Ladies and gentlemen, welcome to Assa Abloy and the fourth quarter reporting. A quarter that has been very good for Assa Abloy despite a very challenging surrounding. We saw a strong ending of the year with strong growth in EMEA, Americas, Global Tech, and Entrance. Pretty much the only area which did not grow well for us was APAC due to the Chinese market that continued in a weak direction. We also made a provision for receivables in the quarter of SEK 250 million, which was met by a release of an earn-out that did not come through in China for the same reason, the market is not doing very well. Sales improved by 15% on the back of 5% organic, 4% acquired growth, and 6% positive capital. EBIT improved by 13%.
Earnings per share continued also to improve by 12% to SEK 1.91. A very good evolution. Looking to the year, it looks pretty much the same, slightly better. With strong growth in Americas, Global Tech, Entrance System, and good growth in EMEA. We saw negative growth throughout the year in APAC as well, a few percent. I will come back to that later on. Sales reached SEK 68 billion, an improvement by 20%, and EBIT achieved SEK 11.1 billion, also an improvement by 20%, just like earnings per share improved 20% to SEK 6.93. Very, very good and positive evolution throughout the company. Turning to market, my favorite slide. A lot of things happens, always difficult to choose really what to go after or tell you about.
One thing here in the first part is Entrance Systems, where we have seen very good traction from specification, where we in fact more and more go into a building and offer the whole building, and we see a very, very good result out of that, throughout the world, in fact. Customers are definitely interested to have a full portfolio, total door solution to their buildings. We saw also a very exciting big order for CLIQ Systems, where we go now more and more into cloud, and in this case, it was for workstations, where you then can manage the whole population. In this case, it was more than 100,000 units in one go that are interconnected with some 24, I'm not sure exact number, but more than 20 locations where people sit and manage the system as such, completely decentralized, but centralized through cloud. The identities are updated with our Seos systems with the help of a mobile phone.
Also that is quite exciting how you can do it in the future. Many customers are requesting similar solutions to their problems or their challenges with security. We saw also very good traction from our flagship shipping system in the U.S. We have now five centers in the U.S. where we can ship within a few hours to our customers throughout the USA. We see that it has become, in a rather short period of time, very popular, where we ship a given range of products with very short lead times. Strong traction there as well, and we have had this now developing on the last few years. Also on the sales side, very exciting evolution.
We have now, it says one, but today I can stand here and say we have two now that would like to have a virtual ID system where you in fact manage your driving licenses with the help of a mobile phone. The mobile phone becomes the ID carrier rather than you have the plastic cards that you have today in your wallet. More to tell as we move along in the year. Turning now to the market, a little bit strange situation in a way because we are used to say emerging market is doing fantastic. We have 1% organic growth this year on emerging markets, so much slower, mainly due to China, but also Brazil has been weak throughout the year. Mature markets, on the other side, have average grown 5%.
If we look to the different parts of the world, North America grew organically 7%, Europe 4%, and Pacific 7%. Complete upside situation to what we have been used to in a number of years. All mature markets are in fact doing quite well. Looking then to the emerging markets, Latin America, 5% organic growth, a little bit lower, slower this quarter than before, and it's due to Brazil. All the other markets are doing fine, including Mexico and this. Looking to Africa, here we see definitely a different situation with rather negative evolution in countries that are connected to oil, and also in South Africa, which is connected to raw material, where we see demand is slackening as we move forward. We had organically here -2% for the year.
In Asia, due to China, that decline in the year, -6%, we had -1% for the whole region. All the other markets are almost compensating for the weak Chinese market. This is of course a favorite slide where you show then since we had the recession in 2010, that we've grown here, it says 22%, but if you add 2010, 24% growth altogether. You can see here the distribution among the regions. It's clear that EMEA has been and is the weakest area, while Americas has been very strong throughout these years. The growth has been between 2% and 4% year after year after year. It's a very, very solid development. Where we see there's good demand, especially on the electromechanical side, which gives us growth on a continuous basis, despite then that there are quite some changes in demand across the globe.
This year, we grew 4%. This one is also very exciting in the sense that if you go back to 2010, with the help of organic, then that was 24%, you add the acquired growth has been between 3% and 17% per annum. You can see then that we have grown from something like SEK 35 billion to SEK 68 billion by now, and excluding currencies. There's no currency in this, and that means 94% growth in this period of time. A very solid evolution. Profit has followed. Profit has improved by slightly more than 100%, from SEK 5.5 billion to SEK 11 billion. We see a little bit margin accretion during this period of time, which many people say to me, "This is no good," but in fact, since we have bought so many companies with low margin, I feel pretty happy about it, I must say.
It's very good. You can see here the line on margin is rather flattish. It's 16.3%, between 16% and 17%. It's been there for quite a while, but we're adding a lot of body mass to acquisitions with low margin. I'm very happy about this evolution. This quarter, however, we could not compensate in full for the margin dilution we got for acquisitions. We did seven acquisitions in Q4, and also the currencies that are diluting us by 0.4%. That's both transaction and conversion that we are suffering from. This will carry on for a couple of more quarters, and then it will be gone. If you think about this, nothing strange. Most markets in the world, with the exception of the dollar itself, have devaluated quite strongly. It's not much we can do about this phenomena that we are losing.
On a year basis, you on acquisitions and -0.3% on currency. We said we thought it would be in that magnitude in the beginning of the year. Looking to the manufacturing footprint, it carries on. We have reinforced with the money we took provision for a couple of years back. You can see here we lost 480 people. We've extended the program, and Carolina will tell about the savings that are quite good, both this year, but also looking into next year. Even though we are planning to take another one, we have made more than 50 acquisitions since last time, we're planning to make one new provision for 2016. We have lost more than 10,000 employees, and we have still SEK 550 million to carry us through this year and into next year. Then we will, of course, launch some new projects as we go along.
On the margins, I mentioned that we lost 0.2%. What is in fact hampering us a little bit is that the price, you can see there, 1.5%. It should be more really, even though I'm very happy with 1.5%, but we really need a little bit more really to compensate in full for the currencies as such. Despite that, I'm, as I said, very happy with thinking about that also raw materials are coming down. We get help from raw material, but we need a little bit more of price really to be awash. Therefore, we have currency -0.4% and acquisitions -0.4% as well. As I mentioned earlier, that is diluting us despite then a positive leverage of 0.5%. You can see here, when currency first dropped, we got a plus.
That is what we are comparing with last year, so it's in Q4. The first effect was plus, then it turned negative for us throughout the year. On acquisitions, very active. I can tell you the pipeline going forward is also full active. It is more in the pipeline. In this quarter, we did quite some acquisitions in emerging markets again. We added all together in the year another 4% turnover. Going into next year, we have 3% in the portfolio, meaning that organic growth is minimum 3% into next year. Looking to acquisitions, a few exciting ones. IAI is a tech company. Those of you that are Swedes, you should open up your passport if you carry it and look through, and you will see a figure, which is probably your face if it's your passport, and that is drawn by this laser engraving company.
This is a very reputable laser engraving company that does a lot of advanced laser engraving in various parts of different kinds of IDs. It is also, in fact, on banknotes. The first picture that you can see is a banknote where they have made a laser engraving, almost impossible to forge. This is adding very nicely to our eGov side, more technology, but also to our printing side, the Fargo printing side, more capabilities to do advanced printing as such. It is accretive to earnings per share, but only slightly. It is not a high profit company. Another tech company, very exciting for Entrance Systems. This company is historically specialized in elevator intelligence, but also in the door side. What they do is, among others, IR sensors, infrared sensors, and it really adds intelligence to the door.
These IR sensors have developed so much today that they can do almost everything except face recognition. They can recognize you from your body or the way you move, and that means that you can also have access control with the help of an IR sensor at the door. They can also be built into the door, so you don't see it. From an aesthetic point of view, a fantastic change, and a game changer, you could say. It can also read you when you come. Do you have the intention to go through the door or past the door? If you pass the door, it doesn't open.
If you want to go through it, then it is going to see how wide are you, and it is going to open in relation to what you need, which means, in fact, that the building can then be much more sustainable. The door environment is losing a lot of heat in the building. Therefore, it is very interesting to open the door in a correct way. This company is nicely profitable, I should say, even though we will have some PPA on it. Then we have the tricky one, Papaiz and Udinese. With this, we bought three companies in Brazil and one earlier this year in Brazil, and Brazil, as you know, are in heavy recession. These are at best slightly accretive to earnings per share. Of course, considering that the market has devaluated by some 70%, the currency, we buy them, of course, then less expensive.
We will have a few difficult years with these companies before we come through, but I have no doubt in my mind we have taken leadership in Brazil now on the market. Papaiz, which you see here, is the leading brand in Brazil, from a repute also in South America. We are very happy with this addition. We think the timing was not ideal, but it was the best one because when the times are good, people ask a lot of money. Here we got something for less money, but more difficult. Looking to EMEA as such, EMEA has saw strong growth in Scandinavia, Finland, Benelux, Iberia, and here, Benelux, Iberia has been negative for quite some while, so they are starting to come to life, and also Eastern Europe had strong growth.
We grew 5% altogether, where only France and Italy, in fact, were negative in the quarter. All the rest are growing slightly. Even Africa was not negative, which we were very happy about. EBIT declined quite a bit to 16%, down from 17.5%. Here we have currency 1%, so Europe is very hit. Euro is weak. We buy from other parts of the world, so 1% currency. We had also, from the acquisition side, minus 0.5%, so 1.5% dilution. In this case, we had no leverage, which is very unusual for EMEA, and there was one, to be honest, but we decided to write off receivables in Russia because, as you know, Russia is not doing very well either. There we see that we have tremendous problems to get paid on old deliveries. Looking to Americas, a fantastic situation.
8% organic growth, profit 21%, continuing the same level as one year back with strong growth on our architectural hardware, which is our locks, you could say. Emtek, Canada, Mexico, and South America. Pretty much across the board, very strong growth. Doors grew nicely. You can see doors are growing, but not that strong. That means that new construction is not that much yet, but we see some good statistics, so hopefully it will keep up the market. Residential was a little bit less strong than we have seen in the last few years. We saw very high activity in home automation, so Assa Abloy has taken a lead in alarm systems where you use a lock for the door opening. For the total growth in Americas, we had a very strong order from one of our parties.
That, in fact, gave us 3% of the 8%, so there was a sort of exceptional strong growth. There is rather 5% underlying growth that we had in the quarter. Very strong leverage, 1.3%, eaten up by currency, minus 0.8%, and acquisitions, 0.5% negative as well. I mentioned Brazil. I don't think I need to explain why we have a negative dilution from acquisitions. Of course, we took also the acquisition cost in the quarter. Looking into Asia Pacific, a very good situation in a way. Australia, South Asia doing fine, very strong growth, good growth in New Zealand, good growth in North Asia, and continued decline in China. We lost 11% of turnover, and we also lost likewise 11% of our employees. We are trying to keep up with this rather bleak demand situation. Organically, the region declined by 4%.
Here we have a positive accretion, which is a little bit strange. It's the only region where we have that, but that is the case. Margin was 14.8%, up from 14.6% one year back, but then we had the positive accretion, so real term, we lost 0.5% EBIT margin in a way underlying. Here we are definitely under pressure, but we are of course doing a lot of things in order to keep the profitability on a decent level. Looking to Global Tech, here also a strange situation. A lot of what is our traditional business is going into emerging markets where we had a lot of good projects with solid margin. Those are drying up right now. eGov and Biosite are two of those areas affected, but also physical access control in a number of markets.
Our traditional business here did not grow at all in the quarter, while we had a very strong growth in our project sales, which I mentioned those cards for the Chinese market for the banking side. This gives us a heavy dilution, and that is the reason why we saw 18.4% EBIT down from 20%. I'd like to underline also 20% was all-time high on margin that we have had last year. We didn't realize it was all-time high because we would like to go higher going forward, but at least in those days, it was all-time high. Organically, we grew nicely, 8%. We had strong demand, but of course, the dilution was strong than from projects. We also see negative mix then due to that the high-margin business is in fact flat, and in some cases negative when it comes to Biosite and GovID.
Hospitality on the hotel side continues to have a very positive evolution, very much back on the Seos keys that we sell on the virtual keys to hotel chains. Very strong demand situation. Turning to Entrance Systems, strong growth there pretty much in most areas, high-speed doors, Ditec, Amarr, 4Front. American market, very solid demand. Good growth also in the industrial side in Europe, which has not been the case in the past. Door automatics then also doing well in Europe, but also in the U.S.A. In the residential side, a little bit weaker. FlexiForce, which is then component to other companies outside of the group, but also to our own companies, is rather flattish as development. Margin-wise, we lost three tenths of a percent to 15.1%, down from 15.4% one year back.
Here we have dilution from acquisitions minus 0.4. We have currencies minus 0.4. In fact, the leverage was good in Entrance Systems on the back of 6% organic growth. That concludes my overview. I'd like now to hand over to Carolina that will guide you through the financials, please.
Thank you, Johan. Good morning. A strong end to 2015 for Assa Abloy. I will start with the financial highlights. Of course, with sales, a full 15% growth on the top line. Very importantly, good organic growth of 5%. We estimate the net price effect to be 1.5% and the volume to be 3.5%. Acquired growth 4%, in line with the year so far. The full year ends then on 3% acquired growth. The carryover effect of buying acquisitions towards the end of the year is actually a full 3%. Acquired growth in the books for next year is 3%. Currency, this year's big numbers, they're a bit smaller now. The first half of the year was very strong. Now with the second half, we've come to a level of 6%, also in the fourth quarter on the top line.
The year as a whole has a top-line effect from currency of 13%. Strong top line developed a strong bottom line, EBIT up a full 13%. In the EBIT, we also have two anomalies. One is that with China slowing, the expectations of earn outs is lower, and therefore we put back around SEK 245 million for that. On the other side, the weak China also brings with you credit risks, and therefore we have taken a provision for bad debts of SEK 250 million. The margin, well, we saw strong dilutions both from acquisitions and from currency, and still we almost have the same margin as last year, 16.6% compared to 16.9%.
Adding then to the EBIT, the financial net a bit higher is not necessarily because of the debt, but if you buy companies in emerging markets and the debt balances those emerging markets, means that the interest rates on average is a bit higher. The tax rate stable on 26%. We came down to a full +12% on the earnings per share and a +20% for the full year on earnings per share. The big one this quarter, though, is cash flow. I will come back to that later, but it was an all-time high cash flow, SEK 4.6 billion, really catching up on a weaker start of 2015 on cash. Let's dive into the P&L, looking at the bridge, starting again with organic.
The 5% organic, with the combination of good growth and good savings from the structuring programs, gave us a good margin and an accretion of 50 basis points. I would say we basically squeezed in half the manufacture footprint programs within the existing provision by extending the projects that we have. We see higher savings this year and next year from that. Looking at the different divisions, you'd have to say that the ones that did very well here was Americas and Entrance Systems when it comes to drop through. Global Tech, tough because of the mix, with project sales low margin and therefore diluting on the margin here. APAC with a drop in sales, therefore also a drop in margin on the organic side. Currency, yeah, 6% top line, lower margin on the currency side.
It's a combination of the translation, and there we have sort of the SEK too, and a lot of other currencies being significantly weaker and the U.S. dollar on the stronger side. We also see some transaction effects here with countries purchasing in CNY and in USD mainly, and therefore increasing their cost base here, compensating that then with price increases. Acquisitions, 4% in the fourth quarter, only 7% margin on those. I would say if you buy seven acquisitions basically in December, what happens is you don't get much of the P&L into the numbers in that quarter, but you do get some of the cost. It's a little bit higher than usual, but nothing to worry about there. A full-year view on the P&L from a different perspective, components of sales for the whole year. We start with direct material.
This is the most complex one. Here it has increased, the increase really comes from a couple of things. One is because we continue to outsource. Higher outsourcing will give you a higher % direct material. Two, with the mix, negative mix here with the higher direct material, like for example, the project sales in Global Tech, which are very high on material content here. We can see underlying raw material, there we have seen improvements in most of the divisions. I would say with EMEA lacking a bit. You have to think about the time between sort of buying and it coming in here as well. Conversion cost on the other hand, very good evolution for the year, and we've seen it for a couple of years. The manufacturing footprints really continue to be effective here.
Overall, the gross margin improved 30 basis points during the year. SG&A up basically flat. Therefore, the margin like-for-like improved with 20 basis points from both organic and including the currency. We had 20 basis points dilution from acquisitions. I will leave you with a moment to look at this nice slide. Operating cash flow. Fantastic cash flow in the fourth quarter. What the slide also shows is that we have a very strong seasonality. As you can see, the beginning of the year was slow, we soon pick up an all-time high of SEK 4.6 billion cash flow. That said, on the working capital level, I would say we are in a very good situation. We have around 90 days on inventory, which is good considering our supply chain, and we have 53 days on DSO, also good.
I would say everything is good except China. On the DPO, we have seen significant improvement. We actually improved with a full 10 days year-over-year on the DPO, up to over 60 on the DPO. A positive gap between the DSO and the DPO of almost 10 days. A low CapEx as well. I would say, though, that within the CapEx, there's a big shift from what used to be growing machines in factories towards more other types of investments like, for example, IT. Great cash flow does great things to your net debt. Basically we went from over SEK 25 billion in the quarter to SEK 22.3 billion in net debt. That is actually what we started the year with. The debt is on the same level as we started the year, but the company is 20% larger.
Consequently, the KPIs follow, we have a low gearing of 54, probably more importantly, net debt-EBITDA, that is down to 1.8. Final slide from me, earnings per share. You will see from the graph that it improved significantly during the year. We had a top-line improvement of 20%, EBIT of 20%, earnings per share is up 20%. The dividend proposal for the year is SEK 65. With that, I give back to you, Johan, for conclusion.
Thank you, Carolina. A final slide for conclusions. We saw strong growth in the quarter, 15%, 20% for the year, with 5% organic. Emerging markets also improved to 26% turnover. We see we continue to expand into the new world, and strong EBIT, strong earnings per share, and super strong cash flow. A very good quarter altogether. Thank you. We open it up for Q&A.
Thank you, Johan and Carolina. My name is Oskar Kvarngren with Danske Bank. I'll facilitate the Q&A session today. As usual, please limit yourself to one question and one follow-up, and management need to leave about 11:00 A.M. sharp. I'll start with one question to you, Carolina. When it comes to receivables and the problems there you had in China, I think you said before that you had 100 days outstanding in Q2, 96 days in Q3. What's this number right now post this provision? Also, how worried should we be? Often you see this kind of write-downs, and then there comes more afterwards when you see that things become worse. You also mentioned that you had write-downs in Russia. How worried should we be about this topic?
Well, in China, although it was year-end, we are on 100 days still. DSO just for China. If we hadn't taken that provision, we would have been on 110, 115 days. I think it's important to remember our customer structure, not only China, but the consequences of having a lot of small local customers is that it's very hard to have transparency on their credit ratings. This is our best estimate at year-end. You never know, and considering how tough it is in China right now, I think we'll have to wait and see. We will continue working very hard on the receivables and then take it from there.
Demand-wise in China, I think you mentioned an 11% drop, and you had some easier comps in the quarter. Did you see the market go down sequentially, and what's your best guess going forward now?
Demand continued down as we have seen before. It was really no change. We lost 10% turnover. In fact, you don't have this kind of negative inclination of the market, the market is in decline. I think personally, the losses we have done on sales are rather moderate considering the market as such. If you look to X and others, you talk much bigger numbers and much bigger customer losses. It's not so that we have lost the money, but we think we need to be careful not to hope too much because many customers are in distress and many customers will most likely go bankrupt over time, or many customers will go bankrupt over time.
Okay. Thank you. Just on the U.S. and Americas, you had 8% growth and 3% helped by the specific project. Can you just tell us how some of the important segments you are doing right now? The public, for example, is an important segment. How is that doing? What do you see in 2016? Also in terms of specification market, what do you see there?
Well, the non-residential market has done very well. We have seen a lot more products coming into market. That is also a reflection why we have grown 8% sales as such. It's not uniform. Offices are more stronger. Schools have been a little bit weaker. However, we see good activity levels here. Probably what we can look forward to is that we continue to grow on a decent level this year. 8%, I would not say, don't expect that, but something more of 3%-5% something like that. Our quotes are going up for some 8%-10%. It's a good healthy situation. On the Res side, we see a little bit slower demand.
If I may just finalize on my account, what's the usual question on current trading? What do you see right now and how much will Easter impact in Q1?
Yeah, exactly what you said. We have Easter in Q1, that means a few days will move over. We'll have one working day less, that means less demand in Q1. January started more or less in line with what we think is realistic in this environment with mature markets doing okay, emerging markets in distress. We think something like 2%-4% growth over the year.
Thank you very much. Questions from the floor?
Yes. Thank you.
Yeah.
Hannes Pankin. My first question would be on Americas. You mentioned a few percentage points of a boost to your strong sales growth there. I guess this is rather lumpy, but maybe could you talk about the outlook for this? If it was specifically in the home automation market, could you shed some light on the profitability on such very big activities?
Those days margins are lower, but on the other side, your cost is less, simply because you have less salesmen relative to your sales. The EBIT margin is quite good, to be honest. Looking then to the activity in that sector, most alarm companies are moving in this direction, and Assa Abloy is one of the few that can offer really reliable locks that can be connected to the internet. That is the reason why we are enjoying very good demand.
My follow-up then on Global Tech. You mentioned the dilution due to mix in your businesses. Could you help us to understand the magnitude here? The IM being sort of flattish versus the other being very strong.
What we saw, the magnitude is that we have hardly any growth in our basic business and decline on eGov and biometrics. Their margins are quite high. They're up in excess of 50%, and the new replacement is something where EBIT margin is only a few percent, so you have a heavy dilution for such a thing. Underlying, the basic business is flat to improving, and it's in fact improving, to be honest. Otherwise, you will have dropped even more on the margin.
Well, thank you.
Operator, can we take the next. Oh, sorry. One more question here in the floor, and then we move to the teleconference.
Erik Josefsson from Bohlins Van Capellen . If we see good demand in EMEA and Entrance Systems which is Europe heavy, do you think you'll see better leverage on that sales than we saw in Q4 here going forward?
Well, at least I hope we won't write off Russia receivables every quarter. The answer is yes. We are increasing the prices as we have done three times this year. This is the fourth increase that we do in Europe, you can't sort of recover the EUR minus 20% or the CNY, Scandinavia minus 35% in only one go. It takes some time, and that is what you see on the margin side in EMEA. They're a little bit under pressure. We have pricing power in this industry, our estimation is that this will gradually disappear.
Entrance Systems, if we see good demand there for Europe, which is the main business?
It's early days there. A lot of the demand in Entrance Systems has been from the U.S. side. We see a good pick-up in Europe. It's too early to say how strong it is. The industrial side in Europe also was good in Q4, which is a little bit surprising because most industrialists have trouble really to get growth. I'm surprised that they invest indoors.
Could you just tell us roughly how big the Russian receivable write-off was?
It was a little bit more than EUR 2 million.
Operator, can we take the next question from the conference call, please?
James Moore from Redburn Partners is on the line with a question.
Yeah. Good morning there, Johan, Carolina, everyone. I have a question on volume leverage. If we strip out the currency and the acquisition impact, and I think something like SEK 220 million of saving and allow for some inflation, there's not been a lot of volume drop-through in the group in either the quarter or the second half, and that's a number that's been 30% over time, five years, 10 years. Are we saying that this drop-through decline is entirely linked to a mismatch in timing and currency and should normalize? Is there something else in that that makes you worry about 2016?
Well, I do believe 36.7% drop-through is a good number, that is what we had, and that represents half a percent in margin improvement, we are not disappointed with that number. If we had taken prices up even faster, it would of course have been more, we risk then to lose business. I think it's a delicate balance we have to strike here, how much leverage relative how much we can recover on the price. This is a matter of time. Still, I'm not at all disappointed with that kind of leverage. Many companies have much less.
Could I follow up on the savings? You consistently done better on the other savings line. Could you give us a view for 2016 on the MFT savings and the other savings?
Sure. What we have seen in this quarter is that we had around SEK 80 million from MFT savings, which is much higher than the original estimate was. It was about to pan out during the second half of 2015. If we take for 2016, we can say that around SEK 200 million of savings for this year, 2016, as well.
That's all MFT, anything from the other savings, which seems a big number too?
From the other savings, that we don't give estimates on, we gather bottom up every quarter.
Okay. Thank you very much.
Next question, please, operator?
The next question comes from Andreas Willi from J.P. Morgan. Please go ahead.
Good morning, everybody. My first question is on Global Technologies, where you talk about the more difficult financing conditions for projects in emerging markets. Maybe you could elaborate a little bit on that. Which countries is it? Is it just institutional or government-related projects, or do you foresee a more difficult market to finance private, non-residential buildings in general in emerging markets?
We see it in, namely in the countries that were oil-rich. There we see that letter of credits are delayed or not coming, and that doesn't mean that they're canceled. We've never had so many orders in e-government as we have right now, but we never had so many postponements as we have as well. It is going on from the last half year, and this is in many oil states. On the product side, in the Middle East, we see the same thing. People are starting to delay a little bit, and no wonder with the prices oil has right now, and also in South America, similar situation, especially pronounced in Brazil.
The second question I have on the reversal of the earn-outs. If you could just explain to us specifically, when you booked these earn-outs, they don't go through the P&L, why do they come through the P&L when you release them again?
Andreas, that is a very good question. It's not up to me to decide, but accounting-wise, it is like that nowadays, that when you buy a company, you make an assessment of first what you pay up front and how much of the earn-out you believe that you will pay, and that you book as usual, sort of as goodwill. If that doesn't happen, you release it, and you do release it to the P&L. That is how it works. That's also why we want to be clear about it to show it, because it's a one-off, even if it's a positive one.
The last question on the traditional HID business, the readers and access cards, if you could give us some update how that's doing. Thank you.
The physical access control side is doing quite well, growing strongly in the U.S., growing nicely in Europe, having problem with these projects I mentioned earlier in other parts of the world. On the printing side, reasonable good activity level, but also there suffering from projects in third world. On the identity side, it has been growing throughout the year in a positive direction. That seems to go on, but there banking is an important customer among others, and those have continued to buy.
Thank you.
The next question comes from the line of Ben Maslen from Morgan Stanley. Please go ahead.
Thank you. Morning, Johan. Morning, Carolina. Firstly, just on Americas, Johan, you mentioned strong growth in the digital door locks segment. Is this the kind of residential electromechanical market accelerating now, or is this a kind of temporary boost from the ramp-up of the Google Home Depot partnership?
I believe it's only in the beginning phase. We have early users so far. In Europe, we see the same strong trend upwards. A few companies also interconnect with our lockings, so the concern with us is the need for programming. Unfortunately, most home automation companies have their own standards, so we have to adopt to each and every one of them. As we go along, we will see an increased demand. The question is then how eager will the users be to use that kind of locking solutions? In the U.S., it has proven to be quite positive, meaning that customers really do appreciate. In Scandinavian markets, it is also very strong pickup. Mainland Europe, however, is still slow to adopt. You have markets like Korea, where you have 80%-90% adoption rate, continues at that level, and China is around 15%-20% today.
I'm sure, I have no doubt in my mind, this will continue. It's just the beginning of a trend, lucky for us then we are market leaders in this field. There we will see healthy demand going forward as well. Not peaks in quarters like we saw in this quarter, rather hopefully more evenly spread over the year.
Got it. Thanks. Then a follow-up, if I can, on EMEA. You said France and Italy are still fairly weak markets, there have been some slightly better kind of construction indicators lately suggesting there's some stabilization, perhaps. How far do you think we are from seeing those markets start to bottom out and pick up?
France is more and more leveling, it's only slightly negative. It looks as if it's going to come to life again, we've said it many times before, then it starts to slide again. It's very difficult to predict, right now it looks reasonably good, meaning that we don't see really a strong trend down, rather flattish to perhaps even slightly positive going forward.
Got it. Thank you.
Operator, we'll cut in with a question from the floor here in Stockholm. Anders, please.
Yeah, just to follow up on this reversal of the earn-out, a bit confused.
This originally set up, how was it provided for in the balance sheet then? How much of earn-outs do you now have remaining to be paid in 2016? Please.
I would say that, basically, when you buy a company, there's no change, and it doesn't go through the P&L. You do it the usual way and put it all onto goodwill. The difference is that the estimated earn-out, you book upfront, and then whatever deviation you have to that earn-out goes through the P&L. What we have for this year, 2016, we have around SEK 1 billion, a little bit more than SEK 1 billion, in expected earn-outs after now the reduction of those two.
Nothing of this reversal had gone through the CapEx number historically, right?
No. The buying companies is as usual.
It's just when the earn-outs are not as expected, both ways, up and down, that goes through. To labor the point, when those earn-outs actually become larger than provided for, it doesn't flow through as a provision on the P&L, right? You have to take it through the P&L. Right. Okay, that hasn't happened historically. No.
We have been very successful to acquire companies, we can't do much of a Chinese recession. If we have -10%, these companies also have -10%, then, of course, you don't achieve what you thought you would achieve. It's very difficult to predict. We don't book 100% the goodwill of what we think is going to come in the future. In the past years, we've seen very small amounts, plus or minus, coming in, but those have been rather small because we have been very successful with our acquisitions. We intend to continue like that, but you never know.
Operator, next question from the telephone lines, please.
Lars Brorson from Barclays is on the line with a question.
Thanks. Good morning, Johan, Carolina. Just on EMEA margins, if I can just follow up there. Currency 100 basis point year-over-year, I think I understand, and the provision for receivables about 50 basis points. Adding up to 150 in total, that means margins ex that is flat year-over-year with 5% organic growth and savings coming through. Can you just explain to us some of the dynamics there? A, is mix adverse in the quarter with growth perhaps coming in some of your Eastern European markets? Can you talk a little bit about seasonality in your acquisitions that perhaps means that dilution within M&A is greater than anticipated? Is there anything else going on? That's two margins. Perhaps just to follow up to the comment earlier, Johan, about France leveling out, seeing reasonably good growth perhaps coming through here.
You're still saying in the report that you see Europe stagnating, of course, EMEA growing 5% organically. Can you talk a little bit about what within EMEA did you see stagnating relative to where we were quarter back? Thanks.
That was a long one. You could almost sort of explain it to me. Starting by EMEA margin, it is so indeed that we had the positive leverage in the quarter, we have currency of minus 1%, as I mentioned, and also minus 0.5% from acquisitions. Nothing much to do about that part. The leverage there, and it continues to be there. EMEA has a little bit of a lag on pricing, no wonders, because EMEA is the worst hit when it comes to the currency. EMEA is in recession. Most of our competitors make single-digit profits, and they are very squeezed. It's a hard environment.
Still, we are improving continuously, I'm not worried as such, it takes a lot of hard work from our side, really, to make sure we get those prices up to the right level. In the beginning of this year, again, all prices are up for the fourth time in a year, it's not so that we are sort of relaxing in that part. When it comes to the French growth, it's very difficult to predict, as I mentioned. I cannot really stand here and say about Europe what's going to happen. If Europe is growing, Assa Abloy will grow. Security is something that grows everywhere, and I'm sure that we will catch what there is there. Our electronic lockings and Emtek side is doing very well. We had, in the year, double-digit development on that side throughout the year, it's a very positive evolution.
I don't think it will stop because it's the first of January.
Thanks.
Operator, next question, please.
Andre Kukhnin from Credit Suisse is on the line with a question.
Yes, hi, it's Andre from Credit Suisse. Can I just ask on the raw material benefit in 2015, what was it for you, and what should we anticipate for 2016? On raw material? Yes. We saw a release on raw material overall, so we were down a couple %, it's a bit different between the divisions, though. As I said, that EMEA is sort of the one lacking, but we have to remember that what we buy today is very little raw material. It's really components and almost finished goods. Then we have a sort of a payment term and 90 days inventory before it really comes through. Therefore, so the raw material underlying was down, but direct material is up, that is really due to the mix and continued outsourcing. Got it, when you talked about 1.5% pricing, just to double-check, that's gross, right?
That's not net of the raw material benefit. No, that's net price increase. That is net. Okay. Just last one on cash in Q4, was there anything unusual there, any kind of pull forward that we should be concerned about for 2016, or should 2016 be a normal cash year? Well, it was unusually high, I wouldn't want to draw a sort of straight line on that level. If you take the year as a whole, we had a very good cash conversion, which was in line with EBIT growth up 20%. I think that said, we are now on a level where working capital is on a good level, if we hopefully continue to grow, we will need some more working capital, we have to be a bit careful in expecting improvements there.
One thing is that we have to understand that the company is developing. We are putting more resources in the sales side, on the specification side, which is one of the reasons why we are growing so well. We are spending much more money than ever on innovation, which is also one of the reasons why we have cost increases. The reward is, of course, that we are growing quite nicely as a company. We will continue to invest in this direction. Another one, as Carolina also mentioned, is IT side, where we invest a lot in new IT setup, where we, in fact, are going into a completely different IT costume. Everything is done at the same time as we sort of reshape the whole company. It's heavy, but it works, and the models are there still.
It's sometimes, like in EMEA had quite some cost increases, like Americas. Despite that, both taking away the write-off in Europe, both have nice leverage. I'm not disappointed with what we see there.
Got it. Very helpful. Thank you.
Let me just clarify on the pricing. You mean the 1.5% in absolute terms, right? Just to be clear.
The thing is, what we do is we increase prices gross much higher. What comes through in our P&L on the top line is a net 1.5%. That has nothing to do directly with the raw material.
Perfect. Next question, please, from the phone line.
Sebastien Goulet from BNP Paribas is on the line with a question.
Hi. Good morning. Just, I know it's early days, but could you give us some color on the new cost-saving program you expect to announce later this year? Will it be largely in line in terms of scale with what you have done in the past? Where do you see the scope for savings? Thank you.
I'm not sure if I understood the question.
The MSP, the next one, how big it will be.
We don't know, but typically, the MSP has been around 1 billion SEK. Now we have 50 new companies come into the group since last time. I cannot tell the exact number, but it's not going to be a drama.
Okay. Next question is on the M&A and FX dilution, which has been a bit higher than we expected in Q4. Could you help us to assess the impact for full year 2016, for Q1, and maybe for the full year, based on current spot rates and the acquisitions?
I guess with currency, you have to be careful because it's changing every day, right? Assuming that they are still as they are, we expect the first quarter to have an FX dilution of around 30 basis points, and then that pans out during the year and towards the first half will be more than, and towards the second half, it will be much less. On the M&A side, the 3% carryover on acquisitions, we believe will have 20 to 30 basis points dilution on the margin for 2016.
Okay, thank you.
Next question, please.
Andreas Koski from Deutsche Bank is on the line with a question.
Yes, good morning. firstly, coming back to the EBIT bridge. Can you please repeat what savings you had in the quarter, and how much of that would you say is included in the organic part of the EBIT bridge, and how much of that is included in the acquired part? Just to get a sense what the underlying organic drop was in the quarter.
Well, most of that is in the organic one, we had around SEK 80 million from MSP in the quarter savings, then we had SEK 100, SEK 130 from other savings-
Okay
in the quarter in the organic one.
Thank you. then on Global Technologies, just can you remind us how large part of Global Tech is now project-related businesses, what kind of lead times do you have in this business? also, if you can give us an update what you see in your product-related businesses for 2016.
The whole business is very project-related because they are very frequently. A large corporation decides to go for a new IT and then use access control system, and then we talk about a couple of 1,000 readers and identity equipment and all that. We can talk about a $5 million project. It's very related to projects. We have the specific project business, which is more where there is a large banking card order or something like that, which is more opportunistic. That is the one we normally call project orders. That one has a lead time of less than one quarter. You can get it in the quarter and ship it in the quarter, which happened to the Chinese bank cards in this quarter, and therefore we got this dilution.
It's not so large portion of the business, but if it grows 50%, then it becomes large in that quarter.
Perfect. Thank you. My last question is on the EBIT margin in EMEA, because this is the first time in many years the Q4 margin is weaker than the Q3 margin. You mentioned weak currency, you mentioned acquisitions, and no leverage due to write-downs in Russia. On EMEA, historically, we have also seen a seasonal margin decline of 150-200 basis points from Q4 to Q1, I guess you expect a smaller sequential drop this time. Is that right?
I'm not sure. Do you mean going forward, or?
Yeah, going forward, yes.
We don't give forecasts. I can tell you that we are not sitting still. We have already in Q4 released a couple of hundred people. We are improving our cost base because we have been investing all the time. If you invest, you also have to have the foundation of strong growth. EMEA is growing. We are very cautious to not outgrow ourselves in the sense that we sort of out of control our costing. A lot of projects in MSP will carry on in EMEA. It will carry on throughout the year. We will see good savings. I'm not worried. The price will filter through, and it's also on its way. I'm rather optimistic about the situation, and also the mall situation is not too bad in Europe right now.
Perfect. Thank you very much.
Next question, please.
Alasdair Leslie from Societe Generale is on the line with a question.
Hi, good morning. Just on Mobile Access, seems to have a good start, obviously, within the hospitality industry, and we've heard about initiatives in residential markets. I was just wondering what you're doing to elicit interest in some of your other core institutional segments, particularly education and healthcare, and maybe what's the outlook for adoption longer term in those markets? Thanks.
Well, they are all in a growth mode, and if you looked into the statistics, even though we have seen as a consequence of a lot of negatives coming out from the USA, we've seen in the last quarter some tendency that the number of projects are delayed. Altogether, it's a positive picture in all the segments of non-commercial side of the market. Very difficult to predict, but I think the USA will carry on for what it looks throughout this year.
Thanks. Then maybe just a follow-up as well. Just, we've obviously seen a number of larger orders in the quarter. Do you think this is going to be an ever more common feature going forward as the business evolves across the group, larger projects becoming more prevalent, perhaps a more lumpy sales profile across the group? Thanks.
Not across the group. This is only one time we've had it in the U.S.A. We haven't had it in the past. We don't have it in Europe. Normally you ship, but you ship over a longer period of time. These large orders, for example, telecom industry, those are shipped over a five-year period, three-year period. It's just that you get the frame order and then you start to ship. It's only Global Technologies, really, that has those project orders.
Great. Thanks.
Operator, just cutting in with a question here from
[audio distortion] , please.
Yes. Thank you. Peter Fridh from Handelsbanken. On the sort of earn out still in the books, how much of that is related to emerging markets?
Well, it's a little bit more than SEK 1 billion for next year. Total, it's probably SEK 1.7 billion for the following two years. Out of that, I would say a bit more than half is emerging markets. We also have a couple of, I would call them tech acquisitions with earn out that are promised to grow a lot.
Yeah. Okay, coming back to the leverage, sorry about this. If you strip out the price, even maybe the savings, the pure volume sort of drop through is negative. We've heard about the mix, we heard about decremental margins, of course, in areas where you see a drop in sales. Is there a balance sheet element to this as well? You mentioned this cash flow was more related to receivables and payables than actually inventory.
No, it's not. What you guys often forget is inflation, because you put in the positives, which we've paid as one-off. There is inflation on salaries and general inflation that we have. Especially in parts of the emerging markets, they have more inflation than they should sometimes.
They haven't realized yet that the markets are in distress.
With that.
In many of those, salary increases are 10% or more.
That's very clear. Thank you.
I have a question on organic growth for the full year 2016. If we compare it to 2015, you had EMEA growth was decent. Now we see perhaps a better outlook generally for EMEA in terms of demand that drives EMEA and also Entrance Systems. Americas. You seem to think will be similar level. China. Hopefully not worse. We don't know, but it was pretty big declines last year. Then Global Technologies, you split up into 6 divisions last year to, I think, drive faster growth, and you have some businesses within that hospitality doing well.
What are the parts of the business you think will do materially worse this year, so with that, we could not be as good as last year, which had 4% organic still, because you seem to allude to 2 to 4% this year, which would mean a lot of businesses would have to decelerate.
Well, when I dream during night, I dream about 5 or more. When I see the reality, there are always things that you don't foresee. I think it's cautious stance is that we are going to grow 2 to 4%. I don't see strong weakness anywhere, but I don't see strong situation anywhere either. It's a rather strange world, a wait and see world, and many investments in the world are not carrying through, and we are also an investment type of business, so I cannot really say. I don't know where it's going to happen. My guess would be that the Middle East will run into trouble over time here, because they are, of course, overspending right now with the oil prices that we see. Many other emerging markets countries are running out of funds.
It's a tough world, and of course, you see a lot of transfer of funds to Europe and America because we're not buying any more of that expensive oil. People are getting, and the consumers are getting more in the pocket, and then when they start to discover, normally you get the other phase of the business cycle, meaning that you get more healthy demand. We are not there yet, but if it happens there, I can assure you Assa Abloy will be there as well. Right now, the outlook we have is a weak first quarter due to the Easter effects that we see, and something like 2 to 4% organic, which is unfortunately perhaps disappointing, but I think that is the reality that we do see.
Thank you.
Thank you very much. We're at the top of the hour, and then we have some more questions, but I think we'll have to take them offline. I know you have a very tight schedule today, Johan and Carolina. Please, hand back to Johan for any closing remarks.
Well, I feel very happy. It is a full year now, and have right 20, 20, and 21, depending on if it's cash flow or profit and phase. A very good year. Thank you for your confidence, and we will try to even to beat it in the next year. Thank you