Presentation

KONE’s interim report
for January–June 2016
JULY 19, 2016
HENRIK EHRNROOTH, PRESIDENT & CEO
Figures
for for
Key
figures
January–June 2016
Q2 2016 Key figures
STRONG EXECUTION AND PROFITABLE SALES GROWTH
Q2/2015
Historical
change
Comparable
change
Orders received
MEUR
2,067.8
2,193.5
-5.7%
-1.9%
Order book
MEUR
8,763.6
8,627.4
1.6%
5.5%
Sales
MEUR
2,272.6
2,210.4
2.8%
6.0%
Operating income (EBIT)
MEUR
348.6
325.2
7.2%
Operating income (EBIT)
%
15.3
14.7
MEUR
393.3
426.0
EUR
0.54
0.51
Cash flow from
operations
(before financing
items and taxes)
Basic earnings per share
3
Q2/2016
July 19, 2016
Interim Report January-June 2016 | © KONE Corporation
January–June 2016 Key figures
SOLID OPERATING PERFORMANCE
1–6/2015
Historical
change
Comparable
change
Orders received
MEUR
4,010.1
4,247.3
-5.6%
-3.1%
Order book
MEUR
8,763.6
8,627.4
1.6%
5.5%
Sales
MEUR
4,020.9
3,901.2
3.1%
5.2%
Operating income (EBIT)
MEUR
570.0
537.1
6.1%
Operating income (EBIT)
%
14.2
13.8
MEUR
699.0
638.2
EUR
0.90
0.80
Cash flow from
operations
(before financing
items and taxes)
Basic earnings per share
4
1–6/2016
July 19, 2016
Interim Report January-June 2016 | © KONE Corporation
Q2 2016 Orders received
ORDERS RECEIVED DECLINED BUT REMAINED AT A HIGH LEVEL
MEUR
2,500
-5.7%
-5.4%
Significant growth in
modernization orders;
some decline in new
equipment orders

Some growth in the
EMEA region and
clear growth in the
Americas; orders in
Asia-Pacific declined
due to China
2,068
1,942
2,000

1,500
1,000
500
0
Q1
Q2
Q3
Q4
At historical exchange rates.
5
July 19, 2016
At comparable exchange rates.
Interim Report January-June 2016 | © KONE Corporation
Q2 2016 Sales
GOOD GROWTH IN SERVICE BUSINESSES
MEUR
3,000
+2.8%
2,500
Slight growth in new
equipment, some
growth in maintenance
and strong growth in
modernization sales

Sales in EMEA was
stable, some growth in
Asia-Pacific and
significant growth in
the Americas
2,273
+3.4%
2,000

1,748
1,500
1,000
500
0
Q1
Q2
Q3
Q4
At historical exchange rates.
6
July 19, 2016
At comparable exchange rates.
Interim Report January-June 2016 | © KONE Corporation
Q2 2016 Operating income
GROWTH DRIVEN BY POSITIVE DEVELOPMENT IN ALL REGIONS AND BUSINESSES
MEUR
+7.2%
400

Development
particularly positive in
North America and
Asia-Pacific

Progress in product
and cost
competitiveness
helped in offsetting the
intense price pressure
349
350
300
+4.5%
250
221
200
150
100
50
0
Q1
Q2
Q3
Q4
At historical exchange rates.
7
July 19, 2016
At comparable exchange rates.
Interim Report January-June 2016 | © KONE Corporation
1–6/2016 Sales split
SHARE OF MODERNIZATION AND THE AMERICAS OUT OF TOTAL SALES CONTINUED TO GROW
BY BUSINESS
BY AREA
13%
(11%)
18%
(16%)
43%
(44%)
53%
(56%)
34%
(33%)
39%
(40%)
New equipment
Maintenance
Modernization
Asia-Pacific
EMEA (Europe, Middle East and Africa)
Americas
1–6/2015 figures in brackets.
Figures in charts are rounded and at historical exchange rates.
8
July 19, 2016
Interim Report January-June 2016 | © KONE Corporation
Figures forand market
Business
January–June 2016
development
Q2 2016 Business development highlights
OUR DEVELOPMENT PROGRAMS
First in Customer Loyalty
A Winning Team of
True Professionals
The Most Competitive
People Flow® Solutions
 In June, we opened our new R&D and manufacturing facility in
Allen, Texas to support the growth of the North American
business
 The facility enables us to further improve our competitiveness
and customer service in the North American market in new
equipment and modernization
Preferred Maintenance Partner
Top Modernization Provider
10
July 19, 2016
 Our strengthened modernization offering and processes and
continued focus on sales management contributed to the good
development in orders received and sales
Interim Report January-June 2016 | © KONE Corporation
Q2 2016 New equipment markets
GLOBAL NEW EQUIPMENT MARKET VOLUMES WEAKENED DUE TO A DECLINE IN CHINA
NEW EQUIPMENT
 Market weakened slightly as the market in China declined
ASIA-PACIFIC
 Markets in India and Australia grew, while other markets in the region
remained slow
 In China, price competition intensified during the quarter
EMEA REGION
NORTH
AMERICA
11
July 19, 2016
 Market continued to grow in Central and North Europe, while the
markets in South Europe were rather stable
 Market in the Middle East continued to show growth opportunities
despite uncertainty in the region
 Market grew slightly driven by the United States in particular
 Pricing of new equipment continued to develop positively
Interim Report January-June 2016 | © KONE Corporation
Q2 2016 Service markets
SERVICE MARKETS CONTINUED TO GROW GLOBALLY
MAINTENANCE
12
MODERNIZATION
EMEA REGION
 Maintenance market grew in the region, but with
significant variation between countries; price
competition remained intense
 Modernization market grew strongly in Central
and North Europe; South Europe saw further
signs of stabilization in demand
NORTH
AMERICA
 Maintenance market grew slightly; price
competition remained rather intense
 Modernization market saw slight growth
ASIA-PACIFIC
 Maintenance market continued to develop
positively
 Demand developed positively
July 19, 2016
Interim Report January-June 2016 | © KONE Corporation
Figures for
January–June 2016
Outlook
Market outlook
NEW EQUIPMENT MARKETS
 Asia-Pacific: The market in China is expected to decline by 5–10% in units ordered
and also the price competition to continue intense. In the rest of Asia-Pacific, the
market is expected to see some growth.
 Europe, Middle East and Africa: the market is expected to grow slightly with growth
in Central and North Europe and a more stable development in South Europe and
the Middle East.
 North America: the market is expected to see some growth.
MAINTENANCE MARKETS
 The maintenance markets are expected to see the strongest growth rate in AsiaPacific, and to develop rather well also in other regions.
MODERNIZATION MARKETS
 The modernization market is expected to grow slightly in Europe, to continue to grow in
North America, and to develop strongly in Asia-Pacific.
14
July 19, 2016
Interim Report January-June 2016 | © KONE Corporation
Business outlook (upgraded)
SALES
 KONE’s net sales is estimated to grow by 2–6% at comparable
exchange rates as compared to 2015.
OPERATING INCOME
 The operating income (EBIT) is expected to be in the range of
EUR 1,250–1,330 million, assuming that translation exchange
rates would remain at approximately the average level of January–
June 2016.
15
July 19, 2016
Interim Report January-June 2016 | © KONE Corporation
APPENDIX
17
July 19, 2016
KONE’s Capital
Markets Day 2016
KONE’s CMD 2016 will be held in
Helsinki on September 28, 2016.
The event will be held in central
Helsinki, followed by an optional
tour of KONE’s manufacturing
facilities in Hyvinkää.
Presentations will be held by:

Henrik Ehrnrooth, CEO

Tomio Pihkala, CTO

Larry Wash, EVP, Americas

William B. Johnson, EVP, Greater
China
E&E market and KONE’s performance
in China in Q2 2016
NEW EQUIPMENT MARKETS
CHINA’S SHARE OF TOTAL ORDERS/SALES
In monetary value
New equipment orders received in units vs. market growth
50
~44%
KONE
Market
40
<40%
~35%
Share of
orders
received
Share
of sales
~40%
~35%
Share of
orders
received
Share
of sales
30
~23%
~20%
20
>15% >15%
~10%
10
<5%
0
~-5%
-10
~-8%
>-10%
~-5% ~-5%
-20
2006-2012
CAGR
19
July 19, 2016
2013
2014
2015
Q1/2016
Q2/2016
Q2 2016
FY 2015
Interim Report January-June 2016 | © KONE Corporation
Q2 2016 Balance sheet - assets employed
MEUR
Jun 30, 2016
Jun 30, 2015
Dec 31, 2015
Assets employed
1,305.4
1,297.8
1,306.7
Other intangible assets
271.2
275.9
271.5
Tangible assets
357.6
328.4
345.4
Investments
139.9
118.7
122.7
-1,033.4
-940.0
-983.4
1,040.8
1,080.8
1,062.9
2,186.1
2,036.1
2,575.5
-1,145.4
-955.3
-1,512.6
1,040.8
1,080.8
1,062.9
Goodwill
Net working capital
Assets employed total
Financed by
Equity
Net debt
Equity and net debt total
20
July 19, 2016
Interim Report January-June 2016 | © KONE Corporation
Q2 2016 Net working capital
MEUR
Jun 30, 2016
Jun 30, 2015
Dec 31, 2015
Net working capital
1,457.1
1,428.4
1,326.7
-2,055.3
-2,002.3
-1,829.4
1,512.4
1,500.1
1,480.2
Other non-interest-bearing assets
532.8
467.3
434.0
Net deferred tax assets / liabilities
161.9
146.6
158.8
Provisions
-174.0
-132.7
-173.6
Accounts payable
-676.2
-692.6
-728.9
-1,792.1
-1,654.8
-1,651.3
-1,033.4
-940.0
-983.4
Inventories
Advance payments received
Accounts receivable
Other non-interest-bearing liabilities
Net working capital total
21
July 19, 2016
Interim Report January-June 2016 | © KONE Corporation
Q2 2016 Consolidated cash flow
MEUR
4–6/2016
4–6/2015
1–6/2016
1–6/2015
1–12/2015
348.6
325.2
570.0
537.1
1,241.5
Change in working capital before financing items
and taxes
18.9
75.9
77.7
51.7
132.3
Depreciation and amortization
25.8
24.9
51.3
49.3
100.0
Cash flow from operations before financing
items and taxes
393.3
426.0
699.0
638.2
1,473.7
Financing items and taxes
-99.7
-19.8
-138.4
15.4
-27.0
Cash flow from operating activities
293.6
406.2
560.6
653.6
1,446.7
Investing activities
-41.6
-27.7
-95.2
-59.5
-155.0
Purchase of own shares
-39.3
-
-39.3
-
-71.2
6.4
13.3
6.4
13.3
13.5
Profit distribution
-59.9
-52.6
-718.2
-616.3
-616.3
Changes in non-controlling interest
-19.9
-
-19.9
-
-18.4
Free cash flow
139.4
339.2
-305.6
-8.9
599.5
Operating income
Increase in equity (option rights)
22
July 19, 2016
Interim Report January-June 2016 | © KONE Corporation
As approximately 75% of KONE’s revenues are in other
currencies than the euro, currency fluctuations have a
translation impact
SALES BY CURRENCY 1–12/2015
EUR
Others
TRANSACTION RISK
A substantial part of KONE operations are denominated
in local functional currencies and do not therefore give
rise to transaction risk. In addition, KONE’s policy is to
hedge the foreign exchange exposure of the order book.
TRANSLATION RISK
USD
RMB
23
July 19, 2016
As approximately 75% of KONE’s revenues occur in
functional currencies other than the euro, the translation
risk is significant for KONE. In 2015, KONE’s biggest
geographical market areas outside the eurozone in
terms of net sales included China, United States, Great
Britain, Australia, Sweden and India.
Interim Report January-June 2016 | © KONE Corporation
Our absolute EBIT has grown faster than sales
12 months quarterly rolling absolute EBIT and EBIT margin progression, 2009–Q2/2016
MEUR
1,400
14.5
16%
1,200
14%
1,000
12.1
800
12%
600
We have seen
improvement both
in absolute and
relative EBIT
10%
400
EBIT
EBIT-%
200
0%
0
Q1/2010
24
July 19, 2016
Q1/2011
Q1/2012
Q1/2013
Q1/2014
Q1/2015
Q1/2016
Interim Report January-June 2016 | © KONE Corporation
Sales by market 2005–2015 (MEUR)
CAGR, %
10,000
8,000
6,933
4,603
4,000
2,000
3,242
66%
5,225
65%
65%
58%
55%
16%
17%
7.7%
44%
49%
4,079
62%
46%
4.6%
15%
16%
18%
21%
21%
17%
21%
27%
35%
38%
41%
44%
13%
14%
2005*
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
8.4%
10.0%
11.6%
12.1%
12.7%
14.0%
13.9%
13.2%
13.8%
14.1%
14.4%
12%
EMEA
25
65%
4,987
39%
19%
16%
22%
0
3,601
4,744
10.3%
7,334
6,277
6,000
8,647
July 19, 2016
22%
Americas
21%
Asia-Pacific
25.4%
EBIT margin %
*2005 figures are pro forma.
Interim Report January-June 2016 | © KONE Corporation
Sales by business 2005–2015 (MEUR)
CAGR, %
10,000
8,647
8,000
6,933
10.3%
7,334
6,277
6,000
4,000
3,242
40%
2,000
19%
3,601
41%
19%
4,603
4,744
48%
47%
4,987
5,225
50%
4,079
45%
19%
19%
46%
54%
57%
14.3%
12%
6.0%
7.0%
55%
46%
16%
14%
13%
19%
17%
17%
37%
34%
32%
32%
31%
41%
40%
36%
33%
34%
37%
2005*
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
8.4%
10.0%
11.6%
12.1%
12.7%
14.0%
13.9%
13.2%
13.8%
14.1%
14.4%
0
New equipment
26
July 19, 2016
Modernization
Maintenance
EBIT margin %
*2005 figures are pro forma.
Interim Report January-June 2016 | © KONE Corporation