Increased presence in Asia
CHARACTERISTICS OF THE ASIA PACIFIC DIVISION
  • The division's main sales markets are Australia, New Zealand and China.
  • Sales to the residential and commercial segments are approximately equal.
  • Asian markets now account for about 20 percent of sales and 30 percent of production – some of which goes to ASSA ABLOY's other regions.
The Asia Pacific division comprises companies in Australia, New Zealand, China and elsewhere in Asia and accounts for 8 percent of ASSA ABLOY's total sales. During the year the division achieved an organic growth of 2 percent and an EBIT margin of 11.1 percent. Its head office is located in Hong Kong. The division has 4,300 employees in 9 production units and 8 sales companies. Its largest markets are Australia, New Zealand and China, and the leading companies in the division are ASSA ABLOY Australia, ASSA ABLOY New Zealand, and Guli Security and ASSA ABLOY Wangli in China.
Report on the year
As in the previous year, the residential and non-residential segments each accounted for about half of the division's sales in 2005. The Australian and New Zealand commercial market continued to show good growth. The residential market in Australia was somewhat weaker due to poor residential and retail activity. The division was also affected by the weak US dollar, which reduced the profitability of the division's export business.
Asian sales grew significantly in 2005, primarily due to acquisitions. The trend of moving production from New Zealand and Australia to Asia continued.
Non-residential segment
The division has established strong positions on the institutional and commercial construction market in both Australia and New Zealand. In 2005 efforts have been focused on the specification of projects, increasing knowledge of customer requirements, and modification of products to tailor complete solutions for end-users.
The esthetic design of products has become more and more important to sales success during 2005. The division has made increased use of interior designers and architects who have, for example, worked in the automotive industry (Ford) or worked with distinguished architects such as Sir Norman Foster.
A significant number of new products for the non-residential segment were introduced during 2005, including some that combine traditional door hardware with high-technology products from Global Technologies division. These products are intended for up-market offices and similar commercial buildings, where they provide an attractive appearance without a visible card-reader.
There has also been growing collaboration between Asia Pacific division's specification team and ASSA ABLOY Entrance Systems, which produces automatic doors. This has led to increased sales of Group products in major pro-jects.
Security Merchants, which was acquired in 2004 primarily for its electronic expertise, has been working closely with the division's other companies to upgrade their product offerings. By adding electromechanical products to their portfolios this has enabled Group companies to offer a wider range of products to specifiers.
Residential segment
The residential segment in Australia has been weak during 2005, with decreasing demand partly mitigated by new-product launches. Electromechanical keyless locksets have been successfully launched in Australia and are now also being sold in New Zealand and selected Asian markets. As an alternative to using keys, householders operate exterior door locks with a battery-powered remote device similar to those employed by modern cars.
A designed range of locksets with a choice of levers and knobs and a range of finishes to match modern decor was launched in 2005 and has been equally successful on the market.
ASSA ABLOY New Zealand produces security fittings for residential doors and windows, most of which are sold to Original Equipment Manufacturers. Although total sales rose during 2005, the company's export business was impacted by the weak US dollar. During the year several of the production lines were moved to China. The relocation of production will continue in 2006.
Asia Pacific division, Key figures
  2005 2004 2005 2004
Income statement SEK M SEK M AUD M AUD M
Sales, external 2,019 1,726 356 320
Sales, internal 190 121 33 23
Sales 2,209 1,847 389 343
Organic growth 2% 7% 2% 7%
Operating income (EBIT) 245 278 43 52
Operating margin (EBIT) 11.1% 15.1% 11.1% 15.1%
 
Capital employed        
Capital employed 1,985 1,671 340 324
- of which goodwill 995 818 171 159
Return on capital employed 12.9% 16.8% 12.9% 16.8%
 
Cash flow        
Operating income (EBIT) 245 278 43 52
Depreciation 66 62 12 12
Net capital expenditure -40 -29 -7 -5
Change in working capital -12 -43 -2 -8
Cash flow 1 259 268 46 51
 
Average number of employees 4,352 3,629 4,352 3,626
1 Excluding restructuring payments.
Sales / EBIT 2
Capital employed /
Return on capital employed
2
EBIT / Cash flow 2
1 Excluding restructuring payments.
2 2003 has not been adjusted for IFRS but amortization of goodwill has been excluded.