ASSA Abloy: Currency ate into revenue. The business is fine.

Sales fell six percent. If you stopped reading there, you would come away with the entirely wrong impression. The Swedish krona strengthened sharply against the dollar and other major currencies this quarter, which mechanically reduces revenue when foreign sales are translated back into Swedish kronor, even if nothing changed in the actual business. Strip that out, and organic growth, meaning growth from the underlying business after removing currency swings and acquisitions, came in at two percent. Not spectacular, but steady and consistent with recent quarters. The business did not shrink. The exchange rate simply made it look that way. 

The operating margin, basically how much profit the company retains from each krona in sales, increased from 14.9 percent a year ago to 15.3 percent. This is significant because currency effects and recent acquisitions were together dragging margins down by 40 basis points, with one basis point equal to one hundredth of a percentage point, and the company still outran that headwind. Operational execution was genuinely strong, according to ASSA ABLOY’s Q1 2026 report, published on 28 April 2026. 

Cash flow is where it gets more interesting. Operating cash flow, the actual cash the business generates after paying its running costs, increased by 30 percent to SEK 3.14 billion. The cash conversion ratio, which measures how efficiently pretax profit turns into real cash in the bank, rose from 0.51 to 0.66. That is not a rounding error. It is a real improvement. Net debt, meaning total borrowings minus cash on hand, relative to EBITDA, which is earnings before interest, taxes, depreciation and amortization and a rough measure of the business's raw earning power, also continued to fall and now sits at 2.1 times, down from 2.4 a year ago. The balance sheet is quietly getting healthier. Earnings per share, the profit attributable to each individual share, held almost perfectly flat at SEK 3.18 versus SEK 3.20, which is a minor miracle given everything working against them. 

At first glance, the Americas division appears to be a disaster, with reported sales down 14 percent. However, on closer inspection, currency appears to account for every single percentage point of that decline, while organic growth was actually up four percent, the best of any division in the quarter. North American commercial buildings and Latin America were both growing. The one genuine weak spot is the North American housing market, where high mortgage rates are keeping residential sales soft. This is a significant issue, but it is also a well understood one, and it is not spreading to the rest of the business. 

European industrial demand is cooling, and this can be seen in the Entrance Systems division, where both the industrial and automation segments declined. That is a legitimate concern for the sector more broadly. But ASSA ABLOY has a structural cushion that most industrial companies do not. Roughly two thirds of its revenue comes from aftermarket sales, meaning service, maintenance, and replacement rather than new installations. When construction slows, people do not rip out their existing doors and locks. That is a meaningful stabilizer, and it shows in the numbers. 

The most powerful near term lever is the one ASSA ABLOY does not control: currency. If the dollar and euro recover against the krona, reported numbers will improve significantly in coming quarters without the underlying business doing anything differently. At the current share price of 366.70 SEK, that optionality looks underappreciated. 

The second thing to watch is North American housing. Any sign that rate cuts are finally feeding through to housing starts would be a direct positive for the Americas division, which is already growing organically despite the residential drag. If both of those shift in the right direction, the gap between perception and reality closes fast.