Welcome everybody. It must be because this is my fourth year's time I'm standing here, you would like to see me. That must be the reason why so many are here today. You're most welcome to the third quarter report 2015 from Assa Abloy. Yet again, a very positive report. We saw continued positive development mainly in the mature markets in the quarter, just like we've seen earlier in the year, with strong growth in Americas, EMEA, and Entrance Systems. While Global Tech had flat, I will tell a little bit more about Global Tech later on, why it was flat in the quarter. We had quite some growth in many parts, but one part was not so good. We saw a negative situation in APAC due to the weak Chinese market, but again, a rather modest downturn in the Asian market.
Sales improved by 19% on the back of 3% organic and 4% acquired growth. A very good evolution with 12% currency. It's coming down now a little bit. Last quarter it was 15%, now it's going a little bit slightly down. Looking to EBIT, also very good improvement, 19% up, almost SEK 3 billion in the quarter, SEK 2,970 million with SEK 238 million of currency impact as well in positive. Earnings per share was improving also by 18% to SEK 1.86. January to September, we have a good evolution as well, more or less a similar situation with strong growth in Americas and here Global Tech is with us. It has grown 7% since the beginning of the year.
Entrance Systems as well, while EMEA is a little bit less strong at 4% since the beginning of the year. We saw negative growth in APAC just like in Q3, it's around 3% negative, so no big deal as such. Sales is almost SEK 50 billion, 21% improved to last year with 4% organic and 3% acquired growth. EBIT is 22% improved to SEK 8,041 million. Earnings per share up 23% to SEK 5. A very, very good evolution. Turning now to the market, here is always difficult. What should I share with you? We have many things. We continue to take very big rewards for our innovation. Apart from that, we have more than 30% of our sales coming from new innovations. We also win a lot of awards.
Now we have ASIS, which is the biggest award for us, but it's the biggest show in the U.S. We won five prizes there. We won for Quantum Secure for predictive security, ActivID, which is together with Microsoft, that you can with your smart card log in to all your systems in one go and authenticate yourself. A very handy feature that we have added together with Microsoft. Aperio Cabinet Locks. More and more people have cloud, and in the cloud you need to protect your data and you have it in cabinets. Here we have an Aperio solution that has taken a lot of interest from the market. Then, of course, sustainability. We have a hoard of sustainable products coming into market. Here we have won first prize for two of them, which save 97% of energy relative traditional locks, so big innovation.
On the eGov side, which you will see later, did not do very well in the quarter. We won a very large contract with Americas on the U.S. Green Card, SEK 88 million over five years. A very nice win for us and that shows also that the technology we have is a good technology. Very positive. On the digital door locks, we are now launching multifamily housing, which means that you have everything in the building electronified, and you can use it out of the cloud, tracing and tracking everything. You have the digital door locks on the front door, you have on the entry, you have a high security type of solution, electronic as well, exit doors, fire doors, laundry rooms, everything is then digitalized and very easy to manage. We think this will come quite forward into this market.
As those of you who know Americas, that's where we launch it first now. That is that multi-housing is coming more and more in the U.S. market. This is aimed at that new segment or that growing segment. Nest, which was acquired by Google recently, they have also talked to us for quite a while, and you can see the very pretty round lock there that looks like a mobile phone. That's not by chance. They wanted a mobile phone lookalike. It's called Yale. If I look to what we are going to sell, we are going to sell it together with their thermostat. That means that the thermostat is sort of panel communicated with the net in the cloud.
Our lock then will sort of be the first level of security of a house, where you sort of can unlock and lock with the help of a mobile phone from any location you like. Very handy, and you can also open with your mobile phone with a mobile key. A very handy solution for home automation, a segment that is growing very fast, not only in the U.S., but in most markets across the globe. Here we have a leadership as well, very exciting. Looking then to the globe, a little bit different picture than we're used to. Mature markets are doing quite well. Americas has grown 7% since the beginning of the year organically, Pacific the same, and Europe 3%. Less than Europe, but still 3% for Europe is not bad because the business cycle is not all that fantastic.
South America, not counting a couple of government orders that should have been invoiced in the quarter, grew 6%. Counting them, we have this flat situation in South America. Africa grew 6% organically, good evolution, and APAC declined 3%, mainly or not only due to China. China is the only market that goes down there. Since the beginning of the year, we have a -7% from China altogether, which I feel is not a bad score considering the rather big slump we see in the marketplace. Altogether, a pleasing picture. Important to see also is that emerging markets continues to grow in relevance and importance for us, 25% now, up from 24% last year. Not bad considering that's where the markets are the most depressed.
China is 10% of group sales, it's - 7. That has, of course, a drag on emerging market as well. Looking to sales growth, this graph I love. The reason for it is because you look to 2010, and you go up to where we are now, it's more than 85% growth. This is a combination of more than 25% organic and then acquired growth that has been in excess of 5% per annum. This, of course, together creates a fantastic size increase of the group. This year, with the currency we see and also the growth, we will pass SEK 68 billion. Not a bad score. Up from then SEK 35 billion that we were back then in 2010 after the crisis. We have more than regained organically what we lost.
We lost 12% during the crisis. We were rather resistant to a downturn. This is, of course, due to that our locks are very much in the renovation market and not new construction market. Altogether, in this quarter, we grew normally 7%. That's a good score. Operating income, this one I almost jump of joy, because if you go to 2010, it's even better. We passed SEK 10 billion. A couple of quarters ago, I said we will soon pass SEK 10 billion. Now I will say we will soon pass SEK 11 billion because it's moving forward rather nicely. Carolina is shaking her head. I think we will. Right now we are SEK 10.7 billion, 22% up to last year. It's a continued good evolution.
Looking to profitability in percent, it looks more dull. This is, of course, due to that we acquire a lot of companies with low margins that are diluting us. In this quarter, no exception. We had the 0.1% dilution. We had an unusual dilution from currencies that we've had all year. We will continue to have in Q4 of 0.3% negative. The reason for that is simply because Carolina will show it, simply because due to conversion into Swedish krona, that we lose something on that. There is a good reason for why we have that situation. It will disappear for next year. Looking to manufacturing footprint, since there is an uncertain world, we decided this quarter to accelerate a little bit more. That means that we continue our program. We're closing these 80 factories where we have closed now 72.
We have SEK 700 million in the balance sheet. We could see that, and some of you have asked, do we really have everything allocated? Eureka, we didn't. We have decided then to do a little bit more with the same money, you could say. In this quarter, we saw another 200 people leaving due to accelerated programs. We had some 1,000 people more added altogether, which means then that we will not see manufacturing footprint program this year. Most likely next year, since we have some 35 companies acquired since we had it last time. It's only natural we get more and more things that we need to address. In this case, we just settle and do with what we have. On the margin side, a flat situation, 70% margin in the last year. We have price increases, 1.5%.
Very many markets have devaluated. Very difficult to really say what the percentage is. This is an estimation. We think 1.5%, and we have volume growth of 1.5%. The margin was flat, but in reality, we had good leverage. Carolina will show that. Of course, with currency minus 0.3 and acquisitions 0.1 negative, it became flat. On the acquisition side, a lot of activities. We continue to have a huge number of companies in dialogue. The difficulty, as you know, is regarding what kind of price to pay. We are a little bit shy on paying high multiples that we see sometimes in the surrounding world. We've succeeded so far with 11 companies. We've added 3.3%, so we are heading towards the 5% acquired growth, which is our average. I can't guarantee it, but at least the trend is reasonably good.
We will see if we will be successful also this year to acquire 5%, which means then next year we can look forward to continued acquired growth. Nergeco was the one that we did in this quarter. A very nice company, and adding SEK 350 million to our portfolio or to our sales. This company is high-speed doors. High-speed doors is a sort of growing segment within industrial doors, where people use more and more for fast in and out passage, interior in the factories and outside of the factories.
This company complement us nicely, both on the product side, but mainly due to that they have a very good coverage in Southern Europe where we, who come with our companies we have today, are more Northern European oriented, so we don't have the, I would not call it perhaps flimsy doors, but the more light-duty doors that are used in the southern part of Europe. This complement us and gives the full range also for the Southern European arena. Looking now to the divisions. EMEA, a good situation when it comes to growth. We had 5% organic growth with savings and efficiency kicking in, so very good leverage. Unfortunately, also here, currency negative with minus 0.6, so it was very hard for us to absorb that, and also dilution of 0.3%. We dropped to 16.6, down from 17% last year.
Northern Europe continues to grow well. Southern Europe has started to grow, which we haven't seen in many years. We have in between countries like France and Benelux, mainly Holland, that are still difficult for us, but a much less decline than we used to see in the past. Altogether, in my opinion, rather positive picture in Europe. In Americas, our quotations continues to grow at a good pace. We see strong growth in architectural hardware, which tells us there's good activity. EMTEK, Canada, Mexico, South America, we are growing everywhere, in fact, in a good way. Very positive evolution, 6% organic. Margin was flat at 21.8%, same as last year. Also here, we are suffering from currency, minus 0.3 in this case, which means that we had leverage of 0.6, which is a very good leverage for Americas with that kind of growth.
We should remember that we continue to invest in more sales force and also in R&D. Even within that frame, we can invest. Part of the reason why we are doing so well has also to do with raw materials that we see now come down in price as well. Very good leverage as such. The only area we had flat was indoors, and we had a malware in one of our factories there, which made it difficult for us to ship. The orders are there, but we could not ship very well. Therefore, it was flat indoors, not on orders, but in shipments. In Asia Pacific, a difficult situation when it comes to China. Apart from that, everything is doing quite well and growing. The question is how long? For the time being, it's looking very nice, very well.
We should remember China is a very big trading partner with the other markets, most likely, we will see some effect also from that over time. New Zealand, South Asia, North Asia, and Australia are all doing fine. China declined, and for the group, minus 7%. A little bit more for APAC, it's a little bit better in the other divisions, the evolution as such. Looking to margin, almost record, 15.7%, down two tenths of a percent. In this case, we had an accretion. Here the currencies had helped us a little bit. They did not help us, but we had accretion from the acquisitions we've done in the last year. Altogether, a rather pleasing picture. I was surprised to see how high or that we could keep the margin as good as we could.
We should remember, of course, that in China, more than 40% of the staff has left, and this is, of course, due to that we started to restructure two years before shit hits the fan in the sense that we started to see decline. We were a little bit ahead of the curve. If you take Global Tech, HID then, a good picture. I'm optimistic and positive. We see Inlays doing very well. Quantum Secure grew very strongly. Good growth in physical access, which is the main business that we have there. Secure Issuance, which is printing, ID Assurance, which is identity, all are growing in a decent way. Even Project Sales was flat. Now we have the counter what was not good, and that was government ID and biometrics.
Biometrics is very much that you get, for instance, ATM machines for Brazil, and you have tens of thousands to be shipped, readers. Next year you have nothing. In this case, I think you can guess where we were this quarter. There was nothing in this case. We had quite negative on biosolutions, and this comes and goes. On the gov ID side, we had a number of nice orders. You saw the U.S. Green Card. To be shipped later on only. We also could not ship a number of rather important orders simply because there is lack of money in most of the third emerging markets. Colombia, Brazil, a number of markets, we see that they are sort of postponing, or they simply don't have the funds to pay for what should be shipped.
I don't know if this is only one quarter or we will going to see it more, but the margin contribution from those two areas is quite important. Of course, we suffered and also on margin, 18.6% down from the record of last year, 20%. Nothing much to do. We had leverage, if you take away that drag, we had underlying leverage at six as such, and hospitality did continue to do very well. The picture is not bad, and it's 18.6 in my opinion, is one of our better margin scores as well. I'm not disappointed as such. Looking then to Entrance Systems here, I'm really excited. Entrance Systems is doing well despite all the changes we've done. We closed a lot of infrastructure in Entrance Systems. Margins went up from 13.2 to 13.9.
We had dilution from acquisition by 0.1%, but we had also quite some dilution from currency in Entrance Systems. Despite that, the margin expanded by 0.7%. Very good evolution. Of course, we grew 6% organically as well, but very strong leverage out of that growth. That tells me that efficiency in Entrance Systems is continuously improving in a very positive direction. You can see on the blue there, the size of Entrance Systems now, more than a quarter of the group. It's more and more important that this part of the group is performing well. That is, of course, in this case, very nice situation. Most companies that we bought were 6% EBIT, 8% EBIT, so I'm very pleased with this number. That concludes my overview. I'd like now to hand over to Carolina to guide us through the financials. Thank you.
Thank you, Johan. Good morning, everybody. It certainly is a large crowd here today. It was Johan's 40th quarter. It's my 15th quarter, but still. Starting as usual with the financial highlights and with the sales. We saw good organic growth of 3%, and here we have the same number of working days, so it's a like-for-like comparison. We also estimate the price impact to be 1.5% and the volume to be 1.5%. Moving on then to acquired growth 4%, I would say as expected in the quarter. A lot of smaller acquisitions in emerging markets, as well as one in HID, brings us to 4%. The big one, still currency. A full 12% increase on the top line due to currency.
I'll come back to that later to explain why the effect is so large on the top line, but also why it has an effect on the bottom line. Total 19% up on the top line, and very good news because also 19% up on the operating margin. We're very happy to say SEK 2,970,000,000 in profit, so almost SEK 3 billion here. A number that was a little bit weaker in the beginning of the year was cash flow. We have a seasonality, but even relating to that, it was a bit weaker in the first half. We saw good cash flow in the third quarter coming back, so 25% higher than previous year in the third quarter. Finally, adding to the EBIT, the financial net also affected by the currency, as well as the stable tax rate of 26%.
We get the strong improvements of the earnings per share, full 18% improvement here. From the overview to the details, we look at the P&L and the bridge and separate the organic, the currency, and the acquisitions. Starting with the most important, then the organic. We saw good organic growth of 3%, we saw a strong drop-through of over 32% and a 40 basis point improvement on the margin from that. Here we can say that it was all the divisions that had good growth in the quarter, that had good results. We saw Entrance Systems very strong here. Americas as well, but also EMEA having good results on the drop-through. APAC compensating with efficiency, but a tough drop on China made it slightly down here on the drop-through.
As Johan mentioned on Global Tech, really, I would say it's a combination of the mix, but also the two areas which we had lower sales in with a very high margin last year, not repeating in this quarter, and therefore also a negative drop-through on Global Tech. Overall, a very strong number here with +40 basis points improvement. The next one, currency. Still strong influencer. For us, this is mainly a translation effect. Since the dollar, but also most currencies changed significantly towards the krona end of last year, we've had strong influence the whole year so far, and we will also continue to see that in the fourth quarter where we estimate, assuming that the rates stay as they are, 8% effect on the top line, but a similar effect on the bottom line with the dilution.
Here, translation being the big one, and just one example of why the dilution comes. We don't have as high margin on the bottom line here as our average. For example, with the Swedish krona then, as Johan mentioned, that take Entrance Systems and EMEA having very high margin business in SEK, and that, of course, not being changed when the other currencies are all changing to the better towards the krona makes a mix effect here, and therefore a lower margin on currency. We expect to see that as well in the fourth quarter. Finally, acquisitions, 4%, I would say as expected, and emerging markets and tech acquisition also lower than our average 13.3%, so I would say as expected. 10 basis points dilution, not larger than that because the top line isn't that big in change.
Overall going from 17 to 17, but quite some changes within that. Another picture to show for the P&L, here I've taken the year-to-date numbers to try to show you the trends better. Here you can see the P&L, but as components of sales. We've also excluded the acquisitions to make sure we compare like for like. Starting with, I would say, the most complex one, direct material. Direct material year-to-date is up 30 basis points. Here underlying, we see raw materials, and so have you seen, come down significantly. In the areas where we have higher raw material content, like in high security doors with a lot of steel, there we have seen good improvements from lower pricing in steel.
We have seen, I would say, mostly in Americas as well as in APAC, hopefully we will see some as well in EMEA. The rest of this is really mix change as well as the change of the currency. It's a mix depending on organic growth, also depending on in which currencies the sales are, therefore you see this effect. Part of the opposite you see on conversion costs. Conversion cost is down significantly. Part of it, the reverse from direct material, part of it clearly coming from the efficiency measures, both the restructuring programs as well as the other efficiency measures. Overall, year-to-date, our gross margin has improved with 30 basis points. SG&A, here we see good improvements on the support functions, increased efficiency there.
At the same time, we continue to invest in front-end, both in salespeople, specifiers, as well as R&D. Basically, we're investing in future growth therefore not optimizing short-term the EBIT margin here. You can see that the SG&A is up 10 basis points year-over-year. EBIT improvement year-to-date so far like-for-like is 20 basis points. We have the 10 basis points dilution from acquisitions. You see overall an improvement of 10 basis points year-to-date. From the P&L to the cash flow graph. I think the first thing to comment on is that we have a very strong seasonality in our numbers. You can see that the first half of the year we have low cash flow seasonally, the second half of the year we have strong cash flow. Q3, no exception.
We saw strong cash flow in the Q3. Considering that the group is growing almost 20% year-over-year, we have to look really at the efficiency KPIs to see how we're doing on, for example, the different parts of working capital. What we see is on the DSO, the credit days, that they have gone up 5 days. They're up to 56 now, I would say that half of that is from China the other half is more spread over the world. The DPO is also improving more everywhere, with the same number of days, the inventory is flat on 96. Even the inventory on flat and DPO improvement is not enough to compensate for the receivable side. Therefore we see higher working capital here. The good cash flow did good things to the debt.
We didn't have that much acquisition spend in the quarter as well, the debt is now down to SEK 25 billion. Again, I think we have to put this in relation to the size of the company. We do that with the KPIs here as well, the gearing is down to 63. Probably more importantly, the net debt EBITDA is down to 2.1 compared to 2.3 about a year ago. A good development here as well. I guess my favorite slide, the CFO favorite slide, earnings per share. It has a very nice curve as you see, a very nice steep curve here.
Start with the EBIT, that's up full 19%. You add the financial net, which was higher mainly due to currency, both because of the currencies that we are borrowing in, but also the rates that you have with those currencies. It should mirror where you are making money in your business, and it does. You add the tax rate of 26%, you get a very strong development also on earnings per share, which is up then 18% in the quarter and an all-time high of 1 krona and 86 öre. Overall, a very strong quarter. With that, I give back to you, Johan, for conclusions.
See if I can get it moving. There it moves. I've chosen today to only conclude with numbers. In fact, we had strong growth, 19%. We had strong earnings, EBITA evolution, and we had strong cash flow as well. We have not spoken so much about cash flow, but Carolina showed it. It didn't look much in that chart, but it grew by 25% in the quarter, also a good number. Altogether, a pleasing picture where we continue to see good organic growth in almost every market. With those words, I open up then for Q&A, and Anders Idborg, I think you have promised to help us with some good, intelligent questions perhaps.
I'm not sure about that.
I'm sure it will be
Let's start off anyway. In the report, you talk about Europe still being stagnant, and I think it's fair to say that when you look at the overall construction markets, renovation markets. Still you grow by 5% in EMEA this quarter, 6% in Entrance Systems. I know you've implemented some price increases. My question is really, in what areas are you outgrowing the market? Those price increases, will they carry on into next year and allow you to have a good organic growth in Europe despite flattish construction markets?
It is very difficult to say, are you growing market share or not? I can only say that the electronic side of the business is growing very fast. I think that someone else is not growing the same pace, then we are taking share. It is of course composed of 27 markets, so it's very hard to really say what is doing what. The second question was about?
About the price increases, basically that you implemented.
Yeah.
Yeah.
Well, since Europe is buying a lot from Asia, and mainly China, we have to take the prices up. There's no other alternative, and we are the largest player in the marketplace, so we do raise the prices. We raised them several times on Global Technologies. We raised them several times also on Entrance Systems as well as in EMEA. The exact percentage I don't have per region, but we have a good increase of price in the region.
Obviously now we have a slightly weaker renminbi compared to the second quarter.
It dropped 4%.
Can you keep those? Yeah.
The main thing for us right now has been to recover the raw material decreases. We have renegotiated almost every supplier in Asia, and everywhere in fact. What we have seen that we have much more credit, longer credit terms as a result of that, but also quite some price concessions on the raw material side.
I see. Just a question to Carolina on this day sales outstanding. I think you mentioned after Q2 that it was up to around 100 days in China.
Are you seeing a stabilization there, or are you seeing it spreading further and wider into the Chinese market, the credit issues there?
Yeah. I think we have to separate us and the market. Starting with us then in China. The Chinese DSO are now 96 days. That's still 25 days higher than we were a year ago. I would say we are still not happy, but we're working a lot both on credit giving, but also on the collection. Coming to the market, what we hear is that it's not pretty out there. I think that's about as much I can say on that.
All right. Finally from me, there's no way getting around it, Johan, if you could just update us on current trading and into Q4 so far.
Current trading looks the same as Q3, more or less. A very similar pattern. It is one day less in October, so that means that we're not going to see the same average. On the other side, November is one day more, so that will equal itself. Altogether, I cannot see any negative trend or any positive trend. It's more or less the same.
Fantastic. We'll take questions now, starting here at the floor in Stockholm. Let's start here, Guillermo.
Hi, good morning. It's Guillermo Peigneux-Lojo from UBS. Could you comment a bit on the trends you're seeing in China, with respect of the organic growth? Then I have maybe a follow-up on other markets.
Our team out there thinks the market goes down more than we have done. We know we are gaining a number of new customers, and the new customers are looking for more solid partners as well. There has come a new fire door norm where all our companies have been certified, while we know that a large number of them are not. We think we are gaining something from that part as well. The only side where we can say that we think the market, especially on the lock side, where we don't have fire norms or other things protecting us in a way, we can see that the market has dropped more than 20%, also for us. The market is not good at all. I don't think it's over. I think it's going to carry on.
I said, I think once in this forum that I believe personally looking to statistics, that China is probably eligible for something like 40% decline in relative where it used to be. Just looking to other emerging markets, when you're over the boom of construction, which you do initially to put all the infrastructure in place, and then you come into the next phase, which is more maintaining and developing in a more reasonable pace. When that will happen, I don't know. I think it will go down to the same level as other emerging markets over time, but it will probably take a few years before we're there.
That 20% you're talking about, is it something that has been accelerating during Q3, or is it just the same through the year, or?
Well, it's not the impression from our team out there that this is the case, but we are doing quite well. At least we feel that we are doing quite well, so I really don't know. Some segments are still holding up very nicely, like specification segment for foreign company investments. Probably we see a number of companies still implementing themselves. Will it continue? I don't know. There are pockets of demand. Digital door locks are doing very well. Fire certified doors are doing well, but I think that the reason is because a number of other companies fell out of the market. There are segments that are carrying a good evolution. If you look only to the naked parts, then it's more than 20% decline that we have seen.
Last question regarding end markets. France, can you comment a bit on what the trends are and what you would expect actually in Q4?
Cautiously optimistic. That's I think I can conclude. I think France is not really coming to growth, but it's not declining much anymore. Will it continue? I hope, but it's difficult to tell.
Yes. Thank you. Peder from Handelsbanken. Johan, when China started to move on demand side negatively, a while after you started to cut people, you saw possibility then for assets to being attractive. The picture you paint now with halfway down to the bottom, is it fair to assume that we see your activity picking up here in the acquisition, or do you want to wait to flush this out?
Unfortunately, it takes time for people to realize what they used to have is not worth the same money. We are negotiating in with a number of people, potential deals. I just had this on the way to office this morning, a rather long discussion with our head in Asia. It was just regarding what price are you willing to step in at. My feeling is it's not yet ripe, the time. We will wait a little bit longer. Definitely so that many wants to sell.
Okay. Tied to that, you mentioned early in your presentation, thank you for that there might be another manufacturing footprint next year. Another question is, of course, on the acquisition globally. You are contributing by 4%, I guess now. You have a 5% target. Should we expect this to be higher next year?
Well, it's enough to make one larger one, and you're there. It's very unpredictable, and we have a few larger ones that we are negotiating with. The problem we've had is with the larger ones is that they attract also private equity companies, and we have seen some of them disappear at multiples that we would not even dream about. I think it's no problem. We wait a few years. A company is not for one day, it's for many years. We wait a few years, and they will come back to market and hopefully at a more reasonable price tag.
Yeah, that's fine. Okay, on Global Tech. I think you were pretty clear about the signs and the magnitude of the weak spot. Could you help us out there? Is the rest of Global Tech, apart from government ID and biometrics growing by 4% or 5% or something like that?
Global Tech is very much project-oriented, it is difficult to predict. Some quarters it grows by 10, next quarter nothing. Very difficult. If I look to orders, it looks pretty good. Of course, an order needs to be shipped, and if the customer is lacking funds, which we have in the eGov side, we're sitting with the orders, which are probably not worth that much. I think it's a problematic situation. I'm positive to what we have. We have great innovations. I think if the market is bearing and people have money, we're going to continue to grow. That is at least my best guess about what is happening there. Emerging markets lacking funds, raw material not at low prices, oil at low prices. Many of the economies are relying on those funds, those sources for money.
Therefore, they are postponing to take what they have ordered right now.
What's the comp stand? Sorry for all these questions, in the fourth quarter and going into 2016, are we facing similar comparisons as we do in the third quarter, or easier or worse on Global Technologies, the lumpiness?
Yeah. Well, there are different parts of Global Technologies with different projects. Yeah. Exactly. We saw 10% first quarter and 10% second quarter, right? Now we are flat, and that's due to two parts only. Some of them have good quarters coming up, and some of them have poor quarters coming up. Overall, we have seen pretty good growth. Hoping that some of the horses will run and some probably not, it should be okay.
Okay. Thank you so much.
Great. Take a question here as well, before.
Stefan Andersson, SEB. Just a quick follow-up on Global Technologies. If you take a bigger picture view on that annually looking order intake and looking further into the future, do you see it as a 1%-5% growth business, or do you see it as a 5%-10% growth business?
I think it's a fast-growing business if you do the right things. We just changed head of that division because we want someone that drives more growth. It will take some time before we're there. It's a lot of new engineers we've added to get more fuel for growth. It's also a tricky business because it's very much product-oriented, so it's not so just to push a button. We have the virtualization of identities and keys, which I think holds a fantastic potential. We are now launching here the full virtualization in a sense also that you can easily scale it up. We have had a problem that if you order 10,000 keys, we had to more or less manually issue them.
The new thing that we're launching now, it's that you can launch 10,000 keys in one go, and all of a sudden, because there's a lot of interest in the market. We have great innovations, but we need to carry them through and make them more products that you can really sell in large volumes. We are on our way in a high pace to that direction. Personally, an identity is something that is coming everywhere with authentication, and we have good technologies for those things. eGov is a segment that's growing a lot. Here, there also, we will see virtualization. You will probably have your driving license and other stuff on this in the future, rather than to you have it on a paper. Then you can't forge it, which you sometimes can do with a paper.
I think we are well-placed for those things. Will we get it all? No. Will the market grow there? Yes. We should at least try to grow in parity with those market segments. Great. We'll switch to the telephone conference operator.
Thank you very much, sir. As a reminder, ladies and gentlemen, should you wish to ask a question, please press 01 on your telephone keypad, and then wait for your name to be announced. Our first question comes from the line of Andre Kukhnin from Crédit Suisse. Please go ahead.
Good morning. Yes, it's Andre from Crédit Suisse. Thanks for taking my questions. Firstly, on the headcount reduction, which accelerated substantially in the quarter, could you give us some guidance for Q4? Are you continuing to go at this sort of pace? Just a quick follow-up on that is, you seem to only utilize SEK 65 million of the provision to implement those headcount reductions. Is this just the timing, or are you taking heads out in regions where it's cheaper, i.e. China, U.S., or are you taking more through underlying EBIT?
I think I understood your question. It was a little bit poor line. On restructuring and on headcounts and provisions, what we have done with the existing program is basically we have increased the scope using the same funds, because the further on you come in a program towards the end, you can see then if you do have some leftovers, as Johan mentioned. What we have done is within the frame of the existing footprint, we have added around 1,165 people, actually. Around, yeah. That will give us good savings towards the, well, second half of this year, but also next year. Net, it's around 1,000 people left to leave. Exactly when that happens, I think that would have to be up to the divisions to decide exactly when.
During, I would say, the next six months, the bulk of that people will most likely leave. Where they are, yes, they are in emerging markets, but it's also doing a little bit more on the existing programs that we have, both in Europe and some parts in the U.S.
Great. Thank you. Can I ask, that doors delivery problem in Americas in Q3, how big was that, and has that been resolved?
I'm not sure. Could you repeat, because the line is so bad. Can you take it once again?
Sorry about this. The issue that you cited in Americas on doors, the inability to ship, has that been resolved, and how big was that issue?
Yes. Not so big, but yes. It's, as I said, on the wooden door side. Things happens every now and then. We had a major machine breakdown, and we were standing still for a while waiting for repairs, so it was not much we could do about it. We are back online, and we have caught up with the loss there.
Great. Thank you. Very final question on investment in specifiers. This has been carrying on for a while. Could you just give us an idea of how many specifiers do you have right now? What is the target, or what would be the optimal amount?
Did you hear that?
Yeah. Specifiers.
Specifiers. Okay. I couldn't hear what you said.
He asked about our targets in specification, how many we have in different places.
We have 500 people altogether. We normally don't disclose where they are, but we have in all areas, and we have in recent time also built up quite a number of them in Asia. We continue to pursue in the U.S., we are adding continuously since we are growing rather quickly with good results.
Versus that 500, what is the optimal amount? Do you need 1,000, 2,000, or are we just scratching the surface?
I don't think there is an exact number, but I think we have a good number right now, except in the emerging markets where I think this is a new phenomena. What we see is most of those markets are serviced by no-brand import mainly from China, from on locking side. When we appear there with a specification team specifying mid-market type of solutions, we have a very good ground for winning the ground there. There is a lack of, so to say, organized specification in those markets. Are we going to continue to add people in those areas? Definitely. When it comes to the mature markets, they are not growing all that much. I think we are not far away from an optimum already today.
That's great. Thank you very much. Sorry about the line.
Thank you. Our next question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead.
Hi there. This is Jessica instead of Daniela. We just had a couple of questions. The first question was on M&A, where you mentioned that you expect to see some sort of an acceleration to meet your 5% target, or at least next year. We just were interested to see where do you think the best opportunities lie, and which areas do you still find attractive? The second question was basically the evolution in market share. Do you think that you are gaining market share because of the penetration of digital locks? That's all. Thank you.
Acceleration when it comes to acquisitions, we are at 3.3%. The 5% is not far away. It's enough to continue to do what we do and do a couple of more before end of the year, and we are there. Where do we see opportunity? We see good opportunity in China. We see good opportunity in South America in some markets. We see Mexico, even though we are very large already there. We see bolt-on in many of the existing mature markets, and we see technology. Technology is a problem with sometimes because the multiples are so high. There is more a matter of which one to acquire in that case and to what price, and it's very difficult to meet on a reasonable price level.
On the market share, we normally don't comment, but I can say that we are growing very fast in electronic locking. The question is then, is anyone else doing the same? We really don't know. If they are, they're probably maintaining their share then. On the mechanical locks, we see a rather flattish evolution globally, and it has been so for many years, and they get more and more replaced by electronics. Today, more than 50% our sales value is electronics, and it's very positive for us since electronics has less lifetime and more service and maintenance and software needed to be upgraded on a continuous basis. The recurring element of business is increasing, which is positive.
Thank you.
Thank you. Our next question comes from the line of Andreas Willi from JPMorgan. Please go ahead.
Good morning, everybody. My first question is on price, which contributed about half to the organic growth this quarter. Maybe you could talk a little bit more about what is underlying price versus pass-through of the big currency moves we have seen, and whether we should expect that price component therefore to moderate as kind of the year-on-year currency swings start to normalize as we go into next year.
Well, price is a little bit higher than it used to be. It used to be 1%, now it's 1.5%. It's not so that we are jumping very high on the price increases. We try to raise price wherever we can, and we do it in beginning of the year, and in some markets, we've done it several times this year, but it depends, of course, the degree of devaluation. Where we have seen devaluation has mainly been smaller markets, therefore this price element has not sort of overshadowed so much. Only large market to us has been Sweden, in fact, that has devaluated as well. There, of course, we have also taken some price measures. Normally we have a price increase of something like 1% per annum, so that is sort of normal pace.
My second question is on acquisition earn-out. If you just could give us the number that we should keep in mind as potential cash outflow in the future from acquisitions, where there's still an undecided earn-out in that sense.
Yes, sure. I would say that this is only one quarter left this year, so it's not much, SEK 100, SEK 200 in the fourth quarter. Then we have around SEK 700, SEK 800 for next year and something similar for the two years after that.
Thank you very much.
Thank you. Our next question comes from the line of James Moore from Redburn. Please go ahead.
Yes, good morning, everyone. Johan, Carolina, I've got one on GT and one on non-res in the U.S. On the GT division, can you at all help us with the rough size of government ID and biometrics today as a proportion of GT and some rough idea as to how much above the divisional average the margin might be, and some rough idea as to how much revenues fell? It sounds a lot. I don't know if that means 30% or 90%
Think about how that might move going forward. Secondly, on the U.S. business, there have been some odd worrying comments on the U.S. non-residential environment in August and September from Dodge and some companies. I'm trying to understand if this is just U.S. manufacturing in the oil-related part of non-residential, whether buildings, office, et cetera, are relatively unaffected. I think you said your architectural business is holding up. Is that the door frame lead indicator piece, and are you seeing any worrying signs in U.S. non-res buildings?
First, we don't disclose normally the relative size of the businesses, but we lost some $50 million of turnover, and we lost about $7 million of contribution. A little bit more than that, even. That is about 3% EBIT, and we lost, in reality, less than that. That means that we had a positive leverage taken away from that. That is pretty much what I can give you on that element. On the non-residential environment, it's difficult to predict. You know how unpredictable things are. We see a positive evolution, in general. Offices seems to be saturated. That market has some surplus right now. We have never been extremely strong in that segment, but we have grown nicely with that segment. Hospitals are not growing that much, but education seems to be catching up, which is our main segment.
At least for short term, it looks reasonably okay. We should remember saying this, we grew quite strongly last year, in Q4. That is when it started to take off the growth. We have, of course, high comps to live up to, but at least when I speak to our management there, they're rather optimistic about that we can continue to enjoy growth, probably in the proximity of where we are today. It's jumping up and down, but something between 3% and 7%, depending on if it's a good or bad quarter. It's very positive altogether, and quotes are not double digit anymore, but they are not far from double digit, the growth of quotes.
Door frames looking good?
Sorry, door?
Door frames.
Door frames, we have problems to follow.
Problems to follow? Sorry.
Yeah. It is so that we have a demand that exceeds what we can ship right now or process right now.
Okay. Good quality problem to have. Thank you very much.
Thank you. Our next question comes from the line of Ben Maslen from Morgan Stanley. Please go ahead.
Thank you. Morning, Johan. Morning, Carolina. Two tech questions, I guess. Firstly, Yale and the partnership with Nest. How big an opportunity do you think that is? Is it exclusive? Does it stop you partnering with other large automation ecosystems? What kind of growth are you seeing in home automation in the U.S. at the moment? Thank you.
Since we didn't have much of it a few years back, it's a very steep growth, almost exponential. Simply because we didn't have so much in the past. The opportunity with Yale, we don't know. We hope it's going to be big, but they have sold several millions of thermostats, and those thermostats all can communicate with our lock. If people find the idea tempting, I think that we will see quite some number of locks being sold. We have some other customers like AT&T, among others, and they're doing quite well on this field. We see also in Europe, a lot of lineup of home automation companies who wants to connect to our locks, our locking. There we have a problem to facilitate all the requests we get from home automation companies. We're launching as fast as we can in a number of markets.
Of course, this is a new phenomenon, mainly in Europe. It will take some time before it catches on. I think, looking to the markets that have been in the air for a while, we see a penetration rate of 15%-20% in some of the markets, and up to Korea where you are almost 100%. It's an evolution.
Thank you. Then on the exclusivity point, does it stop you being part of other ecosystems or not?
No.
Okay. Then on Seos.
This is a special design for them. So no one has that design.
Okay, thank you. Then on Seos, you started licensing that recently to accelerate the growth. Just how's that going? I think during the quarter you had an alliance with SheerID. Just how's that progressing? Thank you.
Well. It's progressing well. They don't get 100% of the new sale they have, but they get a good fair share of locks that go together with their home automation systems, and there are some retrofits as well. I am one of them, and it works very well, so I can recommend it.
Thanks, Johan.
Thank you.
Operator, we have time for one final question from the telephone lines, please.
Thank you so much. Our next question comes from the line of Andreas Koski from Deutsche Bank. Please go ahead.
Thank you, good morning. I will also give it a try on Global Technologies. What was the organic growth for Global Technologies if you exclude government ID and biosolutions?
I don't have it in my head, I think it would have been plus four or something.
I have it in my head
I'm just calculating in my head without having done on paper.
Between four and five, but they're a little bit difference between them, but yes.
Can you please clarify, do you expect the project business in these two areas to continue to be weak also in the fourth quarter and continue to contribute with a negative margin mix?
If you take biometrics, we are lacking orders there. It's very on/off, you can have big projects and you have no projects. Right now we have no projects, or we have projects, but not to the same extent as last year. On the eGov side, we have orders, we have shipments scheduled, but we have time after time seen rescheduling. I really don't know. It depends, and we don't ship without money. That means that we prefer then to sit on it till we see the money. Normally, you get irrevocable letters of credit since you have sometimes difficult markets you trade with. If that does not occur that you get that paper, you don't ship simply. Then you sit with it and you don't get any invoicing. Orders are there. Will this persist? I don't know. It's very difficult to tell.
It is so that oil price is half or less than half, and many markets are suffering from this.
Yeah. That's very clear. Lastly, on cost savings, what kind of savings did you have in the quarter?
We have 2 types of savings. On the footprint, we saw good savings of SEK 70 million. If you do your math, you will see that we are now year to date on around SEK 200. That's higher than the expectation for the full year, which was SEK 150, and that's due then to the basically increased scope of the existing provision. Then on the other savings that we also see on efficiency, we have roughly the same amount. Also very good results.
Okay, perfect. Thank you very much.
Great. A final one from the floor here. Thank you.
Thank you. It's Erik Karlsson from Bodenholm Capital. I had a question on the organic EBIT margin for next year. Your pricing power is continuous strong, estimated 1.5% price increases. At the same time, raw materials are falling. You seem to have had some benefit, but we have more to come, and cost savings are going very well. If we assume organic growth is okay for next year, 3%-4%, should we expect organic EBIT margin expansion?
We've had it every year irrespective what happens, so I can't promise that, but I would say my best guess would be yes.
Very clear. Thank you. One final question. You were spookily correct on China in advance, and you cut headcount proactively. Any other markets where you're taking similar actions at the moment?
No, not really, because no other market has that big size except the U.S.A., but the U.S.A. is right now doing fine. No.
Thank you.
Great. That sums it up. Thank you very much for all your answers, Johan and Carolina. Thank you.
Thank you very much. Thank you for coming.