KONE’s interim report for January–March 2016 · KONE’s interim report for January–June 2016...

KONE’s interim report for January–June 2016 JULY 19, 2016 HENRIK EHRNROOTH, PRESIDENT & CEO

Figures for January–June 2016 Key figures for January–June 2016

Q2 2016 Key figures

Q2/2016 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

Cash flow from operations (before financing items and taxes)

MEUR 393.3 426.0

Basic earnings per share EUR 0.54 0.51

3 July 19, 2016 Interim Report January-June 2016 | © KONE Corporation

STRONG EXECUTION AND PROFITABLE SALES GROWTH

January–June 2016 Key figures

1–6/2016 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

Cash flow from operations (before financing items and taxes)

MEUR 699.0 638.2

Basic earnings per share EUR 0.90 0.80

4 July 19, 2016 Interim Report January-June 2016 | © KONE Corporation

SOLID OPERATING PERFORMANCE

July 19, 2016 Interim Report January-June 2016 | © KONE Corporation 5

Q2 2016 Orders received ORDERS RECEIVED DECLINED BUT REMAINED AT A HIGH LEVEL

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

500

2,500

2,000

1,500

1,000

0

Q1

1,942

-5.7% -5.4%

Q4 Q3 Q2

2,068

MEUR

At historical exchange rates. At comparable exchange rates.


Q2 2016 Sales GOOD GROWTH IN SERVICE BUSINESSES

MEUR

3,000

2,500

2,000

1,500

1,000

500

0

+2.8%

+3.4%

Q4 Q3

2,273

Q1

1,748

Q2

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



Q2 2016 Operating income GROWTH DRIVEN BY POSITIVE DEVELOPMENT IN ALL REGIONS AND BUSINESSES

MEUR

349

221

0

50

100

150

200

250

300

350

400+7.2%

+4.5%

Q4 Q3 Q2 Q1

Development

particularly positive in North America and Asia-Pacific

Progress in product

and cost competitiveness helped in offsetting the intense price pressure



13% (11%)

34% (33%)

53% (56%)

Modernization Maintenance New equipment

18% (16%)

39% (40%)

43% (44%)

EMEA (Europe, Middle East and Africa) Americas Asia-Pacific

BY BUSINESS BY AREA

1–6/2016 Sales split SHARE OF MODERNIZATION AND THE AMERICAS OUT OF TOTAL SALES CONTINUED TO GROW

1–6/2015 figures in brackets. Figures in charts are rounded and at historical exchange rates.

Figures for January–June 2016 Business and market development

Q2 2016 Business development highlights


First in Customer Loyalty

A Winning Team of True Professionals

The Most Competitive People Flow® Solutions

Preferred Maintenance Partner

Top Modernization Provider

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

OUR DEVELOPMENT PROGRAMS

Our strengthened modernization offering and processes and continued focus on sales management contributed to the good development in orders received and sales

Q2 2016 New equipment markets


GLOBAL NEW EQUIPMENT MARKET VOLUMES WEAKENED DUE TO A DECLINE IN CHINA

NEW EQUIPMENT

ASIA-PACIFIC

Market weakened slightly as the market in China declined

Markets in India and Australia grew, while other markets in the region remained slow

In China, price competition intensified during the quarter

EMEA REGION

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

NORTH AMERICA

Market grew slightly driven by the United States in particular

Pricing of new equipment continued to develop positively


Q2 2016 Service markets SERVICE MARKETS CONTINUED TO GROW GLOBALLY

MAINTENANCE 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

Figures for January–June 2016 Outlook

Market outlook


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.

The maintenance markets are expected to see the strongest growth rate in Asia-Pacific, and to develop rather well also in other regions.

NEW EQUIPMENT MARKETS

MAINTENANCE 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.

MODERNIZATION MARKETS

Business outlook (upgraded)

KONE’s net sales is estimated to grow by 2–6% at comparable exchange rates as compared to 2015.


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.

SALES

OPERATING INCOME

APPENDIX

July 19, 2016 17

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


Share of sales

~35%

Share of orders

received

<40% ~40% ~35%

FY 2015

Share of sales

Share of orders

received

NEW EQUIPMENT MARKETS New equipment orders received in units vs. market growth

CHINA’S SHARE OF TOTAL ORDERS/SALES In monetary value

-20

-10

0

10

20

30

40

50

Q2/2016

~-5% ~-5%

Q1/2016

>-10%

2015

<5%

2014

~10% >15%

2013

>15%

~23%

2006-2012 CAGR

~20%

~44% Market KONE

~-5% ~-8%

Q2 2016

Q2 2016 Balance sheet - assets employed


MEUR Jun 30, 2016 Jun 30, 2015 Dec 31, 2015 Assets employed

Goodwill 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

Net working capital -1,033.4 -940.0 -983.4

Assets employed total 1,040.8 1,080.8 1,062.9

Financed by

Equity 2,186.1 2,036.1 2,575.5

Net debt -1,145.4 -955.3 -1,512.6

Equity and net debt total 1,040.8 1,080.8 1,062.9

Q2 2016 Net working capital


MEUR Jun 30, 2016 Jun 30, 2015 Dec 31, 2015

Net working capital

Inventories 1,457.1 1,428.4 1,326.7

Advance payments received -2,055.3 -2,002.3 -1,829.4

Accounts receivable 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

Other non-interest-bearing liabilities -1,792.1 -1,654.8 -1,651.3

Net working capital total -1,033.4 -940.0 -983.4

Q2 2016 Consolidated cash flow


MEUR 4–6/2016 4–6/2015 1–6/2016 1–6/2015 1–12/2015

Operating income 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

Increase in equity (option rights) 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

As approximately 75% of KONE’s revenues are in other currencies than the euro, currency fluctuations have a translation impact


EUR Others

USD

RMB

SALES BY CURRENCY 1–12/2015

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.

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.

TRANSACTION RISK

TRANSLATION RISK

Our absolute EBIT has grown faster than sales


16%

14%

12%

10%

0%

1,400

1,200

1,000

800

600

400

200

0

14.5

Q1/2015 Q1/2014 Q1/2013 Q1/2012 Q1/2011 Q1/2010

12.1

EBIT EBIT-%

12 months quarterly rolling absolute EBIT and EBIT margin progression, 2009–Q2/2016

MEUR

We have seen improvement both

in absolute and relative EBIT

Q1/2016

Sales by market 2005–2015 (MEUR)

July 19, 2016 25

0

10,000

2,000

4,000

6,000

8,000

65%

2005*

3,242

66% 16%

49%

2011

5,225

27%

18%

55%

2010

4,987

21%

21%

58%

2009

4,744

17% 21%

3,601

2008

4,603

16% 19%

65%

2007

4,079

14% 21%

7,334

2015

8,647

44%

17%

41%

2014

38%

16%

46%

2012

6,277

35%

62% 15%

44%

2013

6,933

65%

2006

22%

39%

EMEA Asia-Pacific Americas

12% 22%

13%

*2005 figures are pro forma.

8.4% 10.0% 11.6% 12.1% 12.7% 14.0% 13.9% 13.2% 13.8% 14.1% 14.4% EBIT margin %

CAGR, %

10.3%

4.6%

7.7%

25.4%

Interim Report January-June 2016 | © KONE Corporation

Sales by business 2005–2015 (MEUR)

July 19, 2016 26

10,000

8,000

2,000

4,000

0

6,000

19% 13%

55%

2013

6,933

32%

14%

54%

2012

6,277

34%

16%

50%

2011

8,647

2015

32%

12%

7,334

31%

2014

46%

5,225

40%

19%

41%

2005*

3,242

41%

40%

47%

2008

4,603

33%

19%

48%

2007

37% 36%

19%

45%

2006

3,601

17%

46%

57%

2010

4,987

37%

17%

2009

4,744

34%

4,079

New equipment Maintenance Modernization

19%

*2005 figures are pro forma.

8.4% 10.0% 11.6% 12.1% 12.7% 14.0% 13.9% 13.2% 13.8% 14.1% 14.4% EBIT margin %

CAGR, %

10.3%

6.0%

7.0%

14.3%

Interim Report January-June 2016 | © KONE Corporation

KONE’s interim report for January–March 2016 · KONE’s interim report for January–June 2016...

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