Post on 19-Sep-2020
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KONE Q3 2019OCTOBER 23, 2019
HENRIK EHRNROOTH, PRESIDENT & CEO
ILKKA HARA, CFO
Q3 2019 Highlights
▪ Continued good growth in
orders received with improving
margin
▪ Solid growth in services
▪ Improving adjusted EBIT
margin
▪ Strong cash flow
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation3
SOLID GROWTH, IMPROVING MARGIN AND STRONG CASH FLOW
Q3 2019 Key figures
Q3/2019 Q3/2018 ChangeComparable
change
Orders received MEUR 2,007.3 1,831.9 9.6% 6.8%
Order book MEUR 8,399.8 7,791.6 7.8% 4.2%
Sales MEUR 2,557.6 2,288.7 11.7% 9.4%
Operating income (EBIT) MEUR 314.2 258.0 21.8%
Operating income margin (EBIT %) % 12.3 11.3
Adjusted EBIT MEUR 321.9 273.7 17.6%
Adjusted EBIT margin % 12.6 12.0
Cash flow from operations
(before financing items and taxes)MEUR 462.9 273.3
Basic earnings per share EUR 0.48 0.42
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation4
SOLID GROWTH IN ALL BUSINESSES, STRONG CASH CONVERSION
January-September 2019 Key figures
1-9/2019 1-9/2018 ChangeComparable
change
Orders received MEUR 6,411.5 5,859.1 9.4% 7.6%
Order book MEUR 8,399.8 7,791.6 7.8% 4.2%
Sales MEUR 7,297.2 6,627.3 10.1% 8.3%
Operating income (EBIT) MEUR 836.1 750.0 11.5%
Operating income margin (EBIT %) % 11.5 11.3
Adjusted EBIT MEUR 869.9 792.5 9.8%
Adjusted EBIT margin % 11.9 12.0
Cash flow from operations
(before financing items and taxes)MEUR 1,163.9 818.5
Basic earnings per share EUR 1.26 1.19
Q3 2019 Business highlights
▪ Continued faster than market growth in all
businesses
– Broad-based competitiveness
– NPS on a good level
▪ Solid overall execution
– Strong deliveries to customers
– Strong cash conversion
▪ Actions to improve profitability starting to show
results
October 23, 20195
Visible benefits from Accelerate program
Harmonizing roles and processes, leveraging scale & building expertise in
many key functions
Customer Solutions
EngineeringHR Customer Service
& Admin
Logistics Finance Sourcing
Accelerate program targets
Customer centricity
Speed
Efficiency
▪ Estimated total savings somewhat
over MEUR 100 by the end of 2020
▪ Estimated restructuring costs
somewhat over MEUR 100
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation6
Market development
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation8
NEW EQUIPMENT MARKET WAS STABLE
New equipment market development in Q3 2019
EMEA market Asia-Pacific marketNorth American market
>2/3 of
global
market
(in units)
~20% of
global
market
(in units)
<5% of
global
market
(in units)
Stable
▪ Market was stable on a high
level
▪ Market grew slightly with mixed
development across the
different countries
▪ In China, the market grew
slightly in units
▪ Declining market in several
other APAC countries
- - - Significant decline (>10 %), - - Clear decline (5-10 %), - Slight decline (<5 %), Stable, + Slight growth (<5 %), + + Clear growth (5-10 %), + + + Significant growth (>10 %)
Based on KONE’s estimate.
+ Stable
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation9
CONTINUED POSITIVE DEVELOPMENT
Service market development in Q3 2019
North American market
<10% of
global market
(in units)
+ +Maintenance Modernization
>25% of
global market
(in monetary value)
EMEA market
~40% of
global market
(in units)
Maintenance
+ ++
>1/3 of
global market
(in monetary value)
Modernization
Asia-Pacific market
>40% of
global market
(in units)
>15% of
global market
(in monetary value)
++ ++Maintenance Modernization
- - - Significant decline (>10 %), - - Clear decline (5-10 %), - Slight decline (<5 %), Stable, + Slight growth (<5 %), + + Clear growth (5-10 %), + + + Significant growth (>10 %)
Based on KONE’s estimate.
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation10
GOVERNMENT BALANCING BETWEEN SUPPORTING THE ECONOMY AND RESTRICTIONS IN THE RESIDENTIAL MARKET
Chinese property market in Q3 2019
▪ In units ordered, the new equipment market grew slightly y-o-y
▪ Pricing was fairly stable
▪ Government continued to support the economic activity through infrastructure investments
while maintaining restrictions in the residential market
▪ Construction activity stayed on a high level
▪ Real estate investment +10.5% y-o-y in September
▪ Residential sales volume +3% y-o-y and new starts +7% y-o-y in September
▪ New home prices in the 70 biggest cities +9% y-o-y in September
▪ Consolidation among property developers continues
Q3 Financials
October 23, 201912
MEUR
ORDERS RECEIVED GREW IN ALL REGIONS
▪ In Q3, the margin of
orders received
improved slightly
Orders received
0
3,000
2,000
1,000
4,000
7,000
5,000
6,000
8,000
20172010 2011 2012 2013 2014 2015 2016
1,832
2018
2,007
1-9/2019
Q3 growth
9.6%
128
48
Gro
wth
at co
mp
. F
X
1,832
Q3
20
18
FX
Q3
20
19
2,0076.8%
October 23, 201913
MEUR
STRONG SALES GROWTH IN ALL BUSINESSES
KONE has applied new IFRS 15 and IFRS 9 standards from January 1, 2018 onwards and 2017 financials are restated retrospectively. Figures for 2010-2016 are not restated and thus not fully comparable.
Sales
6,000
1,000
7,000
0
5,000
2,000
3,000
4,000
8,000
9,000
10,000
2011 1-9/20192010
2,558
20182012 2013 2014
2,289
2015 2016 2017
Q3 growth
11.7%49
Q3
20
18
Ne
w e
qu
ipm
en
t
Ma
inte
nan
ce
Mo
de
rniz
atio
n
FX
Q3
20
19
2,558
2,289
Growth at comp. FX
9.4%
10.2%
7.4%
10.9%
EMEA 8.1%
APAC 11.5%
Americas 7.6%
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation14
Adjusted EBIT* and adjusted EBIT marginMEUR; %
ADJUSTED EBIT MARGIN IMPROVED IN Q3
▪ Restructuring costs
related to the
Accelerate program:
EUR 8 million
* Adjusted EBIT was introduced in September 2017. Adjusted EBIT excludes restructuring costs related to the Accelerate program** KONE has applied new IFRS 15 and IFRS 9 standards from January 1, 2018 onwards and 2017 financials are restated retrospectively. Figures for 2010-2016 are not restated and thus not fully comparable.KONE has adopted the new IFRS 16 effective January 1, 2019 using the modified retrospective approach and the comparative figures have not been restated..
Adjusted EBIT
274322
0
2
4
6
8
10
12
141,400
1,000
0
200
400
600
800
1,200
201320112010 2012 2017**20152014 2016 2018 1-9/2019
12.0%12.6%
Q3 growth
17.6%8
2
Q3
20
18
Gro
wth
Pro
fita
bili
ty
FX
IFR
S 1
6
Q3
20
19
274
322
Q3 adjusted
EBIT margin
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation15
Cash flow from operations*MEUR
STRONG CASH CONVERSION
▪ Net working capital
contributed positively
to the cash flow driven
by strong development
in advances received
and progress
payments
▪ Adoption of IFRS 16
had a positive impact
of EUR 87 million on
cash flow from
operations* in
1-9/2019
* (before financing items and taxes)
Cash flow
273
463
1,400
1,000
400
200
0
600
800
1,200
1,600
20132010 2011 20142012 2015 2016 2017 2018 1-9/2019
1,164
818
Market and business outlook
Market outlook for 2019
New equipment markets
▪ The new equipment market is expected to be relatively stable or to grow
slightly
▪ In China, the market is expected to grow slightly in units ordered, while in
the rest of the Asia-Pacific, the market is expected to be stable
▪ The new equipment markets in North America and the Europe, Middle East
and Africa region are expected to be rather stable
Maintenance markets
▪ Maintenance markets are expected to see the strongest growth rate in Asia-
Pacific and to grow slightly in other regions
Modernization markets
▪ The modernization market is expected to grow slightly in the Europe, Middle
East and Africa region as well as in North America and to develop strongly in
Asia-Pacific
October 23, 201917
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation18
Sales
▪ In 2019, KONE’s sales is estimated to grow by
5–8% (4–7%) at comparable exchange rates as
compared to 2018
Adjusted EBIT
▪ The adjusted EBIT is expected to be in the range
of EUR 1,190–1,250 (1,170–1,250) million,
assuming that foreign exchange rates would
remain at the October (July) 2019 level. Foreign
exchange rates are estimated to impact EBIT
positively by around EUR 20 (20) million
Business outlook for 2019 (specified)
Burdening our resultBoosting our performance
Raw material prices and
trade tariffs
(MEUR <50)
Labor and
subcontracting cost
increases
Solid order book
Services business
growth
Continued performance
improvements
Accelerate savings
(MEUR ~50)
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation19
There are both headwinds and tailwinds impacting our business in 2020
BOOSTING OUR PERFORMANCE
BURDENING OUR RESULT
Strong order book with recently improved margin in the orders received
Solid growth in service business
Labor and subcontracting cost increases due to resource shortages
Accelerate savings and performance improvements
Economic and geopolitical uncertainties
Summary
▪ Broad-based good
development in all businesses
▪ Entering 2020 in a strong
position
Appendix
By business By area
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation23
7-9/2018 figures in brackets. Figures in charts are rounded and at historical exchange rates.
Q3 2019 Sales split
55%
(54%)31%
(32%)
14%
(14%)
38%
(39%)
42%
(41%)
20%
(20%)
New equipment
Maintenance
Modernization
Asia-Pacific
Americas
EMEA (Europe, Middle East and Africa)
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation24
IMPACT IN Q3
IFRS 16
Balance sheet
▪ EUR 358 million increase in the
2019 opening interest-bearing
debt
▪ EUR 24 million increase in capital
expenditure on lease agreements
Income statement
▪ EUR 2 million positive impact on
EBIT
▪ EUR 3 million increase in
financing expenses
Cash flow statement
▪ EUR 30 million positive impact on
cash flow from operations (before
financing items and taxes)
▪ EUR 2 million negative impact on
cash flow from financing items
and taxes
▪ EUR 27 million negative impact
on cash flow from financing
activities
New equipment marketNew equipment orders received in units vs. market development
China’s share of KONE’s orders received and salesMonetary value
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation25
KONE in China
-5
0
5
10
15
20
25
30
35
40
45
50
201820152006-
2014
CAGR
2016 Q3
2019
Q1
2019
2017
>5%
Q2
2019
<20%
>35%
<5%
~-5%
<5%
~5%
<5%
>10%
<5%
>10%
<5%
KONE
Market<35%
1-9/2018
>35%
1-9/2019
>25% <30%
1-9/2018 1-9/2019
% of sales% of orders received
~-5%
stable
The market grew slightly in units
New equipment orders grew
significantly in units and in
monetary value
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation26
Housing inventoriesNewly built area for sale / monthly sales 3-m MVA
Housing salesSales area growth, change Y-o-Y
E&E market
Sources: China NBS, E-house, CREIS, KONE estimates
Chinese property market
0
10
20
30
40
50
Q1
15
Q3
17
Q3
15
8.4
Q1
17
Q1
16
Q3
16
Q1
18
Q3
18
Q1
19
Q2
19
10.7
21.7
Tier-2
Tier-1
sample of lower tier cities
8/2019:
-20
0
20
40
60
Q1
15
Q1
16
Q3
15
Q3
16
Q3
19
Q1
17
Q3
17
Q1
18
Q3
18
Q1
19
2.9%
9/2019:
-10
0
10
20
30
Q1
17
Q1
19
Q1
16
Q1
15
Q3
18
Q3
17
Q3
15
Q3
16
Q1
18
9.9%
Q3
19
REI Y-o-Y
E&E market Y-o-Y in units
Q3/2019:
Sales area growth
Slight
growth
Sales by currencies 1-12/2018 Currency impact
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation27
Currencies
Main currencies
Others
EUR
RMB
USDMEUR Q3 2019 1-12/2018
Sales 49 -260
EBIT 8 -41
Orders
received48 -239
1-9/19
average
2018
average
Sep 30,
2019 spot
EUR /
RMB7.7167 7.8148 7.7784
EUR /
USD1.1241 1.1809 1.0889
EUR /
GBP0.8841 0.8861 0.8857
EUR /
AUD1.6081 1.5794 1.6126
Balance sheet – assets employed
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation28
MEUR Sep 30, 2019 Sep 30, 2018 Dec 31, 2018
Assets employed
Goodwill 1,379.2 1,321.6 1,333.4
Other intangible assets 254.4 260.5 260.2
Tangible assets 758.2 378.5 397.4
Investments 152.3 138.3 143.3
Net working capital -871.5 -719.0 -757.8
Assets employed total 1,672.6 1,380.0 1,376.6
Financed by
Equity 2,949.5 2,805.5 3,080.6
Net debt -1,276.9 -1,425.5 -1,704.0
Equity and net debt total 1,672.6 1,380.0 1,376.6
Net working capital
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation29
MEURSep 30, 2019 Sep 30, 2018 Dec 31, 2018
Net working capital
Inventories 700.0 648.5 624.1
Advance payments received and deferred revenue -1,808.8 -1,531.7 -1,562.2
Accounts receivable 2,182.0 1,910.8 1,988.3
Other non-interest-bearing assets 815.4 715.3 660.5
Other non-interest-bearing liabilities -1,961.8 -1,687.8 -1,647.3
Provisions -139.3 -132.8 -139.4
Accounts payable -771.0 -741.5 -786.7
Net deferred tax assets / liabilities 112.1 100.3 105.0
Net working capital total -871.5 -719.0 -757.8
Consolidated statement of cash flows
October 23, 2019 Interim Report for January-September 2019 | © KONE Corporation30
MEUR 1-9/2019 1-9/2018 1-12/2018
Operating income 836.1 750.0 1,042.4
Change in working capital before financing items and taxes 151.6 -19.7 -11.2
Depreciation and amortization 176.2 88.2 118.9
Cash flow from operations before financing items and
taxes1,163.9 818.5 1,150.1
Financing items and taxes -235.6 -192.7 -180.2
Cash flow from operating activities 928.3 625.8 969.8
Investing activities -99.6 -67.9 -121.1
Purchase of own shares - - -
Increase in equity (option rights) 37.5 22.5 23.1
Profit distribution -851.7 -849.2 -849.2
Changes in non-controlling interest -3.7 -3.0 -3.1
Free cash flow 10.8 -271.8 19.6