Ladies and gentlemen, welcome to Assa Abloy and the third quarter reporting. A stable and good quarter, as usual, I almost said. Turning now to the numbers. We saw stable development in the third quarter with strong growth in Americas and Global Technologies, good growth in Entrance Systems and growth in EMEA. APAC continued negative as we have seen in previous quarters. Sales improved by 3% to SEK 18 billion, with the 2% organic, 2% acquired growth, and 1% negative currency effect. On the EBIT side, we improved by 2% to SEK 3,000,000,020, with an almost flat currency effect, only -2% in the quarter. We see now that the currency starts to disappear in our numbers. Earnings per share improved by 3% to SEK 1.91. Looking to the full year or January to September, it looks pretty much the same.
A little bit stronger growth, with strong growth in Americas and Global Technologies, good growth in EMEA and Entrance Systems, and negative growth in APAC, just as we saw in this quarter as well. Sales has improved by 4% to SEK 51.8 billion, 3% organic, 3% acquired growth, and 2% negative currency. Profit improved by 4% to SEK 8.3 billion, negative currency effect of SEK 160 million in the year. Earnings per share improved by 4% as well to SEK 5.21. Turning now to the market side, it's always difficult to judge, or not judge, but to choose what to show you. Today, I will share with you about data analytics. That's something that comes more and more into our access systems. In this case, it's CLIQ that is getting an addition of this.
What is happening there is that you can see every moment in a building. It's perhaps not so important if you are in your own home, but even there you can do it. It's more in an airport or other public facilities where you can see if there's any abnormalities happening in the building or any abuse of usage of accesses in various parts of the building. Very important and more and more in demand from our customers. We also see more and more energy efficient solutions. We have showed you several times about our locks that more or less are now having zero footprint when it comes to energy consumption.
Here in this case, it's the same in Entrance Systems where we have launched freezer transportation doors, which are high speed doors, which in a truck container today, they lose a lot of energy when they have open back doors or side doors on a permanent basis when they load and offload the containers or the carriers. In this case, it saves several thousands of liters of diesel fuel in a year because they are cooled by diesel fuel, by having a door that closes the moment you don't need it. It's a very big improvement when it comes to savings. Same in industrial docking systems, more or less. It's not hermetic, but as close as you can get to hermetic closures, which means that you save cool air or hot air, depending on what the climate zone you are in, on the inside or outside.
There is no loss of energy when you do load and offload. Customers can also be guided by return on investment calculators so that they can see themselves, "When do I have my money back on my investment as such?" We also see with the digital door locks, they have been very popular for home automation, but more and more DIY chains likes to see our solutions also to be used by ordinary customers going and buying themselves. They're rather easy to install, so that means that you can buy them off the shelf and install them. We see a pull from DIY chains in a number of countries in recent time. Of course, we are more than willing. For us, this is a new segment because Assa Abloy normally is non-residential company.
Of course, we are not shying away from this opportunity that is occurring in several countries. In the Scandinavia market, we have unified our locksmiths. It is so that in Sweden, we brought all our locksmiths under the name of CERTEGO. We did the same in Denmark and in Norway in recent time, and in the last few months, we have done the same in Finland. This means that we can service our large customers in the Scandinavian region on a 24/7 basis and do installations and do quotations in a sort of standardized way to all those customers. Very important in an economy where access control becomes standard and electronic solutions become standard as well. It's very important for our customers. Turning now to the situation in the world. It is just as before. The mature markets are doing quite well this year.
Americas has grown organically 6%. EMEA has grown 4% organically, and Pacific a little bit less, only 1%. A good evolution. Surprisingly enough, emerging markets is still 24%, despite the negative evolution we've seen in China, with -12% since the beginning of the year of volume or turnover in China. We still have 24% in emerging markets, and this is of course partly due to 5 acquisitions in Brazil last year, but also that we are growing 6% organically in Latin America, 6% in Africa, and in Asia, there we have a negative with -8%. That includes also the Middle East, which is also quite weak in these days. Altogether, a rather pleasing picture, a little bit better than I had expected myself, especially for the emerging market. Here we should remember in Latin America, it includes Brazil, that is -10%.
It's a good evolution in the other markets, I mean. Turning now to sales growth, very good evolution if it look a little bit longer scope. You see the yellow, which is our acquired growth. It's about 2% to even up 17% in full 2011. The blue, which is our organic growth that has continued since the financial crisis, between 2% and 4% per annum. This year is no exception, and this accumulated, in fact, has more than double our sales, up from SEK 34 billion-SEK 35 billion back in 2010 to more than SEK 70 billion. We are shooting through the SEK 70 billion level right now. More than a doubling of the business. Quite encouraging evolution. This quarter, we had 2% or 4% nominal growth, organic 2% and acquired 2%.
Looking to profitability, I'd like to remind you, we buy companies that normally are not making all that much money. Despite this, by lifting the profitability in those companies, we've gone for more than a doubling of the profitability since 2010. It's really behind that, a very strong upsurge on the profitability since impacting every year. In the last four quarters, we have grown profitability by 6%. Margin-wise, we are in our target zone, 16%-17% EBIT, 16.2% to be exact now in the last 12 months. In this quarter, we had no dilution from acquisitions and currency. We said in the beginning of the year, currency is negative, and now it has turned positive, it's nullifying the dilution we have from acquisitions in this quarter. It's a flat situation.
You can see in the last four quarters, we had 16.2% EBIT and one tenth of a percent lower than last year. Very stable evolution. Positive, I must say. One of the reasons why this is happening is our manufacturing footprint, that is doing quite well. As you know, we are going to launch another one here in Q4, a little bit more than SEK 1.5 billion is the costing that we so far have seen. Most likely a little bit more than 10 factories going to be closed and a number will be converted. So far in the old program, 76 factories out of 78 are now closed, we are almost coming to term, and 101 factories have been converted to assembly. Pretty much in high-cost countries today, the Assa Abloy Group is an assembly company.
Of course, if there is a financial downturn, this means that our load or our exposure to downturn has been reduced thanks to this rather serious work. We have seen almost 12,000 people leaving since the beginning of the program. A good evolution, I would say. On the margin side, we lost two tenths of a percent. I would say this is mainly and almost only due to the APAC situation where we have lower margin. You will see that later on the presentation. We have the flat situation between currency and dilution from acquisition. It was zero in between those two. We have savings in manufacturing footprint. Carolina will give a more exact number later on. It is very positive and also general savings, we must remember salaries and raw material have now started to creep up, it compensates for that.
The loss of two tenths of a percent is really related to APAC. Here, of course, due to the drop in China, I mentioned it last time and I'd like to come back to it, that in China, due to that it has dropped so far at the 10, 12% pace, that will put a load on us to really catch up when it comes to savings. We are saving a lot of money, not fast enough when it drops at that pace. We will see a drag from China also in a few quarters forward before we catch up with the decline that we have seen. On the acquisition side, this is the first quarter I stand here and say only one acquisition. That's unusual.
There are many in the pipeline. We continue to have good activity, but we don't rule over the exact timing. Still, we have 10 this year, and we have added almost 3% turnover or SEK 1.9 billion, to be exact, on turnover. We have sold one company as well, also really unusual for us, but it happens sometimes. Turning to this Trojan in the U.K., it's a typical bolt-on acquisition. Very positive for us in the sense that we can add it to our activities in the U.K. without really adding a lot of indirect costing. It means that it adds nicely to our earnings per share. In this case, it complements very much our offering in the U.K. market on doors and windows. We get a complete holistic offering to our customers.
A very positive acquisition. I wouldn't call it a no-brainer because there's a lot of work behind to get it up to standards, but it is a very good accretive acquisition from our point of view. It's a pity it's only SEK 220 million, but that's why we don't make 10 acquisition this year, as you need to do many to get a lot of add on. Turning then to EMEA, an improvement on margin by 0.2%, despite that we only grew 2% organically. Here, in fact, it is from acquisitions that we see a positive accretion. This is because we had Carlocks sold three quarters away, and Carlocks was not very profitable. Sometimes you get dilution in another direction. We saw, as usual, I almost said, strong growth in Scandinavia, and unusual in the U.K., strong growth as well.
Despite then the Brexit, it looks rather good, the U.K. market right now, probably due to that it gets a pull from the weak currency. An unusual friend up there is Israel that we haven't seen growing for a while. In this quarter, it had a strong growth. Germany, Benelux continue to grow in a good way. Iberia and Italy are also coming back. They have been declining for many years in the past. Finland was on, I would say, unusual way. They're not growing this quarter, while Africa is declining and Eastern Europe. Eastern Europe is okay, but Africa is weak, just like the Middle East, as I mentioned earlier. France is also weak as a market, and that we have seen in many quarters before. Altogether, a rather good picture.
Here I like to underline, we had in this quarter two extra working days in August when people are on vacation. We lost two working days in July. There is, especially in the EMEA, that is very sensitive to working days, there was some negative effect of that. Very difficult to quantify, but it's definitely the case. In Americas, pretty much everything is growing. Margin is stable on 21.7%, down one tenth from last year on the back of 5% organic growth. Here we have dilution then from Brazil, where we bought five companies last year, of minus 0.6%. A good achievement, good leverage in what they do. Everything is pretty much growing strongly or at a good pace, 5% as I mentioned altogether, except in the architectural hardwares, which is our basic locks.
That is because we have the very big orders on home automation for last year that have not really produced this year. That means that we have a little bit of a drag for that reason on our ordinary locks. However, a lot of home automation companies are connecting to us, we think this is only temporary. As I mentioned, Brazil is also negative. What is encouraging is that we see that quotation levels continue to improve on a continuous basis. Even though we know that Q4 we had quite high growth, we still see the potential to continue to grow going forward, and the market is still in a good demand situation. Turning to Asia Pacific. Here is a page that you prefer not to show, since it's a little bit tough, let's go through it.
Pacific was growing, Korea was growing as well, and South Asia was flat. What we see is, in fact, a repercussion from China, where markets surrounding are weakening, at least with a few exceptions like India is still doing quite well, and a few other markets also. Mainly what we see is that a number of markets are cooling off. We saw continued decline in China by 12%. Here we continue to reduce our staffing a little bit more than 10% since the beginning of the year in the last 12 months. We follow up, but not fast enough since we are dropping even faster. 12% also for the full year and in this quarter. We dropped a little bit less in the first quarter, more in the second quarter, a little bit less now in the third quarter.
We did also in this quarter, I'm sure the ones that are observant have seen that we did a correction related to 2015. 2015 was a tough year, I was standing here saying we did better than market, and unfortunately, I was wrong. Our people did better in the market in the sense that they sort of add the turnover that should not be there. They sort of started to invoice earlier than they should be. We have corrected that in this quarter, we took then one-off cost to correct the books by SEK 260 million. We have then neutralized it because due to China is not doing so fine, the earn-outs that we are due to come in the market will not come then to the same extent as was planned.
That means that we had an earn-out coming in positively into the books as well. In a way, it neutralized itself. Profitability-wise, it dropped to 12.3%, down from 15.7%. Here we have also some one-off cost. All people that were involved, which were quite a number of people, they were laid off in the quarter. We are looking for new management in a number of locations. We cannot tolerate in the group any kind of conduct in this case. The moment we got to know it, we send people home straight. Something that sometimes you have to live with in an emerging market, but I'm sure we will get over it rather fast. Organically, we declined by 7%, we saw then, as I mentioned, good savings on personnel, but we had redundancy costs in this quarter in our profitability.
However, I like to underline, as I said earlier, that for obvious reason, with this kind of decline, if it continues, we will continue to have problems to have the same profit level as last year. There's nothing much we can do about that. It's just a few quarters then, and then we are back. The balance will come. It's a matter of time. On a group level, it has very little impact. Looking to Global Technologies, a very positive picture. HID grew everywhere strongly. Altogether, Global Technologies grew 7%, and we have the only area that grew less fast was physical access control, which is one of the larger areas within HID. Profitability-wise and sales-wise, we are doing quite well. We have invested quite a lot of people in R&D and in sales in order to foster this.
We have divisionalized HID, and the results are quite good and very positive, I would say. On the hospitality side, we signed more agreements when it comes to virtual keying in hotels. It is developing very well. We saw very strong order take in the last quarter. However, we have then flat sales. We are now meeting very strong sales from one of several agreements we had last year. It's always tough when you grow fast before to grow fast again, but it looks pretty good there as well. Profit-wise, we had a dilution of 0.5%. Profit-wise, we reached 18.1%, down from 18.6% one year back. A rather flat situation with quite some more investment in R&D. We have almost 100 people more. What we are working very hard on is virtualization and cloudification of our offerings.
Investment that we see is very good for the future. A very pleasing picture here. Also in Entrance Systems, a very pleasing picture. Entrance Systems is in a big transition, consolidating an industry that has not been very consolidated, doing a lot of acquisitions, having dilutions, but still growing margin to 14.3% up from 13.9% one year back, despite then dilution of 0.2%. Leverage with 4% organic leverage of 0.6%, very strong. We see strong growth in most areas, and good growth in Industrial and Forefront. The only area that declined in this quarter was our residential doors in Europe.
The reason for that is because we have decided, due to long shipments from the Scandinavian market, we make those doors to France and to Poland, that we are not going to continue those, and that means that we have a discontinuation of a part of the business. That's why it's negative. Altogether, a positive picture for Entrance Systems. Very encouraging considering, as I mentioned, all these changes that we do in there. That concludes my overview. I'd like now to hand over to Carolina to give us some highlights on the financials. Thank you.
Thank you, Johan. Good morning. The third quarter continued in a good way for Assa Abloy on most parameters, and I will take you through them here. In the financial highlights, starting with the organic growth, we saw 2% organic growth in the quarter. We estimate that to be 1% price and 1% volume. We've seen a similar trend on the top line in the divisions as in the first half year. We do believe that we have somewhat of a working day effect in EMEA due to the shift between the holiday months that Johan mentioned. Acquired growth net of 2% in the quarter. That means that we had the divestment of Carlocks that takes it down with 1%, so we are on gross 3 and net 1% acquired growth, as we spoke about before.
The year so far is on net 3% acquired growth, and if I look at what we have in the books already, the full year will then end on the net 3% acquired growth. Finally, currencies. Last year's big drama and showstopper, small effect this year, only 1%, 1% negative in the quarter. The year so far is on minus 2. If we assume that the currency stays flat, which basically they never do, but still, then the year will have a full year effect of minus 2 on the top line here. Totaling the quarter up 3%, and if we then look at what it translated into 2% improvement then of the EBIT. Here we have seen good development in most of the divisions when it comes to the profit.
Also based on the 2% organic growth with, of course, APAC being the tough one with a lower margin. Within APAC, we have the 2 anomalies in the quarter. On one hand side, the correction from last year with the SEK 260 million, on the other hand side, release of the earnouts back to the P&L of SEK 268 million. Basically a wash from those 2 effects in the quarter. The margin, slightly down from 17% to 16.8%, and that is really due to the dilution from the acquisitions. Cash flow, always important. Third quarter, that's when the cash flows start coming in, and this was no exception. We saw good cash flow in the quarter. If we look at the year-to-date number, we're actually up 10% year-over-year on cash flow. A strong development as well on the cash flow. Then finally on the highlights, earnings per share.
In line with the top-line growth, a full 3% improvement. Here we basically have a stable financial net and a stable tax rate, therefore the overall improvement is 3% in the quarter. Year-to-date, same development, top line 4% up and earnings per share up also with 4%. From the highlights, we dive into the details, bridge of the P&L. Again, starting with the organic here. The P&L. Again, starting with the organic here on the 2%. Here we can see that we have the different divisions. We have Americas and Entrance Systems had a combination of good organic growth to strong organic growth and a nice leverage both from raw material improvements, but also very strong operational efficiency gains. We saw a really good drop through from those 2. In Global Technologies, also strong growth.
Here we had a little bit of a mix. Everything grew, but some grew even more. A little bit negative mix here. Also continued investment in R&D. Basically flat on the margin here. EMEA, 2% growth, little bit low to be able to offset the margin effect from inflation, but EMEA basically managed that as well, thanks to the operational savings mainly. We have APAC. APAC continued tough on the top line with minus 7 in the quarter, and therefore an effect also on the margin. The combination of the two anomalies basically evening each other out, but the underlying business, and as Johan mentioned, some of the redundancy costs, therefore significantly lower on the margin. Overall, we managed to have only 20 basis point dilution here. Adding currency, small effect in the quarter, only minus 1 on the top line.
I mentioned in the beginning of the year that we believe that the first half would be negative on the margin and that the second half would be slightly positive on the margin, and that is also what we see in the quarter with 20 basis point improvement on the margin from currencies. Finally, acquisitions and divestments. The net then of the 2%, and I would say as expected and as usual, lower on margin and therefore also dilution from acquisitions of 20 basis points in the quarter. With that, we come to 16.8 in the quarter. A different perspective, not only quarter, but looking at the trends for the year so far in the P&L, and as components of sales instead, we get this picture. Here what we can see is that direct material has had a big change, a big improvement.
There are, as usual, I would say on direct material, different pieces in this equation. One part is that around a third of this is related to raw material development, and we saw that in the divisions that are high on, because the high security doors and high on raw material content. That improved. We also have operational efficiencies, which improves the numbers here, and we also have a mix effect. Part of that comes from China, but also some from the other divisions. The opposite from the mix effect you see on conversion costs, which is basically flat. If I look at the units like for like, they are improving on conversion costs, that's sort of the shift of the mix. The most important, therefore, is the gross margin and the development here.
We have seen strong development on the gross margin in the year. 60 basis point improvement here. Part of that has been reinvested in R&D, salespeople, even some IT, and therefore the SG&A is up a couple of percent points. Therefore, the EBIT for the year, like for like, is up 30 basis points. We add the acquisition and the divestments, and we get back to the 16.1, because the year so far has had a dilution of around 30 basis points from acquisitions as expected. The P&L should materialize into cash, and it has continued to do so. This is a picture that I'm very proud of. To look at development over time, you can see that we have managed to basically transform the P&L profit to cash as well.
You also see from here it's a strong seasonality in the year, with the second half being much stronger. It was similar this year. I would say that we had a very strong second quarter, and therefore the third quarter is strong. More importantly, on a year-to-date basis, we are up 10% when it comes to the cash side. Here you have to look at the efficiency ratios to really see how we are doing. On the DSO, we have improved 3 days year over year to 53. Part of that being the improvement then, and the changes in China. On the DPO, we have also improved with 3 days, also good development here. Finally, on the inventories, we are a couple of days up to 98 days from 96 days, but continues to be on a good level on the inventories.
That to the cash, the other side of it, the gearing and the net debt. I think it is interesting here to see sort of the trend over time. We are now on SEK 25.6 billion in debt. If you look at that compared to a year ago, it is basically where we were a year ago. Since the company has grown and the debt is the same, the KPIs here are improving, and the gearing is really down to 57%. When I looked at this page, I can see it has only been that low, basically just before the Cardo acquisition, on a low level. An important measure also net debt EBITDA ratio, which continues to be on a good level of 2, thanks to the development of the companies that we buy. Finally, earnings per share.
The quarter had a top line increase of 3%, and the EBIT was up 2%. We added to that with a stable debt situation and basically the stable financial net and the tax rate also stable. We came down to 3% improvement of the EPS in the quarter, and a year-to-date number of 4%, also in line with the top line overall growth. With that, I give back to you, Johan, for conclusions.
Thank you, Carolina. Rather short conclusions. Good growth in the quarter, 3% altogether, with 2% organic and 2% acquired growth. Strong growth in Americas, just as we have seen since the beginning of the year, and Global Technologies as well. Digital Door Locks are progressing nicely in the DIY sector, which is a new sector to us to a very large extent. Decline in China continues, unfortunately, just like we said. Stable EBIT development and good cash flow as such, as we saw from Carolina. Altogether, a stable and pleasing picture. That concludes our overview, and we would like now to open up for the floor for Q&A. We have Johan here to help us-
Yes
ask the right questions. Be nice to us now, all right?
I will be very nice, definitely. My name is Johan Wettergren. I'm with Carnegie. I'm here to conduct the Q&A session. Before we start, I just want to ask everyone to limit themselves to one question just so that everyone gets to ask their questions. I think I start with two, one for you, Johan, on China, obviously. No, just can you elaborate a bit on what you expect from China going forward? I mean, looking into Q4 and then into 2017. Are we approaching some kind of bottom, or?
I don't know. As I mentioned last time, we talked about, we are very exposed to the northern part of China due to our door business is quite large in the northern part of China. That is a problem for us because that region is hard hit. While if you move into Shanghai region, southern part of China, we are growing there. It's a sort of dual situation, a number of other towns are not growing either. It's very hard to say. Personally, I think we're going to continue to decline. To what extent, I really don't know. Remember also, we sent home quite a number of our heads. That means that we're now in heavy recruiting to replace those people with hopefully people that are not doing any stupid things.
We are most likely, at least for a quarter forward, in a difficult situation when it comes to management. Yeah. Then one for you, Carolina, on these earn-outs. Now you took back another SEK 268 million, I guess, in this quarter. What do you have left in terms of earn-outs for the remainder of this year and then into 2017, which potentially, if the China problems remain, could be taken back?
Well, first I would say that China, since you mentioned that. In China, there's very little earn-out left. That will not have that much effect on changes. If we look at in total, we have SEK 1.9 billion to pay still on acquired companies, both on earn-outs and holdbacks. A couple of hundred of that is still this year. The rest is really in 2017 and 2018. That is where we are.
Normal situation.
Yep.
How much of that is from Brazil then?
Well, that is a little bit further.
Okay. Yeah
that's in 2017 and 2018, so it's not really for this year. There are a couple hundred million there as well.
Yeah. Cool. Thanks a lot. Let's start here in Stockholm, and then we move over to the telephone conference later. Peder, let's
Okay. On the do-it-yourself sort of initiatives, maybe you could share a bit about the base, how limited that business is today and what you see going forward. Also what your conclusions has been from a more, sort of, the U.S. market is more normal in that sense with the big boxes and your competition there being really strong. Of course, tied to that, what you're aiming for in terms of profitability in that specific segment. Most are doing bad, some are doing very good in profitability in that specific channel. That's my question.
As I mentioned, the residential market is not very large for the group. We estimate it'll be a little bit around 25%. Less in the USA, more in Europe, and even more so in Asia Pacific. Average is around 25%, so three-fourths of what we do is non-res. On the profitability side, when you move into DIY, it's not all that bad because what you do have is a margin that is lower, but as a benefit, you have less cost because they take care of the sales, you don't have the same number of overheads connected to it. Profitability is surprisingly good in that sector.
Especially on the, residential could be both do it yourself and sort of added channels. We talk about locksmiths and all of that. If you try to extract that specific channel, and try to expand the size there and hence the potential.
We are quite big in the U.K. on that side. We sell close to GBP 50 million in this segment. We have it recently in the Scandinavian markets with good success. We are progressing very nicely. You see Nest build a picture of the Nest lock that is on its way to the market. That one will then be in Walmart in the USA, we will see some development there. DIY has never been our focus in the past. The reason for it is because coming with a me-too offering when you haven't been there before, it's not really interesting. We've seen in Mexico and a number of other markets where we then have added the digital offering that we are very attractive as a partner because that's something new that they didn't have before.
In the U.K., we have also extended our offering, we have seen more inroads into that sector as well. I can answer you that it's small today, it's definitely going to grow for us.
Thank you.
Perfect. Do we have any more questions here in Stockholm? No. We move to the telephone conference. Operator, please.
Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question, please press 01 on your telephone keypad. We have a few questions in the queue so far. The first question is from Andreas Filley of JP Morgan. Please go ahead, sir. Your line is open.
Good morning, Carolina. Good morning, Johan. My question is back to China. In terms of the restatement, if you could just explain that to us a bit more. You said you changed the base for organic growth for the prior year, but the absolute sales number in Asia Pacific hasn't changed. Also what would organic growth in Asia and separately in China would've been in Q3 last year, without the restatement? Maybe if you could just elaborate a little bit more, in terms of what exactly you have done in terms of the accounting change, over the last few quarters, and if that's just the last few quarters or is that going back further? Thank you very much.
Yeah. The change is not large enough to do a restatement of the last year's numbers, so we have not restated last year's numbers. The numbers are what they are from last year. The correction that we have made, we have made in this quarter. It is mainly related to 2015. What we have done is that we have taken the P&L effect of this in the third quarter, and that is the SEK 260 million that we have mentioned. What we have done, though, because very important is to understand how the China business is doing, is that we have recalculated the number on organic growth so that you can understand how we are doing compared to sort of the true underlying number in last year's China.
For this year-to-date, we are on 12% negative for China and 8% negative for the whole group, in China. As to the last year's numbers, Johan, you may want to comment on.
Yeah. Last year, I stood here and was rather happy about the situation in China, in the sense that the market, we see, since we do a lot of OEM-ing to other door makers, we saw that the other door makers were declining by, in many instances, 20% or more. We felt very good that we had a rather slow decline ourselves in relative terms. It was about 7%, 8% decline. It was a false picture because our people there were inventive and increased the numbers without having a reason for it. In a way, what we have done and concluded, and we saw it in fact on the receivables that never really got paid, but they were very smart in rolling them.
That is why we discovered only in the second half or after the second quarter reporting, they were rolling them by crediting and re-invoicing. It is fresh receivables, but never paid. It is very difficult to discover. The situation, in a way, is that we exaggerated the turnover from last year, and we do not know the exact number, but of course, we have a rather good picture about it, and we are still working on getting the full picture. We will have to have some patience before I can be precise on the exact number.
Thank you very much.
Shall we.
Thank you. Our next question comes from Ben Marsden of Morgan Stanley. Please go ahead. Your line is open.
Yeah. Thank you. Morning, Johan. Morning, Carolina. Just a couple of questions. Firstly, on China, can you just say what % of group sales it is now post the restatement, post the organic decline? Then, I guess in terms of growth going forward, has this experience or the problems you have had in China just changed your view at all of the attractiveness of that market, and how you expand there via M&A? Do you have to do anything differently there based on what has happened in the last 18 months? Thank you.
I think we need to remember 80% of the world population is not living in Europe or in the Americas. We are not going to shy away. China, there are several ways. You can be like where I used to work, Atlas Copco. You can be sort of growing organically because of demand for investment goods. We have not investment goods. We have locks. We have been forced to get into that market by acquiring local players. I can tell you they were not very conform with the legislation in China when we acquired them. They are nowadays, but it has been a journey, of course, to get into that position. We have not changed our idea about long-term, whether or not it's right to go in this direction. We have now 24% of our turnover in these markets. Most of them are making good money.
It's a matter of volume and structure. Unfortunately, in China, it has been more difficult really to get solid collaborators that really work together with us. I think one of the reasons is because these companies were manually booked. Imagine a company with 4,000 employees, and nothing is on the computer. We are now installing IT systems, every unit that we have. Unfortunately, this has made it possible to have a few loopholes that have, in some cases, been used. When we've seen it, we have immediately taken that person out, but it's still work to be done. I'm not changing. I don't think a second that is not the right thing to go into such a market with 1.3 billion consumers that is going to need a lock on their door going forward, and most likely a digital door lock as well.
It's a very attractive territory for us. The same with Brazil, that is negative now. That's why we took that decision last year. I feel good about it, but we need to work through the difficulty we have, not growing organically, but rather creating a culture that takes some time, unfortunately, but that is part of life.
Thanks. Just in terms of overall percentage of sales?
I was coming to that.
Seven and a half %.
I was coming to that.
I should have started there. Seven and a half %, down from 10.
Got it. Thank you.
Sorry.
If I can have a follow-up. The new restructuring program that will come in Q4, can you kind of run through what the main areas of focus are in terms of where the footprint will be taken out? What level of cost savings should we assume for a SEK 1.5 billion charge? Thank you.
Yep. The program is still work in progress. We are on a little bit more than SEK 1.5 billion in one charge. It's around 10 factories and let's say 40 offices. In total, roughly around 50 projects. Where it is? It's still also work in progress, but a good bet is that quite a lot of that is in Europe, because the cost of change in Europe is high. That said, we have seen really nice projects from all the divisions for this program, and you'll have more information on the savings profile and so on once the program is firm, and we communicate that.
Got it. Many thanks.
Thank you. Our next question comes from Andre Schwikant of Credit Suisse. Please go ahead. Your line is open.
Hi, good morning. This is Tiantian on behalf of Andre. Just a few more questions on China. Can we get an idea on how you're doing relative to the underlying markets specific to your own exposure? We're wondering if there is any temporary impact from the personnel leaving the company. Related to that, can we please get a rough idea on what exactly is your exposure into the Liaoning province, which we think that's where Pan Pan headquarters is based. Thank you.
Well, how we are doing, I think we have disclosed that it's -12% in the quarter and also for the year. How we're doing relative to market, I think I have to answer in the usual way. In China, statistics is not so easy to get your hands on. We can see from what we sell locks to other manufacturers, that the market is not doing very well. Whether or not 12% is representative of the general market, I don't know. I think it has very much to do with what geography you are in. We are in a geography, at least in the northern part, which is not so favorable as far as we can see. On the impact of personnel, we let go of those people that were involved, quite a number of them. There was a scheme among the door group people.
Most of the managers were involved. Unfortunately, we had a rather big number of people leaving, including the financial, because you can't do that without having support of financial people as well. Most of those people have been replaced on an interimership or by permanent people, of course, we are in a recruiting phase. That's all we can say about that. In the northern provinces, I'm not sure if I understood your last question, what really that was. Could you repeat that?
Yes. What exactly your exposure to the northern three provinces or to Liaoning specifically, where I believe the economy is doing very badly?
Well, it is much less than before. That is what I can tell you. We don't normally go into those details, but it's less than it was before because we have dropped there quite a bit.
Okay. Would you be able to say at least, more than 50% or 30%?
No, it's less than 50, but it was a large portion of our sales and still is.
Okay. Understood. Thank you.
Thank you. Our next question comes from Guillermo Polo of UBS. Please go ahead, your line is open.
Hi, good morning. It's Guillermo Polo from UBS. Actually, one follow-up on China regarding the underlying margins. Is there any change in the structure or the mix of the margins as now, you change the way you look at the market? Maybe I have a follow-up, but I will ask that later. Thank you.
Well, as I mentioned, it will take a few quarters before we catch up with the drop that we had in order to adjust our cost base. China is, of course, when you have a market that has been growing 30 years endlessly to the extent that it is today, and you have, for the first time, then a contraction of volume, people start to bite in the sense that people are less willing than, or more willing to give concessions on price. That is also something we have to live through, which is only natural. That's why we think it will have a drag a few quarters forward on our profitability. As you can see here in this quarter, it was 0.2% on total profit. No drama.
Okay. Thank you. Maybe a second question regarding EMEA, actually. I'm interested in understanding a bit the trends in Middle East, probably Turkey and also the U.K. Can you elaborate a little bit on how those markets are evolving as we speak in terms of organic growth? Thank you.
Turkey has been negative in the last quarter. Turkey's not a huge market for us. Russia was negative as well, which is also not a very large market, but still an important one. When it comes to the U.K., we saw good and brisk demand. I don't know if people have sort of got more positive with Brexit in the local market, but at least we got quite some nice orders on a broad basis. It's not only from one sector. The market was pretty good in the quarter as such. In the Middle East, I think it has not dropped all that much yet. We see, of course, that the number of projects that are going on in the market is declining. I'm sure it will drop in the next few quarters. Again, Middle East is not a huge market to us.
It's still an important portion of Europe, but not so much. It's like in Italy or Spain that that falls off. These are things I think we have to deal with on a continuous basis. It just happens.
Maybe actually, sometimes the communication got broke in the conference call, I just wanted to ask, normally you actually talk about the demand outlook in terms of growth into Q4. I didn't hear that communication, I just wanted to ask whether you see actually the same trends continuing, how do you see growth going forward? Thank you.
We grew nicely 5% last year, Q4, as an average. That is all I can say. We have no real crystal ball for Q4. We don't work with orders on hand very much. It's what comes in, that goes out pretty much. I mentioned that the quotation levels in the U.S.A. are positive and there's no major change in demand. Number of working days is very similar. We have one more working day in December, we think. Unfortunately, it's like having them in August, not much result after that. Pretty much flat number of working days. I think no big change. We don't give forecasts, but we don't see when it comes to looking to the calendar, we don't see much of a difference.
Thank you very much. Go back your line.
Thank you. Our next question comes from Daniela Costa of Goldman Sachs. Please go ahead. Your line is open.
Good morning. Two questions. I'm really sorry, one is a follow-up on China just to make sure also because the line was not so good that I didn't miss it. When you look at now the reset profitability for China, is China profitable? The second question, you talked about the DIY opportunity. How big is that already in the numbers, and is that margin accretive? Thank you.
DIY, we have never been large in DIY. We are large in a few markets. It's not significant, but we don't have the exact number. In China, not counting then the correction we did, it's profitable.
Thank you. Our next question comes from Lars Olsen of Barclays. Please go ahead, sir. Your line is open.
Hi, thanks, Johan and Carolina. Sorry, I need to go back to China. I have just one follow-up, but I did want to just try and understand what's going on here. Can you tell us whether this is relating to one specific acquisition or for the entirety of the China business? If it's one acquisition specifically, are we done here? What are the applications or the implications, rather, as far as control and governance in that business is concerned? Are there any legal action associated with what's going on there?
It's concerned PanPan and fyra Window Hardware, which was managed by one and the same manager. A number of the people that in the different locations, which are 10, that were also involved in this part. In answer to that, could you repeat the second question?
It's two acquisitions, obviously dating back a very long time. Surprisingly, we only hear about it now, and I appreciate your point you're making about rolling the receivables. I'm just trying to understand what this means for the China organization and what you're doing in terms of enforcing the governance and control in that part of your business.
We have changed completely, and that has happened since I could say first, why did we discover it? We started and we saw this rolling, and perhaps you would like to answer, Carolina.
When we were looking into the receivables, there was a part that wasn't being paid, and what we saw now was going really deep down into it, that there was a reason for it, and that was that they were too early invoiced. It is most likely to assume that when the normal sales started to drop, it was then enhanced by being a bit too aggressive on invoicing and too early invoicing and then basically rolling those invoices, so with time rolling them. Therefore, the biggest jump we see is in 2015 from this. We have gone through the entities, and we have taken external help on it as well and really go through in a deep dive to make sure that we capture the moment of this.
It's really the effect on the margin and the profit that we have taken now in the quarter, but that's for the full rolling, and it's in the entities that Johan mentioned. There are legal consequences for it that you asked about as well, of course, for the people, and you asked also about any other actions and insurance, and of course, we have also claimed by insurance. That's a long process, I would say. The most important thing now is to get a grip and get the new managers in and get the business going, because that is by far the biggest issue when it comes to our profit, especially going forward.
We have, for obvious reasons, also changed who can stamp an invoice to be paid. We have changed the purchasing, but that has been done since quite a while, so that no one can purchase without having a general agreement, so there are no differences there, et cetera. There are quite some numerous changes that have taken place, not only due to this, but we have done it on a continuous basis, and we are implementing IT systems in each and every unit, which will be concluded by end of 2018 if the plan is followed to 100%. We started to discover this, in fact, by installing an IT system, and we started to see that it doesn't fit what you have here.
What you say doesn't fit with what you're going to enter into the system, doesn't fit with what you have said before or reported before. These things, I think you should not neglect them, of course, but I don't think we should blow them to huge proportions. These things happen when you go in this direction, acquiring a lot of local companies. It is not so that it's only two acquisitions. If you find our Window Hardware group has been our many acquisitions, so they are with different cultures, different people, different locations. It's not so that you just take them in and as one entity. It's many entities here. We talk about 10 facilities across China in many geographies.
I understand that, Johan. Just finally, you are confident that we are not going to see any more issues from any of the acquisitions that follow on from these? These are obviously very old acquisitions. You've done a full review and are confident that we are done as far as these issues are concerned.
I can never be 100% confident, or I cannot promise anything. I think that would be foolish of me. I think we have to realize what we are dealing with people, and if people are not following the way things should be handled, and we have auditors there, they have been there, they haven't seen it, so how could I see it from my office? It's not that easy. I think we have to realize that this is something that we create over time, and sometimes you have to take one step back, and it's no big deal. We will manage it, and we will get over it.
Thanks.
operator, let's move back to the floor here in Stockholm and take one question. Peder.
I, on the other hand, think it's very wise to discuss this matter quite a lot, and this is a good opportunity. The stock is down 7%, the market is very worried. First of all, how large are the two entities in relation to the entire China exposure, 7.5%? Secondly, if I understand correctly, Carolina, the earn-out is basically ended. Would we think about this as demand would stay at current level? There will be no need for further write-downs, and hence there would be no need for reverses of earn-outs either? Tied to that, if demand would shrink further, would potential write-downs hit the P&L clean then?
Finally, you mentioned, Johan, you didn't know exactly how much invoicing was boosted last year, but ballpark, is the organic growth in China, instead of being down 12, is it down 20 or 15 or 25 or something like that? Those are my three questions. Sorry.
If I can start with the entities. When we talk about the entities, there are around 10 big entities. This is not a small part of our China business. Pan Pan is the largest that we have, and this is part of the findings there. We have gone through all the large entities and then taken and contained this, and then what you see now is the sum of that. When you talk about the organic growth, I think it's important to realize that what we represent now for this year organic growth, that is the correct number. It's last year's numbers that were too good on organic growth. Last year's organic growth or decline was worse than we saw.
This year's, what you see, what we talk about, the 7% for APAC in the quarter, and 12% for APAC China year-to-date, and 8% year-to-date China, the whole group. That is the real number for this year. Last year's numbers were too good on the decline.
The 12% is comparing to an abnormal high number?
That's what I mean with the adjustment. We have adjusted it, so it's like-for-like. We have done that on the organic growth.
Exactly
That is such an important number.
Yeah. That's my point, that you don't restate. I want to know if it's compared to the old wrong number last year, is it -20 or -15 or is it -25?
No, it's not relevant. You can say that you have, because it's through last year and the beginning of this year, most of it is in last year, and we say that probably a little less than SEK 500 is the top line effect last year and beginning this year. That is what you're going to have to recalculate on.
Okay. On this earn out, write down, days outstanding type of thinking?
What I would say that earn out is a separate thing from whatever other issues you can have. In this case, of course, the lower performance in China resulted in lower expectant to be paid earn outs in China. The earn outs in China are coming to an end. If you look at the profile of acquisitions, three years have gone. The earn outs that we have now in the books are for other acquisitions.
Could I just add one thing? We are spending a lot of time, I can understand your worry about China. But again, we have four divisions doing very well. Americas is growing nicely, making a record profit. Europe is doing very well, increasing its margin. Entrance Systems is doing fantastic considering all the acquisitions, growing strongly. We have also Global Technologies growing higher than ever at 7%. Altogether a very, very good picture with good organic growth. If you take away APAC, organic growth is quite strong in the group and in the market around us that is difficult, and still we are growing strongly. We have China that will give us a drag of a few tens of a percent. I am not sure if you really are focusing on the right question, that if it needs that much attention.
We give it a lot of attention because we do not like what we see, but this is part of birth. Being born in these markets takes some dipping your nose and getting in trouble, and we are in trouble for a short-term period, and we will solve it. I do not think we should overestimate this situation. I see no real reason why we should not carry on. We have fantastic products. We are winning prizes in every exposition we have. Do not get overexcited about China. Let us look for the total and realize that we are doing quite well.
I think we have time. We have two minutes left, I think we have time for one more question from the telephone conference, please.
Thank you. The final question comes from Matthew Sturg of Royal Bank of Canada. Please go ahead, your line is open.
Yeah, morning all. I was going to ask another one on China, but perhaps not given that.
You're welcome. I'll answer it please.
I'll just ask really quickly on China. The Q4, is the Q4 reported number from 2015, is that the right number to use as our base for organic growth? That was the first one. Then I'll probably change tack and I'll just ask about France and what you saw that was changed from that. I think you said it was good growth in the quarter before, and whether you could just elaborate there. Thanks.
France has been jumping up and down since quite a while. This situation is because it's hovering on some kind of bottom. Is it going to increase or go down? It looks as if it's slightly growing. I think we will end this year with slight growth in France as such. It's a big market for us. It's a difficult environment, we feel that we are doing quite well. Again, we don't give forecasts, looking to where we are after September, it looks as if we're going to end the year in positive territory.
Just on the Q4 base for China, is that the right number? We can use the Q4 2015 base for our number to apply organic growth to, is that right?
What do you-
Is that an adjustment?
Well, the P&L for Q4 will not change, obviously, but it's too high number to compare with Q4 and this year. We will be very specific on what the real organic growth or organic decline will be in the fourth quarter also for China.
Should we use something that was similar to the Q3 for being too high, so it is SEK 200 million?
I cannot really get into the specifics of that. We are going to have to see that for the fourth quarter in detail.
Okay, thanks.
I think we are out of time. Johan, I leave over to you.
As you can see, I'm still smiling despite all these interesting questions about China. I feel very good. I think we are developing in a very positive way. China, we will solve. We have very strong cash flow, strong EBIT, and we are going to have an EBIT that is higher than last year, despite then the difficulties we see around us in the surrounding world. A positive evolution. Thank you very much. Looking forward to the next quarter.