ASSA ABLOY AB (publ)

Thank you, Björn. And also good morning from my side.

Happy to report to you good quarter three results for ASSA ABLOY. It was a quarter of good organic sales development 4% and up with strong growth in Americas and Global Technologies.

A good growth in EMEA and Entrance Systems. A net organic growth of 4% complemented with good growth through acquisitions also up 4%.

Also this quarter, the highlight of the quarter were the electromechanical products up 16% including currency up 11% excluding currency. And strong EBIT growth of 14% and a stable margin and EBIT margin of 16.2%, despite the fact that we booked SEK55 million acquisition cost related to the acquisition of agta record.

And then I would say a very strong operating cash flow up 47%, ofcourse thanks to a good EBIT performance but also thanks to a good improvement in our working capital. So sales of SEK24 billion up 13%, 4% organic, 4% acquisitions and 5% currency and EBITDA margin 20 basis points up at 16.7%.

EBIT margin at 16.2% and then an EBIT of SEK3.9 billion 14% up. If we look a little bit at sales per region, I would say it is perhaps less points that stick out this quarter.

A very good North America 5% organic growth, a good Europe's last year of plus two, I would say despite the economic situation in Europe. A very strong South America plus 8, and that's mainly linked to a couple of project orders in Global Technologies.

Plus six in Africa for the same reason, a couple of projects for Global Technologies. And then plus two in Asia, and plus three in Oceania.

A couple of market highlights. It's good to see that all our efforts we put in a specification, and then our specification teams continue to pay off in all three geographical divisions, also in EMEA, you see here -- met by example for EMEA.

And then you might have seen that announcements of Apple that they are also now focusing on the university, vertical and it's in that called collaboration that we've got a nice order at Clemson University, for a combined offering of HID technology together with electronic locks of the Americas. We’re also one of the founding partners of the FiRa Consortium, and together with Samsung and a couple of other big multinationals.

The idea there is we need to promote and provide brand technology in our Access Control fields. And then we launched several new products in our smart residential space.

Another quarter with positive organic growth, now 26 consecutive quarters with positive organic growth. I think a very nice track record.

And our operating margin slightly below our bandwidth, where we want to be up 16% to 17% that's slightly slowly getting back into that bandwidth and then the EBITDA margin right in the middle of that 16% to 17%. So if you can keep operating margins stable on a high level, then you can increase your top line, you can accelerate your operating profits, 14% up in the quarter as compared to the same quarter last year, 67% up in the last five years.

The acquisitions have been a very active quarter, with four acquisitions completed in the quarter and 10 year-to-date. And those 10 acquisitions represent an acquired annualized sales of SEK2.4 billion.

We are still working on closing agta record and LUX-IDent. agta record is now expected to close early beginning of next year, and LUX-IDent we will close this quarter.

So more information on a couple of the acquisitions we did in the quarter. Life Safety Power, an American supplier of smart access control policy solutions.

There were sales of SEK290 million, 65 employees complementing nicely our Access Control portfolio and that acquisition will be accretive to the EPS as of the start. Placard, Australian secure parts manufacturer, reached sales of SEK420 million and the 70 [ph] employees announcing our position in the smart card market in Oceania, and also this one will be accretive to EPS from the start.

And then LUX-IDent, a Czech RFID component provider with sales of SEK180 million and its 45 employees enhancing nicely our RFID component offering and optimizing our ASSA ABLOY operations footprint in the sense that we were very dependent on one factory in Asia for these RFID compounds. Now with this LUX-IDent acquisition we can leverage operations in a much better way.

And these acquisition will be neutral to EPS. If we then go into the different divisions starting with EMEA, an organic sales growth of 3%, I believe a good results if we take into account market conditions in Europe, with a very strong growth in the Middle East, strong growth in East Europe, but negative growth in Finland, U.K.

and South Europe. You will remember from Q2 that there are concerns in Scandinavia that we are not sure if the downtown in Scandinavia was a temporary thing or a more permanent thing.

We have seen again good growth in Scandinavia. Of course, with one working day more as compared to the same quarter last year.

It was -- that was geographically almost right because we haven't seen that negative growth in Finland, rather than in Scandinavia. Now in Finland definitely we see market conditions going down.

Same is true for U.K. as I mentioned earlier.

There's still all the discussions around the Brexit, but on the other hand we still see good market conditions in other places in EMEA, for instance East Europe, Benelux and definitely also the Middle East. An operating margin of 16.1%, 20 basis points up there were very good volume leverage of 40 basis points driven by operational efficiencies.

And then a negative currency effect 40 basis points, ofcourse merely because of the SEK. And then acquisitions 20 basis points up, that is mainly the shift from our ABLOY business from EMEA to Global Solutions a kind of internal acquisition you could say.

So overall, I think good performance for EMEA. And the same is definitely true for Americas.

Their organic sales was up 6%, 6% on top of a 10% organic growth in the same quarter last year. So we’ve a difficult comparison.

Last, I would say all business areas in U.S. were performing strongly, with the exception of perimeter security, where we saw negative growth, but a good growth in Canada, and I would say an improving Latin America.

Operating margin of 20.5% 40 basis points up. We have a very strong volume leverage 50 basis points, ofcourse driven by the good organic growth, by the fact that we were able to now fully compensate with price increases and operational efficiency measures for the raw material increases that we experienced last year.

FX flat and M&A 10 basis points diluted. Asia Pacific, negative organic sales growth of minus 1% with strong growth in South Asia, but negative growth in China, India, South Korea and Japan.

In South Korea, we really see market conditions going down and importantly, [Indiscernible] market is down high double digits as our Korea is obviously for us an important market. We also see still negative development in China, when it comes to the market.

But I would say in China, we are also now much more selective and we take orders, which orders to take, obviously we want to take orders where we can make profit so we can make profit and that will be based entities and all that. So that's not an explanation of why we see that negative growth in China.

And that strategy is also visible in our operating margin, where we are 30 basis points up and where we get a leverage of 10 basis points despite that negative organic growth, and that is of course also because of the more selective approach in China. Currency 10 basis points up and also acquisitions 10 basis points up.

We are progressing with our China business plan. I would say we are in line with expectations, but as explained earlier this is a longer term project.

We then go to Global Technologies. Another strong performance with an organic sales growth of 6% on top of an organic growth of 12% same quarter last year.

We have a very strong growth in global solutions for all of our verticals. And then a little bit of a mixed picture in HID, a very strong growth in secure insurance, but only stable growth in physical access and then some negative growth in some other business areas.

An operating margin of 20 3%, with a negative volume leverage of 20 basis points mainly due to continued investments in R&D as on the HID side, but mainly also on the Global Solutions side, and then also the investments in the new verticals in Global Solutions. [Indiscernible] by currency 30 basis points and then dilution from acquisitions 120 basis points.

That is three reasons. That's one as I explained earlier.

The shift from our ABLOY business from EMEA to Global Technologies. Then is the acquisition of Crossmatch, big acquisition of €100 million where we are performing I would say even better than planned.

Our margin is also improving faster than planned. But of course, we have an operating margin of 20, more than 20%.

That acquisition remains for the time being dilutive. And then we had some extra acquisition costs, in the acquisition embedded in HID.

But overall, I think also very good performance for Global Technologies, and then Entrance Systems, an organic sales growth of 3%. And here in Entrance system the fact that we had one working day more in the quarter accounts to have the most because that’s the di9vison that is mostly affected by the working days also because of the service now.

The strong growth in pedestrian doors and high performance doors, a negative growth in residential doors in Europe. And then I’m very happy to see our strong accelerated growth in service, where we see that SAP really pays off, and it is also translated in the operating margin 13.6%.

We have a very strong volume leverage of 60 basis points due to that strong growth in service because we know you make better margins in service than on equipments. Also thanks to operational efficiencies, and also thanks partly of course to the mix because you know that you make better margins on pedestrian doors and high performance doors, than we do on residential doors.

30 basis points in dilution of currency, and then 80 basis points dilution of the acquisitions, but it is mainly I would say exclusively the SEK55 million acquisition cost we booked for agta record there, we have not booked all costs for that acquisition of their project to date. And with that, I’ll give it over to Eric for some more details on the financial figures.

Thank you, Nico. And also from my side a very good morning.

Our sales grew with 13% of which the organic part was 4%. As mentioned here before by Nico, it’s mainly driven by Americas and Global Technologies.

And also as mentioned, we also had one working day more in Q3. The acquired growth is also 4%.

If we sort of what we expect then for Q4, is around 3%. The FX was 5% in the quarter.

And when we look at it today, that's roughly what we expect also for Q4. What is very encouraging to see is that we can actually see that the changes that we have 13% in sales.

We have a 14% improved EBITDA. We have a 13% better income before taxes, net incomes [Indiscernible] connect to see that it flows through, but again on the topline it actually flows through all the way to the bottom line.

The EBITDA margin is 10 basis points better and the EBIT margin is at the same level as what it was last year. I mean the highlight once again, I think is now for the third quarter in a row, that as I said the highlight is the operating cash flow.

It was this quarter up with 47%. Main reason for that is of course that we have good earnings, but also that we have good efficiency in our net working capital management.

Specifically then if you look at inventory, reduced, but also we see good progress on in accounts receivables. Return-on-capital employed remain on at the same level as last year with 17%.

If we then look at more from a bridge perspective for the group, you can see that we had a good organic leverage, it sort of it improved the results for 30 basis points. If we look on price versus volume, the price here is rounded down to 1%.

So it's a little bit higher than that. Where we see the most prices coming through is actually in the Americas.

Currency is slightly negative with 10 basis points, and that comes from the negative transaction effect that we have within certain divisions. And then I mean if you look in total there the acquisitions sort of had a negative impact of 10 basis points.

It would end up to a cost breakdown. You can see that now in the -- in the quarters before we have.

I mean, the first we had negative impact of direct material due to the higher raw material prices which we couldn't compensate and prices in the Q2 we were flat. And now you can actually see that in the Q3 we actually overcompensated for the raw material pricing.

But also – I would also say that we have had good work done by our sourcing team in order then to improve our costs on direct material. Conversion costs is also helping us with 10 basis points.

We have had a good traction on the manufacturing footprint program, giving us about SEK200 million in the quarter, but also we have other operational efficiencies, which also helps to this. If you look on SG&A, it’s flat.

We have had good volume leverage, but then we have also invested quite a lot in R&D, mainly within the Global Technologies division. All-in-all if you exclude acquisitions, we are 20 basis points better than the same quarter last year.

I said once again, this is the highlight. Operating cash flow improved by 47%.

And as you can see, we actually have a better cash flow than earnings before tax at 104%. Ofcourse they're very happy with this, but we also know that this is not sustainable, and that overtime of course it will go down below 100%, but still as I've mentioned before that we have done a lot of work on our operational efficiency.

Part of it flows into the result, but I would say even more floats into our networking capital, and specifically than on the inventories. Looking on the gearing.

You can see that debt versus equity is up by 1% versus last year, so it ended at 64%. In actual value it's up with SEK5.5 billion, but out of this 3.7 comes out of the IFRS effect of 3.7 and then you have currency which is another 1.5.

So the net debt versus EBITDA is at the same level at 2.1. So, I mean our financial situation is stable, so we can continue our acquisition strategy even after we have finalized the acquisition of agta record.

Last but not least, the earnings per share is year-to-date upward 20% versus last year. And with that, I hand it back to Nicol.

Thanks, Erik. So the summary, a good quarter three results with a good organic sales development up 4% complemented with good growth recognitions, also 4%.

Also, this quarter, higher growth in electromechanical products up 16%. A strong EBIT growth of 14% is stable.

EBIT margins despite the SEK55 million acquisition costs for agta record. Very strong operational cash flow.

And then new news for you. We would like to invite you to our Capital Markets Day next year May the 13th and that Capital Market Day will take place in London.

And with that, I give it back to Björn for the Q&A.

Thank you Nico. Before we open up for your questions, could I just please remind you to limit yourself to one question and one quick follow up.

So we allow as many as possible to ask questions. Operator, this means that we are ready to start the Q&A session.

Please go ahead.

Hi, good morning gentlemen. Thanks for taking my question.

The first one really was a little bit more around the language you have in the kind of the comments around the quarter. Are you talking about an underlying growth, which has slowed in the quarter and when we look at the number I guess it's maybe not so clear for us too to see that.

And generally speaking, you're talking about market conditions becoming more challenging, so I was hoping whether you could give us some color around the trends you are really seeing and you know how does that compare with the number you reported? That's my first question.

Okay. If we talk about the underlying growth, we ofcourse take the fact into account that we had one working day more in the quarter, which in general of course currently like I mentioned it comes in the first business and [Indiscernible].

And in systems, if we then you look a bit at market conditions, I guess my message is very similar to what I said a quarter ago. We see clearly a general slowdown in the markets.

We all read newspapers, we look at the news. So I think there is consensus that there is a general slowdown.

But then if we are a little bit more specific for our business and our market and if I go a bit in the different regions, I think perhaps through the Americas, we clearly see a slowdown on residential new build. As I mentioned earlier, that is not so important for the Americans, because we are not so exposed to residential new build for America.

It's more a challenge for rental systems, because they have an important garage door business in North America, and that is obviously linked to new builds. But we also start to see KPIs leading indicators on the commercial side going in the wrong directions.

I must say, we don't see that yet in our market activity. We still have good solid market conditions on the commercial side in North America.

We still have good spec business, which is for us a little bit, a leading indicator. But ofcourse, there’s those KPIs are atleast something to look out for.

And we then go to Mexico. I’ve said also in previous quarter that we are more concerned with Mexico than before.

Also because of the political situation that has changed. We are perhaps a bit more optimistic in South America in general.

Countries like Chile, Colombia, but also a bit on Brazil, a bit more positive than I would say six months ago. If we then go to Europe, I think a very mixed picture.

As I mentioned before, Finland you see definitely market conditions down. We see the same in the U.K.

where several of our customers also went bankrupt in recent weeks and recent months. We also see France still on a low but perhaps stable level.

That being said then we see also a lot of markets that are still going strong. Some markets in Eastern Europe, Middle East even perhaps a surprise for us, we still see good market momentum in Germany, and also in in the Benelux.

So a little bit of mixed picture in EMEA. And then in APAC in Australia, and definitely a residential business very much down.

And so far we have been able to compensate that with a very good job done on the commercial side. We will see how that now processes in the coming quarters.

And then definitely Korea where as long as there is residential side, those are the commercial side market conditions are down. And like -- like I mentioned earlier, in China, our market conditions are still down, but it's more us ourselves that has to execute on our new strategy irrespective of the market conditions.

So the global picture if you don't look at Entrance Systems of course they are very manufacturing related. And I think it's fair to say that manufacturing in general is done there also partly exposed to residential.

I commented on residential before, but we have still a bit more positive on retail as we are the only one in the world that we see that retail level you see that is that perhaps there is less retail, but the retail is of a higher level, and you see more growth, which is obviously good for our pedestrian door business. Now we should also not forget that in Q4 we will have one working day less, and that also for the Americas in particular, the comparison will be very difficult in the sense that we had a big order of Wal-Mart last year that will be zero.

This Q4, and then ofcourse that also the fact that we will rest [ph] at a big quarter for Q4 last year, and that has leveled much more out now on I would say a normal level. That was a bit of a long answer, Lucie…

Thank you. Just maybe a quick follow up on the on the last point around the smart lock.

So I understand Elmech generally speaking is it 11% on an organic basis up in the quarter. Can you maybe just kind of separate you know or give us some indication on how the smart lock business has been growing in the quarter.

I am also asking because ofcourse, South Korea sounds to be quiet on the low side as well.

Yes. So if you take a total electromechanical business with a 31% of our total business, it’s true that we were up 16% including currency 11% and excluding currency.

And if you then take out that the digital door locks for residential application, there we saw still the highest growth, but still a good double digit growth. But on a lower level than in Q2, and a lower level than Q1.

So we see -- we see that growth rate going down. And it is partly because of Korea.

It's also because like I mentioned earlier in Google Nest, is now more than 12 months in our figures. And ofcourse you get a big uptick when you start from zero.

And then -- the percentages are ofcourse very high. But then once you start to compare Q4, Q5, Q6 and so when you compare it with a high quarter in the same quarter a year before, and that's where the comparisons become more difficult.

I think from Google Nest you should expect that this level still flatten out this time.

Thank you.

Hi. Thanks.

Good morning, Nico. My quick follow-up just on the formal question is on Global Tech.

I think I heard you mention that couple of larger contracts swinging the meter for you there. What was the boost specific to growth in GT from that?

And anything major in the pipeline for Q4 that might similarly swing the meter? And then, I'll come back to my primary question after that.

Yes, I would say, the nature of the business of some of our business areas in HID and I would say there's nothing dramatic. It's not that we got a very big project.

Every quarter we get some projects from the couple of million or so. And it was not more outspoken this quarter than previous quarter.

It was more on the geographical map. Of course, if you get a couple of million orders in Africa that moves the needle and shows an highest percentage growth.

But overall I would say that is not the reason why HID or Global Technologies were performing as we present as normal digit.

Thank you. Nico, that's helpful.

And then just to – I want to just talk briefly about your EBIT margin range. I think it’s fair to say your language has become should we say, progressively more cautious on that as you've move through the year.

I think I heard you early in the end of Q1 call talk about getting margin firmly within the range 16% to 17% for the remainder of the year. I think I heard you on this call earlier talk about being contented.

You can keep margins flat and still drive top line. I appreciate you've had some greater headwinds maybe from M&A, notably of course from agta this quarter maybe then you anticipated.

But what has changed really through the year as far as your assessment of your ability to get firmly within the margin range is concerned?

Perhaps I didn't express myself correctly, but I think I've said from the beginning of the year that we had the ambition to bring our EBIT margin back within the 16% to 17% bandwidth from the low end towards the end of year. And I would say, we still have that ambition.

Obviously, the close as we come to the end of the year the more challenging it will become. I would say, there's two things that have change since my previous statements is of course the fact that we now book that SEK55 million for the agta record acquisitions and that is our costs project to-date.

We will book some more cost for agta record in Q4, because we will continue to book the cost as they come. So that's one negative factor I would say.

And the second one is of course the extra import tariffs towards the U.S. I've said that its not a problem for us to compensate by price increases, but of course you always have a small delay between the cost coming and the prices being increased and that set us back little bit.

And those are only two negative comes I would say, but I reconfirm that we still have that ambition to bring it up to that 16% towards the end of the year. The ambition becomes more challenging clearly.

Understood. Thank you.

Next question please.

Good morning. Thanks for taking my question.

Just a quick follow-up, first on agta record cost for Q4 that you just mentioned. How will they compared to Q3 from what you know right now?

So we've looked like I mentioned, SEK55 million. We believe that the total project totally depends on how fast the administration will go.

So they're more or less double. So SEK100 million, SEK110 million, so we still have another SEK50 million, SEK55 million to go.

Most probably most of that cost will come in Q1 next year. So the cost should be smaller now in Q4.

Very helpful. Thank you.

And could we just talk about restructuring that more obviously strong quarter in Q3. You're saying that this benefit will fade in Q4 and then kind of on the SEK300 million for the full year 2020.

Firstly, maybe could you help us quantify the Q4? And then thinking about 2020 is that kind of plan that in turn now that SEK300 million is what we have in the program and that's what you target to deliver and that will happen?

Or there is kind of contingencies there that maybe market related or other further programs because its – just want to get the color what's that kind of executing fast and existing programs and drawing that out? Or executing fast and maybe finding other opportunities with major potential surprises upside in 2020?

Hi. I can take that question.

I think, I mean, first of all, we're very happy that we actually have best attraction in the program than what – let's say what we have in the original plan. And that sort of what you see that we have – I mean, we have the highest saving ever from an MSC program now that we have in the Q3.

What we have done, because I think it's also normal business practice is also that we have also added new programs within the program in order then to let say also to make sure that we also get benefits coming into the next year. This will not add anything to the restructuring provision that we will book in Q4.

So it remains on the SEK300 million level that we will book to in Q4. I was – sorry I know I'm speaking for the third time, I'm sorry, but I was just more wondering about the potential for further savings and for kind of 2020 against that 300 million of savings that you mentioned in the statement whether there is a room to do more that.

Of course, Andre, you can do the setting only once. We're happy that we got the savings earlier.

We have said from the beginning that the payback on this project is around three years, little bit less than three years. I think, if you will do the off the calculation we will see that its even little bit better.

But again, you can do the savings only once. That's being said, of course, after MFPs certainly we will continue with the new MFP-8 [ph].

I'm confident that projects will – project principal will continue as we continue to buy companies and as we buy companies also with operations on a constant base we see opportunities to further rationalize our operational footprint.

Great. Thank you very much.

I appreciate it.

Thank you.

Thanks very much for taking the question – questions actually. The first one is about the exit rate in September when you said the underlying growth slowed in the quarter, so I suspect that the growth rate was a bit slower in September than what it was at the beginning of the quarter.

So could you be a bit more specific around that perhaps and perhaps highlight to whether that's merely equation of more limited price raises or if that's really volume driven? So that's question one number.

And the second question is actually a follow-up on the savings, earlier question. Because when you guide for a level of selling equivalent to about SEK300 million next year, so that's an average of SEK75 million, so compared to what you've achieved in Q3, that's a 50 bps shortfall to a quarter.

And if indeed growth further slows down next year you add as well the dilution of agta, how do you intent to make it for that shortfall and remain within the targeted margin range of 16% to 17%?

I'll start with the first question, perhaps you can take the second, Erik. If you look past volume, we have the 4% and as Erik explained we show one and three, that's the way we're around on the figure.

You should look at price around 1.5% and their volume remaining. We have always said from the beginning that our 2% price that we exchange in the first half of the year would level out again going into the second half of the year to normal levels that we've seen historically around that 1% and as exactly what is happening now.

So you should expect now in Q4 and going forward that ties effect to level out around that 1%. We were able to increase with 2% because of the high material inflation.

Of course last year over the last 18 months, as material indexes have now stabilized on a high level, that's more normal level, also pricing comes back in the more normal level. Then we cannot change market conditions.

We can only do or/and we try to do our best in the given market conditions and where we can also go outperform the market. And that's what I think we have done in Q3, that's what we will continue to try to do also in Q4 and going forward.

I think on the margin, remember that NFP is one part of what we're doing. We're also doing other things.

I mean, we talked a bit about price. We will also of course come with new products out to the market.

We're also doing quite a lot of work when it comes to sourcing activities. The NFP as such, yes, we have had a very good traction so far.

So for next year, the saving tempo will go down. But that's also now where we had added new project into the program in order then to keep let's say the savings out of NFP on a higher level.

So you shouldn't only focus on NFP because we're also do other things when it comes to operational efficiency, when it comes to sourcing, when it comes to new product out to the market, and that will help us in to come back into the 16%, 17% bandwidth.

Including the dilution of agta?

We have already said before that the agta will have a diluting effect on the margin.

Okay. Thanks very much indeed.

Thanks.

Thank you.

Hi. Good morning.

Two questions if I may. The first one is just about the outlook for Q4.

I know a lot of things can happen. But given your comments on the working days, the backlogs and pricing leveling out, do you think you can grow organically in Q4, bear in mind the comps?

And I have a follow-up.

Yes, of course we don't give forecast. As you know I think I explained the markets momentum.

But let me say that. Okay, I showed this graph.

We had 26 quarters of positive organic growth that would be very disappointed if you could not show you next quarter, 27th quarter. It's a positive organic growth.

Like I mentioned earlier, there is headwinds in different markets, but we still see good opportunities in other markets. And again, we will try and continue to try to outperform the market by doing good job on new product development and channel management and so on.

And I was surprised by the strength of security door business in the quarter with of course having accelerated despite we've seen some peers warning. Do you explain this is a good performance?

I don't have a specific answer. I think, are you specifically talking about…

The security door, although I not aware it was 20% in the quarter?

At the hardware you mean, not the doors.

The security doors I'm not aware.

In which division?

In all divisions, you know break down the sales by product lines and looking at security doors and other ware, I think that the course of accelerated even on an organic basis quite strongly.

You look at of course at the total result and of course we did a couple of acquisitions in that field. We did acquisition for Spencer doors.

We did another acquisition in Australia, New Zealand, and that it's most probably one of the [Indiscernible].

They were already there in Q2. So I'm talking the acceleration between Q3 and Q2.

Yes. Of course, it cannot do it like that in Q2 and Q3, because you will see everything accelerating in Q3 versus Q2, because it’s of course also linked to the seasonal way of our business, and of course also did a number of working days that you have in the quarters in total.

And -- of course understands those acquisition.

And if I may just a very last question on the tariff increase, I mean, you had a 15% duty tax on the locks coming in 1st of September and I guess this affect your smart lock business. Are you confident you can pass it through your main channel, mentioned ?

Of course, its affect, I would say, everything that we buy in China falls in that category and that we sell in U.S. we sell only smart residential locks, also HID to a certain extent and Global Solutions.

But also Americas and Canada are affected by this. And like I mentioned earlier in general we can compensate those tariffs by more better -- in cases – there is always a little bit of lag.

But if you take that lag out not being consideration most of it you can you can compensate up to this -- of course.

Thank you.

Thank you.

Good morning. Guillermo from UBS.

Just a couple of questions as well. The first question is on EMEA, electromechanical on electronic locks and I wonder you know what is happening to growth there.

I guess is very lackluster. I understand that the market is growing less, but if I'm not mistaken declining to some extent on a year on year basis.

If so the case what would you expect some of the trends that we've seen in all the regions especially Americas to start to flow through EMEA if at all? That's the first question.

I will step back for the second one.

That perhaps I thought, I know we make life complicated for you, but in this one also need to take into consideration the move of ABLOY from EMEA to Global Technologies. And I think that's sort of -- that's the main reason why you see that it's flat, if you look on the electromechanical in EMEA.

All right. And what is the underlying growth then.

We start to basically look that into 2020 then?

I think that what you have. I think we are still very positive when it comes to the digital locks and especially then if you look on the -- in the EMEA we will also beginning of next year also launch new products, which we think will sort of we have a good sales improvement also for next year.

And when you talk about the products do you talk about collaborations with Google Nest or Alexa or are we talking about new products basically from your side?

I'm talking basically here about new products.

Okay. Thank you.

Then can I ask about the acquisitions obviously I can give you exclude agta record. That is really SEK2.3 billion of announced acquired for next year.

What I've been thinking about the mix and some of them will be dilutive, some of them will be less dilutive. But if it is the case that or we should think about of these acquisitions especially the ones that fall in the HID division broadly less dilutive or even accretive to margins at some point?

I didn't make the calculation specifically for HID, but I think in general you should expect a similar pattern as we experience now, so it will be slightly dilutive also probably next year.

Okay. So if we are – if I thought -- if I want to share with you some calculations I guess, agta record is finally consolidated and you are on top SEK2.5 billion of order acquisitions you know that equates to and this is obviously based on 2009, it didn't numbers which is not 2019 numbers, but roughly speaking about 7% to 8% of top line already next year?

Maybe what has happened so far is around 5% to top line. The question was more in your comparison, yes, of course when agta record will –when that acquisition will be finalize and that sort of that's the unsecured part and if you look in your calculation there.

All right. And on agta record I think if you look at the releases of another 5%?

If you take agta record included under the assumption that we will close somewhere beginning next year then all the acquisitions we have announced so far that are close until after being closed, all that together represent around 5% growth to acquisitions for next year. And when it comes to bottom line what we say is that if you take everything except agta record you should guarantee similar dilution as we had this year and that 20 basis points type of model and an agta record that depending a bit on the PPI calculation – on the PPI calculation when we closed, they will be around 375 million euro top line and the bottom line slowly and slightly above 10%.

Understood.

Also go perhaps also to help to even further, on the acquisitions that they're closed to date, we have a run rate for next year of 1.5%, all the ones that were closed to-date. That could help I think in your calculation.

Indeed. I think we need to move over to the next question.

Of course. Thank you.

Thank you.

Hi. Good morning.

I have one question. Can you give me details on how the takeout on any special smart lock contracts will be coming in coming quarters?

And whether that helps 3Q 2019 and by how much? And I feel Assa's OSG drop was inflicted due to plant closure and whether that continues going forward?

As we have started smart lock, I assume that you are referring to smart lock for residential applications?

Yes.

So to put it again in the right perspective that's around 250 million euro of our total business. And our electromechanical business in total is around 31% of the business.

So in that mechanical part, it still a lot of small part in the overall picture. But I mean you should expect the growth rates definitely to go down, because e-commerce as I mentioned earlier quarter after quarter we compared with a more happy quarter for year ago.

And in the first four quarters if you specifically for Google Nest you compared of course zero a year ago and then you have set a high percentage of growth. Every quarter you compare with the strong quarter off of Google Nest a year ago and therefore comparisons are more difficult.

And that's an outspoken thing for Google Nest, but it's very similar for our other businesses and Digital develops there comparisons become more and more difficult. We continue to see an acceleration of the adaptation of consumers moving from mechanical to digital.

And therefore we will continue to grow that business. That's clearly at a lower base or a lower growth rate, the experience is historically.

As I expect best Q4 is the most difficult one because that is the most difficult comparison because the reasons I mentioned earlier. And then the second question is can you repeat the second question please?

Yes. It's about the organic sales growth was good job which was self-inflicted due to plant closures and also whether that continues going forward?

So specifically Assa the negative growth of minus 1% I would say, there is two main reasons that it's Korea, where there's an important market for us and like I mentioned earlier, the market in Korea is definitely a high double digits down as well on the commercial side as on the residential side. And as being a strong player in that market it's of course very difficult to do significantly better than the market.

And the second reason that we has to do with China market conditions are also down that where we are also much more active in our approach to which all of this and therefore which sales we take where we have been much more selective in taking orders and therefore realizing sales in a profitable way and walking away on an unprofitable order and sales and that's why you see a negative effect on the top line notable effect on the bottom line. And yes for sure the consolidation of our operations in China where we close factories over time has a positive effect.

But of course the first moment when you close the factory first has a negative effect because you create some uncertainty and just and then overtime you will see only the savings. And as we started this process a year also we're still very much in that transition place.

Thank you. One last point, can you also highlight operative dynamic in U.S.

and some pricing outlook if possible?

Yes. On the pricing like Erick mentioned, we have the strongest price effect in the Americas because we have a significant metal door business in the Americas.

And as you remember 18 months ago, metal prices end up in a very significant way almost 60% in 18 months. As metal prices have now level as a lower stable level and therefore also pricing cases are coming down.

Americas is actually a market where you can through inflation -- organic inflation, tariff through price inflation, [Indiscernible] players. And when it comes to competition I would say there is not so much difference in the dynamic.

Its similar colleagues compared in the market today as where there a year ago [Indiscernible] in the market, so no real differences in dynamics out here. I think we have time for one more question operator.

Thank you very much. Well, I would like then to round up this conference and thank you very much for your participation and interest.

And we look forward to seeing and speaking with you in the coming weeks. Thank you.