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October 22, 2016

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Inflating sales figures gets the sack

SWEDEN’S Assa Abloy, the world’s biggest lockmaker, said yesterday that it has fired several executives at acquired companies in China after discovering they had inflated sales figures for 2015.

Assa Abloy corrected the irregularities in its third-quarter report published yesterday, taking a 260-million-crown (US$29 million) hit to operating profit and sending its shares, which had been nearly flat year-to-date, down as much as 8.6 percent in its biggest one-day fall in eight months.

“2015 was a tough year and I was standing here saying we did better than the market and unfortunately I was wrong,” Chief Executive Johan Molin said. “Our people added turnover that should not be there, they started to invoice earlier than they should.”

Assa Abloy reported sales of 5 billion crowns in China last year. Molin said the fraud had taken place at companies producing fire doors in China. “All people that were involved, which was quite a number, were laid off in the quarter. So we are looking for new management in a number of locations,” Molin said.

Assa Abloy reported a slightly smaller increase than expected in group profit for the third quarter as sales fell in China on a sluggish market.

Operating profit at Assa Abloy, which has been outgrowing rivals helped by acquisitions and a shift toward digital access systems, rose to 3.02 billion crowns from 2.97 billion crowns a year ago against a mean forecast of 3.05 billion crowns in a Reuters poll of analysts.

While the profit miss was not substantial, analysts said the firm had a strong track record of delivering on expectations.

Organic growth slowed to 2 percent from 4 percent in the previous quarter, and from 3 percent a year ago, as a sales decline in the Asia-Pacific division accelerated amid a slump in demand in China where turnover shrank 12 percent.

“The third quarter of the year showed satisfactory growth for Assa Abloy generally, with the exception of Asia-Pacific,” Molin said. The division still accounts for less than a fifth of group turnover, but Assa Abloy’s strategy is to expand in emerging markets.

Assa Abloy’s competitors include unlisted Swiss firm Dorma-Kaba and Allegion of the US.


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