Significant improvements in markets across the world

Asia:

Strong improvement despite market conditions
Despite the persistent economic slump, ASSA ABLOY Asia has managed to boost its net profits due to a significant shift in product offering to the higher-end range.

C.K. Jeang, President and ceo of ASSA ABLOY Asia, explains: “By gradually eliminating low-end items from our product range and replacing them with higher-value ones, we achieved a 35 percent rise in net profits in 2002, and continue to enjoy a strong operating cash flow.

“These higher-grade products consist of stainless-steel knob-sets and handle-sets, door closers, high-security rim locks and a growing range of DIY safety and security products. They are designed to meet the security Standards that now apply both in China and in our leading export markets in North America, the Far East and Russia.

“To educate our customers, employees and architects about the benefits of the latest high-security technologies, we have established the ASSA ABLOY Training Institute in Singapore, and Security Centers in Bangkok and Hong Kong.” In addition, significant progress has been made in intra-Group trade.

Zheng Jie is one of first traders to bring the western DIY concept to China. He transformed his traditional hardware distribution center in Shanghai to a HomeMart DIY store two years ago. “Locks act like security guards at your home,” he says. “And we continue to select Guli as our long-term partner because our customers have confidence in the quality of GULI locks.”

Product synergies include the French Touch security package for the Asian markets, abloy lock, with guli stainlesssteel furniture, and Assa cylinders with Yale ansi-graded locks. Cross-selling and buying opportunities range from the Million Program door-closer project spearheaded by Guli to the 6000-Series knob-sets produced for the North American DIY and builders’ markets, and stainless-steel trims for northern Europe.

“On the cost side, we have instituted staff reductions to bring the size of our organization in line with current economic realities,” says C.K. Jeang. “The Profit Center structure and cell manufacturing at Guli were implemented to streamline production and raise operating efficiency.”

Rising standards in China
The Asian lock market is highly fragmented, particularly in China where Guli’s 25 percent share makes it the market leader. The Guli factory was iso 9001 certified in 2002, and the Chinese Government recently recognized the company for its product quality and innovative designs. As the nation’s standard of living steadily rises, Guli is working to educate the market on the importance of higher security standards. China is also making a concerted effort to raise its hardware standards to meet the World Trade Organization compliance target set for 2004, as well as spending huge sums on infrastructure for the 2008 Olympic Games.

Southern Africa:

Sales growth aided by building recovery
ASSA ABLOY South Africa, the country’s leading lock company, has chalked up another successful year marked by 25 percent growth in sales and a strong profit compared to 2001. John Middleton, President of the company, says the positive turnaround in the residential building sector and timely anti-dumping legislation to discourage cheap Asian imports have been a big boost to business.

“The South African lock industry is closely linked to the building sector which has shown a solid comeback after two years of recession. This is particularly true of government refurbishment of buildings. Our remaining sales are split between commercial construction, the retrofit market and DIY products. DIY continues to grow well, responding to the rapidly growing number of middle-class households in South Africa and their demand for higher levels of security. For all these reasons 2003 looks like being an even better year.”

Market leader
To capitalize on its leading position in the fragmented South African market, the company targets specific market segments via two Group brands, Yale and Union, and two national brands, Esco and Solid.

 
“With more than 400 people employed, we have extremely heavy daily foot traffic in and out of the buildings,” says Daniel Lengosane, Director of Internal Security for the Union Buildings in Pretoria, the administrative seat of the South African government. “We therefore needed a highly advanced locking system to secure the building, its people and the information it holds. Security is the nerve center of any organization. The use of Mul-T-Lock cylinder locks made it possible to assign master keys to those in senior positions while using servant keys for non-sensitive areas.”

John Middleton: “We have now finalized the relaunch of the Yale brand platform for our complete range of retail and DIY products, which account for more than 20 percent of our sales. Union and Solid will represent products in the architectural and commercial segments and Union and Esco the wholesale segment. Other Group companies’ products sold in South Africa are effeff and HID in access control and Mul-T-Lock to locksmiths. Altogether this creates a very strong platform for promoting the trend toward higher security.”

The company is working on several fronts to promote higher standards of security. In cooperation with leading insurance companies and standardization bodies it is introducing a new lock grading system based on European Standards. It also offers a range of specification services to architects.

“Being part of the worldwide ASSA ABLOY Group has many strategic advantages. It enables us to source the very latest high-security products. It also provides us with an excellent training ground for our staff. We have sent people to New Zealand, Australia and the USA for factory visits. These cross-learning experiences have proved invaluable for the whole company in terms of new ideas and company morale.”

Israel:

Market leader with a global reach
Faced with a deepening recession at home that impacts virtually all customer segments, Mul-T-Lock, the market-leading lock company in Israel, has managed a remarkable increase in domestic sales and is continuing to grow its business in 70 countries throughout the world. The only significant exception is Japan, which saw a marked decrease in demand for high-security locks. Mul-T-Lock President and ceo, Tzachi Wiesenfeld, says that despite the rather gloomy picture at home, Mul-T-Lock’s overall performance for the year has exceeded expectations.

Tailored solutions
“We are a global company operating from a small domestic market in a prolonged recession. New construction in Israel has fallen by more than 50 percent since 1995. Nonetheless we increased our domestic sales by ten percent in 2002 through aggressive selling primarily in the commercial sector. Fortunately for us, a majority of our sales go to export markets in western and eastern Europe, North America, Asia and Japan. We have succeeded well in these areas thanks to our total commitment to satisfying a wide range of specific customer demands. This calls for tailor-made lock solutions, ever-shorter lead times and a highly dedicated sales network.”

Product diversity
Looking ahead, the President sees promising growth abroad on a number of fronts. “We are very excited about our company’s increased focus on electromechanical locking. We have developed an electromechanical cylinder, Intelleqt, which is based on the Group’s CLIQ technology. In western Europe alone we see the demand for these locks growing 4-5 times faster than for mechanical security products. In eastern Europe we anticipate a rise in sales by as much as 50 percent. On our largest markets in North America, France and the UK we anticipate a 15 percent growth in sales in 2003. And we expect to see a turnaround in Japan in the second and third quarters of the year. We are also continuing to strengthen and diversify our product portfolio in Israel by importing an increasing number of complementary products from our sister companies within the Group. These include exit devices, electric strikes and door closers.”

Eastern Europe:

Cooperation on a global level
While the new eastern Europe is growing up, ASSA ABLOY’S organization in this region is characterized by an entrepreneurial spirit and an eagerness to do business.

“The market has been pretty good during the year,” says Lars Lilja, Market Development Director in ASSA ABLOY’s East European organization. “The exception is Poland where the political and economical climate remains bad and there is little new construction.

“All companies except ASSA ABLOY Poland show organic growth, and total sales increased by 11 percent to eur 43.5 m in 2002. Hungary and Turkey show particularly good growth, but these are countries where we still have limited presence. Our sales in Russia continue to develop well.”

Emergency exits show the best growth on all markets. In general, insurance companies and investors have raised security and safety demands and require an upgrade of security solutions, whilst more people now have more to protect.

A trend in these countries is that they are tending to become more sophisticated since many are candidates for membership of the European Union. “Through our local companies and organizations in the Czech Republic, Latvia, Lithuania and Russia we are involved in developing and influencing security standards by cooperating with insurance companies, police departments and other authorities,” says Lars Lilja. “And most of our companies are now iso 9001 certified.”

ASSA ABLOY’S Romanian companies, Urbis International and Urbis Security, have successfully taken over the manufacturing of products previously made in countries with higher labor costs. “The loss-making manufacturing by Grorud in Norway was moved to Urbis International during last year,” says Lars Lilja. “Parts of the manufacturing of products for the German companies Melchert and Dörrenhaus are also now being taken over by Urbis International and Urbis Security. And Assa in Sweden has manufactured its door hardware accessories in Romania for a couple of years now.”

The East European organization is also utilizing the Group’s strengths in cross-buying. “The Czech company fab has expanded its product portfolio with door closers from Abloy in Finland, panic exit devices from JPM in France and door hardware from Bezault in France,” Lars Lilja explains.

In many east European markets, Yale is a sleeping brand – a brand that is recognized by many people but has no particular presence. Now the Group is planning to relaunch the Yale brand on the retail market, initially in Poland and Hungary. “We are introducing the Yale padlock series, which has a rating system for grading security performance and aims to help customers choose the correct padlock for any application,” says Lars Lilja. The rating system was created by Lockwood Security Products in Australia, then adopted and further developed by ASSA ABLOY UK.

In October 2002 the Group acquired both uba Almadis, for many years Assa’s distributor in Lithuania, and Radikovic in Slovenia, a distributor for effeff focusing primarily on highsecurity solutions.

South America:

High security means big business
In the highly fragmented, pricecompetitive Brazilian lock market, from where ASSA ABLOY runs its South American operations, taking the high road in security has made all the difference. Group company La Fonte made a strategic decision to focus on the manufacture and sale of highsecurity products targeted at the top end of the market. Francisco Bastos, President of La Fonte, says it has proved a resounding success.

“We have just completed the best year in our company’s history, breaking all previous sales records. In 2002 we achieved a 40 percent rise in overall sales compared with 2001, and 2003 looks like being better still. Our domestic sales have increased by 25 percent and exports to North America and other South American countries are up by more than 50 percent.”

Respected brand
La Fonte enjoys the highest brand recognition in Brazil and is the undisputed leader in setting new and higher standards in lock technology. The company manufactures mortise lock sets, auxiliary locks, exit devices, hinges and lever handles in attractive contemporary designs, sought-after in this style-conscious market. Concerns over rising crime rates also favor companies that can offer a wide range of reliable high-security products.

When the contractors Hochtief were building the new main offices of BankBoston in São Paulo, Brazil, they came to La Fonte for the more than 2000 locks required for the project, plus exit devices, door closers and door hardware. “Security and safety were equally important considerations,” says Contract Manager Teodoro Andrade. “We chose La Fonte’s products because of their internationally recognized quality as part of the ASSA ABLOY Group, and for the guarantee of good assistance during the project and technical support afterwards.”

 
“Even though only 20 percent of the Brazilian population can afford our products we have a high market potential because of the sheer size of the country,” says Francisco Bastos. With 170 million people, the Brazilian economy is the biggest in South America, representing some 50 percent of the continent’s gdp. La Fonte also has a strong foothold in many neighboring countries.

La Fonte has gained much by being part of the ASSA ABLOY Group. Crosslearning has helped the company to adopt a number of best practices in production and administration, and it actively pursues cross-buying and sellling opportunities. It currently imports bored locks from China, door closers from the USA, panic exit devices from Italy, electromechanical locks and padlocks from Finland and technology for high-security cylinders from Israel.

New strength in Chile
ASSA ABLOY’S recent acquisition of the Chilean market leader, Poli Cerraduras, gives it a second manufacturing base in South America and strengthens its position in the region.

Poli has a strong presence in most important DIY stores and home centers in Chile. During 2003 the company will implement a program to increase its sales through the locksmith channel by means of training programs and specially designed in-store displays. On the export side, high-quality products designed to meet international requirements, especially the new electric rim lock, are expected to sell well to other ASSA ABLOY companies.