Ladies and gentlemen, welcome to Assa Abloy and the second quarter report, a report that I feel very proud of. A good result, as I almost said usual, I should be careful, but good result this time as well. Just like we saw in the first quarter, we saw in the second quarter as well that Europe and America are continuing a strong way. We saw strong growth in Americas, EMEA, and in Global Technologies. Entrance Systems that was a little bit more affected by industrial weakness, especially on the U.S. side, grew in a good way as well. APAC was negative, and that is due to China, that continues down, but a little bit weaker situation also in the rest of Asia.
Sales improved by 5% to SEK 17.9 billion on the back of 4% organic, 4% acquired, and 3% negative currency effect. EBIT improved by 6% to SEK 2.9 billion, with minus SEK 81 million from currency, and earnings per share, thanks to lower interest rates, grew by 7% to SEK 1.82. Altogether, a very pleasing picture, I would say. Half year is not very much different. We have seen very similar evolutions in the whole year. Strong development despite the challenging market, especially the emerging markets are clearly weaker right now. Strong growth in Americas, good growth in Entrance Systems, EMEA, and Global Technologies, and negative in APAC. It's almost the same as we saw on the other slide. Sales improved by 4% to SEK 33.8 billion, 4% organic, 3% acquired, 3% negative currency.
Profit improved by 5% to SEK 5.3 billion with minus SEK 158 million from currencies, and earnings per share improved also 5% to SEK 3.30. We estimate that the tax rate will remain stable at 26% for the year. On the market side, always difficult to choose, one interesting news is that we are, for 2016, going to be included in the Forbes index again, among the 100 most innovative companies in the world, which I think is quite nice for a small company like Assa Abloy to be really seen as we are, very innovative, we have some 1,800 engineers now, in fact, more than 1,800 engineers, turning out quite some exciting products every quarter. We saw also strong development in EMEA for digital.
Right now, Europe has grown so much on digital, it's in fact now 33% of what EMEA sells, or even more than that, is now electronic type of locking systems. Very good development. Here in this quarter, we saw Aperio coming strong. We are launching a new version, more enhanced functionality with very good results, also smart door locks, or digital door locks, as we normally call them, have also developed in a very good way in EMEA, even though we are in early days, I would say. We have also in the U.S., quite some good evolution on our service centers.
We have some seven, eight service centers where of five now is holding a standard, basic number of componentry or locking solutions that are off the shelves, so we can ship within the same day if we get an order, which is certainly very appreciated by different kinds of construction companies, which have their work sites that needs to have lockings in a very short lead time. This has become very popular in the USA. Also on top of that, we have also added bending capability for frames. I've talked about it in the past, how important it is to have the frames ready more or less immediately when they are needed. If you get them in there, you also get the door as a whole.
Therefore, it's important to be close to the customer, ship them very short notice, and make sure that you also fill the hole with your door later on. Both those things have done very well for us in this quarter. I also spoke a few quarters back on the CLIQ cylinders that we are adopting into the Asian market, and here we have also seen a very good evolution with a very strong pipeline build. Mainly utility companies of various kinds are interested in this kind of solution, cloud-operated system that is completely electronic, and completely tagging on what is happening in your systems. We had also an order for the first time in Japan on magnitude of SEK 3 million in the quarter, very attractive evolution here. Look at the group sales. We see good evolution in Americas.
As I mentioned, 7% organic since the beginning of the year. We have in Europe 4% organic growth, also very good score, and Pacific, 1% organic growth here. APAC is doing very well, but other parts of the group is doing a little bit less. Looking to Latin America, which is also becoming more and more important to us, also organic growth 7%. Here I was surprised because despite some of the declines, some 10% in Brazil, we still grew 7% organically in this region, which I think is a very good score. Here we have had some success with DIY chains, we just sort of moved our positions in this region. Africa, not much fun news there, unfortunately. They are suffering in Africa, or most markets are suffering in Africa. Raw material prices are low. That means the investment levels in construction are low.
We have only 1% organic, which is very unusual for us, I would say, in this region. Looking to Asia, there China is pulling us down. We have -4% altogether, where China is -11%. Excluding China, we are growing, a market like India is a nice exception when it comes to weakness in the region, there are a few others also growing in a nice way. It's not all black, but we can clearly see that China is not contaminating, but it is affecting a little bit the rate of growth in the surrounding markets. No wonder, since it's a big trading partner. As a consequence of China and Brazil also going down a little bit, we can see that emerging markets declined to 23% of our total sales.
Last year it was 25%. We also made a few acquisitions in the mature markets. This one is one of my favorites. The yellow is acquired growth. The blue is organic growth. Since the financial crisis, we are close to 40% organic growth. We have grown the yellow also at a very high pace, around a little bit more than 5% since then. Altogether, a continuous growth since 2010. That has meant for us that our turnover has gone up from SEK 34 billion to a little bit more than SEK 69 billion, more than doubling. This quarter was no exception. 8% nominal growth, not counting under currency. This is the way we normally count. Here we have, of course, adjusted under currency so that you can compare. On the income statement, it's even better.
We have something like SEK 5.3 billion back in 2010. Now we are running at SEK 11.3 billion. More than a doubling of profitability, despite all those many acquisitions that have come in at low margin to the company. 11% improvement in the last 12 months. Run rate right now is SEK 11.3 billion. A very good score in the last four quarters. Operating margin follows. In fact, it expanded even in this quarter, despite a dilution by 0.3%. You can see we are in our target span 16%-17% profitability. Underlying our profitability in this quarter, like most quarters, it has expanded by half a percent. This quarter we had less currency that pulled us down in the previous quarters. We are then expanding margin by two-tenths of a percent.
The last 12 months to 16.3%, exactly the same as we had one year back. Dilution from currency, we think if currencies are like they are, which they never are, by the way, if they stay as they are, we most likely will see currency fade out. We will see acquisitions on the other side. I think we have done a few new ones. Some of them with not very high profitability. We'll probably be in the region of three-tenths of a percent of dilution. Turning now to the Manufacturing Footprint Program, going very well. We have now closed 76 factories since the beginning. It continues. Of course, those of you that know us, only two to go. That means we have to fill the bag. That is exactly what we're going to do. We're going to work with some new ones.
As you know, we have announced already in Q4 we will take a hit for that. It looks right now like we have very many good projects. We have made some 50 acquisitions since last time. We will probably run up to SEK 1.5 billion rather than SEK 1 billion that I mentioned. I think it was last time I mentioned SEK 1 billion. What I did not take into consideration was that we have many good ideas how we can continue to improve efficiency in the group. The program so far have reduced our staffing by 11,000 people. We have half a thousand left for the programs that are running. We have almost SEK 400 million in the balance sheet to commit to those changes. As you can see here, equally important is the closing of factories.
We have 99 factories converted to assembly, which I think is also limiting our sensitivity to downtrends if there is one, because we share it with our suppliers, and we have also less investment as a consequence for that. On the margin side, I mentioned we expanded the margin with two-tenths of a %. We had dilution by -0.2%, that means the leverage was half a %. A good evolution. Here, price is an important parameter, of course, for profitability. As you know, raw material has now started to rise, and that means in Q3 you will see a number of price increases to compensate for raw material. Altogether, a pleasing picture with 4% organic growth. Acquisitions. I was surprised myself when I saw, I shouldn't be, but I was, that we have nine acquisitions so far this year. The pipeline is full as usual.
We divested Car Locks last quarter. That is of course cooling down the number a little bit, but we have added, say, SEK 1.7 billion, about 2.5% so far in the year to our turnover. We continue to be in the run rate something over business cycle around the 5%. It looks pretty good, and the pipeline, as I mentioned, is quite full. Let's have a look on a few of the ones that we did in the last quarter. We have Nassau in Denmark, a very nice bolt-on complementary acquisition on the industrial side in Europe. Sales and service is their specialty, and they are big in a number of markets where they complement Assa Abloy footprint. A very exciting add-on to the group. The standalone, as you can see here, is not unusual. New to earnings per share.
The company did not make much money standalone. That means it's an interesting, I wouldn't call it target, but an interesting addition to come to our family, I would say. Looking to DemoTeller in the U.S., that's a tech company, software driven. In the banking world, the banks go more and more into printing cards and banking cards instantly when you move into the office to make people spend faster. A good cause apparently. That means we didn't have a software that we could then offer our banks. We can offer them the printers and a number of other things, but now we also have a very powerful software, so we can add the printing, the whole infrastructure to the banking world.
This is now taking place in the U.S. where DemoTeller is, and we think it's going to roll out in many other markets across the globe. This company is a tech company and also accretive to earnings per share, rather profitable. It's definitely enhancing our position in the marketplace, even though it's not a huge segment right now. In Eastern Europe, we tried for years to take a bigger position in Eastern Europe, and you've seen quarter after quarter that we add companies to our portfolio, and Mauer is no exception. Mauer is a very good company when it comes to high-end type of cylinders. Three interesting acquisitions. I turn now to EMEA. EMEA, it's long since I could stand here and say everything is good. We grew 6% and every market grew.
You should remember also we got a little bit positive effect from the Easter, and it's mainly affecting Europe with the Easter effect. Europe has grown 4% since the beginning of the year, so it's pretty much in the region where it should be. Strong growth in Scandinavia, in Finland, in Germany and Iberia, Eastern Europe, and Africa. In fact, this quarter, Iberia was the highest rate growth in all companies in Europe, which is quite interesting. It has been going down, down for many, many years. It seems as if, thanks to a lot of tourism, I think, in part, that a lot of the driving force in Iberia is taking place when it comes to locking solutions. We saw good growth in the U.K., Benelux, France, Italy, and Israel. Here every market was growing.
As I mentioned earlier, Electromechanical is one of the main pillars. Profitability-wise, we expanded margin from 15.1% to 15.3%, but we also had acquisitions and currency -0.2% , so a leverage of 0.4. Americas, sunshine is there, at least for our type of business. Strong growth in doors, and this is good news because doors are new construction, so that means there is new construction taking place in the U.S. that we haven't seen in many years, namely within the institutions. We see Electromechanical very strong, residential very strong, Canada, Mexico, South America, with the exception of Brazil. Brazil had double-digit declines, which was no surprise to us. That was calculated that it would be like that. Good growth in architectural hardware, security, and in Canada. Everywhere here, like in Europe, every market is in fact growing with a few exceptions.
Organically 8%, our margin expanded from 22% to 22.1%, but here you can see the dilution is rather heavy from Brazil. The companies we bought there are not very profitable and of course, under pressure as well. We have some dilution from that for the next four quarters. We have now two quarters with that kind of dilution, and still the margin holds up, and we are also investing in more specifiers. Asia Pacific. You'd like to flip to the next page because it's not so good. Still good in a way, because looking to margin, 14%, I think 14.1%, I'm rather happy with that. We see that the mitigating actions that we undertake to limit the loss from volume are working. We had declined by 0.3%. We had strong growth in the Pacific, good growth in South Asia and Korea.
Everything outside of China did rather well, while China had a rather heavy double-digit decline in the quarter as such, and 11% since the beginning of the year. Here we saw that some 5% of our personnel leaving since the beginning of the year. Of course, we can't do this without outsourcing. A lot of this is not pure savings, but also that we share the burden of decline with our suppliers. Unfortunately, I can tell you, we don't see much light at the tunnel in China. We have a big footprint in the northern part of China, and that will continue as for what we see negative going forward into the year, unfortunately. That concludes Asia Pacific. A difficult situation, but so far we have been able to manage in a reasonable way. On Global Technologies, here HID had a nice evolution.
Physical access control is growing at a nice pace, and part of that is our virtualization of keys. We see good demand of Bluetooth solutions and virtual keys for HID. Should not overestimate, but we see that customers to a very high degree are adapting their systems to go virtual on ID to pass the door. GovID, we saw some states now getting money, so we have good evolution on GovID. IDT on the inline side, which is a little bit connected to GovID, also continue to grow in a good pace, and Quantum Secure type of utilities, airport security, has a very strong demand here. We have a little bit of problem to follow because the market is really looking for solutions, how to manage big subcontractors, among others, and a big number of personnel in critical buildings.
On the hospitality side, we are now meeting Starwood invoicing of last year. That means that we grew, but just slightly. But profitability continues to be in a good level. Organically, altogether, 5% growth, a very good score. We are adding more on R&D, so we added some 50 people, and in the last year, more than 100 people in R&D, so there is quite some heavy investments there. And we expanded margin by half a percent, and leverage was 0.6, so quite a pleasing leverage as such. On Entrance Systems, strong growth in door automatics, European industrial, and high-speed doors. Most of this is related to Europe. Europe is now growing better than the U.S., which is Amarr and 4Front, which were growing but a little bit less than we have seen in the past.
If you look to the U.S. side, we grew some 40% on Amarr and 4Front in the last few years. So the market has been very solid on those parts. No wonder that it goes at a little bit lower growth rate. And Ditec is mainly Italy, so Italy also was positive in the quarter, which is one of the first quarters in many years. The year residential was a little bit negative in the quarter as such. But altogether also here, a very positive picture. Our margin expanded from 12.9% to 13.2%, 0.3% with normal dilution of 0.3%. So leverage here 0.6, so a good evolution as well. That concludes my overview. I would like now to hand over to Carolina to take us through the financials.
Thank you, Johan. Well, I am here today on this sunny day and there is actually quite some sunshine also on the numbers. Looking then at the financial highlights and really starting with the top line and the very important organic growth. We saw a full 4% organic growth in the quarter. That does have a day effect from Easter being in the first quarter this year. So we estimate the day effect to be around one day for the group, and also an estimate on the price and the volume. We believe that net price increase is about 1% and we have three on volume. So in total, 4% organic growth, which makes the half year as well to 4%. Then, moving on to acquired growth. Here we also saw a good 4% acquired growth, and that is the net of the divestment of Car Lock, which is about 1%.
It was five acquired minus one divested. We will see the Car Lock business effect for logical reasons for the full year than for four quarters until it drops out of the numbers. Here it is really Americas with the emerging markets as well as Entrance Systems continuing with the industrial door roll-ups that give us this nice acquired growth. Currencies. Last year, a big positive, as you could see last year, up SEK 2 billion in the quarter on top line. Now we are down SEK 400 million, and it is really around -3% as expected. The half year is on 3%, and we estimate the full year to be around -2% on the top line. Again, with currencies, the only thing you know is that they are going to change. Overall top line, 5% increase. I always like to see improved profit.
We did, we saw a full 6% improvement on EBIT. The combination of the good top-line growth as well as some raw material relief, as well as the really nice savings that we had, both from MFPs and other areas, helped us to improve the operating income to a full 6%. Margin, even expansion of margin. Johan mentioned if we expanded the margin from 16.1% to 16.3%. With the good results from the P&L, we saw a 50 basis point improvement like for like, and we had particular, I would say, dilution from acquisitions and also some from currency. Very good to see an expansion of margin overall here. Another very important one, cash flow. We saw good results on the cash flow up 27% year-over-year.
SEK 2.5 billion in cash flow, and now we have SEK 3 billion for half year in cash flow. A really good development there as well. Finally, earnings per share, even higher improvement than the EBIT. We had a slightly lower financial net, and we estimate the tax rates to be stable, 26% like last year. With that we managed to increase the earnings per share to 7%, and therefore the half year is up a full 5%. Let us dive into the P&L and looking at the different parts of the bridge. Again, we start with the organic growth, and here we have the 4%, and we have the divisions. We have EMEA, which had strong organic growth in combination with good efficiency savings that had done a good drop-through here. Americas, very strong organic growth as well as direct material relief from raw material. Also very strong drop-through here. Asia Pacific, tougher, of course, with continued drop on the top line. They did not manage to have a positive drop-through, but I should say that we mitigated quite a bit of it by increased efficiencies and taking out a lot of people on the operations side. Global Technologies, also a good growth as well as a good mix, not too much project sales. We saw a really nice drop-through here as well. Finally, Entrance Systems. Entrance Systems had good organic growth, but very good savings then coming from well, basically acquisition consolidation and restructuring as well as release from direct material. Overall, that is how we got to the very nice 50 basis points improvement on the margin like for like on organic.
Also very strong drop-through here. Asia Pacific, tougher, of course, with continued drop on the top line. They didn't manage to have a positive drop-through, but I should say that we mitigated quite a bit of it by increased efficiencies and taking out a lot of people on the operations side. Global Technologies, also a good growth as well as a good mix, not too much project sales. We saw a really nice drop-through here as well. Finally, Entrance Systems. Entrance Systems had good organic growth, but very good savings then coming from well, basically acquisition consolidation and restructuring as well as release from direct material. Overall, that's how we got to the very nice 50 basis points improvement on the margin like for like on organic.
Currency -3%, basically as expected and as we sort of flagged for in the first quarter that there will be a slight dilution on the margin and here we are, -10 basis points from currency. We were -20 basis points in the first, we expect the full year to be around 2% on the top line and hopefully be flat on the margin from currency. Acquisitions 4% and as usual on average lower margins than we have and therefore a dilution of 20 basis points from acquisitions. Different view of the P&L components of sales. Here we compare the first half year. We continue to see a strong improvement on the direct material line. For the half year, as you have here, you have 70 basis points.
I would say around half of that comes from underlying raw material, and the other half is really from mix. If you move on then to conversion cost, what you can see is that the conversion cost is basically flat. Therefore, the mix shift between lower direct material products versus conversion costs. If I just look at like-for-like conversion costs, it's an improvement there as well, thanks to the MFP. Overall, the gross margin improved with a full 60 basis points in the first half year, and some of that we then spent on increased R&D as well as salespeople and specifiers. For the first half year, an expansion of the margin with 30 basis points. Adding back then the acquisitions, we are back on flat for the first half. Again, we have this curiosity with the lower direct material, including acquisitions.
That is really because we have divested Car Lock business, who are significantly higher on direct material, and therefore the total is even lower on direct material, including acquisitions. Cash flow. When EBIT is good, cash flow is better. Here we can see that in the second quarter, cash flow really came back. Even year-over-year, due to seasonality, we really need to compare year-over-year the quarters. We can see that we have a significant improvement on cash flow. It's up 27% to SEK 2.5 billion in the quarter for the group. Within that, you need to take into perspective our size, and therefore we follow very closely our different KPIs, especially working capital. If we start with the DSO, we are on 56 days, which is basically flat compared to a year ago when it was 56 days.
We have the same on DPO, which is an increase. We now have no gap between DSO and DPO, which is very good. Inventory actually down to 91 days from 99 days. Overall, that helped release cash, and in combination with a good profit from the business, we saw a very good operating cash flow. I would say, though, that we continue to see tough times in China, and we continue to work hard on collections in China, and it's not going to be over until next quarter either. We're going to have to, just like Johan said there, a couple of tough times ahead, and we need to continue working also on the credit risk and also on the DSO in China here. Overall, a very good picture for the group on cash flow. Net debt.
We are on SEK 27 billion, compared to a quarter ago, it's a couple of billion higher. We have the good cash flow from the operations, we have the dividend and some payment for acquisitions. What I think is really interesting is actually to compare a year ago, because basically we only have increased the debt with half a billion if you compare to a year ago, while the group is growing. That really shows when you look at the different KPIs. The gearing is now down to 64%, and also maybe even more importantly, net debt EBIT is down to 2.1. Good development of the KPIs here. Earnings per share, finally. Starting with the top line, it's up 5% on the top line, EBIT that increased 6%.
With the lower finance net, we actually increased the earnings per share with a full 7%. A very good development for the quarter, which brings the half year to 5% increase on earnings per share. With that, I give back to you, Johan, for conclusion.
Thank you, Carolina. Conclusions are pleasing this time as well. Good growth by 5%, 4% organic, 4% acquired growth, as Carolina just showed. Strong growth in mature markets, which is in fact where we have the majority of our sales. I think that is a solidifying factor. We're chosen as one of the most innovative companies in the world, which I think is also a very strong mark for the group, what we can achieve. EBIT improved by 6%, the cash flow improved even more by 27%. With those positive words, I open now the floor for Q&A.
All right. Thank you very much. I'm Fredrik Agardh from Nordea. I'm here to facilitate the Q&A. I've been asked to instruct everyone to keep it to one question at a time so that Johan and Carolina have a chance to answer them properly. With that said, I'll start with one for you, Johan. 4% is obviously a very good growth number. Americas and EMEA impressed with the quarter. Is there any specific trajectory through the quarter that you'd highlight? With that said, also, what has the third quarter started like in terms of growth numbers?
That was two questions. You're starting in a bad way. If I start with the easiest one, the quarter July, for those of you that count working days, we do. It's two working days less, we see minus 1% in the cards right now, which I think is not a bad score, which is pretty normal. When it comes to the perspective of growing, I think we have to realize the drag we have from APAC due to China is going to continue. I have not changed my idea about what we're going to grow, and that is between 2% and 4% for the year. Where we will land, I don't know. We lose at least 1% from the drop in China of turnover.
If you look at the Americas then and Europe, is it your opinion that you're taking market share, or is it in line with underlying markets?
It's a very complicated market, so it's difficult to tell. Our competitors, you can't compare right over. We are not doing bad because it is like that. We are doing okay, and at least in some segments, we are growing more than the surrounding work. It's very hard to generalize and say everywhere we are growing much more. We are doing quite okay.
Okay. Carolina, on the margin and the margin expansion in the quarter, how much of that was referring to the raw materials tailwind?
Yeah. We have looked at the raw material and the underlying. We should be aware of that it's quite a small part of our direct material that is related to raw material nowadays, since we, as Johan mentioned, tried to outsource quite a lot and have done so. We saw raw material help basically in Americas and in Entrance Systems. There we had some help. On the other hand, we had inflation basically balancing that off. What helped us with the expansion is, next to that, is the price increase as well as the restructuring.
Okay. Can we put a number on it on the margin?
Can't define it as tight as that.
If we mark to market FX then and the raw materials looking into the second half, you said FX was roughly flat. Was that for the full year or is it a second half number?
What we believe, assuming now that the FX stays as it is now, is that the full year top line effect will be 2%, that the bottom line will be flat on margin. Since we are now down 20 basis points on margin by H1, that means there will be a slight positive effect on the margin in the second half for that.
Okay. Thank you very much.
Raw material, what you have seen is that raw materials continue to go up actually. That is not necessarily a bad thing for us because what we do then is that we can, in a very nice way, continue to increase prices, which actually gives us a better leverage than the savings we do when raw materials go down.
Okay, let's go to some questions in the room. Peter?
Peter from Handelsbanken. I'm sorry, on China, I think an impressive margin given the circumstances. You mentioned you've taken out almost 600 people. How much left is there to do? You're starting to shrink the business and taking down costs quite significantly. Tell us a bit about the actions and if there's still flesh out there, and combined to that on eventual write-downs and maybe positive effects on earn-outs also. Thank you.
Do you want to do the flesh part?
Yeah, you can take the earn-out first, then. Thank you.
Yeah. You talked about the first thing you brought was on the possible write-downs. I think what you do is as you go, you always provide for possible bad bets. So far the estimate we have, and we did in Q4 on a major chunk, that was what we estimated then, and for now we don't know. We do our work and we will see. When it comes to the other part of the question, the earn-outs, I think with earn-outs there are some small pluses and minuses, basically we try to balance that out so that it doesn't have any effect on the margin. If there are any larger deviations, plus or negative like we had, we will clearly speak about that.
Looking to China, what we call flesh, I recall it are good employees, that's a little bit different. We are not aiming at reducing like that. We have, of course, still quite some possibilities for continued outsourcing, which we are doing, the fact that that is what you see very much. We can leanify our factories, put a better flow in, we automate to some extent some of our manufacturing lines. I estimate personally that it's far from over in China when it comes to the way we can rationalize. We still have 22 facilities in China, there is also potential then to reduce the footprint, to become more efficient from a footprint point of view. In all these things, not to lose control, you need also to have it in a structured way. Therefore it is something that takes time.
That's why I say it's very hard to follow when you have -11% on turnover. We had negative leverage in APAC, that will continue as if it's dropping at this pace. You can't reduce costs at the same pace, unfortunately. You should remember China is some 7% of our total, it's not a major item of our profitability, I think we will continue to manage it in a reasonably good way.
Okay, I think we have some questions from the telephone conference, let's go ahead, please.
Ladies and gentlemen, if you wish to ask a question, please press 01 on your DTMF keypad . Our first question comes from the line of Ben Maslen from Morgan Stanley. Please go ahead. Your line is now open.
Thank you. Good morning, Johan. Morning, Carolina. Johan, a question on Americas, please, and the very strong 8% growth. You mentioned that the residential market was strong. Can you talk a bit about the non-residential market and whether the growth you're seeing is coming from the commercial and office part of that segment, or are you seeing growth in the institutional schools and hospitals? Any difference in trends that you see there? Thank you.
Residential is not the strongest growing. It grew strongly, but not the strongest. It's institutions, on the other side, did very well in the quarter, and especially the doors. The doors is, of course, new construction, there is some expansion of the number of buildings that are in this region where we catch a piece of, that looks very positive. When it comes to quotes, we see that quotes are still growing at a high pace, that means that the market is still in a decent demand mode.
Thank you. Just a quick follow-up on Global Tech. You said GovID returned to growth on the back of your customer cash flow improving. Can you talk a bit about how the pipeline looks and whether you would expect that recovery to carry on through the second half of this year? Thank you.
If you try to predict GovID, I think you are making an error. I will not predict it. I tried it in the past, I badly failed. It is very difficult because very often you have a delivery of SEK 4 million or SEK 5 million, which makes a difference in the quarter for you, and you have it or you don't have it. What we can say is that the total order stock has grown in the last two years, shipments have been less. I'm rather cautious in this.
Got it. Thank you.
Our next question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead. Your line is now open.
Hi, good morning. I wanted to ask a question about what you mentioned on Entrance Systems that on the sales in European resi have weakened. I guess you also have some exposure inside EMEA to resi. Can you comment a little bit more on sort of what's the underlying trend in European resi? I guess you had a very high, good growth in EMEA overall, so you probably grew in resi inside EMEA. What are the differences basically on why it's weakening in Entrance Systems? Thank you.
It's simple. We have decided to exit France. It's a decision taken by ourselves. It's growing in other parts, but we also, to some extent, one other market where we have decided we are too far away with our machines, so to ship across long distances is very expensive. The profitability of that part of the business has not been good, so therefore we took that decision.
Okay, thank you.
On Entrance Systems. Residential is growing in Europe, but not for us right now due to that decision.
Clear. Thanks.
Hello, would you like to take the next question, please?
All right. Yeah, go ahead from the telephone conference.
Okay, the next question comes from the line of Andre Kukhnin from Credit Suisse. Please go ahead. Your line is now open.
Yes, good morning. It's Andre from Credit Suisse. I have a question on Global Tech and on hospitality. In particular, you said that we've now comped the Starwood shipment, how's the order book and pipeline looking at the moment? Would it be reasonable to assume this business coming back to double-digit growth in the second half?
I remember it grew nicely and strongly last year in the second half. Business looks good. The Americas has grown over the year before, I think we will definitely grow, but double digit, I think it's too much to say. I don't know. I hope of course, but I don't know. It's a reasonably good business right now.
Got it. Thank you. Can I just follow up on the price increases you mentioned for Q3? Could you give us a bit more detail in terms of where you're planning them and what sort of magnitudes? Because at the moment, I think you're annualizing 1% as you mentioned in the presentation. It sounds like we can expect a little bit more for the full year if you're pushing some through in Q3.
We are already in the full activity to take another round of price increases. Of course, there are many markets that have devaluated heavily, so those are, of course, our main targets, but also general price increases where the raw material has gone up in the U.S., it's gone up to quite some extent. The same is in Europe, and also in China. In China, it's very tough to be honest, simply because you have this pressure of shrinking volumes for everybody. Altogether, as was mentioned here by Carolina, it's a good situation for us in the sense that we can normally take the price up more than the raw materials' weight is in our numbers. We are normally helped by inflationary situations on the material side.
We are not very worried, but in every division we have undertaken price increases, of course, not across the board, but in selective areas. My expectation is we will cover that raw material price increase.
These are not as high price increases as you've done at the beginning of this year across the board?
They will be tailored for the local situation. If the country has devaluated then, like Brazil, then you increase some 10%, 15%, 20%. There is no other way you can do it. In a market where there is like the US dollar, which is a strong region, there you perhaps talk about three gross, and then of course it depends how much you have net. You don't know it upfront, but we will definitely continue to cover for the raw material price increases and inflation on salary, by the way.
Great. Thank you very much.
Thank you.
Our next question comes from the line of Andreas Willi from JP Morgan. Please go ahead. Your line is now open.
Good morning, Carolina. Good morning, Johan. I have a question on your comment you made during the conference call that you still expect the 2%-4% rate of organic growth for the year, that you kind of don't know at this point where you will land. Even you've done 4% in the first half of the year, you've just spoken about maybe a better pricing number in the second half. What keeps you from guiding to the higher end of that rate? Because to get down to two, you need zero in the second half. I understand your concerns about China, but where else do you have concerns that prevent you from basically guiding more to the 4% for the year? Is this the slowdown in the U.S. despite the good dynamics we see, or are you more concerned about Europe?
Where does that caution come from?
Running China is bad. Brazil is bad. A number of regions are not doing all that well. The Middle East is heavy. Africa is heavy. I can continue for long. I think I must realize that growing at 4% organically is a good score and it would be foolish for me to say that we were going to grow even more, knowing that China is going to continue to go down. I think therefore I stick to what I said in the beginning of the year. I think this year is a 2%-4% year.
Knowing now that we are at half year, I don't think two will be the number we will see. It's still a very tricky thing, and we normally never predict. I don't want you to get the wrong idea over that we could now or it's from four to five to six to seven. We are not there. The economies are not supporting that. We are growing in many segments more than the market is growing up to our estimation, and that is, of course, benefiting us, and it will continue to benefit us as if we continue to innovate as we do. It's not going to make us outgrow tenfold the market or anything.
Thank you very much.
Okay, our next question comes from the line of James Moore from Redburn in London. Please go ahead with your question. Your line is now open.
Yeah. Hello, everyone. Johan, Carolina, I have a few small ones. Could I start with savings? Should we expect an MFP 6 in the second half?
Yes.
Great. Should we think about a charge for that in the second half with it?
Yes.
Okay.
As Johan mentioned, it's actually so that we have grown quite a lot as a group. The last one was of SEK 1 billion, but just looking FX-wise and size-wise, including the 50 acquisitions we have done, it seems to us that we have a lot of good projects and potential cases. I come back to Johan's comments that it's probably more up to SEK 1.5 billion than as a one-off charge. We will package it during the third quarter and make sure that it's all done and dusted by Q4.
Thanks. On acquisitions, you said, Johan, the pipe is quite full. Do you have ambitions to accelerate from the 2%-3% acquisition pace you've done in the last couple of years to the high single-digit pace you did 2010-2014, now your balance sheet has been redressed?
Ambition is always there, price is not there. The price of companies is quite high, we've had a lot of acquisitions where we have decided not to go. The reason for it is price. We don't know what will happen to the world economy. A lot of borrowing is out there in the nature, so to speak, we don't want to go too deep in debt ourselves, we keep it in a balanced way. I think a pace of 5% is quite nice to have. It really makes a difference over a few years time. At least I'm not aiming at, for the sake of growing, to go much faster. If there is a good potential and opportunity, we will do, it's not something that we're really running for.
We are doing quite well already, 4% this year and the run rate, last year the same. It's a good score in a difficult market with very high prices.
Great. Electromechanical, I get the sense that has it accelerated from sort of, I don't know, 10% to mid-teens? It feels like it must have. If so, why is that?
Most Electromechanical products of newer nature are growing at a double-digit pace. Of course, we have also older types, just like we have in mechanical locks, and they're growing to a lesser extent. Altogether, it's a much higher growth rate than you have on the mechanical side of the business. In a way, it's natural because every electronic lock you sell replaces a mechanical lock. It's no way that mechanical can outgrow electronics. It's a good pace. It's not so that it's euphoric. We see customers more and more adopting to electronic solutions. They increase and enhance their security, and this is a trend that has been there for ages, and it's going to continue. It's very good for us.
Thanks. Lastly, just China receivable days, I think you said 120 to 150 last. Could you perhaps give us an update?
Yes. I think we can. We are on 126 days, we were on almost 150 in the first quarter. That said, the first quarter, due to seasonality in Chinese New Year, it is the highest quarter. 126 is still around 30 days more than a year ago, we are continuing to work hard on this issue.
Great answers. Thanks, guys.
We have a follow-up question here from the room in Stockholm. Andreas, please go ahead.
Thank you. Andreas Brocker at Corem. A big picture question. When I think about EMEA versus Americas, SEK 8 billion both of them is I know for the first half, it's like SEK 16 billion for the year. They're about the same size. When we look three, four years out into the future, if you think about which market is more consolidated, which has more organic growth and technology, will they be the similar size three, four years? Do you get a feeling that one will be considerably larger than the other?
There are two sides to it. Europe has, if the old Europe is 300 million, 350 million people, you have Eastern Europe that has been added. Europe and also Middle East, it's rather big, Africa. If you add those parts, Europe has higher potential from a population point of view than Americas. Americas has a much higher growth rate and also population growth. Therefore, if I would estimate, I think Americas would probably outgrow on organic the European side, while Europe might grow due to the acquisitions that are bolted only the new portion of the work that didn't used to be part of Europe. With that said, personally, I think Europe has a much tougher game to stay on the same growth rate as Americas. It's related to the population.
Thank you.
Okay, let's go back to the telephone conference. Our next question comes from the line of Andreas Koski from Deutsche Bank. Please go ahead with your question. Your line is now open.
Thank you. Good morning. It's Andreas Koski from Deutsche Bank. Firstly, on China, I understand you expect China to weaken further into the second half of the year. Just to get a sense of comparables for the second half, how far below was China in the first half of this year compared to the second half of last year? What kind of sequential decline have you seen year-to-date from the second half of last year? I don't have that number in my head.
You can't really say that because of the seasonality. The first quarter in China is one month, really.
Yeah.
We try to look at it year-over-year to have a fair comparison. You have seen now that we are double-digit down in the first half, and we were down second half of last year, as well. Unfortunately, when we say that we see continued decline, it means comparing to the lower year-over-year number for the second half. We believe we'll continue to decline.
Okay.
We have spoken about China, it's over-investing in construction, especially on the residential side, and many places are standing half empty, even though the big agglomerations are growing still. We have good situation in southern China. In some other areas, remote areas and northern China, where we have a very strong footprint, is not doing at all well. We see on our order intake that we're going to have negative going forward into the second half as well.
Maybe you don't want to answer this, do you expect it to be double-digit negative also in the second half of the year?
No idea, a good guess would be yes.
Okay. May I just ask about the calendar effect, because you're talking about one extra day. Just looking at it mathematically, one extra day would correspond to about one and a half to two percentage points of growth. I guess that sounds a bit too high, so I wonder what impact in percentage points do you think the calendar effect actually had on organic growth for the group as well as for EMEA in the quarter?
Well, it was clearly higher in EMEA since they are not only celebrating Easter but also taking off on this Easter. I think the best thing is to look at the half year, because you basically erase the calendar day effect, and you can see the run rates and for EMEA then we are on four. I think that's how you can see, and you do the same really for the group, where we can say that the whole group is basically on that level as well.
Okay. Thank you very much.
We appear to have no further questions now in the conference.
Telephone conference.
Telephone conference, please, any further questions?
Our next question comes from the line of Lars Brorson from Barclays. Please go ahead. Your line is now open.
Thank you very much. Hi, Johan. Hi, Carolina. Just a couple of quick follow-ups. Just on China, I couldn't hear what you were saying earlier, Johan, apologies for that. Obviously in China we did have, and sorry to [belabor] the point on China, but we've had some government stimulus measures over the past year. We've seen housing starts improve. Can you give us a sense of what you're seeing more broadly, to what extent are things stabilizing and perhaps to what extent is your view of China impacted by your heavy North China exposure?
I spoke about it last time, we see that the larger towns in China are doing quite well. Southern part of China is doing quite well. We are growing in those parts. We have, on the other side, seen quite negative in the northern part and some other areas as well. We see on the commercial projects, the fire door type of applications, a good situation, while we see on the residential doors quite negative situations. It's really a mixed picture. Last year it was the opposite. The residential did very well while we had the problem with the commercial doors. Very difficult to predict, but I do believe a lot of investment or stimulus that have been given has gone to the commercial side. At least that is what we see now, picking up a little bit.
I'm talking about now the decline rate that is declining less, that is euphoric and far from.
Just on EMEA and Americas, on the incrementals there, if I strip back for FX and M&A dilution, you're running in the mid-20s and mid-30s respectively. Any reason why you can't continue to deliver that into the second half as you raise prices in terms of the operating leverage in those two divisions?
If we continue to see this growth, we do have a lot of savings coming in on both, I would say the only thing that's going to turn is most likely the raw material then, to be compensated then by price increases. With that kind of organic growth, we should be able to have similar nice drop-throughs.
Just finally on your MFP 6, I know we'll wait for the details until Q4, should we expect that again to be weighted towards EMEA Entrance Systems and APAC? Can you give us some sense for how perhaps this program will be weighted towards or between the divisions?
Reality is that we have a lot of good projects in all divisions, let's call it change cost is high in Europe, there are project-wise more in EMEA and Entrance Systems also where the acquisitions have been done in the last couple of years. I would say that the majority will be there, but there will also be good projects in some in Global Technologies, some in America.
Okay. Great. Thanks.
Back to the floor for further questions.
All right. Let's go to one in the room here. Floor question.
Thank you. You mentioned in Europe that the electronic side is doing well. Any sense of the bread and butter old school mechanical lock, is it growing in Europe? That would be a gauge of the actual construction activity. Is it flat or growing? Please take out the day effects.
We are winning many specification projects. That is fueling also the traditional locking solution. Yes, it's growing underneath as well. Of course, adding the total sum of locks is every electronic lock is a mechanical lock sort of disguised electronics. It is always something mechanical holding a door. There is a nice growth underlying, it's not bad at all.
Follow-up, Carolina, savings, the other savings and the manufacturing savings.
Go on, please.
Yes. For the existing programs, we have around SEK 60 million in the quarter in savings from MFP. We have around SEK 50 million in other savings. What is left of the existing program is roughly that runway with SEK 60 per quarter, till the end of this year and a small carryover effect for 2017. As you know, we will have new stuff with the new MFP.
Great. Thanks.
Okay. I think we need to round it off here, unfortunately. Johan and Carolina have a very tight schedule. Johan, any concluding remarks here?
Well, as you can see from my smile, I haven't been smiling all the time because we've spoken about China. I feel very pleased with the quarter, and proud also. A good performance altogether with 8% nominal growth, 5% total growth, the profit improvement on earnings per share by 7%. Very pleasing quarter, strong cash flow as well. With those words, thank you very much. To all you investors, thank you for supporting us and have a good summer. See you in the autumn.
We now conclude the conference call. Thank you for attending. You may now disconnect your lines. Thank you.