UPDATE 2-Assa Abloy aims to double emerging market sales

Fri Nov 16, 2012 11:31am EST

Related Topics

* Market trend roughly unchanged from Q3 -CEO

* Emerging markets could reach 50 pct of sales-CEO

* Has "active pipeline" of acquisitions

By Anna Ringstrom and Helena Soderpalm

STOCKHOLM, Nov 16 (Reuters) - Assa Abloy, the world's biggest maker of locks, aims to double sales in emerging markets to half its total revenue, a goal it will achieve after 2025, it said on Friday.

Assa Abloy, whose products range from ordinary household locks to advanced digital entrance systems, has seen sluggish growth in mature markets, not least in Europe where public spending cuts have weighed heavily on demand.

"We think the potential is not the 25 percent we have today but rather 50 percent," Chief Executive Johan Molin said during a presentation to investors and analysts, referring to the share of group sales located in emerging markets.

The company, a rival to U.S. groups Ingersoll-Rand and Stanley Black & Decker with a vast portfolio of brands such as Yale and China's PanPan, sees its expansion in emerging markets as key for growth amid the weakness elsewhere.

After increasing its share of sales in emerging markets from 10 percent in 2005, helped by numerous acquisitions, there are not all that many companies left to buy, Molin told Reuters.

"At a growth pace of 7-12 percent per year it will take us quite a few years before we are there. We will surely have written 2025 in our diaries before we are there."

Assa's shares, which have soared 30 percent this year while the blue-chip index in Stockholm is up 5 percent, were unchanged on Friday afternoon, roughly in line with the market.

Fellow Swedish blue chip Electrolux also said on Thursday it aimed to increase emerging markets sales to half of its revenues from 35 percent now, but expected to reach that level in 2017.

WEAK GROWTH AHEAD

He said in the interview that market trends were roughly the same as in the third quarter with Europe weak, North America clearly better and emerging markets mixed, with China somewhat weaker than usual.

"That means, for Assa Abloy, as we said in connection with the Q3 (report), that we think growth will be very weak going forward, at least for a few quarters."

Amid the general gloom, recent months have seen signs of growing activity in the long-suffering U.S. construction market.

Molin stood by targets for a 16-17 percent operating margin and 10 percent net sales growth, of which 5 would come via acquisitions. In the third quarter, the margin was 16.7 percent and growth was 6 percent, of which 1 percent was organic.

He said profitability could be kept as Assa bought companies with low profitability and then improved their earnings.

"Growth wise, these are hardly times for saying we should grow more than 5 percent (minus acquisitions). In current conditions I'd say we should be happy if we do."

Molin said Assa Abloy, which has bought 11 peers so far this year, still had an active pipeline of potential acquisitions.

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