Assa Abloy's organic sales take hit from slow China construction market

By Elviira Luoma

(Reuters) -Sweden's Assa Abloy, the world's biggest lockmaker, said on Wednesday its organic sales fell 1% in the second quarter as weakness in China's construction market continued to weigh on its Asia Pacific business.

The company, whose products range from security doors to electronic and mechanical locks, does not expect any improvement in China's construction activity in the short term, CEO Nico Delvaux told Reuters in an interview.

"I think it's early to forecast what's going to happen next year, but definitely the second half of the year is going to remain very low," Delvaux said.

The rival to U.S.-based Allegion and Stanley Black & Decker said the Asia Pacific division's sales fell 5% organically, while its Global Technologies segment saw a 7% drop from a strong year-ago period.

"Both Global Technologies (down versus the still tough comp) and Asia-Pacific (very weak, China-driven) missed consensus organic sales by >200 bp," J.P.Morgan wrote in a note to clients.

Assa's shares were down 1.3% at 308.40 Swedish crowns per share by 1039 GMT.

On a reported basis, the group's sales grew by 10% driven by its recent acquisitions. It made a record 24 acquisitions last year and further 11 in the first six months of 2024.

"The continued solid non-residential development in the US contributed to good organic sales growth of 3% in the Americas division while EMEIA's (Europe, Middle East, India and Africa) organic sales grew 1%," Delvaux said in a statement.

Assa's quarterly operating profit, excluding items affecting comparability, jumped 11% to 6.09 billion Swedish crowns ($575.23 million), aided by cost actions, strong price realisation and lower direct material costs. That was in line with market expectations, according to an LSEG poll.

($1 = 10.5871 Swedish crowns)

(Reporting by Elviira Luoma in Gdansk; editing by Milla Nissi)