Increased focus on
Characteristics of the EMEA division
The EMEA division comprises companies in Europe, the Middle East and Africa. EMEA is the Group's largest division and accounts for 41 percent of total sales. During the year the division achieved an organic growth of 3 percent and an EBIT margin of 14.7 percent. The EMEA division has 12,400 employees, 46 production units and 30 sales companies. The division is organized into eleven geographical market regions. EMEA's management is based in Stockholm, Sweden. The division's largest markets are Scandinavia and France, and the leading companies are Abloy, Assa, Tesa and Vachette.
The EMEA division companies operate in a strongly diversified market with significant local differences. Different traditions in the markets of northern Europe, southern Europe, the Middle East and Africa, reinforced by different building standards and different climates, mean that there are many different needs to be met. Consequently there may be substantial differences between the products in demand on each local market. ASSA ABLOY's strength is that its companies have a large installed base of locks in every local market, which leads to good aftermarket sales. ASSA ABLOY has excellent relationships with distributors and good knowledge of local lock standards. The aftermarket accounts for a significant fraction of EMEA's sales. Local brands play an important part in winning such business.
In EMEA's largest markets there is generally no clear distinction between products for the residential segment and products for the commercial segment. Many products currently sell to customers in both segments. An interior door lock for an office will serve equally well in a home. In this respect the European market contrasts with, for example, the American market.
Many Group companies have a broad product range to cater for different local demands and dimensional standards and different door materials such as wood, aluminum, steel and glass. With modification, some of these products can be used in many of EMEA's market regions with the aim of creating more secure, more functional locking solutions. However, this requires increased efforts in certain markets to inform and educate dealers, customers and other interested parties about the advantages of better security solutions.
Report on the year
Demand for ASSA ABLOY's products was generally stable during 2005. The year started weakly with relatively low demand in the first half of the year, but sales improved in the second half of 2005. EMEA saw strongest growth in its markets in Scandinavia, eastern Europe, the Middle East and Africa.
The prices of raw materials, including important metals such as brass and zinc, continued to rise. However, Group companies were largely able to compensate for these cost increases by means of greater cooperation in purchasing and by raising their own prices.
During 2005 EMEA began to unify the Group companies' marketing and sales forces under the main ASSA ABLOY brand name.
The Leverage & Growth action program, whose activities came to an end during the year, has improved ASSA ABLOY's production structure. 'Lean manufacturing' methods are used more and more widely in the division's factories.
Ongoing reductions of the cost base will play a major role in ASSA ABLOY, and experience gained from the Leverage & Growth program will be important in seeing these continuing measures through.
The importance of the electromechanical product segment continues to grow throughout ASSA ABLOY, and in EMEA the segment recorded good growth during the year. One example of this progress was the success of CLIQ, which achieved particularly good sales in Germany. The German market is characterized by a relatively high proportion of large office complexes with security solutions based on masterkey systems. One advantage of CLIQ is simpler key management, which makes it easy to exclude a key from the system. Another is the ability to handle systems with more than 2000 cylinders.
EMEA division, Key figures
1 Excluding restructuring payments.
1 Excluding restructuring payments.
2 2003 has not been adjusted for IFRS but amortization of goodwill has been excluded.