Tax effect restructuring costs

Total items affecting comparability after tax

Group

2019

9,993

2020

9,171

–

–312

–246

1,909

–1,366

255

797

Net profit excluding items affecting comparability

10,240

8,374

Weighted average number of outstanding shares (thousands)

1,110,776

Earnings per share excluding items affecting comparability (SEK)

9.22

7.54

Group

Parent company

2019

–

–785

–239

–4

–

–58

–1,052

2020

–

–569

–55

–122

–

–48

–792

2019

–276

–288

–

–5

–876

–26

–1,471

2020

–251

–297

–

–128

–

–28

–703

NOTE 11 Financial expenses

SEK M

Intra-Group interest expenses

Interest expenses, other liabilities1

Interest expenses, interest rate swaps

Interest expenses, currency derivatives

Exchange rate differences on financial items

Fair value adjustments shares and interests

Other financial expenses

Total

1 Of which 103 (18) is fair value adjustments on derivatives, non-hedge accounting, for the Group.

ANNUAL REPORT 2020 | ASSA ABLOYNotes

NOTE 14 Intangible assets

2020, SEK M

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 and impairment

Divestments of subsidiaries

Sales, disposals and adjustments

Reclassifications

Amortization

Impairment

Exchange rate difference

Closing accumulated amortization and impairment

Carrying amount

2019, SEK M

Opening accumulated acquisition cost

Purchases

Acquisitions of subsidiaries

Sales, disposals and adjustments

Reclassifications

Exchange rate difference

Closing accumulated acquisition cost

Opening accumulated amortization and impairment

Sales, disposals and adjustments

Reclassifications

Amortization

Impairment

Exchange rate difference

Closing accumulated amortization and impairment

Carrying amount

Goodwill

61,970

–

6,421

–882

–

–5,116

62,392

–4,309

–

260

–4,048

58,344

Goodwill

57,646

–

2,685

–

1,635

61,970

–4,233

–

–76

–4,309

57,662

Group

Parent company

Brands

7,410

1,904

–95

–520

8,701

–1,263

–

–3

–

–1,194

7,506

Other intangible
assets

Total

Intangible assets

12,817

389

1,377

–25

–32

–714

13,820

–6,270

–2

–1,199

–69

308

–7,219

6,601

82,197

390

9,703

–1,002

–32

–6,350

84,914

–11,842

–2

–1,201

–69

637

–12,462

72,452

7,604

122

–

7,727

–4,496

–

–733

–

–5,229

2,498

Group

Parent company

Brands

6,924

341

–

–4

149

7,410

–1,239

–

–2

–

–23

–1,263

6,146

Other intangible
assets

10,942

623

955

271

12,817

–5,179

–10

–2

–954

–5

–120

–6,270

6,547

Total

Intangible assets

75,512

624

3,981

2,054

82,197

–10,651

–10

–2

–956

–5

–218

–11,842

70,355

6,868

736

–

7,604

–3,871

–

–625

–

–4,496

3,108

Other intangible assets consist mainly of customer relations and technology. The carry-
ing amount of intangible assets with an indefinite useful life, excluding goodwill,
amounts to SEK 7,467 M (6,105) and relates to brands.

Useful life has been defined as indefinite where the time period, during which an

Material assumptions used to calculate values in use:
• Budgeted operating margin.
• Growth rate for extrapolating cash flows beyond the budget period.
• Discount rate after tax used for estimated future cash flows.

asset is deemed to contribute economic benefits, cannot be determined.

Impairment testing of goodwill and intangible assets with indefinite useful life
Goodwill and intangible assets with an indefinite useful life are allocated to the Group’s
Cash Generating Units (CGUs), which consist of the Group’s five divisions.
For each cash-generating unit, the Group annually tests goodwill and intangible assets
with an indefinite useful life for impairment, in accordance with the accounting princi-
ple described in Note 1. Recoverable amounts for Cash Generating 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.

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 conservative estimate. Further, an average discount rate in
local currency after tax has been used in the calculations. The difference in value com-
pared 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 2020Notes

Note 14 continued

2020
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:

2020, SEK M

Goodwill

Intangible assets with indefinite useful life

Total

EMEA

10,475

136

10,610

Americas

Asia Pacific

10,444

718

11,162

3,884

788

4,672

Global
Technologies

14,881

811

15,692

Entrance
Systems

18,660

5,015

23,675

Total

58,344

7,467

65,811

2019
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:

2019, SEK M

Goodwill

Intangible assets with indefinite useful life

Total

EMEA

11,121

237

11,358

Americas

Asia Pacific

14,105

1,342

15,447

4,168

744

4,912

Global
Technologies

15,459

902

16,361

Entrance
Systems

12,809

2,880

15,688

Total

57,662

6,105

63,766

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

2020
If the estimated operating margin after the end of the budget period had been one per-
centage point lower than the management’s estimate, the total recoverable amount
would be 5 percent lower (EMEA 5 percent, Americas 4 percent, Asia Pacific 8 percent,
Global Technologies 4 percent, and Entrance Systems 5 percent).

If the estimated growth rate used to extrapolate cash flows beyond the budget
period had been one percentage point lower than the basic assumption of 3 percent,
the total recoverable amount would be 13 percent lower (EMEA 13 percent, Americas
13 percent, Asia Pacific 10 percent, Global Technologies 13 percent, and Entrance Sys-
tems 13 percent).

If the estimated weighted capital cost used for the Group’s discounted cash flows
had been one percentage point higher than the basic assumption of 8.0 to 9.0 percent,
the total recoverable amount would be 17 percent lower (EMEA 17 percent, Americas
17 percent, Asia Pacific 15 percent, Global Technologies 17 percent, and Entrance Sys-
tems 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 there-
fore be interpreted with caution.

None of the hypothetical cases above would lead to an impairment of goodwill in an

individual Cash Generating Unit.

2019
If the estimated operating margin after the end of the budget period had been one per-
centage point lower than the management’s estimate, the total recoverable amount
would be 6 percent lower (EMEA 6 percent, Americas 5 percent, Asia Pacific 11 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 Sys-
tems 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 percent, Global Technologies 17 percent, and Entrance Sys-
tems 17 percent).

None of the hypothetical cases above would lead to an impairment of goodwill in an

individual Cash Generating Unit.

ANNUAL REPORT 2020 | ASSA ABLOYNotes

NOTE 15 Property, plant and equipment

2020, SEK M

Opening accumulated acquisition cost

Purchases

Acquisitions of subsidiaries

Divestments of subsidiaries

Sales and disposals

Reclassifications

Exchange rate difference

Closing accumulated acquisition cost

Opening accumulated depreciation and impairment

Divestments of subsidiaries

Sales and disposals

Impairment incl. reversals

Depreciation and amortization

Reclassifications

Exchange rate difference

Closing accumulated depreciation and impairment

Carrying amount

2019, SEK M

Opening accumulated acquisition cost

Purchases

Acquisitions of subsidiaries

Sales and disposals

Reclassifications

Exchange rate difference

Closing accumulated acquisition cost

Opening accumulated depreciation and impairment

Sales and disposals

Impairment incl. reversals

Depreciation and amortization

Reclassifications

Exchange rate difference

Closing accumulated depreciation and impairment

Carrying amount

Land and land
improvements

Machinery

Equipment

Construction in
progress

Group

1,215

11,226

–19

–49

–91

1,139

–150

–

–9

–1

–138

1,001

296

–290

–393

248

–1,014

10,153

–8,395

248

377

–40

–617

749

–7,582

2,572

4,203

338

246

–82

–314

246

–126

4,511

–3,272

297

–4

–420

–87

–3,375

1,135

692

706

–8

–36

–681

–60

616

–

616

Land and land
improvements

Machinery

Equipment

Construction in
progress

Group

1,142

10,026

–28

–12

1,215

–145

–

–9

–

–4

–150

1,064

249

157

–22

406

409

11,226

–7,458

–16

–616

–328

–8,395

2,831

3,805

228

–145

127

155

4,203

–2,889

132

–2

–381

–2

–130

–3,272

931

684

701

–28

–709

692

–

692

Buildings

6,301

274

–343

–104

157

–212

6,150

–3,321

112

–74

–221

–6

–3,448

2,703

Buildings

5,958

–103

167

186

6,301

–3,053

–1

–224

–2

–100

–3,321

2,980

Parent company

Equipment

–

127

–65

–

–12

–

–77

Parent company

Equipment

–

–4

–

–47

–

–18

–

–65

Total

23,635

1,417

664

–742

–895

–9

–1,502

22,569

–15,137

433

736

–118

–1,268

810

–14,541

8,026

Total

21,614

1,218

356

–326

–20

793

23,635

–13,544

217

–19

–1,230

–563

–15,137

8,498

NOTE 16 Right-of-use assets

The following amounts regarding right-of-use assets are recognized in the balance
sheet.

The following amounts related to leases are recognized in the income statement:

SEK M

Buildings

Machinery

Vehicles

Other equipment

Total

Group

SEK M

2019

2,943

705

2020

2,763

676

Amortization attributable to right-of-use assets:

Buildings

Machinery

Vehicles

Other equipment

3,731

3,513

Operating expenses attributable to:

Additions to right-of-use assets for 2020 amounted to SEK 1,164 M (1,016).

Short-term leases

Leases of low-value assets

Variable lease payments are not included in lease liabilities

Interest expenses relating to:

Lease liabilities

Total

Group

2019

2020

–860

–8

–305

–29

–78

–12

–16

–96

–912

–11

–354

–31

–62

–14

–18

–85

–1,404

–1,486

The total cash flow attributable to leases in 2020 was SEK 1,360 M (1,255).

ASSA ABLOY | ANNUAL REPORT 2020 Notes

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

412140907, R.C.S. Versailles

CH-232-0730018-2, Granges

A-2320 Schwechat

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

C.20402, Nairobi

CH-020.3.900.822-0, Zürich

100

392

197

287

475

6,036

1,819

185

189

4,257

538

376

1,086

771

1,964

109

3,091

293

901

217

2,410

138

844

762

203

303

5,323

974

679

1,160

35,821

1,000

1,306,891

400

6,500

60,000

1,000

800,000

150,000

60,500

180

15,184,271

2,500

1,330,000

501,000

13,787,856

100,220

100

9,621

48,190,000

50,108,549

112

3,115,080

100,100

1,000,000

25,000,000

50,000

650,000

2,400

1,000,000

13,500

5,166,945

Group

NOTE 17 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.

ASSA ABLOY France SAS

HID Global Switzerland S.A.

ASSA ABLOY Entrance Systems Austria 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

ASSA ABLOY East Africa Ltd

Agta record ag

Total

1 The Group’s holdings amount to 100 percent.
2 The Group’s holdings amount to 99.7 percent.

NOTE 18 Investments in associates

Country of registration

Number of shares

Share of equity
2019, %

Share of equity
2020, %

Carrying amount
2019, SEK M

Carrying amount
2020, SEK M

Company name

Agta record ag

Goal Co., Ltd

PT Jasuindo Arjo Wiggins Security

SARA Loading Bay Ltd

Saudi Crawford Doors Ltd

Others

Total

Switzerland

Japan

Indonesia

United Kingdom

Saudi Arabia

–

2,778,790

1,533,412

4,990

800

–

1,916

637

2,595

On 20 August 2020 a majority stake was acquired in agta record ag and the company
transitioned from associate to subsidiary. In conjunction with the acquisition the previ-
ous share of equity was revalued to fair value, which entailed a revaluation effect of SEK
1,909 M.

Further information on the transaction can be found in the Report of the Board of

Directors.

–

589

637

ANNUAL REPORT 2020 | ASSA ABLOYNotes

NOTE 19 Deferred tax

NOTE 22 Trade receivables

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

SEK M

Opening balance

Acquisitions and disposals

Recognized in income statement

Actuarial gain/loss on post-employment benefit obligation

Exchange rate differences

Closing balance

Group

2019

2020

SEK M

430

321

370

470

174

624

1,205

1,338

1,848

520

2,368

2,386

482

2,868

–1,163

–1,531

Group

2019

–410

–183

–638

–13

2020

–1,163

–546

104

Trade receivables

Loss allowance

Total

Trade receivables by currency

SEK M

USD

EUR

CNY

GBP

SEK

AUD

CAD

KRW

Other currencies

Total

Maturity analysis

–1,163

–1,531

SEK M

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

Change in loss allowance for trade receivables

SEK M

Opening balance

Acquisitions and divestments of subsidiaries

Receivables written off

Reversal of unused amounts

Provision for bad debts

Exchange rate differences

Closing balance

2020

461

–

131

592

2020

3,057

2,164

4,790

Group

2019

3,102

2,402

5,701

11,276

10,079

The Group has tax loss carryforwards and other tax credits of SEK 4,545 M (3,375) 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 20 Other financial assets

Group

Parent company

SEK M

Investments in associates

Other shares and interests

Non-current interest-bearing receivables

Other non-current receivables

Total

2019

2020

–

104

–

159

212

2019

1,621

–

153

1,774

NOTE 21 Inventories

SEK M

Materials and supplies

Work in progress

Finished goods

Advances paid

Total

Impairment of inventories during the year amounted to SEK 474 M (487).

Group

2019

16,598

–898

15,701

2020

14,990

–1,325

13,665

Group

2019

5,376

3,521

1,388

848

643

432

376

509

2020

4,496

3,457

1,184

766

613

430

338

274

2,608

2,107

15,701

13,665

Group

2019

2020

11,201

10,475

3,554

1,206

637

5,397

2,908

922

685

4,515

–57

–272

–120

–146

–575

–898

15,701

–155

–226

–671

–1,325

13,665

Group

2019

1,178

–477

–125

257

898

2020

898

123

–174

–49

646

–119

1,325

NOTE 23 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.

ASSA ABLOY | ANNUAL REPORT 2020 Notes

NOTE 24 Share capital, number of shares and dividend per share

Number of shares, thousands

Series A
shares

Series B
shares

Total

Share
capital,
SEK K

Opening balance at 1 January 2019

57,525

1,055,052

1,112,576

370,859

Closing balance at 31 December 2019

57,525

1,055,052

1,112,576

370,859

age 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 2020, shares accounted for 44 percent (45) and fixed income
securities for 29 percent (32) of plan assets, while other assets accounted for 27 percent
(23). The actual return on plan assets in 2020 was SEK 345 M (817).

Number of votes, thousands

575,259

1,055,052

1,630,311

Amounts recognized in the income statement

Opening balance at 1 January 2020

57,525

1,055,052

1,112,576

370,859

Pension costs, SEK M

2019

2020

692

186

910

824

2019

2,717

615

877

188

1,091

1,030

2020

2,925

586

Closing balance at 31 December 2020

57,525

1,055,052

1,112,576

370,859

Number of votes, thousands

575,259

1,055,052

1,630,311

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 outstanding long-term incentive programs are expected to result
in significant dilution in the future. The total number of treasury shares as at 31 Decem-
ber 2020 amounted to 1,800,000. No shares have been repurchased during the year.

Defined contribution pension plans

Defined benefit pension plans

Post-employment medical benefit plans

Total

of which, included in:

Operating income

Net financial items

Amounts recognized in the balance sheet

The dividend paid during the financial year totaled SEK 4,276 M (3,888), equivalent

Pension provisions, SEK M

to SEK 3.85 (3.50) per share.

NOTE 25 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. Pen-
sion 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
members and pensioners. The Group has not changed the processes used for managing
these risks compared with previous periods.

The investments are well diversified so that depreciation of an individual investment

should not have any material impact on the plan assets. The majority of assets are
invested in shares as the Group considers that shares 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 combination of ordinary
government bonds and corporate bonds but also in inflation-indexed bonds. The aver-

Provisions for defined benefit pension plans

Provisions for post-employment medical benefit plans

Provisions for defined contribution pension plans

Total

3,346

3,514

Pensions with Alecta
Commitments for old-age pensions and family pensions for salaried employees in Swe-
den are secured in part through insurance with Alecta. According to UFR 10, this is a
defined benefit plan that covers many employers. For the 2020 financial year, the com-
pany 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 29 M (29), of which SEK 13 M (13)
relates to the Parent company. Pension contributions are expected to remain largely
unchanged in 2021.

Alecta’s surplus can be distributed to policyholders and/or the insured. As at 30 Sep-
tember 2020, Alecta’s surplus expressed as the collective consolidation level amounted
preliminarily to 144 percent (148 percent as at 31 December 2019). The collective con-
solidation level consists of the market value of Alecta’s assets as a percentage of its
insurance commitments calculated according to Alecta’s actuarial calculation assump-
tions, which do not comply with IAS 19. The collective consolidation level is normally
allowed to vary between 125 and 155 percent. If the consolidation level deviates from
this range, measures in the form of an adjustment of the premium level should be taken
to return to the normal range.

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

United Kingdom

Germany

Other countries

Total

Specification of defined benefits, SEK M

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

Key actuarial assumptions

2019

3,246

2020

3,206

–2,983

–2,796

263

410

–

263

–

263

–

410

–

410

2019

2020

109

–23

780

–

866

–

866

–21

779

–

857

–

857

2019

2,224

2020

2,095

2019

1,817

2020

2,055

–1,972

–1,842

–1,206

–1,376

252

–

610

862

–

862

254

–

582

836

–

836

611

724

679

726

1,341

1,408

2019

7,396

–6,184

1,213

1,504

615

3,332

2020

7,455

–6,035

1,420

1,506

586

3,511

Key actuarial assumptions (weighted average), %

2019

2020

2019

2020

2019

2020

United Kingdom

Germany

Discount rate

Expected annual salary increases

Expected annual pension increases

Expected annual medical benefit increases

Expected annual inflation

2.0

n/a

1.9

n/a

2.1

1.4

n/a

1.9

n/a

2.2

1.2

2.8

1.5

n/a

1.5

0.9

2.8

1.5

n/a

1.5

3.2

n/a

5.9

3.0

2.5

n/a

5.8

3.0

1,356

1,412

3,346

3,514

ANNUAL REPORT 2020 | ASSA ABLOYNotes

Note 25 continued

Movement in obligations

2020, SEK M

Opening balance 1 January 2020

Acquisitions and divestments

Recognized in the income statement:

Current service cost

Past service cost

Interest expense/income

Total recognized in the income statement

Recognized in other comprehensive income:

Return on plan assets, excluding amounts included above

Gain/loss from change in demographic assumptions

Gain/loss from change in financial assumptions

Experience-based gains/losses

Remeasurement of net pension obligations

Exchange rate differences

Total recognized in other comprehensive income

Contributions and payments:

Employer contributions

Employee contributions

Payments

Total payments

Closing balance 31 December 2020

2019, SEK M

Opening balance 1 January 2019

Recognized in the income statement:

Current service cost

Past service cost

Gains and losses from settlements

Interest expense/income

Total recognized in the income statement

Recognized in other comprehensive income:

Return on plan assets, excluding amounts included above

Gain/loss from change in demographic assumptions

Gain/loss from change in financial assumptions

Experience-based gains/losses

Remeasurement of net pension obligations

Exchange rate differences

Total recognized in other comprehensive income

Contributions and payments:

Employer contributions

Employee contributions

Payments

Total payments

Closing balance 31 December 2019

Plan assets allocation

Plan assets

Publicly traded shares

Government bonds

Corporate bonds

Inflation-linked bonds

Property

Cash and cash equivalents

Alternative investments

Insurance contracts and other assets

Total

Post-employment
medical benefits

Defined benefit
pension plans

615

–

–81

–27

–

–27

586

8,901

411

139

167

313

–

245

295

–54

486

–743

–257

–

–439

–407

8,960

Post-employment
medical benefits

Defined benefit
pension plans

571

7,523

–

–33

615

123

–5

222

348

–

210

797

–14

994

358

1,352

–

–344

–322

8,901

Plan assets

–6,184

–271

–

–125

–220

–

–220

604

384

–178

–32

369

160

–6,035

Plan assets

–5,227

–

–161

–655

–

–655

–306

–961

–89

–22

277

166

–6,184

Total

3,332

140

145

213

–220

298

295

–54

319

–219

–178

–

–96

–274

3,511

Total

2,868

129

–5

218

–655

234

797

–14

362

436

–89

–101

–189

3,332

Sensitivity analysis of defined benefit obligations and post-employment medical
benefits

The effect on defined benefit obligations and post-employment medi-
cal benefits of a 1.0 percentage change in some actuarial assumptions,
change in percent

Discount rate

Expected annual medical benefit increases

+1.0%

–15.2%

9.4%

-1.0 %

16.2%

–7.8%

2019

2,772

2020

2,630

829

946

205

427

666

892

176

325

919

6,184

1,242

6,035

ASSA ABLOY | ANNUAL REPORT 2020 Notes

NOTE 26 Other provisions

NOTE 29 Assets pledged against liabilities to credit institutions

SEK M

Real estate mortgages

Other mortgages and collateral

Total

Group

Parent company

2019

2020

2019

2020

123

–

137

–

NOTE 30 Contingent liabilities

SEK M

Guarantees on behalf of subsidiaries

Other guarantees and contingent liabilities

Total

Group

Parent company

2019

2020

–

123

–

139

2019

7,652

–

2020

9,190

–

7,652

9,190

In addition to the guarantees shown in the table above, the Group has a large number of
minor bank guarantees for performance of obligations in operating activities. No mate-
rial liabilities are expected as a result of these guarantees.

Restruc-
turing
reserve

778

1,366

–

–747

–105

–68

1,224

Restruc-
turing
reserve

1,190

312

–

–726

–29

778

SEK M

Opening balance at 1 January 2020

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 2020

SEK M

Opening balance at 1 January 2019

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 2019

Balance sheet breakdown:

Other non-current provisions

Other current provisions

Total

Group

Other

573

175

–138

–74

–

–4

551

Group

Other

445

400

–237

–38

–

Total

1,351

1,542

–138

–822

–105

–72

1,775

Total

1,635

711

–237

–764

–29

Group

2019

722

630

1,351

2020

616

1,159

1,775

The restructuring reserve at year-end relates mainly to the ongoing restructuring pro-
gram launched during the year and the previous year. The restructuring reserve is
expected to be used over the next two years. The non-current part of the reserve
totaled SEK 193 M. For further information on the restructuring programs, see the
Report of the Board of Directors.

Other provisions mainly relate to legal obligations including future environment -

related measures.

Maturity profile – guarantees, SEK M

<1 year

>1 <2 years

>2 <5 years

>5 years

573

1,351

Total

NOTE 31 Cash flow items

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 deferred considerations

Other

Adjustments for non-cash items

NOTE 27 Other current liabilities

SEK M

VAT and excise duties

Employee withholding tax

Advances received

Social security contributions and other taxes

Deferred considerations

Other current liabilities

Total

Change in working capital

Group

Inventories increase/decrease (–/+)

2019

618

159

2020

653

143

Trade receivables increase/decrease (–/+)

Trade payables increase/decrease (+/–)

Other working capital increase/decrease (–/+)

1,267

1,224

Change in working capital

128

883

710

110

781

970

Divestments of subsidiaries

Purchase prices received, net

3,765

3,880

Cash and cash equivalents in divested subsidiaries

Change in consolidated cash and cash equivalents due to divestments

NOTE 28 Accrued expenses and deferred income

SEK M

Personnel-related expenses

Customer-related expenses

Deferred income

Accrued interest expenses

Other

Total

Group

Parent company

2019

3,486

1,170

569

158

1,786

7,170

2020

3,407

1,236

565

126

2,353

7,687

2019

354

–

2020

252

–

502

425

Group

2019

2020

123

139

Group

2019

2020

–63

–

132

–147

–358

–324

572

–229

–443

248

148

–

–3

152

–257

–203

131

–95

687

1,331

–370

958

2,606

1,206

–37

1,170

ANNUAL REPORT 2020 | ASSA ABLOY

Notes

NOTE 32 Reserves

See below for an account of some acquisitions completed in 2020 and 2019.

Hedging reserve

Cash flow
hedges

Exchange rate
difference

SEK M

Opening balance 1 January 2019

Other comprehensive income in associates

Net investment hedges

Exchange rate differences

Tax attributable to reserves

Closing balance 31 December 2019

Opening balance 1 January 2020

Other comprehensive income in associates

Reclassified to profit or loss

Net investment hedges

Cash flow hedges

Exchange rate differences

Tax attributable to reserves

Net
investment
hedges

–243

–

–5

–

–247

–

–5

–3

–

Closing balance 31 December 2020

–255

5,339

–

Total

5,096

–5

1,556

–6

–4

6,975

6,728

6,975

6,728

–70

–313

–

–70

–318

–3

–4,559

–2,049

1,794

–

Of the item Net investment hedges, the entire amount relates to closed hedge relation-
ships for which hedged objects remain.

2020
agta record
On 20 August 2020 ASSA ABLOY, previously a 39% shareholder in the Swiss company
agta record, announced that it had completed the indirect acquisition of the 54% share-
holding in agta record from the shareholders of Agta Finance. agta record is a well-
established manufacturer and service organization for entrance automation. It is head-
quartered in Fehraltorf, Switzerland.

ASSA ABLOY then launched a public offer for the acquisition of all remaining out-
standing shares in agta record at a price of EUR 70.58 per share. As at 31 December 2020
ASSA ABLOY owns 99.7% of agta record.

Agta record was fully consolidated into ASSA ABLOY on 31 August 2020. Intangible

assets in the form of technology, brands and customer relationships have been dis-
closed in the purchase price allocation. Residual goodwill mainly relates to synergies
and other intangible assets that do not meet the criteria for separate reporting.

AM Group
On 28 February 2020 ASSA ABLOY acquired 100 percent of the share capital in AM
Group, an Australian industrial door company within entrance automation.

The acquisition of AM Group complements the product offering and geographic cov-

erage in Australia. AM Group has its headquarters in Sydney, Australia

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

2019

2020

whereof
agta record

Other acquisitions
Other noteworthy acquisitions during the year include Biosite (UK) and Access-IS (UK).
Please see the Report of the Board of Directors for further information on these acquisi-
tions.

Cash paid for acquisitions during the year

3,564

8,058

6,054

NOTE 33 Business combinations

SEK M

Purchase prices

Holdbacks and deferred considerations for acquisitions
during the year

Fair value previously owned shares in associates

Adjustment of purchase prices for acquisitions in prior years

Total

Acquired assets and liabilities at fair value

Intangible assets

Property, plant and equipment

Right-of-use assets

Deferred tax assets

Other financial assets

Inventories

Current receivables and investments

Cash and cash equivalents

Deferred tax liabilities

Pension provisions

Other non-current liabilities

Current liabilities

Total

Goodwill

Cash paid for acquisitions during the year

Cash and cash equivalents in acquired subsidiaries

Paid deferred considerations for acquisitions in previous years

Change in cash and cash equivalents due to acquisitions

Net sales from acquisition date

EBIT from acquisition date

Net income from acquisition date

255

–7

318

3,752

–

3,813

12,134

9,850

3,281

2,691

1,296

356

–

208

681

120

–278

–

–225

664

265

132

646

1,062

2,239

–706

–189

–462

–1,186

–1,223

1,128

2,685

3,564

–120

459

3,903

1,078

117

5,713

6,421

8,058

–2,239

418

6,238

2,091

175

138

477

131

119

472

895

2,149

–557

–189

–136

–918

5,135

4,715

6,054

–2,149

–

3,905

1,346

145

117

The table above includes fair value adjustments of acquired net assets from acquisitions
made in previous years. The only acquisition conducted in 2020 that is significant in
terms of size for which separate acquisition details need to be provided is agta record,
which is presented separately in the table above. The figures for agta record are also
included in the total column for 2020.

Purchase price allocations have been prepared for all acquisitions in 2020. The net
sales of acquired units for 2020 totaled SEK 4,801 M (2,509) and net income amounted
to SEK 453 M (230). Acquisition-related costs for 2020 totaled SEK 233 M (169) and
have been reported as other operating expenses in the income statement.

2019
KEYper
On 31 January 2019 ASSA ABLOY acquired 100 percent of the share capital of KEYper, a
leading supplier of electronic and mechanical key management systems in the US with a
strong presence in the automotive segment.

The acquisition of KEYper complements the products within intelligent key and asset

management solutions offered by Traka. KEYper is headquartered in Harrisburg, North
Carolina.

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

LifeSafety Power
On 30 August 2019, ASSA ABLOY acquired 100 percent of the share capital of LifeSafety
Power Inc., a leading US supplier of smart integrated access control power solutions for
OEMs, integrators and end-users.

The acquisition complements the Group´s access control portfolio. LifeSafety Power

is headquartered in Libertyville, Illinois.

Placard
On 27 September 2019 ASSA ABLOY acquired 100 percent of the share capital in Plac-
ard, Australia’s largest secure card manufacturer.

The acquisition of Placard expands the Group’s offering of secure identities, while
offering customers a broad range of secure card and digital ID solutions. Placard is head-
quartered in Melbourne, Australia.

Intangible assets in the form of brands and customer relationships have been dis-
closed in the purchase price allocation. Residual goodwill mainly relates to synergies
and other intangible assets that do not meet the criteria for separate reporting.

De La Rue’s national identity solutions business
On 14 October 2019 ASSA ABLOY acquired the international identity solutions business
from De La Rue.

The acquisition strengthens ASSA ABLOY’s market position through an expanded offer-
ing within digital citizen ID solutions. The operation is headquartered in Basingstoke, UK.
On the reporting date the acquisition analysis is preliminary with respect to valua-

tion of intangible assets.

Other acquisitions
Other noteworthy acquisitions that closed during the year mainly consist of Spence
Doors (Australia). Please see the Report of the Board of Directors for further informa-
tion about this acquisition.

ASSA ABLOY | ANNUAL REPORT 2020NOTE 34 Employees

Salaries, wages, other remuneration and social security costs

SEK M

Salaries, wages and other remuneration

Social security costs

– of which pensions

Total

Group

Parent company

2019

21,109

5,892

824

2020

21,462

5,708

1,029

27,001

27,170

2019

2020

295

193

488

295

158

454

Remuneration and other benefits of the Executive Team in 2020, SEK thousands

Name

Fixed
salary

Variable
salary

Stock-
related
benefits

Other
benefits

Pension
costs

Nico Delvaux, President and CEO

18,389

1,350

8,482

152

6,446

Other members of the Executive
Team (9 positions)

Total remuneration and benefits

41,030

59,420

5,702

7,052

8,729

17,211

2,298

2,450

9,997

16,444

Total remuneration and other benefits of the Executive Team amounted to SEK 122.8 M in 2019.

Fees to Board members in 2020 (including committee work), SEK thousand

Name and post

Lars Renström, Chairman

Carl Douglas, Vice Chairman

Eva Karlsson, Board member

Birgitta Klasén, Board member

Lena Olving, Board member

Sofia Schörling Högberg, Board member

Jan Svensson, Board member

Joakim Weidemanis, Board member

Employee representatives (4)

Total

Board of
Directors

Remu-
neration
Committee

Audit
Committee

2,350

150

900

685

–

7,360

–

225

Total

2,500

900

685

885

685

885

1,035

685

–

200

–

200

275

–

675

8,260

Total fees to Board members amounted to SEK 7.6 M in 2019.

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 for 2020 totaled SEK 49 M (64), excluding pension costs and social secu-
rity costs. Pension costs amounted to SEK 10 M (10). Pension obligations for several sen-
ior executives are secured through pledged endowment insurances.

Guidelines for remuneration to senior executives
Scope
The Annual General Meeting 2020 adopted the following guidelines for the remunera-
tion and other employment conditions of the President and CEO and other members of
the ASSA ABLOY Executive Team (the “Executive Team”).

These guidelines are applicable to remuneration agreed, and amendments to remu-
neration already agreed, after adoption of the guidelines by the Annual General Meeting
2020. These guidelines do not apply to any remuneration decided or approved by the
General Meeting.

Employment conditions of a member of the Executive Team that is employed or resi-

dent outside Sweden or that is not a Swedish citizen, may be duly adjusted for compli-
ance with mandatory rules or established local practice, taking into account, to the
extent possible, the overall purpose of these guidelines.

Promotion of ASSA ABLOY’s business strategy, long-term interests and sustainability
One of the strategies for value creation followed by ASSA ABLOY is Evolution through
people. With the objective that ASSA ABLOY shall continue to be able to recruit and
retain competent employees, the basic principle being that remuneration and other
employment conditions shall be offered on market conditions and be competitive, tak-
ing into account both global remuneration practice and practice in the home country of
each member of the Executive Team. These guidelines enable ASSA ABLOY to offer the
Executive Team a total remuneration that is on market conditions and competitive. Pre-
requisites are thereby established for successful implementation of the Group’s busi-
ness strategy, which on overall level is to lead the trend towards the world’s most inno-
vative and well-designed access solutions, as well as safeguarding ASSA ABLOY’s
long-term interests, including its sustainability. More information about ASSA ABLOY’s
business strategy and ASSA ABLOY’s sustainability report is available on ASSA ABLOY’s
website assaabloy.com.

Notes

ASSA ABLOY has on-going share-based long-term incentive programs in place that
have been resolved by the General Meeting and which are therefore excluded from these
guidelines. Future share-based long-term incentive programs proposed by the Board of
Directors and submitted to the General Meeting for approval will be excluded for the
same reason. The purpose of the share-based long-term incentive program is to
strengthen ASSA ABLOY’s ability to recruit and retain competent employees, to contrib-
ute to ASSA ABLOY providing a total remuneration that is on market conditions and com-
petitive, and to align the interests of the shareholders with the interests of the employees
concerned. Through a share-based long-term incentive program, the employees’ remu-
neration is tied to ASSA ABLOY’s future earnings and value growth. At present the perfor-
mance criteria used is linked to earnings per share. The programs are further conditional
upon the participant’s own investment and holding period of several years. More infor-
mation about these programs is available on ASSA ABLOY’s website assaabloy.com.

Types of remuneration
The total yearly remuneration to the members of the Executive Team shall be on market
conditions and be competitive and also reflect each member of the Executive Team’s
responsibility and performance. The total yearly remuneration shall consist of fixed base
salary, variable cash remuneration, pension benefits and other benefits (which are spec-
ified below excluding social security costs). Additionally, the General Meeting may – and
irrespective of these guidelines – resolve on, among other things, share-related or share
price-related remuneration.

The variable cash remuneration shall be linked to predetermined and measurable
targets, which are further described below, and may amount to not more than 75 per-
cent of the yearly base salary.

The members of the Executive Team shall be covered by defined contribution pen-
sion plans, for which pension premiums are based on each member’s yearly base salary
and is paid by ASSA ABLOY during the period of employment. The pension premiums
shall amount to not more than 35 percent of the yearly base salary.

Other benefits, such as company car, life insurance, extra health insurance or occupa-

tional healthcare, should be payable to the extent this is considered to be in line with
market conditions in the market concerned for each member of the Executive Team.
Premiums and other costs relating to such benefits may totally amount to not more
than 10 percent of the yearly base salary. Furthermore, housing allowance benefit may
be added in line with ASSA ABLOY’s policies and costs relating to such benefit may
totally amount to not more than 25 percent of the yearly base salary. Premiums and
other costs relating to other benefits and housing allowance benefit may, however,
totally amount to not more than 30 percent of the yearly base salary.

Criteria for awarding variable cash remuneration
The variable cash remuneration shall be linked to predetermined and measurable finan-
cial targets, such as earnings per share (EPS), earnings before interest and taxes (EBIT),
cash flow and organic growth and can also be linked to strategical and/or functional tar-
gets individually adjusted on the basis of responsibility and function. These targets shall
be designed so as to contribute to ASSA ABLOY’s business strategy and long-term inter-
ests, including its sustainability, by for example being linked to the business strategy or
promote the senior executive’s long-term development within ASSA ABLOY.

The Remuneration Committee shall for the Board of Directors prepare, monitor and eval-

uate matters regarding variable cash remuneration to the Executive Team. Ahead of each
yearly measurement period for the criteria for awarding variable cash remuneration the
Board of Directors shall, based on the work of the Remuneration Committee, establish
which criteria that are deemed to be relevant for the upcoming measurement period. To
which extent the criteria for awarding variable cash remuneration has been satisfied shall be
determined when the measurement period has ended. Evaluations regarding fulfilment of
financial targets shall be based on determined financial basis for the relevant period.

Variable cash remuneration can be paid after the measurement period has ended or
be subject to deferred payment. Paid variable cash remuneration can be claimed back
when such right follows from general principles of law.

Duration of employment and termination of employment
The members of the Executive Team shall be employed until further notice. If notice of
termination is made by ASSA ABLOY, the notice period may not exceed 12 months for
the CEO and 6 months for the other members of the Executive Team. If the CEO is given
notice, ASSA ABLOY is liable to pay, including severance pay and remuneration under
the notice period, the equivalent of maximum 24 months’ base salary and other
employment benefits. If any other member of the Executive Team is given notice, ASSA
ABLOY is liable to pay a maximum of 6 months’ base salary and other employment bene-
fits plus severance pay amounting to a maximum of an additional 12 months’ base sal-
ary. If notice of termination is made by a member of the Executive Team, the notice
period may not exceed 6 months, with no right to severance pay.

A member of the Executive Team may, for such time when the member is not entitled
to severance pay, be compensated for non-compete undertakings. Such compensation
shall amount to not more than 60 percent of the monthly base salary at the time of the
termination and shall only be paid as long as the non-compete undertaking is applicable,
at longest a period of 12 months.

ANNUAL REPORT 2020 | ASSA ABLOYNotes

Note 34 continued

Remuneration and employment conditions for employees
In the preparation of the Board of Directors’ proposal for these remuneration guide-
lines, remuneration and employment conditions for employees of ASSA ABLOY have
been taken into account by including information on the employees’ total remunera-
tion, the components of the remuneration and increase and growth rate over time in
the Remuneration Committee’s and the Board of Directors’ basis of decision when eval-
uating whether the guidelines and the limitations set out herein are reasonable.

The decision-making process to determine, review and implement the guidelines
The Remuneration Committee’s tasks include preparing the Board of Directors’ deci-
sion to propose guidelines for remuneration to the Executive Team. The Board of Direc-
tors shall prepare a proposal for new guidelines at least every fourth year and submit it
to the Annual General Meeting. The guidelines shall be in force until new guidelines are
adopted by the General Meeting. The Remuneration Committee shall also monitor and
evaluate programs for variable remuneration to the Executive Team, the application of
the guidelines for remuneration to the Executive Team as well as the applicable remu-
neration structures and remuneration levels in ASSA ABLOY. The members of the Remu-
neration Committee are independent of the company and its management. The CEO
and other members of the Executive Team do not participate in the Board of Directors’
processing of and resolutions regarding remuneration-related matters in so far as they
are affected by such matters.

Deviation from the guidelines
The Board of Directors may temporarily resolve to deviate from the guidelines, in whole or
in part, if in a specific case there is special cause for the deviation and a deviation is neces-
sary to serve ASSA ABLOY’s long-term interests, including its sustainability, or to ensure
ASSA ABLOY’s financial viability. As set out above, the Remuneration Committee’s tasks
include preparing the Board of Directors’ resolutions in remuneration-related matters.
This includes any resolutions to deviate from the guidelines.

each performance-based share award linked to the relevant year entitles the holder to
one Series B share at the end of the three-year vesting period, provided that the other
conditions are met.

The performance-based condition was 60 percent fulfilled for LTI 2018. Fulfilment of
the performance-based condition for LTI 2019 and LTI 2020, respectively, is intended to
be presented in the Annual Report for the financial years 2021 and 2022.

Outstanding performance-based share awards for LTI 2020 total 594,625. The total
number of outstanding performance-based share awards for LTI 2018, LTI 2019 and LTI
2020 amounted to 1,409,499 on the reporting date of 31 December 2020.

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 also adjusted for
performance-based share awards not expected to be realized at the end of the vesting
period of the respective program. The company further assesses the probability of the
performance targets being met when calculating the compensation expense.

The fair value of ASSA ABLOY’s Series B share on the allotment date for LTI 2020, 28

May 2020, was SEK 196.25. The fair value of ASSA ABLOY’s Series B share on the allot-
ment date for LTI 2019, 24 May 2019, was SEK 194.23. The fair value of ASSA ABLOY’s
Series B share on the allotment date for LTI 2018, 25 May 2018, was SEK 191.63.

The total cost of the Group’s long-term incentive programs (LTI 2017–LTI 2020)

excluding social security costs amounted to SEK 49 M (49) in 2020. In April 2020 vesting
of remaining parts of LTI 2017 took place equivalent to 126,551 shares (108,193) at a
total market value at the time of vesting of SEK 22 M (21). The payment referred to
above for the transferred shares in LTI 2017 was recognized in equity.

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

Transitional provisions applicable for the Annual General Meeting 2020
The total expensed remuneration of the Executive Team, including previous commit-
ments not yet due for payment is reported in the Annual Report 2019 in Note 34.

Average number of employees per country, broken down by gender

Group

2019

2020

Long-term incentive programs
At the Annual General Meeting 2010, it was decided to launch a long-term incentive
program (LTI 2010) for senior executives and other key employees in the Group. The
purpose was to create the prerequisites for retaining and recruiting qualified employees
for the Group, to contribute to provide a total remuneration that is on market condi-
tions and competitive and align the interests of the shareholders with the interests of
the employees concerned.

At the 2011 to 2020 Annual General Meetings, it was decided to implement further

long-term incentive programs for senior executives and other key employees in the
Group. The incentive programs were named LTI 2011 to LTI 2020. LTI 2011 to LTI 2017
were based on similar terms to LTI 2010. LTI 2018 to LTI 2020 is based on similar princi-
ples as the earlier program, but with an extended measurement period of three years for
the performance-based condition and removal of matching shares.

For each Series B share acquired by the CEO within the framework of LTI 2018, LTI
2019 and LTI 2020, 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 three programs (LTI 2018–LTI 2020), employees

have acquired a total of 369,906 Series B shares in ASSA ABLOY AB, of which 141,791
Series B shares were acquired in 2020 within the framework of LTI 2020.

Each performance-based share award for LTI 2018, LTI 2019 and LTI 2020 entitles the
holder to receive one Series B share in the company free of charge three years after allot-
ment, provided that the holder, with certain exceptions, at the time of the release of the
interim report for the first quarter 2021 (LTI 2018), first quarter 2022 (LTI 2019) and
first quarter 2023 (LTI 2020) still is employed by the Group and has maintained the
shares acquired within the framework of the respective program. In addition to these
conditions, the number of performance-based share awards that entitles the holder to
Series B shares in the company depends on the annual development of ASSA ABLOY’s
earnings per share based on the target levels, as defined the Board of Directors, during
the measurement period 1 January 2018 – 31 December 2020 (LTI 2018), the measure-
ment period 1 January 2019 – 31 December 2021 (LTI 2019) and the measurement
period 1 January 2020 – 31 December 2022 (LTI 2020), where each year during the
measurement period is compared to the previous year. The outcomes are calculated
yearly, whereby one third of the performance-based share awards is measured against
the outcome for the first year in the measurement period, one third is measured against
the outcome for the second year in the measurement period and one third is measured
against the outcome for the third year in the measurement period. The outcome for
each year is measured linearly. Unless the minimum target level in the interval is
achieved for the year, none of the relevant performance-based share awards will give
the right to any Series B shares. If the maximum target level in the interval is achieved,

China

Sweden

United Kingdom

France

Mexico

Germany

Brazil

India

Australia

Poland

Finland

Netherlands

Czech Republic

Canada

Malaysia

Romania

Belgium

Norway

Switzerland

South Korea

South Africa

Spain

Denmark

Italy

New Zealand

United Arab Emirates

Hungary

Chile

Ireland

Israel

Austria

Others

Total

10,914

8,731

2,344

2,034

1,917

1,740

1,461

1,465

1,690

953

1,269

1,208

1,054

1,204

822

814

762

729

664

609

703

716

580

559

435

356

373

311

271

191

253

201

of which
women

of which
men

3,012

3,565

613

672

585

527

450

142

249

349

338

189

389

250

425

322

152

130

164

212

302

150

113

111

105

7,902

5,166

1,731

1,362

1,333

1,213

1,011

1,015

1,547

704

920

870

865

816

573

389

440

577

534

446

491

414

430

446

324

251

337

241

191

135

172

168

Total

11,112

7,625

2,386

2,139

2,034

1,765

1,556

1,550

1,491

1,250

1,232

1,194

1,151

1,081

820

793

744

711

646

640

634

620

573

544

418

355

347

297

245

228

217

200

of which
women

of which
men

3,047

3,412

632

536

592

539

459

465

133

322

340

322

210

381

255

399

295

143

122

169

176

253

153

117

118

100

8,065

4,213

1,754

1,603

1,442

1,227

1,097

1,084

1,357

929

891

872

941

701

565

395

449

568

524

470

458

367

420

427

301

254

310

240

177

147

149

171

1,462

386

1,075

1,873

688

1,185

48,992

14,785

34,207

48,471

14,718

33,753

ASSA ABLOY | ANNUAL REPORT 2020Notes

Parent company

2019

2020

of which
women

of which
men

198

Total

269

of which
women

of which
men

196

Total

281

Sweden

Total

Gender distribution of Board of Directors and Executive Team

stakeholders. Maintaining an optimal capital structure enables the Group to keep capi-
tal costs at a low level. The Group can adjust the capital structure based on the require-
ments that arise by varying the dividend paid to shareholders, returning capital to share-
holders, issuing new shares or selling assets to reduce debt. The capital requirement is
assessed on the basis of factors such as the net debt/equity ratio.

Net debt is defined as interest-bearing liabilities, including negative market values of

derivatives, plus pension provisions and lease obligations, less cash and cash equiva-
lents, and other interest-bearing investments including positive market values of deriv-
atives. The table ‘Net debt and equity’ shows the position as at 31 December.

2019

2020

of which
women

of which
men

Total

of which
women

of which
men

Total

Net debt and equity

Board of Directors1

Executive Team

– of which Parent company’s

Executive Team

Total

1 Excluding employee representatives.

SEK M

Non-current interest-bearing receivables

Current interest-bearing investments incl. positive market values
of derivatives

Cash and cash equivalents

Pension provisions

Lease liabilities

Group

2019

–45

–257

–442

3,346

3,739

2020

–159

–472

–2,756

3,514

3,562

Other non-current interest-bearing liabilities

21,100

22,381

NOTE 35 Financial risk management and financial instruments

Current interest-bearing liabilities incl. negative market values
of derivatives

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.

Total

Equity

Net debt/equity ratio

5,610

3,685

33,050

59,154

0.56

29,755

58,879

0.51

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 finan-

cial transactions are conducted by the subsidiary ASSA ABLOY Financial Services AB,
which is the Group’s internal bank. External financial transactions are conducted by
Treasury. Treasury achieves significant economies of scale when negotiating borrowing
agreements, using interest rate derivatives and managing currency flows.

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

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. Standard & Poor’s revised the outlook for the long-term credit rating to nega-
tive in May. The reason for the change was the uncertainty about the effects the Covid-
19 pandemic would have for ASSA ABLOY’s financial development.

Agency

Standard & Poor’s

Moody’s

Short-term

Outlook Long-term

Outlook

Stable

Negative

A –

n/a

Maturity profile – financial instruments1

SEK M2

Long-term bank loans

Long-term capital market loans

Short-term bank loans

Derivatives (outflow)

Total by period

Cash and cash equivalents incl. interest-bearing receivables

Non-current interest-bearing receivables

Derivatives (inflow)

Deferred considerations

Trade receivables

Trade payables

Lease liabilities

Net total

Confirmed credit facilities

Adjusted maturity profile1

31 December 2019

31 December 2020

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

>5 years

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

>5 years

–1,444

–1,567

–1,507

–9,357

–329

–8,575

–1,368

–1,462

–1,179

–1,089

–2,417

–1,160

–9,101

–51

–146

–136

–13,960

–20

–55

–3,062

–11,010

–9,040

–17,969

–3,526

–10,315

106

–451

190

–32

3,174

165

14,049

–157

166

–6

–3,257

–6,582

–33

–9,871

155

–961

–1,336

–4,302

–12,188

–4,302

–12,525

–24,713

–463

–9,338

–2,401

–11,739

–781

13,665

–7,028

–1,145

3,966

12,058

16,024

–570

–3,113

–2,409

–15,947

–22,039

609

15,893

–883

15,701

–7,908

–1,183

190

14,925

15,116

1 For maturity structure of guarantees, see Note 30.
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.

–874

–1,259

–408

–4,453

–11,415

–10,027

–4,453

–12,058

–23,472

–10,027

ANNUAL REPORT 2020 | ASSA ABLOYNotes

Note 35 continued

Financing risk and maturity profile
Financing risk is defined as the risk of being unable to meet payment obligations as a
result of inadequate liquidity or difficulties in obtaining external financing. ASSA ABLOY
manages financing risk at Group level. Treasury is responsible for external borrowings
and external investments. ASSA ABLOY strives to have access on every occasion to both
short-term and long-term loan facilities. In accordance with financial policy, the availa-
ble loan facilities, including available cash and cash equivalents, should include a reserve
(facilities available but not utilized) equivalent to at least 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 particular date in the immediate future. An important component of liquidity plan-
ning is the Group’s Multi-Currency Revolving Credit Facility totaling EUR 1,200 M. The
maturity for EUR 1,116 M was extended in 2020 and is now due in April 2025. A smaller
portion, EUR 84 M will still mature in April 2024. This credit facility was wholly unutilized
at year-end. Moreover, existing financial assets are also taken into account. The table
shows undiscounted cash flows relating to the Group’s financial instruments at the
reporting date, and these amounts are therefore not found in the balance sheet.

Cash and cash equivalents and other interest-bearing receivables
Current interest-bearing investments totaled SEK 46 M (55) at year-end. In addition,
ASSA ABLOY has long-term interest-bearing receivables of SEK 159 M (45) and financial
derivatives with a positive market value of SEK 426 M (202) which, in addition to cash
and cash equivalents, are included in the definition of net financial debt. Cash and cash
equivalents are mainly invested in bank accounts or interest-bearing instruments with
high liquidity from issuers with a credit rating of at least A–, according to Standard &
Poor’s or similar rating agency. The average term for cash and cash equivalents was
4 days (18) at year-end 2020.

The Parent company’s cash and cash equivalents are held in a sub-account to the

Group account.

SEK M

Cash and bank balances

Short-term investments with maturity less
than 3 months

Cash and cash equivalents

Short-term investments with maturity more
than 3 months

Non-current interest-bearing receivables

Positive market value of derivatives

Total

Group

Parent company

2019

418

442

202

745

2020

2,756

159

426

3,388

2019

2020

–

Interest rate risks in interest-bearing assets
Treasury manages interest rate risk in interest-bearing assets. Derivative instruments
such as interest rate swaps and FRAs (Forward Rate Agreements) may be used to man-
age interest rate risk. These interest-bearing assets are mostly short-term. Maturity for
the investments has risen during the year. The fixed interest term for such short-term
investments was 164 days (144) at year-end 2020. A downward change in the yield
curve of one percentage point would reduce the Group’s interest income by around
SEK 0 M (1) and consolidated equity by SEK 0 M (0).

Interest-bearing liabilities
The Group’s long-term loan financing mainly consists of a GMTN Program of SEK 16,189 M
(17,886), of which SEK 15,047 M (15,814) is long-term, Private Placement Program in
the US totaling USD 225 M, of which USD 225M (225) is long-term, and loans from
financial institutions such as the European Investment Bank (EIB) of EUR 18 M (37) and
USD 366 M (120), and loans from the Nordic Investment Bank of EUR 190 M (55). Dur-
ing the year, three new issues were made under the GMTN program for a total amount
of SEK 1,570 M. Other changes in long-term loans are mainly due to some of the origi-
nally long-term loans now having less than 1 year to maturity. The size of the loans
decreased because of currency fluctuations, in particular regarding the USD. A total of
SEK 5,806 M was raised in new long-term loans, while SEK 3,252 M in originally long-
term loans matured during the year.

The Group’s short-term loan financing mainly consists of two Commercial Paper Pro-

grams for a maximum USD 1,000 M (1,000) and SEK 5,000 M (5,000) respectively. At
year-end, however, the outstanding balance under the Commercial Paper programs was
SEK 0 M (0). In addition, substantial credit facilities are available, mainly in the form of a
Multi-Currency Revolving Credit Facility of EUR 1,200 M (1,200). At year-end the aver-
age time to maturity for the Group’s interest-bearing liabilities, excluding the pension
provision and lease obligations, was 53 months (51).

Some of the Group’s main financing agreements contain a customary Change of Con-

trol 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.

ASSA ABLOY | ANNUAL REPORT 2020Note 35 continued

External financing/net debt

Credit lines/facilities

US Private Placement Program

Multi-Currency RCF

Bank loan EIB

Bank loan NIB

Global MTN Program

Other long-term loans

Total long-term loans/facilities

Global MTN 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 and Non-current interest-bearing investments

Derivative financial instruments

Pension provisions

Lease liabilities

Net debt

Notes

Amount, SEK M

Maturity

Carrying amount,
SEK M

Currency

Amount
2019

Amount
2020

Of which Parent
company, SEK M

Aug 2022

Aug 2024

Apr 2024

Apr 20242

Apr 20232

Jun 2026

Jun 2028

Feb 2022

Mar 2022

Apr 2022

Jun 2022

Jul 2022

Feb 2023

Mar 2023

Oct 2023

Nov 2023

Dec 2023

Jan 2024

Apr 2024

May 2024

Jul 2024

Sep 2024

Oct 2024

Feb 2025

Mar 2025

Jun 2025

Dec 2025

Mar 2026

Nov 2026

Feb 2027

Jun 2027

Sep 2027

Oct 2027

May 2029

Jun 2029

Aug 2029

Oct 2029

Dec 2029

Mar 2030

Apr 2030

Feb 2031

Aug 2034

1,238

614

844

11,214

702

2,154

678

23,978

1,124

43,225

1,142

8,190

5,000

1,938

3,221

19,491

62,716

USD

EUR

USD

EUR

USD

EUR

USD

EUR

USD

SEK

EUR

USD

EUR

SEK

USD

EUR

USD

EUR

USD

EUR

USD

EUR

CHF

EUR

NOK

EUR

NOK

EUR

USD

EUR

USD

EUR

SEK

150

–

1,200

103

–

500

100

550

100

–

300

–

200

100

–

100

150

1,116

263

500

100

550

100

300

200

100

1,215

1,142

–

1,238

614

–

702

2,154

678

164

502

100

500

151

201

2201

8291

819

301

550

164

246

1,002

164

502

3341

819

501

246

4441

201

4681

299

502

2931

499

2021

149

100

3121

259

8571

300

698

100

991

1,124

22,381

1,142

–

1,938

433

3,514

25,895

–2,756

–205

–255

3,514

3,562

29,755

164

502

100

500

151

201

818

819

301

550

164

246

1,002

164

502

301

819

501

246

410

201

463

299

502

286

499

191

149

100

279

259

809

300

698

100

991

886

15,677

1,142

452

1,594

17,271

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.

ANNUAL REPORT 2020 | ASSA ABLOYNotes

Note 35 continued

Change in loans

SEK M

Long-term
loans

Short-term
loans

Total

Opening balance 1 January 2020

21,100

5,460

26,560

Cash flow from financing activities

Long-term loans raised

Long-term loans repaid

Other changes in cash flow short-term loans

Total

Changes without cash flow impact

Acquisitions of subsidiaries

Divestments of subsidiaries

Reclassifications

Unrealized exchange rate differences

Other changes in non-cash items

Total

Closing balance 31 December 2020

5,806

–

5,806

182

–

–3,181

–1,631

105

–4,525

22,381

–

–3,252

–1,522

–4,774

–66

3,181

–319

–11

2,828

3,514

5,806

–3,252

–1,522

1,032

225

–66

–

–1,950

–1,697

25,895

SEK M

Long-term
loans

Short-term
loans

Total

Opening balance 1 January 2019

19,398

7,594

26,992

Currency composition
The currency composition of ASSA ABLOY’s borrowing depends on the currency com-
position 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.

Net debt by currency

SEK M

USD

EUR

GBP

CNY

AUD

NOK

CZK

PLN

KRW

CHF

SEK

Other

Total

31 December 2019

31 December 2020

Net debt
excl.
derivatives

Net debt
incl.
derivatives

Net debt
excl.
derivatives

Net debt
incl.
derivatives

11,843

14,389

403

606

232

789

146

335

922

2,283

1,048

33,050

15,603

8,183

1,688

1,880

1,218

798

784

465

614

977

-1,263

2,103

33,050

11,201

13,525

493

577

612

124

234

748

1,477

636

12,311

11,783

2,120

1,868

1,340

656

628

554

505

-1,616

-1,968

1,574

29,755

Cash flow from financing activities

Long-term loans raised

Long-term loans repaid

Other changes in cash flow short-term loans

Total

Changes without cash flow impact

Acquisitions of subsidiaries

Reclassifications

Unrealized exchange rate differences

Other changes in non-cash items

Total

Closing balance 31 December 2019

4,615

–

4,615

164

–3,461

394

–10

–2,913

21,100

–

–2,903

–3,413

–6,316

632

3,461

4,182

5,460

4,615

–2,903

–3,413

–1,701

796

–

461

1,269

26,560

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 indi-
vidual business units. The main principle is to allow currency fluctuations to have an
impact on the business as quickly as possible. As a result of this strategy, current cur-
rency flows are not normally hedged.

Transaction flows relating to major currencies (import + and export –)

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 calculates the impact on
income of changes in interest rates on a rolling 12-month basis. The Group strives for a
mix of fixed rate and variable rate borrowings in the loan portfolio, and uses interest rate
swaps to adjust the fixed interest term. The financial policy stipulates that the average
fixed interest term should normally be within the interval of 12 to 36 months. At year-
end, the average fixed interest term on gross debt, excluding pension liabilities and
lease commitments, was around 32 months (34). An upward change in the yield curve
of one percentage point would increase the Group’s interest expense by around
SEK 89 M (102) and reduce consolidated equity by SEK 65 M (75).

Currency, SEK M

AUD

CAD

CHF

CNY

DKK

EUR

GBP

RON

SEK

USD

Currency exposure

2019

574

921

–552

2020

679

852

–772

–1,908

–1,653

236

1,954

615

–387

–2,236

1,375

192

1,523

589

–342

–2,223

1,120

Change in lease liabilities

SEK M

Opening balance

Effects of the transition to IFRS 16

Acquisitions of subsidiaries

Divestments of subsidiaries

New and terminated leases

Amortization of lease liabilities

Exchange rate difference

Closing balance

Balance sheet breakdown:

Non-current lease liabilities

Current lease liabilities

Total

Group

2019

3,711

–

917

–1,159

118

3,739

Group

2019

2,588

1,151

3,739

2020

3,739

–

265

–37

1,169

–1,275

–299

3,562

2020

2,477

1,085

3,562

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

2019

2020

AUD

CHF

CNY

DKK

EUR

GBP

HKD

KRW

NOK

USD

227

792

188

–16

–14

753

ASSA ABLOY | ANNUAL REPORT 2020Note 35 continued

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. When-
ever 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 individ-
ual currencies. Treasury uses currency derivatives and loans to achieve appropriate
financing and to eliminate undesirable currency exposure.

The table “Net debt by currency” on page 92 shows the use of forward exchange con-
tracts in relation to financing in major currencies. Forward exchange contracts are used
to neutralize the exposure arising between external debt and internal requirements.

Financial credit risk
Financial risk management exposes ASSA ABLOY to certain counterparty risks. Such
exposure may arise from the investment of surplus cash as well as from investment in
debt instruments and derivative instruments.

ASSA ABLOY’s policy is to minimize the potential credit risk relating to surplus cash

by using cash flow from subsidiaries to repay the Group’s loans. This is primarily
achieved through cash pools put in place by Treasury. Around 96 percent (97) of the
Group’s sales were settled through cash pools in 2020. 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 deriva-
tive 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 94 shows the impact of this netting.

Commercial credit risk
The Group’s trade receivables are distributed across a large number of customers who
are spread globally. No single customer accounts for more than 1 percent of the Group’s
sales. The concentration of credit risk associated with trade receivables is considered
limited, but credit risks have increased in pace with increased activity in emerging mar-
kets. The fair value of trade receivables is equivalent to the carrying amount. Credit risks
relating to operating activities are managed locally at company level and monitored at
division level. For more information see Note 22 and the section “Impairment of finan-
cial assets” in the information on accounting principles.

Commodity risk
The Group is exposed to price risks relating to purchases of certain commodities (pri-
marily metals) used in production. Forward contracts are not used to hedge commodity
purchases.

Fair value of financial instruments
Derivative financial instruments such as forward exchange contracts and forward rate
agreements are used to the extent necessary. The use of derivative instruments is lim-
ited to reducing exposure to financial risks.

The positive and negative fair values in the table ‘Outstanding derivative financial
instruments’ on page 94 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 equivalent to the gross value of the contracts.

For accounting purposes, financial instruments are classified into measurement cate-

gories in accordance with IFRS 9. The table ‘Financial instruments’ on page 94 provides
an overview of financial assets and liabilities, measurement category, and carrying
amount and fair value per item.

Risk management through hedge accounting
During the year the Group used hedge accounting in its financial risk management.
Hedges 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 regard-
ing the effects of net investment hedges in other comprehensive income, see Note 32.
Net investment hedges are used to manage currency risk that arise through investments
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 interest
rate risk in loans with variable interest rates are used to adjust the interest rate risk for
variable interest rates.

Interest rate risk related to the long-term loans are hedged through hedge account-

ing using interest rate swaps. In cases where the loans are denominated in a currency
other than SEK, currency risk is not included in the applied hedge accounting. For risks
related to net investments in foreign subsidiaries, hedge accounting is only applied to

Notes

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 relationship between the
hedging objects and the hedging instruments. Hedging relationship effectiveness is
tested through periodic forward-looking evaluation to ensure that an economic rela-
tionship still exists. Examples of identified sources of ineffectiveness in the hedging rela-
tionship 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 dur-
ing the year. For this reason, the economic relationship has been 100% effective. One
possible source of future inefficiency is the reforms under discussion for the IBOR mar-
kets, where proposed changes include how LIBOR for USD and CHF are determined.
Most likely, the methods will be reviewed for the majority of currencies, for which rea-
son any outstanding interest rate derivatives may be affected at some point in the
future. All outstanding interest rate derivatives have exposure to interest periods after
the end of 2022, at which time many of these changes are expected to take effect.

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
2019

Fair value
2020

Net in-
vestments
2019

Net in-
vestments
2020

3,532

3,041

373

2020 to
2029

2021 to
2029

2020 to
2029

1:1

–88

–34

–38

1:1

–187

–20

–99

1:1

–53

–194

–255

–5

–3

–

Changes in the value of fair value hedged items are recognized 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.

ANNUAL REPORT 2020 | ASSA ABLOYNotes

Note 35 continued

Disclosures of offsetting of financial assets and liabilities

SEK M

Financial assets

Financial liabilities

2019

2020

Gross
amount

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

Amounts
netted in the
balance sheet

Net amounts
in the balance
sheet

Amount
covered by
netting agree-
ment but not
offset

202

150

–

202

150

157

104

426

172

–

426

172

Net
amount

350

Netted financial assets and financial liabilities only consist of derivative instruments.

Outstanding derivative financial instruments at 31 December

Instrument, SEK M

Foreign exchange forwards, funding

Interest rate swaps1, fair value hedges

Interest rate swaps1, cash flow hedges

Total

31 December 2019

31 December 2020

Positive fair
value2

Negative fair
value2

Nominal value

Positive fair
value2

Negative fair
value2

Nominal value

108

–

202

–143

–6

–

–150

10,375

3,532

–

13,907

240

187

–

426

–172

–

7,923

2,609

432

–172

10,963

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

Cash and cash equivalents

Financial assets at fair value through profit or loss

Shares and interests

Derivative financial instruments

Hedge accounting

Held for trading

Total financial assets

Financial liabilities at amortized cost

Trade payables

Lease liabilities

Long-term loans – hedge accounting

Long-term loans – non-hedge accounting

Short-term loans – 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

2019

2020

Carrying amount

Fair value

Carrying amount

Fair value

15,701

153

442

108

153

442

108

13,665

252

2,756

187

240

13,665

252

2,756

187

240

16,504

17,106

7,908

3,739

2,933

18,167

688

4,772

7,908

3,739

2,933

18,422

688

4,772

1,366

143

39,722

143

39,977

7,028

3,562

2,781

19,600

–

3,514

944

171

7,028

3,562

2,781

20,157

–

3,515

944

171

37,600

38,158

The fair value of long-term borrowing is based on observable data by discounting cash
flows to market rate, which is deemed to correspond with level 2 according to the fair

value hierarchy. The fair value of current receivables and current liabilities is considered
to correspond to the carrying amount.

Financial instruments: measured at fair value

SEK M

Financial assets

Derivative financial instruments

Financial liabilities

Derivative financial instruments

Deferred considerations

2019

2020

Carrying
amounts

Quoted prices
(level 1)

Observable data
(level 2)

Non-observable
data (level 3)

Carrying
amounts

Quoted prices
(level 1)

Observable data
(level 2)

Non-observable
data (level 3)

202

150

1,366

–

202

150

–

1,366

426

172

944

–

426

172

–

944

Measurement at fair value is classified hierarchically in three different levels based on
input data used in measurement of the instruments. 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. Belongs to level 3 in the hierarchy.

For derivatives, the present value of future cash flows is calculated based on observa-
ble yield curves and exchange rates on the balance sheet date. Belongs to level 2 in the
hierarchy.

ASSA ABLOY | ANNUAL REPORT 2020
%

Operating margin (EBIT)1

Five years in summary

Amounts in SEK M unless stated otherwise

2016

2017

2018

2019

2020

71,293

76,137

84,048

94,029

87,649

Return on capital employed1

Operating income (EBIT) excluding items affecting comparability

11,254

Sales and income

Sales

Organic growth, %

Acquisitions and divestments, %

Operating income (EBIT)

Income before tax (EBT)

Net income

Cash flow

Cash flow from operating activities

Cash flow from investing activities

Cash flow from financing activities

Cash flow

Operating cash flow

Capital employed and financing

Capital employed

– of which goodwill

– of which other intangible assets and property, plant and
equipment

– of which right-of-use assets

– of which shares and interests in associates

Net debt

Non-controlling interests

9,657

8,952

6,653

8,575

–4,063

–4,271

240

10,467

12,341

11,673

8,635

9,248

–8,661

–861

–274

12,909

6,096

5,297

2,755

9,225

–6,427

–2,728

10,929

11,357

70,351

47,544

75,932

50,330

17,618

19,144

–

2,109

23,127

–

2,243

25,275

81,146

53,413

19,518

119

2,434

29,246

14,920

14,608

13,571

9,997

12,665

–5,464

–7,301

–100

14,442

92,204

57,662

21,191

3,731

2,595

33,050

–8

11,916

12,458

11,676

9,172

13,658

–6,741

–4,558

2,359

14,560

88,634

58,344

22,134

3,513

637

29,755

Shareholders’ equity, excluding non-controlling interest

47,220

50,648

51,890

59,143

58,870

Data per share, SEK

Earnings per share before and after dilution

5.99

7.77

2.48

9.00

8.26

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

Key figures

Operating margin (EBIT), % excluding items affecting
comparability

Operating margin (EBIT), %

Profit margin (EBT), %

Return on capital employed, %

Return on capital employed excluding
items affecting comparability, %

Return on shareholders’ equity, %

Equity ratio, %

Net debt/equity ratio

Interest coverage ratio, times

Total number of shares, thousands

7.09

42.51

3.00

7.77

45.60

3.30

8.09

46.71

3.50

9.22

53.25

3.85

169.10

170.40

158.15

219.00

7.54

53.00
3.901
202.50

Average number of employees

15.8

13.5

12.6

14.1

16.5

15.0

49.6

0.49

14.1

16.2

15.3

16.6

17.6

50.9

0.50

19.1

15.4

7.3

6.3

7.6

16.2

5.4

48.7

0.56

8.0

15.9

15.5

14.4

16.6

17.0

18.0

50.1

0.56

14.9

13.6

14.2

13.3

13.6

13.0

15.5

50.1

0.51

16.7

Number

50,000

40,000

30,000

20,000

10,000

1,112,576

1 Excluding items affecting
comparability.

Number of outstanding shares, thousands

1,110,776

Weighted average number of outstanding shares, before and
after dilution, thousands

Average number of employees

1 Dividend proposed by the Board of Directors.

1,110,776

46,928

47,426

48,353

48,992

48,471

ANNUAL REPORT 2020 | ASSA ABLOYFive years in summary

Comments on five years in summary

2016
The Group’s growth remained strong during the year, with
total sales growth of 5 percent excluding exchange rate effects.
The mature markets, primarily in Europe and the US, showed
robust growth, while the trend in the emerging markets in Asia,
Africa, the Middle East and parts of South America was more
subdued in general, affected by factors such as the low prices
for oil and other commodities. For ASSA ABLOY, the weak
demand in these markets was most pronounced in China.

A new restructuring program was launched during the
year. About fifty production plants and offices are set to
close over a three-year period, with an estimated payback
period of less than three years.

The focus in recent years on product development, innova-
tion and sustainability continued at a high level during 2016.
The technology shift toward an increased share of electrome-
chanics with more digital and mobile solutions is expected to
benefit ASSA ABLOY in the long term, and the proportion of
sales of electromechanical products exceeded 50 percent.
Operating income for the year, excluding items affecting
comparability, increased by 2 percent and cash flow contin-
ued to be strong. Earnings per share after full dilution, exclud-
ing items affecting comparability, increased 2 percent.

A total of 13 acquisitions were consolidated during the
year, which strengthened the market position for the Group
in key areas such as entrance automation and secure identity
solutions. ASSA ABLOY’s car locks operation was sold.

2017
Sales growth continued to be robust during the year.
Organic growth was 4 percent, driven by growing demand
for electromechanical and digital door opening solutions.
For ASSA ABLOY, the mature markets primarily in Europe
and the US demonstrated continued robust growth, while
the trend in the emerging markets was weaker, especially
in China, Brazil and the Middle East. Growth in Asia outside
China continued to be robust.

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 declara-
tions as part of its sustainable solutions initiative.

Operating income for the year, excluding items affect-
ing comparability, increased by 10 percent compared with
2016, and cash flow remained strong. Earnings per share
after full dilution, excluding items affecting comparability,
increased 10 percent.

A total of 16 acquisitions were consolidated during the
year, which strengthened the market position in areas such
as smart door locks, physical access management and iden-
tity solutions. ASSA ABLOY divested its project operation
within HID Global, AdvanIDe, in its entirety.

2018
Growth was strong during the year, with organic growth
of 5 percent driven by continued successes for electrome-
chanical and digital solutions, as well as strong growth in
North and South America. The mature markets continued
to demonstrate a favorable trend, with the US and Europe
demonstrating strong and robust growth, respectively,
during the year. The trend in the emerging markets was

weaker, especially in Asia and the Middle East.

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 and cash flow re-
mained strong. Earnings per share after full dilution, exclud-
ing 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.

2019
Organic growth was 3 percent, driven by good growth in
the Americas and Global Technologies divisions. Growth
was particularly strong in the US on robust demand for
smart locks in the private residential market, as well as the
commercial business segments. Growth in Europe and Asia
was generally mixed. The trend for the emerging markets
continued to be relatively weak.

The product development initiative accelerated during
the year with large investments in R&D, as reflected by the
27 percent of sales which relate to products that are less
than three years old.

Operating income for the year, excluding items affecting

comparability, increased by 12 percent and cash flow re-
mained strong. Earnings per share after full dilution, exclud-
ing items affecting comparability, increased 14 percent.

Acquisition activity continued to be high during the year;

at the same time, an agreement was also signed for the ac-
quisition of agta record, the largest acquisition since 2011.

2020
Demand was negatively impacted during the year by the
Covid-19 pandemic. Organic growth was –8 percent for the
Group, with a negative sales trend in all divisions. Cost-saving
measures and staff cuts have largely offset the negative
impact on earnings from lower sales. A new restructuring
programme was also launched at the end of the year, with
plans to close about ten plants and about thirty offices for a
two-year period. The operating cash flow remained strong
thanks to, among other things, cost reductions and reduced
working capital.

Demand was generally more stable in the more mature
markets in Europe and the US compared with the trend in
the emerging markets, especially in Asia, the Middle East and
Africa. The focus on product development and innovation
continued with undiminished strength. Major investments
were made in R&D, where the full workforce was kept intact
during the year.

Operating income for the year, excluding items affecting
comparability, decreased by 20 percent. Cash flow remained
strong. Acquisition activity continued to be high during
the year; for example, the acquisition of agta record was
completed.

ASSA ABLOY | ANNUAL REPORT 2020Definitions 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.

Equity ratio
Shareholders’ equity as a percentage of total assets.

Operating margin (EBITA)
Operating income before amortization of intangible assets
recognized in business combinations, as a percentage of
sales.

Operating margin (EBIT)
Operating income as a percentage of sales.

Profit margin (EBT)
Income before tax as a percentage of sales.

Operating cash flow
Cash flow from operating activities excluding restructuring
payments and tax paid on income minus net capital ex-
penditure and amortization of lease liabilities. See the table
on operating cash flow for detailed information.

Net capital expenditure
Investments in, less sales of, intangible assets and property,
plant and equipment.

Depreciation and amortization
Depreciation and amortization of intangible assets, prop-
erty, plant and equipment and right-of-use assets.

Net debt
Interest-bearing liabilities less interest-bearing assets. See
the table on net debt for detailed information.

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.

Definitions

ANNUAL REPORT 2020 | ASSA ABLOYProposed 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 10,112 M
Net income for the year: SEK 5,552 M
TOTAL: SEK 16,452 M

The Board of Directors proposes that a dividend of SEK 3.90 per share, a total of SEK 4,332 M, be distributed to shareholders
and that the remainder, SEK 12,120 M, be carried forward to the new financial year. The dividend amount is calculated on
the number of outstanding shares as per 5 February 2021.

In order to facilitate a more efficient cash management, the dividend is proposed to be paid in two equal installments, the
first with the record date 30 April 2021 and the second with the record date 23 November 2021. If the proposal is adopted
by the general meeting, the first installment is estimated to be paid on 5 May 2021 and the second installment on 26 No-
vember 2021.

No dividend is payable on ASSA ABLOY AB’s holding of treasury shares, the exact number of which is determined on the
record date for payment of dividend. ASSA ABLOY AB held 1,800,000 treasury shares as at 5 February 2021.

The Board of Directors and the President and CEO declare that the consolidated accounts have been prepared in accord-
ance 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 ac-
cepted accounting principles in Sweden and give a true and fair view of the Parent company’s financial position and results.

The Report of the Board of Directors for the Group and the Parent company gives a true and fair view of the development of
the Group’s and the Parent company’s business operations, financial position and results, and describes material risks and
uncertainties to which the Parent company and the other companies in the Group are exposed.

Stockholm, 5 February 2021

Lars Renström
Chairman

Carl Douglas
Vice Chairman

Nico Delvaux
President and CEO

Lena Olving
Board member

Eva Karlsson
Board member

Sofia Schörling Högberg
Board member

Birgitta Klasén
Board member

Jan Svensson
Board member

Joakim Weidemanis
Board member

Rune Hjälm
Board member
Employee representative

Mats Persson
Board member
Employee representative

Our audit report was issued on 5 February 2021

Ernst & Young AB

Hamish Mabon
Authorized Public Accountant
Auditor in charge

ASSA ABLOY | ANNUAL REPORT 2020Auditor’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) except for the corporate
governance statement on pages 47–57 for the year 2020.
The annual accounts and consolidated accounts of the com-
pany are included on pages 40–94 and 98 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 2020 and its financial perfor-
mance 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 2020 and their
financial performance and cash flow for the year then ended

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

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.
For each matter below, our description of how our audit
addressed the matter is provided in that context.

in accordance with International Financial Reporting Stand-
ards (IFRS), as adopted by the EU, and the Annual Accounts
Act. Our opinions do not cover the corporate governance
statement on pages 47–57. 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 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 con-
trolled companies within the EU.

We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinions.

We have fulfilled the responsibilities described in the
Auditor’s responsibilities for the audit of the financial state-
ments section of our report, including in relation to these
matters. Accordingly, our audit included the performance of
procedures designed to respond to our assessment of the
risks of material misstatement of the financial statements.
The results of our audit procedures, including the proce-
dures performed to address the matters below, provide the
basis for our audit opinion on the accompanying financial
statements.

Auditor’s report

ANNUAL REPORT 2020 | ASSA ABLOYAuditor’s report

100

Goodwill and other intangibles with an indefinite useful life

Description of the matter

How this matter was addressed in the audit

In our audit we have evaluated and reviewed key assumptions,
the application of recognized valuation practices, discount rate
(and other source data that the Company has applied. Our eval-
uation has included comparing to external data sources, such
as forecasts of inflation or assessment of future market growth
and by evaluating the sensitivity in the Company’s valuation
model. We have specifically focused on the sensitivity in the
calculations and have made an independent evaluation of
whether there is a risk that reasonably probable events would
give rise to a situation where the value in use would be lower
than the carrying amount. We have included valuation experts
with appropriate skills in the team performing our review.
Finally, we have evaluated disclosures provided in Note 14
(“Intangible assets”), specifically with regards to the disclosure
of which of the stated assumptions that are most sensitive in
calculating the value in use and the sensitivity analysis for those
key assumptions.

The value of goodwill and other intangibles with an indef-
inite useful life as of 31 December 2020 amounted to
72.5 billion SEK. The Company performs an annual
impairment test as well as whenever impairment indica-
tors are identified. The recoverable amount for each
cash-generating unit is determined as the value in use,
which is calculated based on the discounted present
value of future cash flows. Key assumptions in these cal-
culations include forecast operating results, growth rates
to extrapolate future cash flows and discount rates to be
applied on future estimated cash flows. Applied discount
rate (also referred to as “WACC- Weighted Average Cost
of Capital”) is presented in note 14 (“Intangible assets”).
An impairment test is a complex process and contains a
high degree of judgment regarding future cash flows and
other assumptions, not least because it is based on esti-
mates of how the Company’s business will be affected by
future market developments and by other economic
events. Therefore, we have assessed valuation of goodwill
and other intangibles assets with an indefinite useful life
to be a key audit matter.

Provisions – Restructuring programs

Description

How our audit addressed this key audit matter

The restructuring program is described in the Report of
Board of Directors in the annual report in note 26.
Restructuring programs have been launched during the
year and previous years and provision amounts to 1.4 bil-
lion SEK as per December 31, 2020. A provision for
restructuring measures is recognized when the Company
has established a detailed plan and either implementa-
tion has begun, or the main features of the measures
have been communicated to the parties involved. In our
audit we have focused on the recognition in the proper
period and valuation of the restructuring provision as
they require management judgment and estimation.
Because of the significant amount and subjectivity of the
estimates involved, we have assessed restructuring provi-
sions to be a key audit matter.

We have reviewed the Company’s process for identifying
restructuring projects and the estimated costs for these pro-
jects. Our audit procedures include evaluating if the restructur-
ing programs in all material respects are in line with the
accounting principles for provisions, i.e. IAS 37. We have evalu-
ated if there is a present obligation. We have challenged man-
agement’s assumptions related to the provisions with the aim
of assessing the appropriateness of the provisions. Based on
risk and materiality, we have compared the inputs in the calcu-
lation to supporting documentation. This includes, among
other things, the examination of minutes, agreements and
communication with employees. We have evaluated manage-
ment’s assessment of remaining cash flows by reviewing their
quarterly project updates. Finally, we have evaluated the disclo-
sures provided regarding restructuring activities in Note 26.

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 on
pages 1–39, 95–97 and 104–109. The Board of Directors and
the Managing Director are responsible for this other infor-
mation.

Our opinion on the annual accounts and consolidated
accounts does not cover this other information and we do
not express any form of assurance conclusion regarding this
other information.

In connection with our audit of the annual accounts and
consolidated accounts, our responsibility is to read the infor-

mation identified above and consider whether the informa-
tion is materially inconsistent with the annual accounts and
consolidated accounts. In this procedure we also take into
account our knowledge otherwise obtained in the audit and
assess whether the information otherwise appears to be
materially misstated.

If we, based on the work performed concerning this infor-

mation, conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regards.

ASSA ABLOY | ANNUAL REPORT 2020Responsibilities of the Board of Directors and the Managing Director

The Board of Directors and the Managing Director are
responsible for the preparation of the annual accounts and
consolidated accounts and that they give a fair presentation
in accordance with the Annual Accounts Act and, concern-
ing the consolidated accounts, in accordance with IFRS as
adopted by the EU. The Board of Directors and the Managing
Director are also responsible for such internal control as they
determine is necessary to enable the preparation of annual
accounts and consolidated accounts that are free from
material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated

accounts, The Board of Directors and the Managing Director

are responsible for the assessment of the company’s and the
group’s ability to continue as a going concern. They disclose,
as applicable, matters related to going concern and using the
going concern basis of accounting. The going concern basis
of accounting is however not applied if the Board of Direc-
tors and the Managing Director intends to liquidate the
company, to cease operations, or has no realistic alternative
but to do so.

The Audit Committee shall, without prejudice to the
Board of Director’s responsibilities and tasks in general,
among other things oversee the company’s financial report-
ing process.

Auditor’s responsibility

Our objectives are to obtain reasonable assurance about
whether the annual accounts and consolidated accounts as
a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that
includes our opinions. Reasonable assurance is a high level of
assurance but is not a guarantee that an audit conducted in
accordance with ISAs and generally accepted auditing stand-
ards in Sweden will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggre-
gate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
annual accounts and consolidated accounts.

As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional skepticism
throughout the audit. We also:
• Identify and assess the risks of material misstatement of

the annual accounts and consolidated accounts, whether
due to fraud or error, design and perform audit proce-
dures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our
opinions. The risk of not detecting a material misstate-
ment resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, inten-
tional omissions, misrepresentations, or the override of
internal control.

• Obtain an understanding of the company’s internal con-
trol relevant to our audit in order to design audit proce-
dures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effective-
ness of the company’s internal control.

• Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and
related disclosures made by the Board of Directors and
the Managing Director.

• Conclude on the appropriateness of the Board of Direc-
tors’ and the Managing Director’s use of the going con-
cern basis of accounting in preparing the annual accounts
and consolidated accounts. We also draw a conclusion,
based on the audit evidence obtained, as to whether any
material uncertainty exists related to events or conditions
that may cast significant doubt on the company’s and the

group’s ability to continue as a going concern. If we con-
clude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related dis-
closures in the annual accounts and consolidated
accounts or, if such disclosures are inadequate, to modify
our opinion about the annual accounts and consolidated
accounts. Our conclusions are based on the audit evi-
dence obtained up to the date of our auditor’s report.
However, future events or conditions may cause a com-
pany and a group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of
the annual accounts and consolidated accounts, including
the disclosures, and whether the annual accounts and
consolidated accounts represent the underlying transac-
tions and events in a manner that achieves fair presenta-
tion.

• Obtain sufficient and appropriate audit evidence regard-
ing the financial information of the entities or business
activities within the group to express an opinion on the
consolidated accounts. We are responsible for the direc-
tion, supervision and performance of the group audit. We
remain solely responsible for our opinions.

We must inform the Board of Directors of, among other mat-
ters, the planned scope and timing of the audit. We must
also inform of significant audit findings during our audit,
including any significant deficiencies in internal control that
we identified.

We must also provide the Board of Directors with a state-

ment that we have complied with relevant ethical require-
ments regarding independence, and to communicate with
them all relationships and other matters that may reasona-
bly be thought to bear on our independence, and where
applicable, related safeguards.

From the matters communicated with the Board of Direc-

tors, we determine those matters that were of most signifi-
cance in the audit of the annual accounts and consolidated
accounts, including the most important assessed risks for
material misstatement, and are therefore the key audit mat-
ters. We describe these matters in the auditor’s report unless
law or regulation precludes disclosure about the matter.

Auditor’s report

101

ANNUAL REPORT 2020 | ASSA ABLOYReport on other legal and regulatory requirements

Opinions

In addition to our audit of the annual accounts and consoli-
dated accounts, we have also audited the administration of
the Board of Directors and the Managing Director of ASSA
ABLOY AB (publ) for the year 2020 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 pro-

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 eth-
ics for accountants in Sweden and have otherwise fulfilled

posal in the statutory administration report and that the
members of the Board of Directors and the Managing Direc-
tor be discharged from liability for the financial year.

A separate list of loans and collateral has been prepared in

accordance with the provisions of the Companies Act.

our ethical responsibilities in accordance with these require-
ments.

We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinions.

Responsibilities of the Board of Directors and the Managing Director

The Board of Directors is responsible for the proposal for
appropriations of the company’s profit or loss. At the pro-
posal of a dividend, this includes an assessment of whether
the dividend is justifiable considering the requirements
which the company’s and the group’s type of operations, size
and risks place on the size of the parent company’s and the
group’s equity, consolidation requirements, liquidity and
position in general.

The Board of Directors is responsible for the company’s
organization and the administration of the company’s affairs.
This includes among other things continuous assessment of

the company’s and the group’s financial situation and ensur-
ing that the company’s organization is designed so that the
accounting, management of assets and the company’s finan-
cial affairs otherwise are controlled in a reassuring manner.
The Managing Director shall manage the ongoing adminis-
tration according to the Board of Directors’ guidelines and
instructions and among other matters take measures that
are necessary to fulfill the company’s accounting in accord-
ance with law and handle the management of assets in a
reassuring manner.

Auditor’s report

102

ASSA ABLOY | ANNUAL REPORT 2020Auditor’s responsibility

Our objective concerning the audit of the administration,
and thereby our opinion about discharge from liability, is to
obtain audit evidence to assess with a reasonable degree of
assurance whether any member of the Board of Directors or
the Managing Director in any material respect:
• has undertaken any action or been guilty of any omission

which can give rise to liability to the company, or
• in any other way has acted in contravention of the

Companies Act, the Annual Accounts Act or the Articles
of Association.

Our objective concerning the audit of the proposed appro-
priations of the company’s profit or loss, and thereby our
opinion about this, is to assess with reasonable degree of
assurance whether the proposal is in accordance with the
Companies Act.

Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with
generally accepted auditing standards in Sweden will always
detect actions or omissions that can give rise to liability to
the company, or that the proposed appropriations of the
company’s profit or loss are not in accordance with the Com-
panies Act.

As part of an audit in accordance with generally accepted
auditing standards in Sweden, we exercise professional judg-
ment and maintain professional skepticism throughout the
audit. The examination of the administration and the pro-
posed appropriations of the company’s profit or loss is based
primarily on the audit of the accounts. Additional audit pro-
cedures performed are based on our professional judgment
with starting point in risk and materiality. This means that we
focus the examination on such actions, areas and relation-
ships that are material for the operations and where devia-
tions and violations would have particular importance for
the company’s situation. We examine and test decisions
undertaken, support for decisions, actions taken and other
circumstances that are relevant to our opinion concerning
discharge from liability. As a basis for our opinion on the
Board of Directors’ proposed appropriations of the compa-
ny’s profit or loss we examined the Board of Directors’ rea-
soned statement and a selection of supporting evidence in
order to be able to assess whether the proposal is in accord-
ance with the Companies Act.

The auditor’s examination of the corporate governance statement

The Board of Directors is responsible for that the corporate
governance statement on pages 47–57 has been prepared in
accordance with the Annual Accounts Act.

Our examination of the corporate governance statement

is conducted in accordance with FAR’s auditing standard
RevU 16 The auditor’s examination of the corporate govern-
ance statement. This means that our examination of the cor-
porate governance statement is different and substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing and generally accepted

auditing standards in Sweden. We believe that the examina-
tion has provided us with sufficient basis for our opinions.
A corporate governance statement has been prepared.
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.

The auditor’s opinion regarding the statutory sustainability report

The Board of Directors is responsible for the statutory sus-
tainability report and that it is prepared in accordance with
the Annual Accounts Act.

Our examination has been conducted in accordance with

FAR’s auditing standard RevR 12 The auditor’s opinion
regarding the statutory sustainability report. This means that
our examination of the statutory sustainability report is dif-

ferent and substantially less in scope than an audit con-
ducted in accordance with International Standards on Audit-
ing and generally accepted auditing standards in Sweden.
We believe that the examination has provided us with suffi-
cient basis for our opinion.

A statutory sustainability report has been prepared.

Ernst & Young AB with Hamish Mabon as auditor in charge, Box 7850, 103 99 Stockholm, was appointed auditor of ASSA
ABLOY AB (publ) by the general meeting of the shareholders on the 29 April 2020.

Stockholm 5 February 2021

Ernst & Young AB

Hamish Mabon
Authorized Public Accountant

Auditor’s report

103

ANNUAL REPORT 2020 | ASSA ABLOYShareholder information

ASSA ABLOY as an investment

We are the global leader in access solutions. Since ASSA ABLOY was founded in 1994, we have
created significant customer and shareholder value by continuously optimizing our produc-
tion and developing new, innovative products that meet our customers’ needs and demands.
Below are the main reasons why we create customer and shareholder value.

+138%

sales in 10 years

107%

EPS in 10 years

SEK 28 bn

dividend in 10 years

4 Good industry to be in – We are subject to under-
1
lying strong megatrends supporting growth and
demand for our products. These include increased demand
for security and sustainable buildings, urbanization, digita-
lization, changing codes and continuous changes in local
market regulations (see page 7). Our customer offering is
aligned with the fundamental growth trends and a usually
steady aftermarket makes us less vulnerable to the cyclical
demand affecting many other industries.

4 Consistent profitable growth – We have a long track
2
record of profitable growth. Our revenue has grown
by more than 9% annually during the last ten years and the
adjusted EBIT margin has been stable at above 16%, when
excluding the year of the pandemic. We continue to focus
on growing through customer relevance and being cost
efficient in everything we do, which enables us to deliver
consistent profitable growth. The shift to electromechanical
products also enables us to continue to grow in a profitable
way long-term.

4 Leading market position – We have the largest
3
installed base and through our employees the deep-
est know-how of locks and different access solutions in the
world, which is continuously maintained and upgraded with
new solutions. Two thirds of our revenue is generated from
the aftermarket, which provides us with a stable customer
and revenue base.

established customer bases and brands. After realizing syner-
gies, we grow the businesses and increase their profitability
and margins. This strategy has proven successful and since
2011, we have acquired businesses with SEK 37 billion in
sales that after integration have generated significant value.

4 Strong brand portfolio – There is considerable value
6
in our well-known and trusted brands that play an
important role in creating loyalty and differentiation. We
use a multi-brand strategy to combine global and local
strengths. ASSA ABLOY is the Group brand and is increas-
ingly becoming the leading brand for commercial door
solutions. We also have strong master brands to continue
to be a leader in each of the core areas of our business and
a portfolio of other brands in markets and segments where
needed. In total, we have 130 endorsed brands that comple-
ment our offering. Our brands are often leading brands in
their market, such as Yale, which is one of the world’s most
well-known residential lock brands.

tured around local assembly lines close to the cus-

4 Operational efficiency – Our production is struc-
7
tomer, adapted according to the local standards, with some
strategic components concentrated to larger plants. This
enables us to quickly supply our products efficiently to our
customers. We also continue to optimize our supply chain,
product setup and footprint and work with lean processes
and automation.

revenue in R&D. Given the size of our business, this

4 Investing in innovation – We invest about 4% of our
4
gives us a strong competitive advantage, both short and
long term. Our innovation capacity is based on our common
platforms, the global reach but local competence of our in-
novation organization, our more than 2,800 R&D employees
and more than 9,000 patents. Products launched in the past
three years account for 25% of our total sales.

than 300 companies globally since ASSA ABLOY

4 Strong acquisition record – We have acquired more
5
was established in 1994. In many cases, the businesses are
leading access providers in their respective market with well-

our revenue is generated by products which have an

4 Active sustainability initiatives – About one third of
8
environmental product declaration (EPD), based on a life
cycle assessment. As sustainability will be vital to economic
and industrial development in the coming decades, in 2020
we committed to science-based targets. This will further
improve our competitiveness and provides sound business
production and product development incentives. When we
develop new products, our ambition is to minimize their
environmental impact and embodied carbon footprint,
while maximizing sustainability attributes, such as energy
efficiency, during the products’ in-use phase of their lifecycle
and to recycle once they reach their end of life.

Sales and operating income

Dividend and earnings per share

New product ratio

SEK M

15,000

12,000

9,000

6,000

3,000

Omsättning
Rörelseresultat1

Sales
Operating income1

1 Excluding items affecting

comparability.

SEK

SEK M

100,000

80,000

60,000

40,000

20,000

104

Utdelning per aktie

Dividend per share

Vinst per aktie efter
Earnings per share after
utspädning1
dilution1

1 Excluding items affecting

comparability.

ASSA ABLOY | ANNUAL REPORT 2020The ASSA ABLOY share

Share price trend
The beginning of 2020 started with a positive share price
development with the share price peaking in February. In
March, stock exchanges and ASSA ABLOY’s share price fell
sharply following the outbreak of the Covid-19 pandemic.
By 23 March, OMX Stockholm PI Index and ASSA ABLOY’s
share price had decreased by 30 percent respective 27
percent. Thereafter, capital markets stabilized and for the
full year OMX Stockholm PI Index increased 12.9 percent.
ASSA ABLOY’s share price closed at SEK 202.5, a decrease of
7.5 percent for the full year.

The highest closing price for ASSA ABLOY Series B during
the year was SEK 246.5 recorded on 20 February 2020 and
the lowest of SEK 159.35 was recorded on 23 March 2020.
At year-end, market capitalization amounted to SEK 225,297
M (243,654), calculated on both Series A and Series B
shares.

Listing and trading
ASSA ABLOY’s Series B share has been listed on Nasdaq
Stockholm, Large Cap since 8 November 1994 under the
code ASSA-B.ST. Turnover of the Series B share on Nasdaq
Stockholm amounted to 623 million shares (468), equiva-
lent to a turnover rate of 59 percent (55).

The implementation of the EU’s Markets in Financial
Instruments Directive (MiFID) in 2007 has changed the
structure of equity trading in Europe and trading now takes
place on both regulated markets and other trading plat-
forms. Trading is now more fragmented with an important
proportion of trading in shares in Swedish companies on
markets other than Nasdaq Stockholm. In 2020, the ASSA
ABLOY share was traded on numerous markets, with trading
on Nasdaq Stockholm accounting for 30 percent of share
turnover, compared with 65 percent in 2009. The total trade
of the Series B share including other markets in 2020 was
2.070 (1.611) million shares, equivalent to a turnover rate of
196 percent (153).

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 and turnover 2011–20201

Dividend per share 2011–2020

SEK

300

250

200

150

100

No. of shares traded, thousands

600,000

500,000

400,000

300,000

200,000

100,000

SEK

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

ASSA ABLOY B
ASSA ABLOY B, total return

OMX Stockholm PI

No. of shares traded, thousands (incl. after hours)

2020 proposed dividend

Share price and turnover 2020

SIX Return Index

Source: Nasdaq, Fidessa and Bloomberg

No. of shares traded, thousands

Markets for the share1

No. of shares traded, millions

SEK

270

250

230

210

190

170

150

300,000

250,000

200,000

150,000

100,000

50,000

2,500

2,000

1,500

1,000

500

ASSA ABLOY B

OMX Stockholm PI

No. of shares traded, thousands (incl. after hours)

Source: Nasdaq, Fidessa and Bloomberg

Cboe (APA, BXE, CXE)
Stockholm
London
Turquoise

Boat
Others

Source: Fidessa

105

ANNUAL REPORT 2020 | ASSA ABLOYShareholder information

Data per share

SEK/share1

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, millions6

2011
4,102
1.50

2.6

36.6

57.53

64.97

44.50

21.85

2012

4.66

1.70

2.1

36.8

80.97

81.60

57.23

23.29

2013
4,952
1.90

1.7

38.4

2014

2015

5.79

2.17

1.6

37.4

6.93

2.65

1.5

38.2

2016
7.092
3.00

1.8

42.3

2017

7.77

3.30

1.9

42.5

2018
8.092
3.50

2.2

43.3

2019
9.222
3.85

1.8

41.8

2020
7.542
3.903
1.9

51.7

113.27

138.27

178.00

169.10

170.40

158.15

219.00

202.50

114.07

139.17

189.00

190.10

197.10

193.90

231.40

246.50

79.33

25.94

105.63

135.00

148.40

163.80

155.85

154.45

159.35

32.50

37.43

42.51

45.60

46.71

53.25

53.00

1,113.6

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 2011, 2013, 2016, 2018-2020.
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 2020 was 43,734
(29,784) and the ten largest shareholders accounted for
34.9 percent (36.5) of the share capital and 55.5 percent
(56.7) of the votes. Shareholders with more than 50,000

shares, a total of 433 shareholders, accounted for 97
percent (98) of the share capital and 98 percent (98) of the
votes. Investors outside Sweden owned 66.8 percent (69.5)
of the share capital and accounted for 45.6 percent (47.5)
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 2020.

Shareholders

Investment AB Latour

Melker Schörling AB

Capital Group

BlackRock

Fidelity Investments

Alecta Pension Insurance

Swedbank Robur Funds

Vanguard

Norges Bank

Allianz Global Investors

Other shareholders

Total number

Series A shares

Series B shares

Total number of shares

Share capital1, %

Votes1, %

41,595,729

15,930,240

63,900,000

18,027,992

48,366,240

34,785,666

32,847,109

32,445,000

27,600,834

26,549,043

23,222,727

22,233,744

725,072,010

57,525,969

1,055,050,365

105,495,729

33,958,232

48,366,240

34,785,666

32,847,109

32,445,000

27,600,834

26,549,043

23,222,727

22,233,744

9.5

3.1

4.4

3.1

2.9

2.5

2.4

2.1

2.0

725,072,010

1,112,576,334

65.1

100.0

29.4

10.9

3.0

2.1

2.0

1.7

1.6

1.4

44.5

100.0

1 Based on the number of outstanding shares and votes of 1,110,776,334 and 1,628,510,055 respectively, excluding shares held by ASSA ABLOY.

Source: Modular Finance AB and Euroclear Sweden AB.

Ownership structure (share capital)

Ownership structure (votes)

Latour, 9.5%
Legend

Capital Group, 4.4%

Legend

Melker Schörling AB, 3.1%

Legend

BlackRock, 3.1%

Legend

Fidelity Investments, 2.9%

Latour, 29.4%

Legend

Melker Schörling AB, 10.9%

Legend

Capital Group, 3.0%

Legend

BlackRock, 2.1%

Legend

Fidelity Investments, 2.0%

Legend

Alecta Pension Insurance, 2.9%

Legend

Swedbank Robur Funds, 2.5%

Vanguard, 2.4%

Norges Bank, 2.1%

Allianz Global Investors, 2.0%

Other shareholders, 65.1%

Legend

Alecta Pension Insurance, 2.0%

Legend

Swedbank Robur Funds, 1.7%

Vanguard, 1.6%

Norges Bank, 1.4%

Allianz Global Investors, 1.4%

Other shareholders, 44.5%

106

ASSA ABLOY | ANNUAL REPORT 2020Share capital and voting rights
The share capital amounted to SEK 370,858,778 at year-end
2020, 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.

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 Annual General Meeting 2020 autho-
rized the Board of Directors to acquire, during the period
until the next Annual General Meeting, a maximum number
of Series B shares so that after each repurchase ASSA ABLOY
holds a maximum 10 percent of the total number of shares
in the company.

ASSA ABLOY holds a total of 1,800,000 (1,800,000) Series
B shares after repurchase. These shares account for around
0.2 percent (0.2) of the share capital and each share has a
par value of around SEK 0.33. The purchase consideration
amounted to SEK 103 M. No shares were repurchased in
2020.

Changes in share capital

Year

1989

1994

1996

1997

1998

1999

2000

2001

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

Split 3:1

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 proposes a dividend to sharehold-
ers of SEK 3.90 per share (3.85) for the 2020 financial year.
In order to facilitate a more efficient cash management, the
dividend is proposed to be paid in two equal installments,
the first with the record date 30 April 2021 and the second
with the record date 23 November 2021. If the proposal is
adopted by the Annual General Meeting, the first install-
ment is estimated to be paid on 5 May 2021 and the second
installment on 26 November 2021.

The proposal is equivalent to a total dividend yield on the

Series B share of 1.9 percent (1.8). In 2020 the total return
on the ASSA ABLOY share, defined as market price move-
ment plus reinvested dividends, was –5.7 percent, compared
with the reinvested SIX Return Index in Stockholm, which
was up 14.8 percent. Over the ten-year period 2011–2020,
the total return on ASSA ABLOY’s Series B share was 284
percent, compared with the reinvested SIX Return Index in
Stockholm which increased 193 percent.

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

16,761,648

18,437,812

19,175,323

57,525,969

Series B
shares

Share capital,
SEK1

2,000,000

50,417,555

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

53,592,110

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

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).

Shareholder information

107

ANNUAL REPORT 2020 | ASSA ABLOYShareholder information

Information for shareholders

Annual General Meeting
The ASSA ABLOY Annual General Meeting 2021 will be held
on 28 April 2021. The notice to convene the Annual General
Meeting will be made in the prescribed manner.

Nomination Committee
The Nomination Committee has the task of preparing, on
behalf of the shareholders, proposals regarding the elec-
tion 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
division 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 any changes of the
instructions for the Nomination Committee.

The Nomination Committee prior to the 2021 Annual

General Meeting comprises Carl Douglas (Investment AB
Latour), Mikael Ekdahl (Melker Schörling AB), Marianne
Nilsson (Swedbank Robur funds), Liselott Ledin (Alecta) and
Yvonne Sörberg (Handelsbanken Fonder). Carl Douglas is
Chairman of the Nomination Committee.

Dividend
The Board of Directors proposes a dividend to shareholders
of SEK 3.90 per share for the 2020 financial year. In order to
facilitate a more efficient cash management, the dividend
is proposed to be paid in two equal installments, the first
with the record date 30 April 2021 and the second with the
record date 23 November 2021. If the proposal is adopted
by the Annual General Meeting, the first installment is esti-
mated to be paid on 5 May 2021 and the second installment
on 26 November 2021.

108

ASSA ABLOY | ANNUAL REPORT 2020Financial calendar and contact details

Shareholder information

Annual General Meeting and dividend

Annual General Meeting

28 April 2021

Shares traded excluding right
to dividend of SEK 1.95
Record day for dividend
Payment of dividend

29 April 2021
30 April 2021
5 May 2021

22 November 2021
23 November 2021
26 November 2021

Financial reporting
Interim Report January–March 2021
Half-year Report January–June 2021
Interim Report January–September 2021
Year-end Report 2021

28 April 2021
19 July 2021
27 October 2021
4 February 2022

Further information
Hedvig Wennerholm
Telephone +46 (0)8 506 485 51
hedvig.wennerholm@assaabloy.com

Reports can be ordered from
ASSA ABLOY AB
• Website
• Telephone
• Email
• Mail

assaabloy.com
+46 (0)8 506 485 00
info@assaabloy.com
ASSA ABLOY AB
Box 70340
SE-107 23 Stockholm

Production: ASSA ABLOY in cooperation with Narva.
Photo: Peter Hoelstad and ASSA ABLOY’s own photographic library, among others.
Printing: Print Run, Stockholm, 2021.

DIC S W AN EC

R
O
N

Printed matter
3041 0701

109

ANNUAL REPORT 2020 | ASSA ABLOY

The cover of the annual report and some of the pictures in
the report show the Royal College of Music in Stockholm.
This college educates musicians and music teachers at
the highest international level. Recently, the Royal College
of Music moved into this new modern campus area that
was custom-made for music education, and for creating,
experiencing and researching music.

About 1,300 students, together with more than 200 teach-
ers, work in the building. As a center for music, concerts
and events are a natural part of its operation with hundreds
of guests. The different activities in the building create a
demanding environment for security and access.

To manage the access in a secure and convenient way a
decision was made to install more than 300 ASSA ABLOY
Pando readers and integrated WiFi-connected escutcheon
DBL350, all controlled with ASSA ABLOY’s ARX access
control system. ARX is an easy system to use and a secure
way to control connected readers and locks.

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

assaabloy.com