26
KONE’s interim report for January – September 2016 OCTOBER 26, 2016 HENRIK EHRNROOTH , PRESIDENT & CEO
KONE’s interim report for January–September 2016OCTOBER 26, 2016
HENRIK EHRNROOTH, PRESIDENT & CEO
Key figures for January–September 2016
Q3 2016 Key figures
Q3/2016 Q3/2015Historical
changeComparable
change
Orders received MEUR 1,771.7 1,764.5 0.4% 3.3%
Order book MEUR 8,699.0 8,350.7 4.2% 5.6%
Sales MEUR 2,170.2 2,184.2 -0.6% 1.9%
Operating income (EBIT) MEUR 331.1 325.9 1.6%
Operating income (EBIT) % 15.3 14.9
Cash flow fromoperations
(before financing
items and taxes)
MEUR 400.6 432.0
Basic earnings per share EUR 0.52 0.50
3 October 26, 2016 Interim Report January-September 2016 | © KONE Corporation
SOLID DEVELOPMENT ON A BROAD BASIS
January–September 2016 Key figures
1–9/2016 1–9/2015Historical
changeComparable
change
Orders received MEUR 5,781.8 6,011.8 -3.8% -1.2%
Order book MEUR 8,699.0 8,350.7 4.2% 5.6%
Sales MEUR 6,191.1 6,085.5 1.7% 4.0%
Operating income (EBIT) MEUR 901.1 863.0 4.4%
Operating income (EBIT) % 14.6 14.2
Cash flow fromoperations
(before financing
items and taxes)
MEUR 1,099.6 1,070.2
Basic earnings per share EUR 1.42 1.30
4 October 26, 2016 Interim Report January-September 2016 | © KONE Corporation
CONTINUED GOOD OPERATING PERFORMANCE
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation5
Q3 2016 Orders receivedORDERS RECEIVED GREW IN ALL REGIONS OUTSIDE CHINA
At comparable
exchange rates
Clear growth in
modernization orders;
stable new equipment
orders
Growth in EMEA and
in the Americas;
orders in Asia-Pacific
declined due to China
2,500
2,000
1,500
1,000
500
0
1,772
-5.7%-5.4%
Q4Q3Q2
2,0681,942
Q1
+0.4%
MEUR
2009 2016
At historical exchange rates
The relative margin
declined slightly, but
remained at a good
level
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation6
Q3 2016 SalesSTABLE SALES WITH GOOD DEVELOPMENT IN SERVICES
MEUR
0
500
3,000
2,500
1,000
2,000
1,500
-0.6%
2,170
+2.8%
+3.4%
Q4Q3Q2
2,273
Q1
1,748
At comparable
exchange rates
New equipment -2.5%
Maintenance +6.1%
Modernization +13.4%
EMEA +7.2%
Americas +9.4%
Asia-Pacific -4.9%
At historical exchange rates
2009 2016
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation7
Q3 2016 Operating incomeGROWTH DRIVEN BY POSITIVE DEVELOPMENT IN THE SERVICE BUSINESS
MEUR
331349
221
0
50
100
150
200
250
300
350
400
Q2Q1
+1.6%+7.2%
+4.5%
Q4Q3
The EMEA and
Americas regions
contributed to the
growth in operating
income
Progress in product
and cost
competitiveness
helped in offsetting the
intense price pressure
2009 2016
At historical exchange rates
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation8
13%
(11%)
33%
(32%)
54%
(57%)
ModernizationMaintenanceNew equipment
18%
(16%)
38%
(38%)
44%
(45%)
EMEA (Europe, Middle East and Africa) AmericasAsia-Pacific
BY BUSINESS BY AREA
1–9/2016 Sales splitSHARE OF MODERNIZATION AND THE AMERICAS OUT OF TOTAL SALES GREW
1–9/2015 figures in brackets
Figures in charts are rounded and at historical exchange rates
Business and market development
Q3 2016 Business development highlights
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation10
First in Customer Loyalty
A Winning Team of
True Professionals
The Most Competitive
People Flow® Solutions
Preferred Maintenance Partner
Top Modernization Provider
Good momentum in the adoption of our high-rise technologies,
such as UltraRope®, JumpLift™ and People Flow Intelligence
solutions
KONE was ranked 56th out of the 100 most innovative
companies in the world by Forbes
OUR DEVELOPMENT PROGRAMS The results of our customer loyalty survey remained at a high
level
Positive development in service business customer loyalty
thanks to our structured approach to drive actions based on
customer feedback
Q3 2016 New equipment markets
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation11
GLOBAL MARKET VOLUMES RATHER STABLE
NEW EQUIPMENT
ASIA-PACIFIC
New equipment market in Asia-Pacific was rather stable
Market in China declined slightly in units and clearly in monetary value;
price competition remained intense
Market grew in India, was rather stable in Southeast Asia and declined
slightly in Australia from a high level
EMEA REGION
Market grew slightly in South Europe and declined slightly in Central and
North Europe
Market in the Middle East was rather stable despite uncertainty in the
region
NORTH AMERICA Market grew slightly
Pricing environment continued to develop positively
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation12
Q3 2016 Service marketsSERVICE MARKETS GREW IN ALL GEOGRAPHIC REGIONS
MAINTENANCE MODERNIZATION
EMEA REGION Maintenance market grew in the region with
variation between countries; price competition
remained intense
Modernization market grew somewhat in
Central and North Europe; South Europe
showed early signs of recovery
NORTH AMERICA
Maintenance market grew; price competition
remained rather intense
Modernization market saw slight growth ----------
-
ASIA-PACIFIC Maintenance market developed positively Modernization demand developed positively
Outlook
Market outlook (updated)
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation14
Asia-Pacific: The market in China is expected to decline by approximately 5% in
units ordered. Competition is expected 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 slight
growth in Europe and a more stable development in 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 (specified)
KONE’s net sales is estimated to grow by 3–5% at comparable
exchange rates as compared to 2015 (previously 2–6%).
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation15
The operating income (EBIT) is expected to be in the range of
EUR 1,260–1,320 million, assuming that translation exchange
rates would remain at approximately the average level of January–
September 2016 (previously EUR 1,250–1,330 million).
SALES
OPERATING INCOME
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation16
Orders received grew thanks to good development on a broad basis
Continued growth in EBIT driven by positive development in the
service business
We have been able to find good opportunities despite mixed market
trends
APPENDIX
October 26, 201618
Chinese elevator and escalator market and KONE’s performance in China in Q3 2016
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation19
>30%
Share of
orders
received
<35%
Share
of sales
~35%~40%
FY 2015
Share
of salesShare of
orders
received
NEW EQUIPMENT MARKET
New equipment orders received in units vs. market development
CHINA’S SHARE OF KONE’S ORDERS AND SALES
In monetary value
-20
-10
0
10
20
30
40
50
~5%
Q3/2016Q2/2016
~20%
~44%
~-5% ~-5%
Q1/2016
>-10%
2015
<5%
2014
~10%
>15%
2013
>15%
~23%
2006–
2012
CAGR
KONE
Market
~-5%~-8%
Q3 2016
Slight
decline
Q3 2016 Balance sheet – assets employed
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation20
MEUR Sep 30, 2016 Sep 30, 2015 Dec 31, 2015
Assets employed
Goodwill 1,346.7 1,293.3 1,306.7
Other intangible assets 266.7 271.9 271.5
Tangible assets 362.9 328.3 345.4
Investments 143.1 120.2 122.7
Net working capital -1,052.8 -968.7 -983.4
Assets employed total 1,066.5 1,045.1 1,062.9
Financed by
Equity 2,435.2 2,182.6 2,575.5
Net debt -1,368.7 -1,137.6 -1,512.6
Equity and net debt total 1,066.5 1,045.1 1,062.9
Q3 2016 Net working capital
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation21
MEUR Sep 30, 2016 Sep 30, 2015 Dec 31, 2015
Net working capital
Inventories 1,531.8 1,444.3 1,326.7
Advance payments received -2,134.7 -2,022.2 -1,829.4
Accounts receivable 1,470.7 1,421.2 1,480.2
Other non-interest-bearing assets 564.8 498.3 434.0
Net deferred tax assets / liabilities 165.0 153.9 158.8
Provisions -167.5 -142.2 -173.6
Accounts payable -676.7 -663.9 -728.9
Other non-interest-bearing liabilities -1,806.2 -1,658.1 -1,651.3
Net working capital total -1,052.8 -968.7 -983.4
Q3 2016 Consolidated cash flow
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation22
MEUR 7–9/2016 7–9/2015 1–9/2016 1–9/2015 1–12/2015
Operating income 331.1 325.9 901.1 863.0 1,241.5
Change in working capital before financing items
and taxes42.9 81.1 120.6 132.9 132.3
Depreciation and amortization 26.6 25.0 77.9 74.4 100.0
Cash flow from operations before financing
items and taxes400.6 432.0 1,099.6 1,070.2 1,473.7
Financing items and taxes -100.0 -74.6 -238.4 -59.2 -27.0
Cash flow from operating activities 300.7 357.4 861.3 1,011.0 1,446.7
Investing activities -64.8 -54.2 -160.1 -113.6 -155.0
Purchase of own shares - -71.2 -39.3 -71.2 -71.2
Increase in equity (option rights) 5.1 0.1 11.5 13.4 13.5
Profit distribution - - -718.2 -616.3 -616.3
Changes in non-controlling interest -6.7 -18.3 -26.6 -18.3 -18.4
Free cash flow 234.2 213.8 -71.4 -205.0 599.5
Approximately 75% of KONE’s revenues are in other currencies than the euro, currency fluctuations have a translation impact
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation23
EUROthers
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 EBIT has grown faster than sales
October 26, 2016 Interim Report January-September 2016 | © KONE Corporation24
14%
16%
1,200
1,400
0%
10%
12%
1,000
800
600
400
200
0
14.6%
Q1/2015Q1/2014Q1/2013Q1/2012Q1/2011Q1/2010
12.1%
EBIT-%
EBIT
12 months quarterly rolling EBIT and EBIT margin progression, 2009–Q3/2016
MEUR
We have seen
improvement both
in absolute and
relative EBIT
Q1/2016
Sales by market 2005–2015 (MEUR)
October 26, 201625
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-PacificAmericas
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-September 2016 | © KONE Corporation
Sales by business 2005–2015 (MEUR)
October 26, 201626
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 MaintenanceModernization
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-September 2016 | © KONE Corporation
