Achieving continuous improvements
CHARACTERISTICS OF THE AMERICAS DIVISION
The Americas division comprises companies in North and South America. Americas is ASSA ABLOY's second-largest division and accounts for 30 percent of total sales. During the year the division had an organic growth of 5 percent and an EBIT margin of 18.3 percent. Its head office is in New Haven, Connecticut, USA. In the USA the division is sub-divided into product groups and sales organizations, while geographical organizations serve Canada, Mexico and South America. Americas division has 9,300 employees in 24 production units and 8 sales companies. The major companies in the division include Corbin Russwin, Curries, Emtek, Medeco, Phillips and Sargent.
Report on the year
After allowing for raw material inflation which character-ized the construction industry during 2005, the overall non-residential construction markets in the USA and Canada remained steady at similar levels to 2004. During the year there were significant increases in the prices of steel and other raw materials, which in turn led to unavoidable increased prices for ASSA ABLOY Group company products. Sales of residential products continued to grow despite slower growth rates in the US housing market.
The Mexican market showed weak development during the year whereas the Canadian and South American markets remained steady.
Some major activities in 2005 were to consolidate sales forces and to develop specification resources for work in the US market.
Clear distinction between market segments
The North American market differs from the European market in having a clear distinction between products intended for the non-residential segment and products intended for the residential segment. As a result, very few of the division's products are suitable for both markets. The distribution channels serving the two segments are also differentiated.
Another unique characteristic of ASSA ABLOY in the USA and Canada is the manufacturing of non-residential wood and metal doors and related door frames to complement its locking-related hardware and fittings.
The non-residential segment
The non-residential segment, comprising institutional, commercial and industrial end-users, accounts for a very large percentage of the division's sales in the USA and Canada. Typical applications are in public buildings, hospitals, school and college campuses, airports, transport terminals, sports and shopping centers, manufacturing plants and commercial offices. These projects are inherently complex compared to a typical residential building and often include such functional requirements as the integration of door security and safety egress.
Security and safety standards for these more complex environments are much more demanding and often require more lock functionality than typical residential applications. Due to the changing nature of intricate building, fire and life-safety codes, needs for increasing levels of product functionality, complexity and durability are all significantly higher, and it is increasingly essential that door opening solutions be considered as a whole. Consequently the costs and price levels of these products are commensurately higher.
A total solution from ASSA ABLOY is likely to include a coordinated combination of doors and frames from the Door Group; locks, door controls, exit devices, and access-control products from the Architectural Hardware and Electromechanical Groups; and high-security key system solutions from the High Security and Aftermarket Group.
Significant non-residential projects this past year included the Overture Center in Madison, Wisconsin designed by Cesar Pelli and Associates and the Baptist Medical Center in Jacksonville, Florida.
The residential segment
In 2005 the division's Residential Group continued to achieve strong growth, with sales mostly to the retrofit aftermarket. It is notable that the US residential market is less interested in high-security cylinders and key control than the market in Europe.
ASSA ABLOY's companies in Mexico experienced a significant change in order patterns during 2005 mainly due to a major change in laws affecting the taxation of sales and inventory that impacted several distribution channels. In addition, competition in the residential market continued to be strong. The outcome was that sales declined during the first months of 2005 and began recovering slowly later in the year following the implementation of new commercial strategies for these changing markets.
Americas division, Key figures
1 Excluding restructuring payments.
Sales / EBIT 2
Capital employed /
Return on capital employed 2
EBIT / Cash flow 2
1 Excluding restructuring paymets.
2 2003 has not been adjusted for IFRS but goodwill amortization has been excluded.