KONE’S CAPITAL MARKETS DAY 2011 Catching the China Opportunity · KONE’S CAPITAL MARKETS DAY...
Transcript of KONE’S CAPITAL MARKETS DAY 2011 Catching the China Opportunity · KONE’S CAPITAL MARKETS DAY...
KONE’S CAPITAL MARKETS DAY 2011
Catching the China OpportunityWilliam B. JohnsonManaging Director, KONE China
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson2
Real estate market trends
E&E market development
Developing KONE in China
Going forward
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson3
Source: People's Bank of China, National Bureau of Statistics of China.
Macroeconomic indicators
Continued strong macroeconomic backdrop
34.133.216.120.930.221.819.828.129.7Real estate investment
25.023.830.126.124.823.926.026.627.7Fixed investments
14.415.710.312.918.516.616.416.717.0Industrial production
5.03.3-0.75.94.81.51.83.91.2CPI
9.710.38.79.611.411.110.410.110.0GDP
2011Q120102009200820072006200520042003y-o-y %-change
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson4
Real estate industry has continued to perform strongly, but with a slight decline in the growth rate from the 2010 peak
16 %
34 %33 %
21 %30 %
22 %
0
10 000
20 000
30 000
40 000
50 000
60 000
2006 2007 2008 2009 2010 Jan.-Mar.110 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
Real Estate Investment Y-O-Y
15 %19 %
2 %
13 %
41 %
23 %
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
160 000
180 000
2006 2007 2008 2009 2010 Jan.-Mar.110 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
New Construction area Y-O-Y10,000 m2 RMB100 mn
New construction area 2006-Q1/2011 Real estate investment 2006-Q1/2011
Source: National Bureau of Statistics of China
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson5
Real estate investment growth rates in 1st, 2nd and 3rd tier cities in Q1 2011
18%
32%
57%
0%
10%
20%
30%
40%
50%
60%
201020092008200720062005
Tier 3
Tier 2
Tier 1
Jan.-Mar.
Beijing, Shanghai, Shenzhen, Guangzhou
E.g., Chengdu, Chongqing, Wuhan, Hangzhou, Tianjin
E.g., Guiyang, Haikou, Xining, Yinchuan
Real estate investment growth, %
Source: Soufun Database
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Focus of growth moving from 1st and 2nd tier to 3rd and 4th tier cities and from East to West
33.2 %
Real Estate Investment growth rate, 2010
Source: China Economic Information Network
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson7
Measures to cool down real estate sector, but strong focus on affordable housing
Tightening of policies to limit housing prices in the beginning of 2011…
… but strong push for affordable housing
Increased down-payment requirements
Limitations on buying 2nd and 3rd housing
Local city level housing price control targets for 2011
Target to build 36 million affordable homes in 2011-2015 of which 10 million in 2011
Investment 1.3 trillion RMB (USD 197 billion) in 2011
Financing from - Central government - Local governments (from land
sales)- Society institutions
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson8
Affordable housing is the key growth driver
Many forms of affordable housing:– Reconstruction of urban shanty towns,
subsidized by government – Public rent housing - built by government and
leased to fresh graduates and migrant workers)
– Economically affordable housing (commercial apartments, controlled profit margin)
Fixed percentage of development floor area per project to affordable housing and the rest for commercial development
Robust model for years to come to ensure a sufficient amount of entry level apartments
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson9
Real estate market trends
E&E market development
Developing KONE in China
Going forward
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson10
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
160 000
180 000
200 000
220 000
240 000
260 000
280 000
300 000
320 000
340 000
360 000
'80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 ’98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
• In 1992, housing reform implemented.
Significant expansion in the new equipment market
7.9%22.6%
units
310,000
105,000
46,710
• In 1998, housing ceases to be provided by the state.
High-sp
eed deve
lopment s
tage
China new equipment market growth 1980 – 2010
Source: China Elevator Association and KONE’s estimates on the market size
• In 1978, China begins to carry out a policy of reform and opening.
• Market-oriented economic development policy implemented as of 1984.
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson11
New equipment: expected market development in China for 2010-2011
2010 2011
Affordable housing the strongest growing segment, following the China government’s target to build 10 million affordable homes in 2011. Translates into approx. 100 000elevators or somewhat more.
Normal residential affected in 1st and 2nd tier cities by tightened policies to limit housing purchases, lending etc, but high activity expected to continue in lower tier cities.
Non-residential segments expected to continue to grow.Developers shifting focus from residential to commercial real estate.
310 000
Approximately +15% growth
Affordable housing
Otherresidential
Nonresidential
Expected development of new equipment market segments, units
Source: Based on KONE’s estimate
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson12
Competitive landscape: many tiers of competition
Focus on all segments from high-end to low-end and from big cities to small citiesStrong, global brands as support
Focus on mid-end and low-end of the marketsFocus on 2nd, 3rd and lower tiers of cities
Focus on low-end of the market and lower tiers of citiesComponents from suppliers with large volumes
Global companies
JVs of global companies
Local companies
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson13
KONE has grown to become strong Top 3 company in the Chinese E&E market
2005
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor
(no. 8)
Competitor
Competitor
Competitor
Competitor
(strong no. 4)
Competitor
Competitor
Competitor
Competitor
Competitor
GiantKONE (no. 10), one of the fastest growing smallercompanies
+ GiantKONE
strong within the Top 3
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor
2009 2010
GiantKONE (JV in 2005)
...
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson14
Real estate market trends
E&E market development
Developing KONE in China
Going forward
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson15
KONE has grown clearly faster than the market
KONE Market
725%
195%
KONE growth in orders received units vs. market growth, 2004-2010
Grown every year faster than the market during the past 6 years
Significant expansion in the coverage of network in China
Been able to improve its profitability
Developed a market leading maintenance business
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson16
Wenzhou
Shenyang
HangzhouNingbo
Harbin
Dalian
Zhengzhou
Beijing
Jinan
Wuhan
Changsha
ChengduChongqing
Guiyang
Kunming
Nanning
Hainan
Zhuhai
Shenzhen
XiamenFuzhou
Qingdao
Shijiazhuang
Urumqi
Hefei
Tianjin
Changchun
Yinchuan
Lanzhou Shanxi
Lasa
Dongguan
Hohhot
Xining
ShanghaiKunshan
NanjingSuzhouXi’an
Foshan
Shanghai HQKunshan factory
BranchesService stations
Guangzhou
Nanchang
Jiaxing
KONE’s distribution and service network extends to growth regions in China
Real Estate Investment growth rate, 2010
Branches: 43Sales offices 25Service stations: 168
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Strong portfolio of solutions to meet the needs of the different segments
Residentialmarket
Officemarket
Hotelmarket
Infrastruc-ture
marketMedicalmarket
SpecialBuildingsmarket
Machine-room-less elevators (MRL)
• Leader in the MRL technology• KONE MonoSpaceTM and SMonoSpaceTM and TransysTM elevators
•Small machine room elevators (SMR)
• Range of KONE MiniSpaceTM elevators• Serving segments from low-end residential to high-rise applications
•Escalators and moving walks
• Commercial and heavy duty escalators• Moving walks to infrastructure markets and inclined Moving Walks to retail
•
CommonEcoDisctechnology throughout the whole elevator product range
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson18
Industry-leading energy efficiency ratings also in China
KONE 3000MiniSpace
KONE 3000MiniSpace
KONE 3000SMonoSpace
Load (kg) 2000 1350 1350
Speed (m/s) 6 2.5 1.75
Energy efficiencyclass
A A A
The VDI 4707 is a guideline published by the Association of German Engineers (Verein Deutscher Ingenieure), which aims at classifying elevators based on their energy consumption.
Energy efficiency class provided by TÜV
Certificates for elevators manufactured in Kunshan, China
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson19
Maintenance: providing strong future opportunities
Maintenance market characteristics:Significant annual feed from new equipment market to maintenance baseMaintenance market is fragmented, but need for high quality service increasingStrong basic standards for maintenance exist – a license required
KONE focus:KONE focuses on high conversion rate from new installations to serviceService in all segments
410
770
1629
2000 2005 2010
Elevator and Escalator units in operation in China (thousand units)
Over 300 000units to be added in 2011
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson20
Market trends and KONE’s response
Strong develop-ment of affordablehousing market
New KONE 3000 EMiniSpace elevator launched in Q1/2011 with particular focus on affordable housing segment
Growing environ-mental awareness
Leadership in eco-efficiency with VDI A-level energy consumption solutionsContinuous improvement to maintain leadership
Fast growth of installed base
Focus on high conversionsKONE Care service solutions to meet the needs of different customer segments
Demand for high-end majorprojects increasing
Further development of sales, sales support and project management resources
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson21
GiantKONE provides strong second distribution channel
GiantKONE has a strong product portfolio covering– Volume range of small machine room and
machine roomless passenger elevators– Freight elevators– Escalators and ramps
GiantKONE provides– Second distribution channel with a focus on
the fastest growing segment and markets– Additional production capacity, synergy
between KONE China and GiantKONE
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson22
KONE vs. GiantKONE positioning
KONE
Giant KONE
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Jilin
LiaoningBeijingTianjin
Hebei
Shanxi Shangdong
JiangsuSuzhou
Shanghai
Nanxun FactoryHuzhou Ningbo
Hangzhou Jiaxing ShaoxingWenzhou Jinhua Taizhou
Henan
Anhui
Jiangxii
Fujian
Hubei
Hunan
Guangzhou Dongguan ShenzhenGuangxiYunnan
SichuanChongqing
Shananxi
Xinjiang Ningxia
Gansu
Inner Mongolia
Heilongjiang
Guizhou
Hainan
Nanxun HQ and factoryBranch
GiantKONE’s geographical coverage
Real Estate Investment growth rate, 2010
Branches: 40
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson24
Real estate market trends
E&E market development
Developing KONE in China
Going forward
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson25
What we have achieved in China
Grown faster than the market every year for the past 6 years
Reached Top 3 on the Chinese market(KONE and GiantKONE combined)
Expanded product portfolio and geographical coverage
Actively developed our personnel and recruited key talent
Been able to improve profitability
May 19, 2011 © KONE Corporation | Capital Markets Day | William B. Johnson26
What we want to achieve in China
Continue to grow faster than the market– Residential, affordable housing– Commercial segments– Major projects
Expand service business
Further expand network in 3rd and 4th tier cities
Continue strengthening product portfolio– Ride experience– Cost competitiveness, optimize for China
Brand – even stronger awareness of KONE
Fully utilize the market opportunities through two channels, KONE and GiantKONE