Assa Abloy locks in price increases to offset freight costs

Assa Abloy AB (publ), a maker of locks and door systems, released results for the fourth quarter of 2020 with revenue down 6.6% year over year. That partly reflects a downturn in the company's office services business not being offset by a stronger residential sales business. There are indications that the downturn may be continuing into the new year. Panjiva's data shows that U.S. seaborne imports associated with the company fell 4.6% year over year in the fourth quarter of 2020 while shipments in January likely fell a further 17.9%.

Like many companies, as outlined in Panjiva's Feb. 9 research, Assa Abloy is facing higher logistics costs. Yet, CEO Nico Delvaux is somewhat optimistic, stating he sees container costs for shopping from China as "high, hopefully, temporary cost." The company's strategy will also include passing through higher costs to customers, with Delvaux saying, "We will do everything we can and with the information we have today, we will, of course, strive to neutralize material cost increases through price increases." 

Assa Abloy also has to contend with seasonality in its business, particularly with sales of locks rising before year-end price increases. Panjiva's data shows imports to the U.S. in the company's lock business diverged from the overall trend, with imports increasing 9.7% year over year in the fourth quarter of 2020, but have followed the trend in January imports with imports down 17.9%. Imports of hinges and other products fell more quickly in the fourth quarter of 2020 but by a lesser degree in January.

Total U.S. imports of locks also improved in the fourth quarter of 2020 by 6.8% year over year. With most offices closed, Assa Abloy's residential Yale lock brand may have been able to capture sales from homeowners looking for projects in the fall. That can also be seen in imports of locks associated with Spectrum Brands Holdings Inc., who offer the Kwikset brand of residential locks. Lock imports associated with Spectrum increased by 25.8% year over year in the fourth quarter of 2020, and 83.4% year over year in January, while Allegion PLC fell continually throughout 2020, perhaps reflecting its focus on new builds and offices and less so on residential settings.

Eric Oak is a researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.