July 17, 2020 / 6:20 AM / a month ago

Assa Abloy looks to unlock recovery after profit slide

STOCKHOLM (Reuters) - Assa Abloy, the world’s biggest lockmaker, forecast a gradual recovery on Friday following a 44% plunge in second-quarter profit, but warned of considerable uncertainty ahead.

FILE PHOTO: An Assa Abloy lock and key are displayed in a shop in Riga, September 19, 2013. REUTERS/Ints Kalnins/File Photo

The Swedish group reported a quarterly operating profit of 2.10 billion crowns ($231 million), beating the 1.68 billion expected by analysts in a Refinitiv Eikon poll, on a 15% drop in sales to 20.0 billion.

It said cost savings had helped, and demand had started recovering in May as many countries eased restrictions put in place to fight the COVID-19 pandemic.

“If there are no significant new negative events, we expect the financial performance to continue to gradually improve,” CEO Nico Delvaux said in the earnings release. “Our financial targets remain valid.”

However, Delvaux later told a conference call that although sales were better in June than in May, the percentage fall year-on year was still double-digit when seasonally adjusted, and uncertainty about the recovery remained high in the short term.

Credit Suisse analysts said in a note that while the monthly improvement and cost reductions were reassuring, there was little clarity about the shape of the recovery.

Assa Abloy shares were down 4% at 1110 GMT, taking a year-to-date-decline to 9%.

All of Assa Abloy’s factories around the world are now operating after more than 30 closed amid lockdowns and a slump in demand.

The company, whose competitors include Allegion and Stanley Black & Decker, announced cost-cutting measures in April such as reduced working hours, temporary and permanent layoffs, travel bans, curbs on the use of consultants and delays to projects.

It said on Friday it had sustained investment in product development during the quarter.

($1 = 9.0806 Swedish crowns)

Reporting by Anna Ringstrom; editing by Jason Neely and Mark Potter

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