Welcome to ASSA ABLOY and the fourth quarter reporting. We have a solid quarter in front of us where I feel very good about. All four divisions out of five are performing very strongly. I think you can guess that APAC was a little bit troublesome in this quarter, just like in the previous quarters. The financial highlight, we saw solid underlying development in the fourth quarter throughout the group, with good growth in Entrance Systems and EMEA, and growth in Americas and Global Tech. Here we have very high comps from last year. We saw negative growth in APAC, and that was mainly due to China. Sales improved by 6% to SEK 19.5 billion, 1% organic, 3% acquired, 1% divested, and 3% currency. EBIT declined, sorry. Normally, we have always improved.
Declined by 4% to SEK 2.9 billion, excluding APAC and write-off, we had 6% improvements. It follows pretty much sales as we normally have it. Earnings per share declined by -2%. I'm not used to decline, so sorry for that. Turning to the full year, at least now I can use improved. It was a good year despite a challenging market with strong growth in Americas, good growth in EMEA, Global Tech and Entrance Systems, and negative growth in APAC, just like we had also the year before. Improved sales by 5% to SEK 71.3 billion, with 2% organic, 4% acquired, 1% divested, and currency was flat for the year. Also, on profitability, it was flat, more or less. Profitability improved by 2% to SEK 11.3 billion, including China write-down, which was SEK 300 million.
EBIT improved by 4% in the quarter. Earnings per share improved by 2% to SEK 7.09. Oh, thank you. I forgot I'm not synchronized. Two computers is not easy. The market highlights, a lot of exciting things happened. It's always difficult to choose what to share with you. We saw strong digital sales in Europe in this quarter. We saw strong sales in other parts as well, but in particular in Europe. In fact, we are growing in all parts. Digital door locks are doing very well, especially in the Scandinavian region, but also in other markets now start to catch on. The innovation pipeline as well is strong, so we will have a lot of new things coming into market. I feel very good about this.
In Europe right now, more than 30% of sales is coming from electronic products. It continues to grow as a share of our sales. On the HID side, system integrators are now more and more adopting our virtual keys. They're becoming very popular. Only in December, we had more than 100 companies joining. We have 600 companies now that have joined virtual keying. It's still a small business, but it has a high pace of growth, and it passed $10 million in- We are ready. We have a little bit of technical malheur here. We have the computer breaking down just when we're starting. My excuses for a little bit of late start. Welcome to ASSA ABLOY and the fourth quarter reporting. We have a solid quarter in front of us where I feel very good about.
All four divisions out of five are performing very strongly. I think you can guess that APAC was a little bit troublesome in this quarter, just like in the previous quarters. Turning now to the numbers. The financial highlight, we saw solid underlying development in the fourth quarter throughout the group, with good growth in Entrance Systems and EMEA, and growth in Americas and Global Tech. Here we have very high comps from last year. We saw negative growth in APAC, and that was mainly due to China. Sales improved by 6% to SEK 19.5 billion, 1% organic, 3% acquired, 1% divested, and 3% currency. EBIT declined, sorry. Normally, we have always improved. Declined by 4% to SEK 2.9 billion, excluding APAC and write-off, we had 6% improvements. It follows pretty much sales as we normally have it. Earnings per share declined by -2%.
I'm not used to decline, so sorry for that. Turning to the full year, at least now I can use improved. It was a good year despite a challenging market with strong growth in Americas, good growth in EMEA, Global Tech and Entrance Systems, and negative growth in APAC, just like we had also the year before. Improved sales by 5% to SEK 71.3 billion, with 2% organic, 4% acquired, 1% divested, and currency was flat for the year. On profitability, it was flat, more or less. Profitability improved by 2% to SEK 11.3 billion, including China write-down, which was SEK 300 million. EBIT improved by 4% in the quarter. Earnings per share improved by 2% to SEK 7.09. On the market side. Oh, thank you. I forgot I'm not synchronous. Two computers is not easy. The market highlights, a lot of exciting things happened.
It's always difficult to choose what to share with you. We saw strong digital sales in Europe in this quarter. We saw strong sales in other parts as well, but in particular in Europe. In fact, we are growing in all parts. Digital door locks are doing very well, especially in the Scandinavian region, but also in other markets now start to catch on. The innovation pipeline as well is strong, so we will have a lot of new things coming into market. I feel very good about this. In Europe right now, more than 30% of sales is coming from electronic products. It continues to grow as a share of our sales. On the HID side, system integrators are now more and more adopting our virtual keys, and they're becoming very popular.
Only in December, we have more than 100 companies joining, and we have 600 companies now that have joined virtual keying. It's still a small business, but it has a high pace of growth, and it passed $10 million during last year, from more or less very small numbers in the beginning of the year. We also see system integrators who are starting to see the value of this. They start to integrate it in their apps to manage buildings, and in this case, we have an example from Honeywell. Vector, they call it. It's a sort of people flow system and also building management system, where virtual keys is one of the important cornerstones. On entrance side, more and more business is done direct sales and service with service technicians. In Europe, we have far more than 2,000 technicians with vans.
We have more than 1 million service contracts. We have developed now conversion kits for all major competitors. That means that we can take any total building and maintain and manage the doors for the customers, and this is happening at a higher and higher frequency. We also offer e-service maintenance to our customers, which is in fact nothing more than that they can have it online what is happening to the door environment. Also become very popular. In a very short period of time, we have sold more than 50,000 of those contracts. A very good evolution, I would say. Turning now to where am I. I am sorry for this, but I have two computers. Turning now to the group sales in the globe, what it looks like. I can say that North America continued in a solid way for us throughout the year.
If we had not had this AT&T order, which was very big in Q4 last year, Americas grew by 4% organically. I would say Q4 was a normal quarter for us also there. Organically for the whole year, it was +5%. In Latin America, it was also +5% organically. In Europe, +4%. Europe was very strong, I would say, throughout the year with 4% organic. This is a combination of all divisions, and Africa was also +4%. Pacific was weaker, -1%, and this was mainly driven by Australia, where New Zealand was positive. Asia was -6% organically, where China was -11% during the year. China is really the one that pulls us down. This has also an effect on emerging markets for us. The share of emerging markets went down from 26%-24% of total sales.
Still close to one-fourth of our total sales coming from emerging markets. I think that is very important in the future that this continues to grow, since 85% of the world population live in those countries. Looking to sales growth, we have passed SEK 71 billion total turnover for the group. We had a real growth for the year of 5%, a little bit less than we are used to. If we go as my favorite, looking a little bit longer perspective, since 2010, we have more than doubled our sales, so very positive evolution. You can see the combination of the blue, which is organic, and the yellow, which is acquired, how powerful that is for growth. It continues to add and add and add, I see no reason why, maybe we see later on why not we could continue to have growth and acquisitions going forward.
Organic growth, I'd like you to note also, has been positive ever since the financial crisis. This industry is a growing industry, despite then that it might be a difficult surrounding world that we are living in right now. Looking to operating margin, very firm on between 16%-17%. We have, as you can see here, it was 16.2% in the last 12 months, 16.3% the previous 12 months. We said that currency would be zero at the end of the year. It was negative in the first half of the year, positive in the other half of the year, and it ended up zero, and we had dilution from acquisitions by 0.2%. A pretty normal year.
The only thing that was not normal was that we have a dilution from APAC by 0.2%, which will persist during 2017 due to the weakness of the Chinese market. That we already said last quarter. Looking to profitability in absolute numbers, and here it gets very exciting in a way, because here we can see that profit has more than doubled during this year. It's going from SEK 4.5 billion to SEK 11.5 billion, so a good evolution, and last year was one of the weakest years, only 4% improvement, but still in the right direction. A good evolution altogether. Am I not? Yeah, now I'm in tune. Looking at the manufacturing footprint, we launched, as we said, a manufacturing footprint. It became a little bit higher than we said.
We said SEK 1.5 billion. Currency has changed a little bit, so it was almost SEK 1.6 billion. 2,500 people will leave the company, 10 factories close, and 40 sales offices will be consolidated, or other offices will be consolidated throughout the group. 50 acquisitions since we did this last time. No wonder that we had some pent-up demand, and very good return. I was surprised when I saw it myself that we will have a SEK 700 million return over the next three years from this program. We closed some 76 factories and converted pretty much what we have as in manufacturing into assembly units across the globe. A very good consolidation, I will say, throughout the group has taken place during the last seven, eight years. SEK 1.6 billion is still in the balance sheet to implement this program.
On the margin side, excluding now the APAC write-down in the quarter, 16.5%, 16.6%. Remember here we have a 0.2% dilution from APAC in addition here. We have a good evolution despite that we had only 1% organic growth. All divisions but APAC had a good leverage, and I've already mentioned the currency and acquisition impact. Currency was positive in this quarter. Acquisitions, we have rarely seen so many things in the air when it comes to acquisitions. It's quite a lot of activity in this field. We made 15 acquisitions in the last year. It's pretty much what we normally do, and four in the last quarter, and one today in this morning, by the way. We had 4% added turnover. We have never left so many acquisitions possibilities as we did in the last year.
The reason for that is sometimes the prices, as you probably know, are rather exaggerated. We are a little bit careful to pay 13, 14, 15 times that sometimes is the price for assets because the return will be rather low. We are selective, I would say, in where we go. Still we had 4%. It is a growing industry, despite then that it might be a difficult surrounding world that we are living in right now. Looking to operating margin, very firm on between 16% and 17%. We have, as you can see here, it was 16.2% in the last 12 months, 16.3% the previous 12 months. We said that currency would be zero at the end of the year. It was negative in the first half of the year, positive in the other half of the year, and it ended up zero.
We had dilution from acquisitions by 0.2%. A pretty normal year. The only thing that was not normal was that we have a dilution from APAC by two tenths of a percent, which will persist during 2017 due to the weakness of the Chinese market, but that we already said last quarter. Looking to profitability in absolute numbers, here it gets very exciting in a way, because here we can see that profit has more than doubled during this year. It is going from SEK 4.5 billion to SEK 11.5 billion. A good evolution. Last year was one of the weakest years, only 4% improvement, but still in the right direction. A good evolution altogether. Am I not? Yeah. Now I'm in tune. Looking to manufacturing footprint. We launched, as we said, a manufacturing footprint. We became a little bit higher than we said.
We said SEK 1.5 billion, currency has changed a little bit, it was almost SEK 1.6 billion. 2,500 people will leave the company, 10 factories close, and 40 sales offices will be consolidated, or other offices will be consolidated throughout the group. 50 acquisitions since we did this last time, no wonder that we had some pent-up demand. Very good return. I was surprised when I saw it myself that we will have a SEK 700 million return over the next three years from this program. We closed some 76 factories and converted pretty much what we have as in manufacturing into assembly units across the globe. A very good consolidation, I would say, throughout the group has taken place during the last seven, eight years. SEK 1.6 billion is still in the balance sheet to implement this program.
On the margin side, excluding now the APAC write-down in the quarter, 16.5%, 16.6%. Remember here we have a 0.2% dilution from APAC in addition here. We have a good evolution despite that we had only 1% organic growth. All divisions but APAC had a good leverage. I've already mentioned the currency and acquisition impact. Currency was positive in this quarter. Acquisitions, we have rarely seen so many things in the air when it comes to acquisitions, it's quite a lot of activity in this field. We made 15 acquisitions in the last year. It's pretty much what we normally do, and four in the last quarter, and one today in this morning, by the way. We had 4% added turnover. We have never left so many acquisitions possibilities as we did in the last year.
The reason for that is sometimes the prices, as you probably know, are rather exaggerated. We are a little bit careful to pay 13, 14, 15 times that sometimes is the price for assets because the return will be rather low. We are selective, I would say, in where we go. Still, we had 4% added sales, we will continue to see a good addition going forward. If the prices come down, I can promise you there are many targets out there that would be attractive to us. I'm not worried, I would say, because I get the question quite often, why is it only four and not five or six? That is the answer, in fact. We divested also Carlox. That was not a core asset for us during the year.
Looking to the acquisitions, a little bit highlight of a few of them. I will not go through all four. Construction Specialties, perfect acquisition for us. Doors and Dockings, a leader in Mexico with 80 service technicians. This is a small market for industrial doors today, but it's growing quite strongly, this was a very attractive asset for ASSA ABLOY to add to our North American direct sales and service operation. Bluvision, a tech company. Here, of course, multiples are difficult to talk about, but it's expensive. It's a very interesting company because this adds to our access control and our identity and access management part of HID, the ability to triangulate people. Imagine a hospital where you then offer this kind of solution where you know then all the time, real time, where is the doctor? That is sometimes very crucial to know.
An airport where you like to know are the entrepreneurs that might be 10,000 people coming and going during the day, are they where they're supposed to be? Meaning then that you don't need to put up walls or fences or other things. You can see from the system, it tells you whether someone is trespassing or moving in the wrong direction. We think these kind of things together with access control systems are going to fly in the future, that's why we went into this direction. A very exciting addition. It's neutral to earnings per share, it's not going to dilute us. LOB Poland, why are we buying dull locking companies? You could ask yourself, they are not dull. They're very exciting, to be honest.
This is the market leader in Poland, this puts us in a position where with our electronic locks, because we are electronic lockings, the market leader in Poland with electronic lockings, puts us in a position where we can offer the total building in the Polish market. We also own door companies in Poland, all together for the non-res market, puts Assa Abloy with a complete portfolio in the Polish market and as the clear market leader. A very attractive move for us. Turning now to the divisions, EMEA's margin improved from 16 to 16.8 on the back of 3% organic. Here we had unusually 0.5% positive dilution or accretion in this case, this is coming by the face of Carlox. Carlox had a very bad Q4 last year, that is why you see this.
Also that we had good leverage in EMEA, just as before, the northern part of Europe is doing quite well. Germany, Benelux, while we still see France, Italy, also the Middle East. The Middle East was quite weak in Q4. We think it's going to continue weak. We see that the number of projects are diminishing in the Middle East, unfortunately, that is life. Oil prices are low, they're lacking funds more and more. I also put on material cost here, the material cost is, of course, going up tremendously when it comes to steel. We're into the now our third round of % added sales, we will continue to see a good addition going forward. If the prices come down, I can promise you there are many targets out there that would be attractive to us.
I'm not worried, I would say, because I get the question quite often, why is it only four and not five or six? That is the answer, in fact. We divested also Carlox that it was not a core asset for us during the year. To the acquisitions, a little bit highlight of a few of them. I will not go through all four. Construction Specialties, perfect acquisition for us. Doors and Dockings, a leader in Mexico with 80 service technicians. This is a small market for industrial doors today, but it is growing quite strongly, this was a very attractive asset for ASSA ABLOY to add to our North American direct sales and service operation. Bluvision, a tech company. Multiples are difficult to talk about, but it is expensive.
It is a very interesting company because this adds to our access control and our identity and access management part of HID, the ability to triangulate people. Imagine a hospital where you then offer this kind of solution where you know then all the time, real time, where is the doctor? That is sometimes very crucial to know. Or an airport where you like to know are the entrepreneurs that might be 10,000 people coming and going during the day, are they where they are supposed to be? Meaning that you do not need to put up walls or fences or other things. You can see from the system, it tells you whether someone is trespassing or moving in the wrong direction. We think these kind of things together with access control systems are going to fly in the future, that is why we went into this direction.
A very exciting addition. It is neutral to earnings per share, it is not going to dilute us. LOB Poland, why are we buying dull locking companies? You could ask yourself, they are not dull. They are very exciting, to be honest. This is the market leader in Poland, this puts us in a position where with our electronic locks, because we are electronic lockings, the market leader in Poland with electronic lockings, puts us in a position where we can offer the total building in the Polish market. We also own door companies in Poland, all together for the non-res market, puts ASSA ABLOY with a complete portfolio in the Polish market and as the clear market leader. A very attractive move for us. To the divisions, EMEA's margin improved from 16 to 16.8 on the back of 3% organic.
We had unusually 0.5% positive dilution or accretion in this case, this is coming by the face of Carlox. Carlox had a very bad Q4 last year, that is why you see this. Also that we had good leverage in EMEA, just as before, the northern part of Europe is doing quite well. Germany, Benelux, while we still see France, Italy, and also the Middle East. The Middle East was quite weak in Q4. We think it is going to continue weak. We see that the number of projects are diminishing in the Middle East, unfortunately, that is life. Oil prices are low, they are lacking funds more and more. I also put on material cost, the material cost is, of course, going up tremendously when it comes to steel.
We are into the now our third round of price increases, we are trying to catch up. It is 38% or 40% or sometimes even more price increase on steel. Those of you that know us is that steel is one something that is abundant in our products, we need to compensate in the marketplace. We are busy with this in all parts Same in Americas, as you see material cost there as well. Americas, good profitability, 20.8%, dilution by 2%. You can see from Brazil that we have quite some dilution from acquisitions. With only 1% organic growth, Americas' margin kept up. I think it was a very strong score from them. Growth in Mexico, good growth in most other parts.
You see architectural hardware here, negative, has not been in my time before, this is because AT&T was so big last year that when that fell out now, it became negative. Underlying, we are growing in Americas in a good pace. It was 4% in North America. It is a positive evolution underlying. AT&T had a very big order last year, Q4. A pleasing picture from Americas, the same in APAC almost. Here we have 10.4% underlying profitability. It is not so that we pull the drain in APAC. Most markets are doing quite well, China not. As you can see here, we are adjusting quite a bit, minus 12% adjustment. South Asia is negative this time, has to do with India. They took away all the currency or the floating currency, the cash in the market.
October, November became markets where we sort of dropped. We saw just a hole on the ground, December sales returned again, it looks normal in January. I think it was a temporary thing, there was no money in the economy simply. We could not do much about that. Altogether, we took also this write-off of SEK 300 million, Carolina and I will come back to it later on, I will tell you. Here, I think I like also to warn for the material cost. China is a depressed market, here it will take more time to cover up for the raw material increases on steel. Our estimation is that we will have a tough time in the first six months this year to compensate for the steel cost increases. Global Technologies, very good evolution.
Physical access control with the virtual keys is doing very well. Identity and access management, where we added 50, or in fact more than 50 new engineers two, three years back. The new products are catching on in a very nice way, the inlay business, which is related to the gov ID business in part, is also doing quite well. Secure Issuance, which are printers, they sell a lot in Middle East, the Middle East was weak, this quarter was not the best. It was only good growth. While project sales, where we had $20 million order last year in Q4, was not repeated in the same magnitude this year. In fact, the negative there that it was only 1% organic growth, both related very much to the gov ID, mainly the project sales that did not materialize in China this year. Hospitality continued strong.
We see there also a very strong pickup of our mobile keys in the hotel world. All on the price increases, we are trying to catch up. It's 38%-40% and sometimes even more price increase on steel. Those of you that know us, is that steel is one something that is abundant in our products, so we need to compensate in the marketplace. We are busy with this in all parts. Same in Americas, as you see material cost there as well. Americas, good profitability, 20.8%, dilution by 2%, you can see then from Brazil that we have quite some dilution from acquisitions. With only 1% organic growth, Americas' margin kept up. I think it was a very strong score from them. Growth in Mexico, good growth in most other parts.
You see architectural hardware here, negative, hasn't been in my time before, this is because AT&T was so big last year that when that fell out now, it became negative. Underlying, we are growing in Americas in a good pace. It was 4% in North America. It's a positive evolution underlying. AT&T had a very big order last year, Q4. A pleasing picture from Americas, and the same in Asia Pacific almost. Here we have 10.4% underlying profitability. It's not so that we pull the drain in APAC. Most markets are doing quite well, China not. As you can see here, we are adjusting quite a bit, minus 12% adjustment. That South Asia is negative this time, has to do with India. They took away all the currency or the floating currency, the cash in the market.
October, November became markets where we sort of dropped. We saw just a hole on the ground, December sales returned again, and it looks normal in January. I think it was a temporary thing, there was no money in the economy simply. We couldn't do much about that. Altogether, we took also this write-off of SEK 300 million, and Carolina and me will come back to it later on, so I will tell you. Here, I think I like also to warn for the material cost. China is a depressed market, here it will take more time to cover up for the raw material increases on steel. Our estimation is that we will have a tough time in the first six months this year to compensate for the steel cost increases. Global Tech, very good evolution.
Physical access control with the virtual keys is doing very well. Identity and access management, where we added 50, or in fact more than 50 new engineers two, three years back. The new products are catching on in a very nice way, the inlay business, which is related to the gov ID business in part, is also doing quite well. Secure Issuance, which are printers, they sell a lot in Middle East, the Middle East was weak, this quarter was not the best. It was only good growth. While project sales, where we had a $20 million order last year in Q4, was not repeated in the same magnitude this year. In fact, the negative of that, it was only 1% organic growth, was related very much to the gov ID, but mainly the project sales that did not materialize in China this year. Hospitality continued strong.
We see there also a very strong pickup of our mobile keys in the hotel world. All hotel groups are preparing for the shift to offer all their customers virtual keys. This is very beneficial to the ASSA ABLOY group. Margins increased from 18.4% to 18.6% with only 1% organic. This has to do then with the mix we see up in HID. We had a very continued heavy dilution here, mainly from Bluvision and a few others, but 0.3%, and still the margin expanded. A very positive evolution. Entrance Systems continues to consolidate its business, doing well on door automatics where we have new products. Our sliding doors are growing very strong. U.S. is also doing well on the industrial side, so a very positive evolution.
Consolidation continues. We have very positive effect of that, and margin improved from 15.1% to 15.4% in the quarter. A pleasing picture. You can see here the size of Entrance Systems now is 30%, so it's almost past SEK 20 billion. As you know, our target is now set for go for SEK 30 billion. There will be more acquisitions here. That concludes my overview. I would like to invite Carolina now.
Thank you, Johan. Good morning, everybody. Another year ended. It ended in a solid way for ASSA ABLOY. I will start by looking at the financials and the highlights. Starting, as usual, with the very important organic growth. In the quarter, we had 1% organic growth. We estimate that to be 1% price increase and flat volumes. If you look at the divisions, I would say the trend is similar to the third quarter on the growth side. We do have very strong comps for both Americas and Global Technologies. Therefore, the growth on top of that was a bit lower. On the other hand, we have EMEA and Entrance Systems, more Europe-based, which had good growth in the quarter, slightly positively helped by the effect of some working days in December.
We should remember Christmas time, though, doesn't make that much difference with the working days because they're in the middle of a holiday. Then we have APAC, which continued to go down in the quarter. Acquired growth, 2% net, I would say. We've commented on that during the whole 2016 because we've had a divestment of Carlox. Gross, it was 3%, and net, then 2%. For the full year, we are on net 3%. Looking at what we've already acquired during 2016, we do have a carryover effect of around 2% acquired growth already in the books for 2017. Currency, another interesting one, which you can't steer very much. For us, in the quarter, we saw a positive, +3, first time we have positive this year. Therefore, the full year on currency is zero on the top line.
Here, just assuming the currency rates stay the way they are, we will have a carryover effect on 2017 of around 2% on the top line. That said, we are in February, let's say early on in the year, I think we have to wait and see the development on the currency. In total, top line growth of 6% and an EBIT of -4%, then adjusted for the China write-down, it's +6%. It's really in line with the top line growth. Here we have four out of five divisions having good to strong drop-through from the organic side. Happy with that development. Cash flow. Fourth quarter is strong on cash flow for us, and it was this year as well. Very strong. SEK 4.6 billion in operating cash flow.
A good number here coming from the profit, also good control over the working capital. Finally, earnings per share, -2%. Here it's less down than the EBIT, the difference really is that we have a lower financial net in the fourth quarter than we had last year, that really is due to some FX changes that we've had. Minus 2% on the earnings per share in the quarter, and for the full year, +2%. From the highlights, down into the details. Here we have the bridge, I will start with the organic column, +1% on the organic side. Here we saw Americas and Global Technologies with only 1% organic growth, still good and strong drop-through on the margin.
Americas, 30 basis points, actually up to 50 on Global Technologies, also due to a nice mix in Global Technologies that Johan mentioned. We have EMEA and Entrance Systems, both with good organic growth and good results from the efficiency measures and the existing manufacturing footprints, therefore also good drop-through here. We have APAC. Here we have separated the write-down. What you see in the organic column is the like-to-like comparison on the business. With a drop of -4% on the organic side, of course it's tough with the margin, we do have a dilution from APAC on the margin here. Currency, 3% top line I would say as expected, or at least as communicated. Here you can see that we did have a positive effect on the margin of 20 basis points.
We flagged for that the first half of the year was negative on the margin, the second half was positive. For the full year, we are flat when it comes to margin development due to currency. Acquisitions, the net 2% that I talked about. As you can see, only 10 basis points dilution from acquisitions, that is also thanks to the divestment, which was low in margin. Before I go into the P&L from a different perspective, I will make a little bit of a loop around APAC. This slide only shows the APAC, we explained last quarter that we've had overstated sales, mainly in 2015 and beginning of 2016, therefore the comparable numbers are too high.
What you can see here is that, if you look at it like-for-like, fourth quarter in 2016, we are on -4% organically for APAC compared to the reported -8%. For the full year, you will have the effect of -5% being the underlying organic growth or rather decline for APAC, while the reported is 9%. Overall difference for the full year on the sales line is SEK 380 on the difference. Back to the P&L as components of sales. Here we have the perspective of the full year and the like-for-like comparison. You can see, like we've seen during the year, the direct material has gone down significantly during the year, and we have 70 basis points improvement on that side.
I would say that a part of it, probably half, really comes from the mix, and the other half of it comes from lower raw materials underlying. That said, you have to remember we have a time lag because of our inventory times from when we purchase and when we actually have it in the P&L. As Johan commented, we all know that during 2016, most of the major raw materials that are related to us went up significantly. Unfortunately, I would say this looks very good now, but we have to be very careful going into 2017. We have already started with significant price increases in many of the places where that is needed. Conversion cost, stable. Gross margin, nice improvement then for the year, whole 60 basis points. We have the SG&A.
Here we have, I would say half of that is really the opposite effect from the mix. The other half is investment in front-end salespeople, R&D, but also in IT. Like-for-like for the year, the margin is up 10 basis points. We have the dilution from acquisitions of 20 basis points, and we understand the 16.2%. Cash flow. I have to say, fourth quarter in 2015, where we had this very high cash flow of over SEK 4.5 billion, I was very happy. I was a little bit worried this year if we would manage to have as high cash flow in the fourth quarter as we did then. We did. Very happy to say that we managed to have operating cash flow over SEK 4.5 billion. That really brings the full year to a 5% increase on operating cash flow.
Part of that, of course, comes from the increased profits, but also because we have very good control over the working capital. Here we have the DSO that are down to 50 days and the DPO that are around 60, which means we have a very nice gap between the DSO and the DPO. On the material throughput side, we're actually up five days. That's not necessarily volume, but here we do start to see the increased raw material prices that start to creep into the inventories then. Overall, very good cash flow development also in 2016. Good cash flow, low debt. We ended the year with a little bit above SEK 23 billion in debt. If you compare that with about a year ago, it's only about SEK 1 billion higher, and actually only the revaluation of the debt due to FX is higher than that difference.
We have, during the year, managed through our cash flow to both finance the dividend and all the acquisitions that we've done through the year. Therefore we also have a net debt/EBITDA that is on a low 1.8. Good development here as well. Another year ends, and here we are. You can see for the full year, the EPS is now 7 krona and 9 öre. With that, we have also a dividend proposal that is increased to 3 krona, and that's a full 13% increase on the dividend. On that positive note, I give back to you, Johan, for the conclusions. Back to the P&L as components of sales. Here we have the perspective of the full year and the like-for-like comparison.
You can see, like we've seen during the year, the direct material has gone down significantly during the year, and we have 70 basis points improvement on that side. I would say that a part of it, probably half, really comes from the mix, and the other half of it comes from lower raw materials underlying. That said, you have to remember we have a time lag because of our inventory times from when we purchase and when we actually have it in the P&L. As Johan commented, we all know that during 2016, most of the major raw materials that are related to us went up significantly. Unfortunately, I would say this looks very good now, but we have to be very careful going into 2017. We have already started with significant price increases in many of the places where that is needed. Conversion cost, stable.
Gross margin, nice improvement then for the year, whole 60 basis points. We have the SG&A. Here we have, I would say half of that is really the opposite effect from the mix. The other half is investment in front-end salespeople, R&D, but also in IT. Like for like for the year, the margin is up 10 basis points, and then we have the dilution from acquisitions of 20 basis points, and we understand the 16.2. Cash flow. I have to say, fourth quarter in 2015, where we had this very high cash flow of over SEK 4.5 billion, I was very happy. I was a little bit worried this year if we would manage to have as high cash flow in the fourth quarter as we did then. We did.
Very happy to say that we managed to have operating cash flow over SEK 4.5 billion. That really brings the full year to a 5% increase on operating cash flow. Part of that, of course, comes from the increased profits, but also because we have very good control over the working capital. Here we have the DSOs that are down to 50 days, and the DPOs that are well below 60, which means we have a very nice gap between the DSO and the DPO. On the material throughput side, we're actually up five days. That's not necessarily volume, but here we do start to see the increased raw material prices that do start to creep into the inventories then. Overall, very good cash flow development also in 2016. Good cash flow, low debt.
We ended the year with a little bit above SEK 23 billion in debt. If you compare that with about a year ago, it is only about SEK 1 billion higher, and actually only the revaluation of the debt due to FX is higher than that difference. We have, during the year, managed through our cash flow to both finance the dividend and all the acquisitions that we have done through the year. Therefore, we also have a net debt EBITDA that is on a low 1.8. Good development here as well. Another year ends, and here we are. You can see for the full year, the EPS is now SEK 7.09. With that, we have also a dividend proposal that is increased to SEK 3, and that is a full 13% increase on the dividend.
On that positive note, I give back to you, Johan, for the conclusions.
Thank you, Carolina. The conclusions for the quarter are that we had 6% growth, whereof 3% was real term or nominal growth you could call it, which is then acquisitions and organic. Good growth in Entrance Systems and EMEA. Decline in China continued, and stable underlying profit or EBIT development throughout the group in 4 divisions, very strong. NA, APAC, as we saw, not that strong. Very good cash flow, and also the board has decided then to propose 13% in dividend increase. With those words, I would like now to invite for Q&A. Mattias Olsson will help us. Before I let Mattias open up, I would like to clarify a little bit about China as well, because I am sure you have a lot of questions, and I will try to help you out as best as I can.
What has happened in China then in Q3, as you probably remember, we had the fraudulent behavior in eight of our facilities in China. We went in then, for obvious reasons, and laid off more than 50 people. Pretty much all management in those areas left the company very quickly. We brought in auditors to help us out to sort out how things were. We saw then that the sales was exaggerated by some SEK 400 million. That is what Carolina showed on this slide. We rectified that in last quarter. Auditors have continued to work now in this quarter, and one of the things that we asked them to do was really to check for the substance. Are the assets in the company as they should be? The conclusion was not in every case.
We have concluded that the majority what is missing is some receivables, but primarily it is inventory. We took a SEK 300 million one-off in this quarter to rectify that. We have hired new people. Many of those are in, and if not all, but most of them are also on the way in. We are going to be in this year with not full team, but at least a good team, as I would say. From that point of view, I would say we open up 2017 with rectified books. We have 22 units. Other 14 units, we also went in with auditors to check. They could not find any missing substance, so it looks good. That means it was isolated to these eight units.
We go in now into 2017 with corrected books and looking forward then to continue to develop sales. I would rather focus on that than to run around trying to tighten leaks. We have also reinforced a lot in the administrative field. Carolina has been very busy in working on that. We have a split division of what people can do and cannot do, meaning that no one can do the same task like payment and receivable. Either you invoice, but you do not receive money and handle the bank at the same time. We do not risk that anything fraudulent can occur again, even though we can never guarantee 100%. At least we have undertaken a lot of measures, and you cannot pay the suppliers without different people doing it.
We feel good that we have done what we can do and that we start on a new page in 2017. With those words, I open up then for Mattias to lead us in Q&A.
Thank you, Johan. Thank you also, Carolina. As Johan said, my name is Mattias Olsson. I head the Investor Relations team here at ASSA, and I will facilitate the Q&A session today. As usual, I ask you to please ask only one question, so to allow for as many people as possible to ask questions. I will also ask the operator to please repeat the instructions to how to ask questions before we kick off.
Thank you. Now we will begin the question and answer session.
Operators.
If you have a question, please press 0 then 1 on your touch tone phone. If you wish to be removed from the queue, please press 0 then 2. If you're using a speakerphone, you may need to pick up the handset before pressing the numbers. Once again, if you have a question, please press 0 then 1 on your touch tone phone. The first question.
I will start out with asking Johan a question. You say in the report that the global economic development is relatively weak, but you also see positive trends in some markets in Americas and Europe. How has 2017 kicked off, Johan?
As I told, end of last year, October, November were all the weak months. December was a good month, January looks also pretty good. We should remember January has one more working day, we don't think the impact of that day is that strong. It looks pretty good. I'd like also to underline here that Q1 will have an Easter effect in a positive sense. April and March, Easter will shift place between March and April. This year, we will have a full March, and Easter will be in April. That means that we will have a positive mainly in European arena since that's where we celebrate Easter. Altogether, a positive picture. Start of sort of the year.
Okay. Thank you, Johan. I am also the moderator, so I have the privilege. I will also ask Carolina a question. We just launched the sixth manufacturing footprint program. Johan says that it looks good from the savings point of view. Could you tell us what about the program and what to expect in terms of savings also this year and then maybe in 2018, please?
Yes. We have launched a new manufacturing footprint program. The one-off charge is around SEK 1.6 billion. The savings after 2019, the run rate will be SEK 700 million. In 2017, we expect to see SEK 300. In 2018, we expect to see SEK 250, in 2019, SEK 150 million in savings profile.
Okay. Thank you, Carolina. We will kick off the Q&A session here in Stockholm. Please, Peder.
Yes. Thank you, Peder Frölén , Handelsbanken Capital Markets. My question will be related to China, and there might be some small sub-questions in that question. If we look at the run rate in Q4 and assume that all books are cleared, if that run rate were to persist during the course of 2017, what organic growth should we then have, purely mathematically? Tied to that, if you were sort of complete in the marketplace in the sense that all managers are in place, you are back on track, do you sense that will capture some market shares back again that you could add to that figure? Yes, please.
The run rate was -11 for the year, like it was for APAC as a whole for China. As I have said before, our footprint is not general China, it's very much north. North of China has been very weak for us, while regions like Chengdu, Shaanxi and so they're in fact growing. It's not a uniform downslide that we have. We have a number of units, despite then the decline, that are growing while the northern part has declined heavily. Will we then recover market share? Difficult to tell. We are launching now some 20 new door models in the various entities. We put in quite some new engineers to really reinforce our stance there. It looks good. We launched most of them in Q4.
It's not so that we don't have competent people, but we had fraudulent people, we can't work with those. We had to take a sort of a step back and say, "This is something we cannot accept as a company. We need to be clean and everything." In a way you hurt yourself, but long term, we do the right thing. I cannot really answer whether we will regain market share, but I would say I have good hope we do the right things at least.
Again, on the level, just to understand the mathematics here, because since the inflated books were in 2015, that effect is gone, consequently in 2016. If Q4 volumes, daily rates were to persist, what would that mean for organic growth in 2017, purely mathematically?
I hope really it will not persist because it was -14, that was worse in the Q4. I think personally, we see a leveling out because we are very related to the Chinese leakage of the economy also. The economy has turned down quite a bit on the construction. We saw that Volvo, for instance, they had very big sales of excavators now in China. You start by digging a hole normally before you put up the building. Hopefully, and we see also that there are more square meters coming out in the market, I would be surprised, even though I might be surprised, but I would be surprised if the market continued to decline like this.
Thank you.
Okay, thank you, Peder. Any more questions here in Stockholm? Fred, please. Operator, do we have a question from the telephone conference?
The first question we've received on the line is from Andreas Willi, J.P. Morgan. Please go ahead. Your line is now open.
Good morning, Johan. Good morning, Carolina. My question is on price versus raw material. Maybe you could help us there a bit more in terms of understanding the dynamics, as it is 1% price in Q4. Was that enough to offset the raw material impact overall for the group in Q4? If you look into 2017 in terms of what's in the pipeline on raw materials, do you expect that to be immediately offset by the price increases or do you expect a time lag? Basically, what I'm trying to figure out is if you look at price versus cost for 2016 and you compare price versus cost for 2017, what should we pencil in in terms of the bridge?
I know that longer term, high raw materials is a positive, allows you to raise prices, but more from a shorter term perspective should we be worried for the first half of 2017 that this could be a negative rather than maybe a positive like we've had it in the past at times? Thank you.
I think when it comes to locks, yes, we will be able to compensate like always, because there, the raw material content is limited. On the door side, like always, it will take a lag, and the lag will be different for different regions. We think Europe will not have a lag. When it comes to EMEA, we think in America there will be a lag. We have the impression that some of our competitors have hedged. We never hedge, that means that we probably cannot take the full price increase because they haven't reacted in the way we normally do when you have raw material price increases. There we will have a lag in our price increase in America then.
In APAC, in China, due to this market situation, we estimate that we will also have a lag, but I would say the majority we will be able to compensate for. On Entrance Systems side, because we saw this early, we're into the third round of price increases. We think we will be close to cover the raw material increase because there you have a heavy impact, there's a lot of steel in industrial door. Altogether, I'm rather optimistic, and if we have a lag, we talk about a rather short one, so I'm not worried about it.
Thank you very much. Maybe as a follow-up on, you gave guidance for FX and M&A on the top line for 2017. On the margin, is there anything to note there in terms of dilution accretion from FX or M&A at current levels?
The way it looks now, on the FX, of course, there will be a bit higher FX effect in the beginning of the year and then panning out towards the end of the year since we are comparing with the previous year's increase towards the end. In the beginning on the margin side on the FX, I would say slightly positive in the beginning of the year, then really flat and for the full year flat. When it comes to the acquisitions, the around 2% that we have in the books for 2017, they do have dilution, I would say as usual, but since it is only 2%, it is probably 20 basis points from that.
Thank you very much.
The next question we have received is from Lars Thorsen, Barclays. Your line is now open.
Hi. Thanks. Good morning, Johan, Carolina. I want to just return to organic growth and pricing. Just on organic growth, first of all, in Americas, obviously a tough comp, so I appreciate that. If we X out AT&T, you are talking about 4% underlying growth there. Obviously in your comments you point to growth in all other markets than the U.S. I wonder whether you felt there was anything unusual in the quarter given the U.S. election. We have heard some others at least that there was some uncertainty adversely impacting their businesses, more so perhaps on the larger project. Then for the group as a whole, I think this time last year you gave an indication for growth for the full year, i.e., the 2%-4% range we have talked about. I wonder whether you would offer up a view on 2017 at this point.
No. I think we stay with 2%-4% because we don't know about China, and China is a big drag for us. It has, at least for the year that passed, dragged us down by more than 1%. It's very difficult for us to really estimate that. Apart from China, I think we are growing at a good pace. Exact number I cannot really say, but look to Europe, look to entrance. It's not bad what we have, at least not in my opinion. On the U.S. it was a little bit difficult to hear about the growth there, but AT&T was indeed 3% affecting us. We saw October, November were slower months than we normally see, or at least saw the year before. Why was that? I don't know.
There was an election in the U.S., perhaps that had an influence, but we really don't know. December came back in good for us, and our quotes continue to grow all the time. It's not so that the activity with the customers took away, and ABI index went up 5% from 50 to 55 in December. We don't have a feeling that the U.S. is cooling off right now at least.
If I can push you, Johan, on the 2%-4%, how much of that do you expect to be pricing?
Well, probably a little bit more than usual, but 1.5%, perhaps. We haven't really forecasted. Do you have an idea?
No, it usually turns out to be a net 1%, but it's going to be different price increases due to if it's doors or if it's on the lock side. It depends also on the mix of the group.
You heard me mention about China that we're launching a lot of new doors. That is one way to increase price, and then it's difficult to say how much more price you got because you launch a new series of doors at a different price level, and then you can't put that in your price increase. That's a new door. I think there are more than one way to increase the price when you have problems.
That's helpful. Secondly, and finally, if I can just be allowed on your U.S. business, can you remind us how much of the U.S. business or the components into U.S. is imported, and specifically how much from Mexico, China? Maybe secondly, to your U.S. business, Carolina, can you help us understand your effective tax rate in the U.S.? It's not clear to us how much you utilize transfer pricing to lower tax jurisdiction. It'd be helpful to get a sense for how much you might potentially benefit from a U.S. tax reform.
Scott? Yeah.
Tax rate.
I can do the tax part. If you look at the group as a whole, around 35% of our sales are in the U.S. That said, that is not only Americas, it's also nowadays, a big part of Entrance Systems that is in the U.S. Why I'm saying this is that they are very different when it comes to margin. The tax rate in the U.S. on corporate is 38%. Of course, with a lower tax rate, whatever that may be, how it pans out, that would benefit us as a group on tax. How much, and when and what, I think we have to wait and see until it's implemented.
When it comes to imported content to the U.S., in Americas, we have an intact manufacturing base. We estimate that it doesn't take us that much time to re-in-source what we have outsourced. Part of it is coming today, I don't know the exact percent part, is coming from China, but an increasing part has been moved to Mexico because Mexico has become more beneficial when it comes to sourcing. We don't know about China, and China is a big drag for us. It has, at least for the year that passed, dragged us down by more than 1%. It's very difficult for us to really estimate that. I think when it comes apart from China, we are growing at a good pace. Exact number, I cannot really say, but look to Europe, look to Entrance Systems.
It's not bad what we have, at least not in my opinion. On the U.S., it was a little bit difficult to hear about the growth there. AT&T was indeed 3% affecting us. We see October, November were slower months than we normally see, or at least saw the year before. Why was that? I don't know. There was an election in the U.S., perhaps that had an influence, but we really don't know. December came back in good force, and our quotes continue to grow all the time. It's not so that the activity with the customers took away, and ABI index went up 5% in or from 50 to 55 in December. We don't have a feeling that the U.S. is sort of cooling off right now, at least.
If I can push you, Johan, on the 2%-4%, how much of that do you expect to be pricing?
Well, probably a little bit more than usual, one and a half perhaps. We haven't really forecasted. Do you have an idea?
No, it usually turns out to be a net one, it's going to be different price increases due to if it's doors or if it's on the lock side. It depends also on the mix of the group.
You heard me mention about China, that we're launching a lot of new doors. That is one way to increase price, it's difficult to say how much more price you got, because you launch a new series of doors at a different price level, you can't sort of put that in your price increase. That's a new door. I think there are more than one way to increase the price when you have problems.
That's helpful. Secondly, and finally, if I can just be allowed on your U.S. business, can you remind us how much of the U.S. business or the components into U.S. is imported, and specifically how much from Mexico, China? Maybe secondly, to your U.S. business, Carolina, can you help us understand your effective tax rate in the U.S.? It's not clear to us how much you utilize transfer pricing to lower tax jurisdiction. It'd be helpful to get a sense for how much you might potentially benefit from a U.S. tax reform.
Scott?
Yeah.
Tax rate.
I can do the tax part. Well, if you look at the group as a whole, around 35% of our sales are in the U.S. That said, that is not only Americas, it's also nowadays, a big part of Entrance Systems that is in the U.S. Why I'm saying this is that they are very different when it comes to margin. The tax rate in the U.S. on corporate is 38%. Of course, with a lower tax rate, whatever that may be, how it pans out, that would benefit us as a group on tax. How much, and when and what, I think we have to wait and see until it's implemented.
When it comes to imported content to the U.S., in Americas, we have an intact manufacturing base. We estimate that it doesn't take us that much time to re-in-source what we have outsourced. Part of it is coming today, I don't know the exact % part, is coming from China, but an increasing part has been moved to Mexico because Mexico has become more beneficial when it comes to sourcing. We do final assembly in the U.S., while the pre-assembly is done in low-cost markets. I don't see on a temporary basis, this will of course be difficult, but on a longer term, we can easily move back into the U.S., at least in our estimation. In HID, it's mainly software. Otherwise, it's a plastic componentry and a final assembly. All the intelligence is held in our store, so to speak, in our secure vault.
It's not really a problem, it's going to be a temporary thing in that case. On an Entrance Systems, the value add is more or less 100% U.S. except pedestrian doors that have a high European content and some Asian content as well.
That's helpful. Thanks.
I remind everyone that we limit ourselves to one question. Let's continue on the conference call, please.
The next question we have received is from Andre Kukhnin, Credit Suisse. Your line is now open.
Yes. Good morning. It's Andre from Credit Suisse. Thanks for taking my question. Can I just confirm on China, have we really drawn the line underneath that? Can we say that you've done all the digging and that's the final result? Just secondly on that, were there any extra costs associated with that you took to the P&L, like the extra auditors, consultants, the laying off, rehiring, and if so, was that significant?
I think it's for you, Carolina.
Yeah. We have gone through all the entities. First, the ones that were fraudulent already in the third quarter. Now we've looked and finished the audits in all of the companies. What you see in the fourth quarter, the SEK 300, is what we have found, and we've taken all of that in the fourth quarter. It is related to the same eight that we saw in the third quarter. For now, we are all done in China. When you ask about extra costs for auditors and hiring and firing, that is not part of the one-off. That is part of the APAC run rate. Yes, it's part of that, but how significant it is, I think we see that as part of our doing business now.
Got it. If I may just follow up on the quarter results, the central line seemed to be around two times of what it was in the last couple of years. Could you shed some light on what went on there? What would be the right level to think of as maybe normalized level or level for 2017?
Couldn't hear at the beginning of the question, the what?
Sorry. The eliminations line of minus SEK 269 in Q4 looks abnormally high compared to the last couple of years.
Well, I think that sort of changes a little bit over the years, but it is on a normalized line.
Right. The 2016 run rate is representative.
Okay. Thank you, Andre. Next question, please.
The next question we've received is from Ben Maslen, Morgan Stanley. Your line is now open.
Thank you. Morning, Johan. Morning, Carolina. Can you just put a bit more color around the Middle East? How large is that business now as a percentage of EMEA sales?
We do final assembly in the U.S., while the pre-assembly is done in a low-cost market. I don't see on a temporary basis, this will of course be difficult, but on a longer term, we can easily move back into the U.S., at least in our estimation. In HID, it's mainly software, otherwise it's a plastic componentry and a final assembly. All the intelligence is held in our store, so to speak, in our secure vault. It's not really a problem, but it's going to be a temporary thing in that case. On an Entrance Systems, the value add is more or less 100% USA. Except pedestrian doors that have a high European content and some Asian content as well.
That's helpful. Thanks.
I remind everyone that we limit ourselves to one question. Let's continue on the conference call, please.
The next question we have received is from Andre Kukhnin, Credit Suisse. Your line is now open.
Yes, good morning. It's Andre from Credit Suisse. Thanks for taking my question. Can I just confirm on China, have we really drawn the line underneath that? Just secondly on that, were there any extra costs associated with that you took to the P&L, like the extra auditors, consultants, the laying off, rehiring, and if so, was that significant?
I think it's for you, Carolina.
Yeah. We have gone through all the entities. First, the ones that were fraudulent already in the third quarter. Now we've looked and finished the audits in all of the companies. What you see in the fourth quarter, the SEK 300, is what we have found, and we've taken all of that in the fourth quarter. It is related to the same eight that we saw in the third quarter. For now, we are all done in China. When you ask about extra costs for auditors and hiring and firing, that is not part of the one-off. That is part of the APAC run rate. Yes, it's part of that, but how significant it is, I think we see that as part of our doing business now.
Got it. If I may just follow up on the quarter result, the central line seemed to be around two times of what it was in the last couple of years. Could you shed some light on what went on there? What would be the right level to think of as maybe normalized level or level for 2017?
Couldn't hear at the beginning of the question, the what?
Sorry. The eliminations line of minus SEK 269 in Q4 looks abnormally high compared to the last couple of years.
Well, I think that sort of changes a little bit over the years, but it is on a normalized line.
Right. The 2016 run rate is representative.
Okay. Thank you, Andre. Next question, please.
The next question we've received is from Ben Maslen, Morgan Stanley. Your line is now open.
Thank you. Morning, Johan. Morning, Carolina. Can you just put a bit more color around the Middle East? How large is that business now as a percentage of EMEA sales? How deep are the declines? I know you flagged the weakness now for a couple of quarters. When do your comparatives start to get easier as you look through 2017? Thank you.
I don't have in my head the exact number, it is not extremely significant. It has grown quite a bit in the last few years. We have been very successful in the Middle East. I don't dare to give you a number, we can provide you with a number later on. Do you have a number for that?
Yeah, around half a billion.
We saw it coming, we have already taken out quite some people. We have reduced our footprint, not in size, but we have reduced our footprint when it comes to number of people. We feel, of course, not good when things go down, but we are prepared.
Thank you, if I can, just a clarification. If you think, Johan, you can do 2%-4% growth for this year is a reasonable starting point. Within that, what would you expect from Americas this year? You did about 5% growth from 2016. Is that a realistic assumption for 2017? Thanks.
You probably know that better than me, it looks good. That's all I can say. I don't want to give a number. We don't give forecasts.
Okay. Thank you.
Our quotes are up quite a bit.
Maybe I can add on the Middle East. It is about 2% of our annual sales, if you look at the group.
Okay, got it. Thanks. Cheers.
Maybe we will take a question from Stockholm here. Please.
Hi, it's Peder again to follow up. If we look at last year, we saw an organic growth of 2%, say three without China. If we could look at it from a product point of view instead of geographies and divisions, if the electronic and electromechanic part is now, 30-plus %, maybe, what was the growth of the old mechanical locks, and how has that affected your mix in terms of profitability, all else equals?
Profit-wise, electronics is good. You have also the aftermarket, when the more electronics you sell, the more aftermarket you get. As you know, also the lifetime goes down. The more we sell, the better it becomes. Could you repeat the first question? I think I missed that one.
If we do the very simplified and divide your products into old school and new school, basically looking at the mature parts of your offering and exclude China and that, they ought to be flat at best.
Well, I think we should remember that we always have cannibalization. Every electronic lock is a mechanical lock, but with an electronic interface. It's very hard, you're not fair if you say, look to how mechanical is not growing. Every electronic lock has a mechanical content. In a way, you transfer your business from pool one to pool B. If you look only purely on the mechanical locks, in the longer perspective, it has doubled since 2005, you then have six doubled on the electronics. You can have the sort of move between those two buckets.
Deep are the declines. I know you flagged the weakness now for a couple of quarters. When do your comparatives start to get easier as you look through 2017? Thank you.
I don't have in my head the exact number. It is not extremely significant. It has grown quite a bit in the last few years. We have been very successful in the Middle East. I don't dare to give you a number. We can provide you with a number later on. Do you have a number for that?
Yeah, around half a billion.
We saw it coming. We have already taken out quite some people. We have reduced our footprint, not in size, but we have reduced our footprint when it comes to number of people. We feel, of course, not good when things go down. We are prepared.
Thank you. If I can, just a clarification. If you think, Johan, you can do 2%-4% growth for this year is a reasonable starting point. Within that, what would you expect from Americas this year? You did about 5% growth from 2016. Is that a realistic assumption for 2017? Thanks.
You probably know that better than me. It looks good. That's all I can say. I don't want to give a number. We don't give forecasts.
Okay. Thank you.
Our quotes are up quite a bit.
Maybe I can add on the Middle East. It's about 2% of our annual sales, if you look at the group.
Okay, got it. Thanks. Cheers.
Maybe we'll take a question from Stockholm here. Please.
Hi, it's Peter again to follow up. If we look at last year, we saw an organic growth of 2%, say three without China. If we could look at it from a product point of view instead of geographies and divisions, if the electronic and electromechanic part is now, 30-plus %, maybe, what was the growth of the old mechanical locks, and how has that affected your mix in terms of profitability, all else equals?
Profit-wise, electronics is good. You have also the aftermarket, when the more electronics you sell, the more aftermarket you get. As you know, also the lifetime goes down. The more we sell, the better it becomes. Could you repeat the first question? I think I missed that one.
If we do the very simplified and divide your products into old school and new school, basically looking at the mature parts of your offering and exclude China and that, they ought to be flat at best.
I think we should remember that we always have cannibalization. Every electronic lock is a mechanical lock, but with an electronic interface. It's very hard, you're not fair if you say, look to how mechanical is not growing, because every electronic lock has a mechanical content. In a way, you transfer your business from pool one to pool B. I wouldn't say, if you look only purely on the mechanical locks in the longer perspective, it has doubled since 2005, but at the time had six doubled on the electronics. You can have the sort of move between those two buckets. Of course, the six doubling has eaten a lot from the one that doubled only. Part of that is acquisitions, but it's growing still, but not at the very high pace.
Okay, thank you.
Okay, we return to the telephone conference.
Yep. The next question we've received is from Guillermo Fenu, UBS. Your line is now open.
Thank you. Good morning. Hi, Carolina. Hi, Johan. A couple of questions, actually, one question and one follow-up regarding tough comps. Can I just ask whether this tough comps situation is something that will, in a way, hamper organic growth through the first half of 2017? I see tough comps emerging in Europe. I see the U.S.A. was actually having a good first half as well. I was wondering about that.
Well, yes. There is a tough comp. Yes. We had good start of last year and a weaker second half, that's a fact. I'm still not negative, I think, at least looking to quotes and activity in the market, I'm not negative what we look upon going forward into the first quarter, at least. As you know, many of our orders are delivered in the same month, it's very hard really to say. Quoting levels are good, also in Europe.
Thank you. A question to Carolina. Can you quantify the raw materials increase or give us any information about how diluted that movement is so we can play around your pricing? Thank you.
We can play around in your spreadsheets, okay. Well, I would have to say that we try to look forward, if I go back then to the fourth quarter of 2016, we still had a positive effect towards most of that quarter. That's why you can't really take the quarter. You could see from my slide that we did have significantly lower direct material also, as a percentage. What we do see and where we see it is that on the inventory side and as Johan mentioned, already in China, we've seen strong increases. It's not possible to quantify it like that.
I think you have to look at the increase of the raw materials, knowing that around a third of our total direct material is related to raw materials, sort of look at that increase and take probably half a year's lag of the increases of raw materials in the world.
Thank you. That gives me enough. Thank you.
The next-
Okay, maybe we're coming to an end here. Maybe we'll take one last question from the telephone conference, please.
Yep. The last question will be from Mr. James Moore, Redburn. Your line is now open.
Yeah. Good morning, everyone. Hi, Carolina. Hi, Johan. Maybe I could ask about your comment about the Asia Pacific margin and the China raw material, and potentially given the market development, that could be tougher to recoup. Could you help us a little bit with your thoughts on how the full year 2017 Asia Pac margin might develop?
Yeah, just looking at where we are now and sort of taking away the one-offs that are related to historical periods, what we could see in the fourth quarter was that the margin was around 10% compared to almost 15% the previous year. Fourth quarter is a very strong quarter for effeff though. If you look at the run rate for the full year in 2016, we can see that.
Of course, the six doubling has eaten a lot from the one that doubled only. Part of that is acquisitions, but it's growing still, but not at the very high pace.
Okay. Thank you.
Okay, we return to the telephone conference.
Yep. The next question we've received is from Guillermo Fenu, UBS. Your line is now open.
Thank you. Good morning. Hi, Carolina. Hi, Johan. A couple of questions, actually, one question and one follow-up regarding tough comps. Can I just ask whether this tough comps situation is something that will, in a way, hamper organic growth through the first half of 2017? I see tough comps emerging in Europe. I see the U.S. was actually having a good first half as well. I was wondering about that.
Well, yes. There is a tough comp. Yes. We had good start of last year and a weaker second half, that's a fact. I'm still not negative, I think, at least looking to quotes and activity in the market, I'm not negative what we look upon going forward into the first quarter, at least. As you know, many of our orders are delivered in the same month, so it's very hard really to say. Quoting levels are good, also in Europe.
Thank you. Then a question to Carolina. Can you quantify the raw materials increase or give us any information about how diluted that movement is so we can play around your pricing? Thank you.
We can play around in your spreadsheets. Okay. Well, I would have to say that we try to look forward. If I go back to the fourth quarter of 2016, we still had a positive effect towards most of that quarter. That's why you can't really take the quarter. You could see from my slide that we did have significantly lower direct material also as a percentage. What we do see and where we see it is that on the inventory side, and as Johan mentioned, already in China, we're seeing strong increases. It's not possible to quantify it like that.
I think you have to look at the increase of the raw materials, knowing that around a third of our total direct material is related to raw materials, look at that increase and take probably half a year's lag of the increases of raw materials in the world.
Thank you. That gives me enough. Thank you.
The next-
Okay. Maybe we are coming to an end here. Maybe we will take one last question from the telephone conference, please.
Yeah. The last question will be from Mr. James Moore, Redburn, your line is now open.
Yeah. Good morning, everyone. Hi, Carolina. Hi, Johan. Maybe I could ask about your comment about the Asia Pacific margin and the China raw material, and potentially given the market development that could be tougher to recoup. Can you help us a little bit with your thoughts on how the full year 2017 Asia Pac margin might develop?
Yeah, just looking at where we are now and taking away the one-offs that are related to historical periods, what we could see in the fourth quarter was that the margin was around 10% compared to almost 15% the previous year. Fourth quarter is a very strong quarter for APAC though. If you look at the run rate for the full year in 2016, we can see that assuming the same effect, it is around 20 basis point dilution then for us in 2017 due to the change in margin in APAC.
Okay. Thank you. Maybe if I could just follow up a complete aside, basically that's the second question, sorry. dormakaba buying Stanley. Any thoughts on that?
Well, not much. It was not us. It was them. We are already rather large in the U.S.A., antitrust had probably not been easy for us if we had gone in that direction. I guess the same was valid for Allegion, it was probably a safe bet that dormakaba would be the ones acquiring.
That's very helpful. Thanks.
Okay. It's 11 o'clock, I think we can conclude there. Would you like to say some last words, Johan?
Well, I feel good about the year that passed, another strong year for Assa Abloy. We continue to develop our business. A lot of very exciting products in the pipeline, and as I mentioned also, a lot of acquisitions are going on. However, we are a little bit hesitant when it comes to pricing. Looking to 2017 at least, it looks positive from an altogether, from a total picture. I feel good. Thank you very much for coming and following us on the net.