Assa Abloy - Interim Report for the Third Quarter of 2002

* Sales increased by 13%, with 3% organic growth

* Income before tax increased by 28% as a result of ongoing improvements and increased Group coordination

* Operating margin (EBITA), including Besam increased to 14.5%, a rise of 0.9% over the second quarter

* Strong operating cash flow, SEK 1,002 M, 191% of income, from successful capital rationalisation

* Acquisition of Poli, the market leader in Chile, strengthens leading position in South America

Sales and Earnings
Sales for the third quarter rose by 13% to SEK 6,459 M. In local currencies the increase amounted to 20%. Acquired units contributed 17% to the increase in volume. Exchange-rate effects affected sales negatively by SEK 388 M compared with the third quarter last year. Organic growth amounted to 3%.

Sales for the period January to September 2002 totalled SEK 19,008 M, which represents an increase of 17%. Organic growth was 2%. Acquired units contributed 17% to the increase in volume. Exchange-rate effects affected sales negatively by SEK 333 M compared with the equivalent period last year.

The Group's income before tax for the third quarter increased by 28% to SEK 523 M (408). Exchange-rate variations when translating foreign subsidiaries' earnings affected income negatively by SEK 35 M. Operating margin before goodwill amortisation (EBITA) was 14.5%. A large number of integration and rationalisation projects are proceeding successfully. Co-operation in production between different Group companies is also increasing, including moving the manufacture of some components to low-cost countries.

The Group's income before tax for the nine months increased by 25% to SEK 1, 468 M (1 173). Exchangerate variations when translating foreign subsidiaries' eamings affected income negatively by SEK 36 M. Earnings per share after tax and full conversion amounted to SEK 0.88 (0.71) for the quarter, an increase of 24%. Earnings per share after tax and full conversion but excluding goodwill amortisation amounted to SEK 1.55. For the nine months, earnings per share after tax and full conversion rose by 19% to SEK 2.53 (2.12), and earnings per share after tax and full conversion but excluding goodwill amortisation amounted to SEK 4.48.

In the third quarter operating cash flow before tax and company acquisitions totalled SEK 1,002 M (658), which represents 191% of income. Cash flow for nine months was SEK 2,530 M (1,483). Programs to simplify work flows and reduce working capital are contributing to the strong cash flow, and there is significant potential for further improvements.

Development of the Subsidiaries
Sales by the Scandinavian units increased by 6% during the quarter and by 4% for the nine months. Margins are continuing to improve. Norway reported the strongest growth, due mainly to successful marketing of products for higher security. Growth in Sweden rose as a result of successful product launches, including the CLIQ cylinder. Sales in Denmark developed more weakly, with a downward trend in sales of ancillary products with lower margins resulting from the acquisition of Sloth & Co, while locks and lock cylinders showed a stable rate of growth.

Sales in Finland during the quarter were level with those in the equivalent period last year. Growth for nine months was 1%. The Finnish market is still weak, with a surplus of newly built office space arising from the strong telecoms expansion. There was continuing growth in exports, and a new range of high-security cylinders has recently been launched.

The Central European units reported an increase of 1% for the quarter, and an overall reduction of 1% for nine months. The market remains weak with no obvious signs of upturn. The restructuring and cost-reduction program is progressing well and will depress earnings by about EUR 7 M over the period up to the second quarter of2003. Its costs are being applied as they are incurred, the majority within this year. The resulting annual savings are esiimated at EUR 10 M. The German company Melchert, which manufactures lock security fittings, has been acquired at book value. The company has sales ofaround EUR 8 M and for the past ten years has collaborated with Assa Ruko GmbH in the marketing of security packages for locksmiths.

South Europe increased its sales by 2% for both the third quarter and the nine-month total. France is continuing to develop well even though the quarter's sales were slightly slower. Efficiency in the various companies is continuing to develop well, with Vachette reporting particularly encouraging improvements. TESA is developing well and is quickly restoring lost margins after the divestment of its hotel-lock manufacturing. Italy reported faster growth during the quarter. The Belgian market is weaker, with a lower rate of new construction following the completion of several major building projects for the European Commission. At the same time the aftermarket develops well.

The British units are at a turning point. Sales increased I% over the previous year, but the order book is continually improving following the launch ofa large number of new products. A comprehensive program directed at productivity and workflows is ongoing and is having beneficial effects on both margins and working capital.

Growth for the North American operations amounted to 3% in the third quarter and to 2% for nine months. The demand from institutional customers, who account for the majority of sales was continuously stable. The pace of development is high throughout the organisation, with increasing efficiency in all the manufacturing units and clear improvements in margins and working capital during the quarter. In the Door Group the production of frames is being merged and one of the production units is being closed, with a net loss of 100 employees. The costs of this are being applied as they are incurred and the operation will be complete before year-end. Emtek's successes on the private market are continuing, with high growth of volumes and margins. The businesses in Mexico and Canada are developing well, with significantly higher earnings.

Australia and New Zealand increased their rate of growth to 13% during the third quarter, and sales over nine months grew by 9%. A successful business development program based on cross-learning and cross-selling and focusing on new products is creating both growth and rising margins. Ongoing rationalisation of production and distribution is reducing working capital and contributing to improved margins.

New Markets showed a strong growth of 12% during the quarter. Sales over nine months rose by 2%. South Africa, Brazil and East Europe continued to display strong growth, while Mul-T-Lock and Asia have now reversed their negative trend and begun to report rising sales again. All units showed clearly improved earnings.

The Hotel segment has stabilised and the gap relative to last year is narrowing. Sales were 6% below last year for the quarter, as against 10% down for nine months. The now-completed restructuring program has produced a significant improvement in earnings. Marketing to the international hotel chains will be further strengthened following the coordination ofthe Group's interests in the hotel area - VingCard, Timelox, Elsafe and Inhova in Assa Abloy Hospitality.

Growth in the Identification sector rose to 9% for the quarter and amounts to 7% for the nine months. A new generation of products - iCLASS - was launched during the quarter. The products are thought to have major potential and are based on the companies' own smart-card technology combined with biometric identification.
The integration of Besam is progressing well. The company is showing increasing margins in a relatively weak market. Cooperation with other Group companies has already begun and some obvious synergies have been identified.

Other Events

Acquisltion of Poli
Assa Abloy has acquired Poli Cerraduras, the market leader in Chile. The company has sales of SEK 75 M and 300 employees. The acquisition of Poli strengthens Assa Abloy's position in South America and will contribute to earnings per share from the outset.

Acquisitions of Distributors in Eastern Europe
Assa Abloy has acquired UAB Almadis in Lithuania, which has been Assa's distributor for many years. The company has sales of around SEK 7 M.
Assa Abloy has acquired Radikovic in Slovenia, which has sales of around SEK 7 M. The company focuses primarily on high-security solutions and is a distributor for effeff.

In both cases the companies will provide a platform for expansion in their respective areas.

Settlement of the Litigation Concerning Mul-T-Lock
As mentioned in the Annual Report for 2001 Assa Abloy was involved in a litigation where the former owner of Mul-T-Lock claimed an amount of about US$ 45 M. Since Assa Abloy obtained an important favourable decision from the court in Tel Aviv, the parties have now settled the dispute without any substantial net cost for Assa Abloy.

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