Good morning, welcome to this telephone conference. My name is Lars Renström. I am the Chairman of Assa Abloy, the purpose of this call is to introduce the new CEO of Assa Abloy, Nico Delvaux. Also present are Assa Abloy's CFO, Carolina Dybeck Happe, and Head of Investor Relations, Mattias Olsson. With Nico Delvaux, we have found a strong and experienced leader of large global businesses with a strong track record. Nico has vast experience in successfully managing large international operations, he has also the experience of working in many countries. Nico has managed two business areas within Atlas Copco and is presently CEO of Metso Corporation in Finland. Nico has strong experience from leading complex and decentralized organizations, he has a strong focus on innovation and technical development, which is also important.
Atlas Copco is an excellent company that has delivered several successful leaders over the years like, for example, Johan Molin, Ronnie Leten, Björn Rosengren, Nico Delvaux, and myself. Assa Abloy has made a fantastic journey since the foundation in 1994 and is the true global leader in its industry, I am convinced that Nico successfully will continue to develop the group. Before we start the Q&A, I would like Nico to introduce himself. The word is over to you, Nico.
Thank you, Lars. Good morning, everybody. My name is Nico Delvaux, I am really looking forward to assume the position as new President and CEO of Assa Abloy next year. A few words about myself. I am a Belgian citizen, 26 years married with Carla, my wife, and together we have a son of 20 years old. I am an electromechanical engineer, I added also a master in business administration to that. Like Lars said, I have solid experience in running large international organizations similar to Assa Abloy. I started actually my career in a sugar factory in a small city where I was living in the center of Belgium, it was still before my military service.
After my military service, I joined Atlas Copco, I worked 26 years for Atlas Copco, mainly on the compressor side, where I held positions in sales, in marketing, in service, in acquisition integration management, and also in general management. For Atlas Copco, I lived and worked in Belgium, in Italy, in Canada, in the U.S., and in China. Therefore, I would say that I also have good knowledge from within of the three main markets in the world, Asia, Europe, and North America. Perhaps a couple of things what I did in Atlas Copco that I believe are relevant also for the Assa Abloy position. First of all, as you know, Atlas Copco has really R&D and innovation in their genes.
Atlas Copco uses innovation in really everything they do, that's not only for new product development, but also the way they run processes and so on. Another relevant experience is definitely my service experience. Back in 2008, I was the one who created the first service division in the Atlas Copco group, splitting out service activities from the equipment divisions and putting together all the service activities in a newly created service division with the aim to see really service as a business and also to improve customer satisfaction. I would say this has been really an important strategic decision for the actual success of the Atlas Copco group.
In that position, and then also later as the business area President, Construction Technique, where I was based in Shanghai for three years, and then also my last three years in Atlas Copco as business area President for Compressor Technique. We did frequent acquisitions, many smaller ones, similar to what Assa Abloy is doing with their strategy. Also some bigger acquisitions of Edwards and Leybold, two market leaders on the vacuum side, through which we bought ourselves into the vacuum market, and that then also led to the creation of a new dedicated vacuum business area within the Atlas Copco group. Now I work as the CEO for Metso, a Finnish leader in the mining aggregate and valve industry.
I would say that I'm a promoter of decentralization with clear authority and responsibility, meaning that an organization can combine speed and agility of the different business units with utilizing the strengths of the larger organization. For instance, strong processes and economics of scale in product development or in manufacturing or in sourcing. I'm particularly passionate about people, and I consider myself as a true people manager. I really like motivating people to strive forward and achieve results. I'm very much results driven, and I want my colleagues to be the same. I would say that I have a rather inclusive management style, and definitely want to be close to the people and to the operations. In that aspect, I also travel quite intensively because I really want to be close to customers, close to suppliers, and close to our people.
I really consider our people as the most important asset in an organization. People say that I have a lot of energy, and I like definitely to win, both in business and in sports. I'm a fan of football, and my favorite team is a Belgian team called Anderlecht. I'm definitely looking forward very much to the World Cup. By the way, Belgium was the first European team to qualify for the World Cup. I must also congratulate, of course, Sweden, and definitely made a good achievement in defeating Italy in the qualifications. With these characteristics, I'm convinced my leadership will fit very well in Assa Abloy. With that, perhaps, I give the word back to Lars for starting the Q&A session.
Thank you. We will now begin the question and answer session. If you have a question, please press zero then one on your touch tone phone. If you wish to be removed from the queue, please press zero then two. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press zero then one on your touch tone phone. Our first question comes from the line of Andre Kukhnin from Credit Suisse. Please go ahead. Your line is open.
Yes, good morning. Thanks so much for taking my questions. Nico, I'll just start with a very broad one. I appreciate that you haven't even started yet, but I'm sure you've done a lot of due diligence on Assa Abloy before taking this post and making the change. In this new role, from what you know so far, do you expect to make a lot of changes at the early stages of your tenure? Looking at the achievements you listed that are certainly highly relevant from Atlas Copco, where do you think the greatest application of that is going to be at Assa, and what will be most challenging?
Thank you. Of course, I think Assa Abloy, if you look from the start when Assa Abloy was created as a company, I believe it has been a great success. Definitely also over the last 11 years under the leadership of Johan Molin, Assa Abloy has made a tremendous track record. Indeed, I look now forward and I'm very excited to bring Assa Abloy in its development now also up to the next level. My view so far has mainly been outside in. I've talked, of course, to Lars and some other board members to get a better view on Assa Abloy. I believe first of all, we are in a fantastic market. If you just look on the mechanical side, the mechanical lock side, the world is growing, the world urbanization is going on.
Countries like China, India, people are moving to the cities. There will be a lot of locks needed. The market dynamic definitely are strong. Next to that, of course, the whole transformation into more electromechanical solutions and then also the whole digital world is something very exciting and something that I definitely also found very interesting for me in this position. I believe as a market, there is great opportunities. When it comes to strategy, I believe the strategy has proven to be very successful. Just look at the results, recent results. Definitely now with the information I have today and also with the input I got from the board, I don't see any reason to make big changes on the strategy.
The strategy will remain as it is to have strong profitable growth through organic growth and that complemented with the right acquisitions. That's the only thing I can say so far, because again, I don't have that much information yet on Assa Abloy.
Thank you. Maybe just a quick follow-up on China specifically. You are inheriting a, I'd say, somewhat challenging situation there. I think there's a lot been done and it is, I think, under control. To really take it to another level, as you said, maybe is more needed. Do you expect that to be an area of disproportionate focus for you?
Yeah, I'm confident that, as I explained, I lived three years in Shanghai, in China. I traveled also intensively in China itself. I know China markets rather well, and I believe if you want to be a global leader, like we in Assa Abloy definitely want to be, you also have to be one of the leaders in China. China is a big market, therefore, for sure, China must get the right priority and the right attention from management. I'm confident that my experience will help to bring Assa Abloy also in China up to the next level.
Great. Thank you, Nico.
Thank you.
Thank you. Our next question comes from the line of Lars Brorson from Barclays. Please go ahead. Your line is open.
Hi, good morning, Lars, Nico.
Morning.
A couple questions from my side. I guess Metso must be busy now trying to find a replacement for you, with you spending less than six months in that seat. Is there anything other than that's holding back an earlier start? I think you mentioned June 2018 as the latest that you would start. That will be question one, and then maybe just to last, I would be curious as to try to understand how you think about changes to both the management but also to Johan's position, if you like, and role on the board. I guess your head of Entrance Systems is leaving in a few weeks' time. Is that a position that'll be filled before Nico joins or after? And should I expect Johan to retain his board seat after Nico joins? Thanks.
You take the first one, Nico. I take the second.
I can start. Indeed, we have said that I would start latest somewhere middle of June. Of course, everything will depend on how fast Metso can find a solution for my succession. You can imagine that this came as a surprise in Metso. I also want to stress that I'm leaving Metso and joining Assa Abloy, not because of Metso, but perhaps thanks to Metso, in the sense that there is nothing wrong with Metso. I can only say positive things about this company. It's a very good company with a lot of good potential for the future, a lot of good and competent people. It's just that this opportunity from Assa Abloy came along, and obviously, this is fantastic career move for me. I explained already the reasons why, and okay, the timing is as it is.
Thank you, Nico. Coming over to the second question. We have a strong pipeline of qualified people in Assa Abloy, and the vacant position as head of division Entrance Systems, that is already filled with an internal person with very solid experience. Johan's future role in the board, it's up to the nomination committee to decide on the composition of the board, and they will, during spring, announce the person that they nominate for the board. I would say that my personal view is that it's quite rare that a CEO that is stepping down, that he remains on the board.
Understood. Thank you.
Thank you. Our next question comes from the line of Graeme Phillips from Jefferies. Please go ahead, your line is open.
Yes. Good morning. Thanks for taking my call. Congratulations, Nico. Two questions, please. You made the comment about service when you were at Atlas Copco. Can you talk a little bit about what the opportunities, I know it is very early days, you think there could be at Assa Abloy on that side, particularly because I think one of the successes of Compressor Technique was that you made the intention to make more acquisitions or own the distribution of the dealer points, which obviously gave you much more closer focus on customers, which something that Assa Abloy does not necessarily have.
Just on M&A, could perhaps contrast in part of your due diligence, I guess you looked at how Assa Abloy's M&A teams look, because obviously some of the success, again, you touched on this at Atlas Copco, has been the several acquisitions you made during your tenure in Compressor Technique. How they compare, are they sort of in terms of the level of people, number of people, and how you will be able to best utilize that?
If you start, Nico, and I will fill in.
Yes, okay. First perhaps on service and the opportunities I see, again, with a rough outside-in view, I would say that it's in general good service opportunities, because we should look at the complete install base, and Assa Abloy as being a strong market leader, has of course, the biggest install base, and that's really something you can then work on with service. I would say that in particular, in the Entrance Systems division, I see a lot of potential to further develop the service activities. When it comes to merger and acquisitions, of course, I don't know the people in the Assa Abloy acquisition team yet.
I can only say again, from outside, it looks like a very well-oiled machine, because if you see the frequency with which Assa Abloy has been doing acquisitions of recent years in a successful way, it can only be that the team is a very successful and definitely well-trained team. When it comes to how many people in a dedicated team and how many people in the business, I believe in Assa Abloy, it's very similar as we did in Atlas Copco. We only have a small core team that handles, I would say, the technicalities of mergers and acquisitions. The initiative of finding the right targets and negotiating with those targets, once the company is acquired, integrating the company is really a responsibility of the business.
That's really, I believe, also the way it should be, because in that way, you create ownership for the projects you do in the business with the right people.
[inaudible] Thanks very much. I don't know if Lars would add anything.
No, I have nothing to add. Nico covered it all.
Okay. Thanks very much.
Thank you.
Thank you. Our next question comes from the line of Tom Skogman from Carnegie. Please go ahead. Your line is open.
This is Tom Skogman from Carnegie in Helsinki. Of course, there are a lot of Metso shareholders that are now wondering what you're doing and what's going on. I hope you could elaborate a bit more, if it's simply the larger company size that has attracted you to Assa Abloy, or could we just get some more clarity in that, and we don't need to worry about kind of bad issues with Metso coming up?
Yes, Tom, I can definitely elaborate on that. Like I said, I'm very excited to join Assa Abloy. First of all, it's of course, indeed, a much bigger company than Metso from a market cap point of view. It's a bit more than four times bigger. From a number of people perspective, it's indeed also four times bigger. It's also an industry which is closer to my 26 years of experience in Atlas Copco. It's definitely an industry where a lot of things are happening now, as I explained earlier, with the whole digitalization and the move into that direction. It's really me taking an opportunity in Assa Abloy. It's not me running away from Metso, I believe that is very important that I make that statement. Again, there is no single reason for me to leave Metso.
Obviously, there is a lot of good reasons for me to join Assa Abloy. Again, Metso, I believe, is a great company, a lot of potential in the company, a good future, a lot of good people in the organization. In that aspect, of course, it's always a challenge when the CEO leaves. Metso, like all good companies, like Assa Abloy or like Atlas Copco, is not made only of a CEO. There's many other people that make the success of a company. In that aspect also, the chairman has confirmed and reconfirmed that the strategy that we started now is the right strategy, that we will further execute that strategy in Metso also without me in the future. Of course, I will still be there maximum six months.
We will see how long I'm still there, I will be also committed to Metso and making Metso a success till the last day I work for this company.
Okay. Thank you.
Thank you. Ladies and gentlemen, as a reminder, if you do wish to register for a question, please press 01 on your telephone keypad now. Our next question comes from the line of James Moore from Redburn. Please go ahead. Your line is open.
Hi, Lars. Hi, Nico. It's James from Redburn. Congratulations, Nico. I have a question for Lars and one for you, Nico. Lars, as Chairman, perhaps I can ask you about the processes, the governance. When Johan Molin joined back in 2005, the company was a bit of a mess in some senses from an organizational structure that was a collaboration of good acquisitions. You'd rolled them up, you hadn't integrated them. For many years, I always thought that Johan Molin was Assa Abloy. My sense is that Assa has been Atlas Copco, and many of the decentralized processes have been put in place, such that it runs itself better. To what degree do you think all the processes and governance are in place? Do you have a vision of something else that now needs to happen?
What do you think is the key strategic changes that need to happen in the business? Nico, I just wanted to talk about the timeframe. How long do you think it is that you'd like to give to Assa?
Well, if I start out first. Well, Nico's mission is to further develop Assa Abloy in line with the successful strategy that has made Assa Abloy the market leader in its industry. We don't see any need for any major change. We believe that the processes are in place, but there is always a better way of doing things. That of course also applies for Assa Abloy, and that will show itself over the years. I think I stop there and hand over to you, Nico.
Yes, James. As for how long at Assa Abloy. Yeah, it's true that I was only six months in Metso, and I understand that it's not common practice to leave after only six months. You should also remember that before Metso, I had 26 years with Atlas Copco. I would say that I'm very much a one-company man, and I really like to work on the long term. That's definitely also the ambition I have now with Assa Abloy. It's a function, I believe, that has enough challenges for many years to come.
That's a very fair answer. Thank you. Maybe if I could follow up and just say, if there's one thing that you take from your 26 years at Atlas, and when you look at Assa today, if there's one thing that you think you would like to improve on to provide additional value creation to shareholders, what would that be from the early view?
In Assa Abloy, you mean, or no?
Yes.
No, I think it's too early. Again, I only have the outside in view, and it looks as a first impression that Assa Abloy is a very well-run company. Again, I think it has been very successful since its creation and definitely also over the last 11 years when Johan was heading Assa Abloy.
That's it. Yeah.
My ambition will be to continue the success in a similar manner.
Yeah. There I can add that your background in service is highly relevant, and as you mentioned, we believe there is still a potential in the division Entrance Systems to grow their service business even further. Also Nico's experience from innovation and how to manage innovation, is something important that he brings with him to Assa Abloy. Thank you very much.
Thank you, James.
Thank you. Our next question comes from the line of Dennis Dicksmeier from Goldman Sachs. Please go ahead. Your line is open.
Hi, good morning from London. Nico, also congratulations on the new role from us. I have just one question again on your commitment to Assa Abloy. I just wondered if you could make any disclosure in regards to the contract you have signed, how long your commitment is with Assa Abloy, and whether your compensation targets, whether it's share-based or performance-based, just any specific targets. Just wondered if there's any disclosure on this.
Well, I think when it comes to the contract, it's a normal setup that Nico has with a base salary, a short-term incentive, and a long-term incentive program. We have been running long-term incentive programs in Assa Abloy since 2011. Of course, Nico will join the long-term incentive program. Do you have anything more to add, Nico?
No, I think the question was perhaps also on how long you want to stay. I can repeat. I have the ambition to stay till retirement in Assa Abloy. I think there is enough challenge in this exciting job for those years to come.
Thank you very much.
Thank you. Our next question comes from the line of purr . Please go ahead. Your line is open.
Hi. Good morning, gentlemen and Carolina. Nico, congratulations on the new position. The question I had, you spoke quite a lot about the digital and digitalization of this industry. I was wondering if you could kind of share with us maybe your view of the global tech business, which is less, of course, now of a hardware business, more becoming on the software side, and how you are seeing potentially, in a preliminary manner, how to develop this business and also your view on what should be the place of this business within Assa Abloy, considering it's kind of more software-based.
I think it's much too early for me to have a qualified answer on this, because for that, I have to dig really into the specific industry and the specific application. I can only say that I can definitely use my experience on the digital side from Atlas Copco, where we were one of the first ones to connect compressed air installations over the cloud. Today, I think Atlas Copco has more than 100,000 compressor installations connected, where you can read out conditions of compressors from your computer or from your iPhone, wherever you are in the world. There is a lot of really breakthrough things happening in Atlas Copco around connectivity.
I think when you talk about digitalization, I believe you also should not only look at the way you sell and the way you can eventually improve your sales and/or your profitability, but you can also use digitalization to improve your operations. Also there, I think there is a lot of good examples in Atlas Copco how we at that time and day to day have improved their service operations to make it really fully automatic in a digital way. Again, too early to comment specifically on the Assa Abloy challenges.
Thank you.
Thank you. Our next question comes from the line of Matthew Spurr from Royal Bank of Canada. Please go ahead. Your line is open.
Thanks. Morning, everyone. In terms of transition and overlap with Mr. Molin, is there any, or with the day that you start, does Mr. Molin leave? The second one I had was on, you talked about decentralization, you're a fan of that. Just from your outsider perspective, does Assa need more decentralization if you're comparing it to Atlas Copco, where you used to work? Just want your thoughts on how far Assa is down that journey, because obviously it can bring disadvantages. You might say that what happened in China was sort of a consequence of decentralization as well. Just your early thoughts on where Assa is on that journey. Thanks.
I can start off with Mr. Molin. Johan Molin will ensure that we have a smooth transition between him and Nico. There will be overlap, and how big that will be, we will decide when that time comes. I hand over to you, Nico, regarding the second question.
Perhaps first on add-on, on Johan Molin. Of course, I want to drain the 11 years of experience of Johan, because it will give me a quick start. Definitely I look forward to that overlap with Johan. When it comes to decentralization, again, a very rough view today, but it looks very similar between Atlas Copco and Assa Abloy, where perhaps some of the activities of Assa Abloy are still a bit more centralized because there is not the right volume yet to bring it more decentralized. When it comes specifically to China, what you mentioned, I don't believe this has something to do with centralization or decentralization. I believe these type of challenges can also be better solved by decentralization than centralization. It was just over the agents of what happened there.
Thank you.
Thanks.
We have time for a final question. Who gets that one?
Thank you. Our final question comes from the line of Gael de-Bray from Deutsche Bank. Please go ahead. Your line is open.
Thanks very much, and good morning, everybody. I guess an important part of the Assa Abloy business model and success has relied on acquisitions. Perhaps, could you talk a bit more about, Nico, about your own experience, expertise, and general approach to M&A and perhaps in particular on the software side?
Yes, I can do that. I have to go back to my Atlas Copco time, and when we started the service division. At that time, we start to do very frequent acquisitions, perhaps not with the same pace as Assa Abloy, but we would also do an acquisition, I would say every 2 months or so. Most of them would also be in between €30 million-€100 million range. Very similar to Assa Abloy, where either we were acquiring companies for the install base in order to leverage our service capabilities, and we were acquiring companies for technology.
That journey has then continued when I was having the Construction Technique business area, then definitely also the last three years when I was having Compressor Technique business area, where the acquisition of Edwards was made before I became the business area president, but where I was not very much involved in the integration process and where I was definitely actively involved when we acquired Leybold, another vacuum company. I would say that I have a rather vast experience. On one side, doing it myself from a practical point of view, because also earlier in my career, I was also an integration manager a long time ago, Atlas Copco bought Prime Service, Inc., the biggest rental company in the U.S. I've really practical add-on experience. Then, of course, I've also led and supervised several acquisitions as the business area president in Atlas Copco.
Okay. Thank you very much.
Thank you very much. That completes our conference call. Thank you all of you for calling in, and thank you for your attention, and take the chance to wish all of you a Merry Christmas and a Happy New Year in due course. Thank you and goodbye.