KONE Corporation, stock exchange release, July 21, 2009 at 12:30 p.m.
KONE's Q2: Continued good performance
April-June
- In April-June 2009, orders received totaled EUR 953.9 (4-6/2008:
1,092) million. Orders received declined by 12.7%, or 13.6% at
comparable exchange rates.
- Net sales increased by 2.3% to EUR 1,169 (1,142) million. At
comparable exchange rates, the growth was 1.5%.
- Operating income excluding one-time costs was EUR 146.3 (136.7)
million or 12.5% (12.0%) of net sales. The operating income,
including the one-time cost of EUR 33.6 million related to the fixed
cost adjustment program, was EUR 112.7 million.
- The plans for the fixed cost adjustment program have now been
defined. The annual fixed cost reduction is expected to be at least
EUR 40 million starting in 2010 and the total one-time cost relating
to this program is EUR 33.6 million. The program is implemented in
response to the weak new equipment market in order to be better
prepared for 2010.
- KONE further specifies its full-year outlook for 2009. In net
sales, the objective is to grow 2-5% as compared to net sales in
2008. In operating income (EBIT), the objective is EUR 570-595
million excluding the one-time cost of EUR 33.6 million.
January-June
- In January-June 2009, orders received totaled EUR 1,852 (1-6/2008:
2,210) million. Orders received declined by 16.2%, or 17.1% at
comparable exchange rates. At the end of June 2009, the order book
was EUR 3,754 (Dec 31, 2008: 3,577) million.
- Net sales increased by 6.9% to EUR 2,190 (2,047) million. At
comparable exchange rates, the growth was 6.4%.
- Operating income excluding one-time costs was EUR 237.5 (223.2)
million or 10.8% (10.9%) of net sales. The operating income,
including the one-time cost of EUR 33.6 million related to the fixed
cost adjustment program, was EUR 203.9 million.
Key Figures
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
2009 2008 2009 2008 2008
Orders received MEUR 953.9 1,092.4 1,852.4 2,209.9 3,947.5
Order book MEUR 3,754.1 3,838.7 3,754.1 3,838.7 3,576.7
Sales MEUR 1,168.6 1,142.1 2,189.6 2,047.4 4,602.8
Operating income MEUR 146.3 1) 136.7 237.5 1) 223.2 558.4
Operating income % 12.5 1) 12.0 10.8 1) 10.9 12.1
Cash flow
from operations
before financing
items and taxes) MEUR 201.1 118.9 371.4 285.5 527.4
Net income MEUR 86.5 98.8 165.2 162.7 418.1
Total
comprehensive
income MEUR 79.4 99.9 159.6 152.6 436.7
Basic earnings
per share EUR 0.34 0.39 0.65 0.65 1.66
Interest-bearing
net debt MEUR -167.1 87.0 -167.1 87.0 -58.3
Total equity/
total assets % 38.8 30.0 38.8 30.0 39.0
Gearing % -16.1 11.7 -16.1 11.7 -5.6
1) Excluding a EUR 33.6 million one-time cost related to the fixed
cost adjustment program.
Matti Alahuhta, President and CEO, in conjunction with the review:
"I am very pleased with our performance in the second quarter. Our
Orders Received was higher than in the previous three quarters
despite the weakened market environment. This is a result of an
improved customer focus and strong actions to improve our solution
competitiveness. Our record high cash flow exceeding EUR 200 million
was another great achievement.
The new equipment markets continued to be weak. We communicated in
April our intentions to adjust our fixed costs by EUR 40 million in
order to be better prepared for 2010. We have now defined the plans
for this program. Most of the efficiency improvements will be
achieved by developing our organization globally to have flatter
structures with wider spans of control. This will not only improve
our efficiency, but it will also bring us closer to our customers,
strengthen hands-on leadership at KONE, enable better internal
learning transfer and increase the speed of continuous change.
As a result of the weaker market situation and this organizational
development, the number of jobs at KONE is estimated to decrease
globally by approximately 500 during the next nine months. The impact
will be biggest in those country organizations where the new
equipment market has weakened most. Simultaneously, we continue to
recruit in those countries which provide growth opportunities.
Our business has developed well during the first half of this year.
Our order book is strong and the Operating Income, excluding the
one-time item related to the cost adjustment, has developed
positively. Our competitiveness has improved in many market segments
that provide the best growth opportunities in the current very
challenging business environment. Based on this, I have good
confidence also for the full-year development and the fixed costs
adjustment program is an additional action in preparation for 2010."
Analyst and media conference and conference call
A meeting for the press, conducted in Finnish, will be held on
Tuesday, July 21, 2009 at 1:45 p.m. Eastern European Time.
A telephone conference and a meeting for analysts, conducted in
English, will begin at 3:00 p.m. Eastern European Time. The telephone
conference will also be available as a webcast on www.kone.com.
Both meetings will take place in the KONE Building, located at
Keilasatama 3, Espoo, Finland.
Telephone conference numbers:
US callers: +1 334 323 6201
Non-US callers: +44 (0)20 7162 0025
Participant code: KONE
An on demand version of the telephone conference will be available at
www.kone.com later the same day.
About KONE
KONE's objective is to offer the best people flow experience by
developing and delivering solutions that enable people to move
smoothly, safely, comfortably and without waiting in buildings in an
increasingly urbanizing environment. KONE provides its customers with
industry-leading elevators, escalators and innovative solutions for
modernization and maintenance, and is one of the global leaders in
its industry. In 2008, KONE had annual net sales of EUR 4.6 billion
and over 34,800 employees. KONE class B shares are listed on the
NASDAQ OMX Helsinki in Finland.
www.kone.com
For further information please contact:
Henrik Ehrnrooth, Executive Vice President, Finance, tel. +358 (0)
204 75 4260
Sender:
KONE Corporation
Henrik Ehrnrooth
Executive Vice President,
Finance
Anne Korkiakoski
Executive Vice President,
Marketing and Communications
Accounting Principles
KONE Corporation's Interim Report for January 1-June 30, 2009 has
been prepared in line with IAS 34, 'Interim Financial Reporting'.
KONE has applied the same accounting principles in the preparation of
the interim report as in its financial statements for 2008. The
accounting principles for the financial statements have been
presented in the KONE 2008 Financials report published on January 23,
2009. Additionally, the changes in the presentation of statement of
comprehensive income and the statement of changes in equity according
to the revised IAS1 have been applied in the Interim Report. The
information presented in this Interim Report has not been audited.
April-June 2009 review
Operating environment in April-June
In the second quarter of 2009, overall demand for new equipment
continued to be weak in most geographical areas. The overall rate of
decline decreased, but the market situation differed substantially
from market to market. The modernization market was stable and
continued to provide growth opportunities. The global maintenance
market, which by nature less cyclical, continued to grow.
In the Europe, Middle East and Africa region (EMEA), the business
environment remained difficult. Most new equipment markets declined.
The weakest markets were the Middle East, Russia, United Kingdom,
Netherlands and Spain. The infrastructure and hospital segments
showed growth in some countries. The demand for modernization was
good in France in particular and it improved in several other
countries. The maintenance markets continued to develop well.
In the Americas region, the new equipment market continued to
decrease in the United States. Customers' difficulties to access
financing remained an obstacle to decision making. The market in
Canada slowed down. In Mexico, the market continued to be very weak.
The modernization activity remained relatively stable. The
maintenance market developed well, but was very competitive.
In the Asia-Pacific region, the new equipment markets weakened. In
China however, the sequential market development was positive and
provided good growth opportunities. Real estate investments increased
due to improved lending activity for home buyers and land developers.
The Indian market continued to decline further because of the
difficult funding environment for our customers. In Australia and
Southeast Asia the construction market activity was on a very low
level. The maintenance market in Asia-Pacific developed favorably.
Financial performance in April-June
KONE's orders received in the second quarter of 2009 declined by
12.7% and totaled EUR 953.9 (4-6/2008: 1,092) million. At comparable
exchange rates, the decline was 13.6%. The orders received in the
second quarter was higher than in the previous three quarters. All
geographical regions showed decline in orders received. In China,
however, the development was very positive. KONE's progress was
particularly good in modernization and in major projects. The level
of orders received is good evidence of KONE's continuously improved
competitiveness and that our actions have been effective. Maintenance
contracts are not included in orders received.
The largest orders received in the April-June period included an
order to supply and install all elevators and escalators for the new
Tower 185 in Frankfurt, Germany and an order to supply escalators for
China's national high-speed railway project, also known as the
Beijing-Shanghai Express Railway. KONE was awarded a maintenance
contract on all equipment for a period of two years for this project.
KONE won an order to supply elevators for the new Infinity Tower in
Dubai, United Arab Emirates. The installation of the equipment will
start in 2010 and is estimated to be completed in 2011. KONE also won
a contract to design, supply and install all elevators on Celebrity
Cruises' two new passenger cruise ships. In addition, KONE was
awarded a contract to provide both new installations and
modernization to all elevators and escalators at the Los Angeles
International Airport (LAX) in the United States. The contract covers
maintenance, new installation, equipment repairs and upgrades in each
of the eight terminals at LAX.
KONE's net sales grew by 2.3% as compared to April-June 2008 and
totaled EUR 1,169 (1,142) million. At comparable exchange rates, the
growth was 1.5%. Growth was strongest in Asia-Pacific.
New equipment sales accounted for EUR 548.5 (549.1) million of the
total which represented a decline of 0.1% over the comparison period.
At comparable currency rates, the decline was 1.4%.
Service sales (maintenance and modernization) increased by 4.6% and
totaled EUR 620.1 (593.0) million. At comparable currency rates, the
growth was 4.2%.
The operating income excluding one-time costs for the April-June
period totaled EUR 146.3 (136.7) or 12.5% (12.0%) of net sales. The
operating income, including the one-time cost of EUR 33.6 million
related to the fixed cost adjustment program, was EUR 112.7 million.
The good operating income was primarily a result of the development
programs that have led to improved productivity, favorable
development in sourcing costs and tight cost control.
Sales by geographical regions, MEUR
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
2009 % 2008 % 2009 % 2008 % 2008 %
EMEA 1) 736.1 63 747.3 65 1,374.9 63 1,365.0 67 3,001.5 65
Americas 222.3 19 214.0 19 456.4 21 375.7 18 888.3 19
Asia-Pacific 210.2 18 180.8 16 358.3 16 306.7 15 713.0 16
Total 1,168.6 1,142.1 2,189.6 2,047.4 4,602.8
1) EMEA = Europe, Middle East, Africa
The 2010 fixed cost adjustment program
In connection with the first quarter result, KONE announced that it
intends to reduce the 2010 run-rate of fixed costs by EUR 40 million
due to the weak new equipment market. The plans for the program have
now been defined. The annual impact on this fixed cost reduction plan
is expected to be at least EUR 40 million starting in 2010. The total
one-time cost relating to this program is EUR 33.6 million, which
cost has been booked in the second quarter 2009.
The majority of the fixed cost savings will be achieved through
organizational development. This development will flatten the
organizational structures to bring management closer to customers,
broaden the span of control for managers to ensure better hands-on
management and uniform structures globally to improve internal
collaboration. The program, which will be implemented by the
beginning of 2010, will improve the efficiency and speed of KONE.
Selective actions will also be taken in the supply chain and
outsourcing. In addition to these actions, an overall tighter cost
control is targeted throughout the company.
The program is estimated to decrease jobs globally by approximately
500 during the next nine months. Simultaneously, KONE continues to
recruit in certain markets that are providing growth opportunities,
such as China.
January-June 2009 review
KONE's Orders Received and Order Book in January-June
The overall market situation was very demanding in new equipment
throughout the reporting period. The modernization markets remained
quite stable compared to 2008, but became increasingly competitive in
the different geographical areas. The global maintenance market,
which is by nature less cyclical, continued to grow.
In January-June 2009, KONE's orders received declined by 16.2% and
totaled EUR 1,852 (1-6/2008: 2,210) million. At comparable exchange
rates, the decline was 17.1%. Maintenance contracts are not included
in orders received.
The order book increased from the end of 2008 by 5.0% and stood at
EUR 3,754 (Dec 31, 2008: 3,577) million at the end of June 2009. As
earlier, the margin of the order book continued to be at a good
level. Cancellations of orders have remained at a very low level.
In the EMEA region, orders received declined in the continuously
weakening markets in January-June 2009. Despite this, KONE performed
particularly well in Germany. KONE also had a good performance in the
modernization market. KONE's orders received in modernization have
been good in France, Italy and Sweden in particular.
In the Americas region, KONE experienced a decline in orders
received. In spite of the weak market, KONE has been able to
strengthen its market position in many segments due to its advanced
elevator and escalator solutions and improved competitiveness.
In the Asia-Pacific region, KONE's new equipment order intake
declined year-on-year, however it continued to develop positively in
China.
Net Sales
In January-June 2009, KONE's net sales rose by 6.9%, compared to last
year, and totaled EUR 2,190 (1-6/2008: 2,047) million. Growth at
comparable currency rates was 6.4%.
New equipment sales accounted for EUR 993.6 (932.5) million of the
total and represented growth of 6.6% over the comparison period. At
comparable currency rates, the growth was 5.5%.
Service sales (maintenance and modernization) increased by 7.3% and
totaled EUR 1,196 (1,115) million. At comparable currency rates, the
growth was 7.2%.
Of the sales, 63% (67%) were generated from EMEA, 21% (18%) by the
Americas and 16% (15%) by Asia-Pacific.
Financial Result
KONE's operating income excluding one-time costs was EUR 237.5
million (1-6/2008: 223.2 million) or 10.8% (10.9%) of net sales. The
operating income, including the one-time cost of EUR 33.6 million
related to the fixed cost adjustment program, was EUR 203.9 million.
The strong growth was primarily a result of the development programs
that have led to improved productivity, favorable development in
sourcing costs and tight cost control. Net financing items were EUR
15.6 (-3.3) million and include dividends received from Toshiba
Elevator and Building Systems Corporation (TELC).
KONE's income before taxes for January-June 2009 was EUR 221.1
(220.7) million. Taxes totaled EUR 55.9 (58.0) million, taking into
account taxes proportionate to the amount estimated for the financial
year. This represents an effective tax rate of 25.3%. In
January-December 2008, the effective tax rate was 25.8%. Net income
for the period under review was EUR 165.2 (162.7) million.
Earnings per share were EUR 0.65 (0.65). Equity per share was EUR
4.09 (2.96).
Financial Position and Cash Flow
KONE's financial position remained strong and the company had a
positive net cash position at the end of June. In January-June 2009,
cash flow generated from operations (before financing items and
taxes) was EUR 371.4 (1-6/2008: 285.5) million. The strong cash flow
is primarily a result of an improved operating income and continued
good payment terms and hence increased advanced payments received. At
the end of June, net working capital was negative at EUR -181.8 (Dec
31, 2008: -76.4) million, including financing items and taxes.
Interest-bearing assets exceeded interest-bearing net debt and the
net cash position totaled EUR 167.1 (Dec 31, 2008: 58.3) million.
Gearing was -16.1% (11.7%) and total equity/total assets ratio was
38.8% (30.0%).
Capital expenditure, acquisitions and divestments
KONE's capital expenditure, including acquisitions, totaled EUR 48.4
(1-6/2008: 64.7) million. Capital expenditure, excluding
acquisitions, was mainly related to facilities and equipment in R&D,
IT and production. Acquisitions accounted for EUR 29.0 (37.6) million
of this figure. Acquisitions made in January-June will have no
material effect on the 2009 full-year figures.
In January-June, KONE completed the acquisition of FairWay Elevator
Inc, an independent elevator service company in the Philadelphia area
in the United States. Through this acquisition, KONE establishes
itself as one of the largest elevator and escalator companies in the
Philadelphia region. In addition, KONE acquired Excel Elevator Inc,
an independent elevator service company based in Los Angeles. Excel
has a great reputation in the Southern California market for its
quality work in modernizing vertical transportation systems as well
as its significant maintenance base.
Research and development
Research and development expenses totaled EUR 30.9 (1-6/2008: 29.9)
million, representing 1.4% (1.5%) of net sales. R&D expenses include
the development of new concepts and further development of existing
solutions and services. KONE's elevators and escalators are based on
energy-efficient technology.
During the reporting period, KONE strengthened its offering to better
meet the demands of the challenging market.
KONE released new solutions for the infrastructure, modernization and
affordable housing segments. In addition, new solutions for the 2-3
landing machine-room-less segment in the United States were
introduced. The focus has mainly been on solutions that deliver
improved performance, fresh visual options and improved
energy-efficiency. The KONE JumpLift(TM) is an example of the
expanded elevator offering. This innovative offering puts the
elevator into operation already as the building is under construction
phase, enabling more efficient flow of workers, delivering improved
safety and productivity to the job site.
In addition, KONE launched a new escalator release in response to the
demand of the growing infrastructure segment. The cost structure has
been improved and the application scope has been enlarged by adding a
full outdoor solution package and higher vertical rise alternatives
to the offering.
In January 2009, KONE Corporation was awarded a 2008 GOOD DESIGN
award for its innovative elevator design concept. KONE is the first
elevator and escalator company to ever receive such a prestigious
award. Founded in 1950, GOOD DESIGN is renowned as one of the most
recognized design awards program in the world. The awards are given
by The Chicago Athenaeum and The European Centre for Architecture Art
Design and Urban Studies to highlight the best new designs and design
innovations for products and graphics made between 2006 and 2008.
Personnel
The main goals of KONE's personnel strategy are to further increase
the interest in KONE as an employer and to secure the availability,
commitment and continuous development of its personnel. KONE's
activities are also guided by ethical principles. The personnel's
rights and responsibilities include the right to a safe and healthy
working environment, personal wellbeing as well as the prohibition of
any kind of discrimination.
KONE had 34,285 (Dec 31, 2008: 34,831) employees at the end of June
2009. The average number of employees was 34,461 (1-6/2008: 33,301).
The geographical distribution of KONE employees was 56% (56%) in
EMEA, 17% (17%) in the Americas and 27% (27%) in Asia-Pacific.
People Leadership is one of KONE's five development programs. KONE is
increasingly investing in people development programs, personal
coaching and change management.
Environment
KONE published its first Corporate Responsibility Report during the
reporting period.
The development of eco-efficient solutions focused on stand-by energy
saving solutions and regenerative units for elevators. As a result of
these improvement actions, a reduction of 30 percent in the newest
release was accomplished. By next year, an additional 20 percent
reduction will be achieved.
In the service business, eco-efficiency aspects have been included in
the analysis, which provides customers with a comprehensive
recommendation on how to maintain and modernize their equipment in a
cost-effective way.
The most significant Green House Gas emission (CO2) impact of KONE's
own operations relate to the company's vehicle car fleet, electricity
consumption and logistics. As a consequence, projects relating to
KONE's global car fleet and business travel are ongoing. KONE aims to
reduce its operational carbon footprint by 5 percent per unit by
2010.
Capital and Risk Management
The ultimate goal of capital and risk management in the KONE Group is
to contribute to the creation of shareholder value.
Capital is managed in order to maintain a strong financial position
and to ensure that the Group's funding needs can be optimized in a
cost-efficient way even in a critical funding environment. In the
present weak economic situation, having no net debt is a strength.
The financial turmoil has been extremely severe since mid-2008. KONE
is focusing on two major issues regarding its capital and risk
management. Firstly, the capability to adapt its cost structure to
changing volumes in order to stay competitive, and secondly, to
ensure that the Group's liquidity is guaranteed to cover both
short-term and long-term funding needs.
To avoid an unnecessary cost burden in this market environment,
overall cost control has been tightened and a program to decrease the
run-rate of fixed costs has been initiated. In addition, the Group's
cost structure is flexible because of outsourcing in different areas
of the business.
The key area in guaranteeing good liquidity in the short run is to
keep the present good working capital position. In a difficult
economic situation, it is increasingly important to maintain a
healthy order book without deterioration in payment terms, and to
improve credit control and collection activities. Long-term funding
is guaranteed by existing committed lines.
KONE's business activities are exposed to risks, which may arise from
changes in KONE's business environment or incidents resulting from
operating activities. The most significant risks are increases in
personnel costs and raw material costs, fluctuation in currency and
changes in the development of the world economy.
The global economic slowdown and financial turmoil may bring about a
decrease in the number of new equipment orders received by KONE,
cancellations of agreed-on deliveries, or delays in the commencement
of projects. A significant part of KONE's sales consist of services
which are less susceptible to the effects of an economic recession.
The economic recession may affect the liquidity and payment schedules
of KONE's customers and lead to credit losses. Credit risks are
managed by applying advance payments, actively monitoring the
liquidity of customers and active receivable collection efforts.
As a global group, KONE is exposed to foreign exchange fluctuations.
The Group Treasury function manages exchange rates and other
financial risks centrally on the basis of principles approved by the
Board of Directors. The main effect of exchange rate fluctuations is
seen in the consolidated financial statements of the KONE Group
resulting from the translation of financial statements of foreign
subsidiaries into euros.
A significant part of KONE's sales consist of services which are very
labor-intensive. If the increases in labor costs cannot be
transferred to prices or the productivity targets are not met, the
profit development of the Group will be adversely affected. A failure
to efficiently reallocate personnel resources in response to reduced
or changed business opportunities may also have a negative effect on
the profit development.
Changes in raw material prices are reflected directly in the
production costs of components made by KONE, such as doors and cars,
and indirectly in the prices of purchased components. The maintenance
business deploys a significant fleet of service vehicles, and oil
price fluctuations can affect the cost of maintenance.
Appointment to the Executive Board
KONE appointed Henrik Ehrnrooth M.Sc. (Econ) Executive Vice
President, Finance (Chief Financial Officer) and a Member of the
Executive Board as of May 1, 2009. Henrik Ehrnrooth succeeded Aimo
Rajahalme, who served as CFO since 1991.
Decisions of the Annual General Meeting
KONE Corporation's Annual General Meeting was held in Helsinki on
February 23, 2009. The meeting approved the financial statements and
discharged the responsible parties from liability for the January
1-December 31, 2008 financial period.
The number of Members of the Board of Directors was confirmed as
eight and it was decided to elect one deputy Member. Re-elected as
Members of the Board were Matti Alahuhta, Reino Hanhinen, Antti
Herlin, Sirkka Hämäläinen-Lindfors and Sirpa Pietikäinen and as
deputy Member Jussi Herlin. Anne Brunila, Juhani Kaskeala and
Shunichi Kimura were elected as new Members of the Board of
Directors.
At its meeting held after the Annual General Meeting, the Board of
Directors elected, from among its members, Antti Herlin as its Chair
and Sirkka Hämäläinen-Lindfors as Vice Chair.
Antti Herlin was elected as Chairman of the Audit Committee. Sirkka
Hämäläinen-Lindfors and Anne Brunila were elected as independent
Members of the Audit Committee.
Antti Herlin was elected as Chairman of the Nomination and
Compensation Committee. Reino Hanhinen and Juhani Kaskeala were
elected as independent Members of the Nomination and Compensation
Committee.
The Annual General Meeting confirmed an annual compensation of EUR
54,000 for the Chairman of the Board, EUR 42,000 for the Vice
Chairman, EUR 30,000 for Board Members and EUR 15,000 for the deputy
Member. In addition, a compensation of EUR 500 was approved for
attendance at Board and Committee meetings.
The Annual General Meeting approved the Board of Directors proposal
to repurchase KONE's own shares. Altogether, no more than 25,570,000
shares may be repurchased, of which no more than 3,810,000 may be
class A shares and 21,760,000 class B shares, taking into
consideration the provisions of the Companies Act regarding the
maximum amount of own shares that the Company is allowed to possess.
The minimum and maximum consideration for the shares to be purchased
is determined for both class A and class B shares on the basis of the
trading price for class B shares determined on the NASDAQ OMX
Helsinki Ltd. on the time of purchase.
In addition, the Annual General Meeting authorized the Board of
Directors to decide on the distribution of any shares repurchased by
the company. The authorization is limited to a maximum of 3,810,000
class A shares and 21,760,000 class B shares. The Board shall have
the right to decide to whom to issue the shares, i.e. to issue shares
in deviation from the pre-emptive rights of shareholders.
These authorizations shall remain in effect for a period of one year
from the date of the decision of the Annual General Meeting.
Authorized public accountants Heikki Lassila and
PricewaterhouseCoopers Oy were re-nominated as the Company's
auditors.
Dividend for 2008
The Annual General Meeting approved the Board's proposal for
dividends of EUR 0.645 for each of the 38,104,356 class A shares and
EUR 0.65 for the 214,643,060 outstanding class B shares. The date of
record for dividend distribution was February 26, 2009, and dividends
were paid on March 5, 2009.
Share Capital and Market Capitalization
The KONE 2005B options based on the KONE Corporation 2005 option
program were listed on the main list of the NASDAQ OMX Helsinki Ltd.
on June 1, 2005. Each option entitled its holder to subscribe for
twelve (12) class B shares at a price of EUR 4.02 per share. As the
2005B options subscription period ended on March 31, 2009, 4,660
remaining series B options held by the subsidiary expired. The
remaining 12,034 options had been used and the shares were entered in
the Finnish Trade Register in April.
In 2005, KONE also granted a conditional option program, 2005C. The
2005C stock options were listed on the NASDAQ OMX Helsinki in Finland
as of April 1, 2008. The total number of 2005C stock options is
2,000,000 of which 522,000 are owned by a subsidiary of KONE
Corporation. Each option right entitles its owner to subscribe for
two (2) KONE Corporation class B shares at a price of EUR 11.90 per
share. At the end of June 2009, the remaining 2005C options entitled
their holders to subscribe for 3,909,150 class B shares. The
subscription period for series C options will end on April 30, 2010.
In December 2007, KONE Corporation's Board of Directors decided to
grant stock option rights to approximately 350 employees of KONE's
global organization. The share subscription period for 2007 stock
option will be April 1, 2010-April 30, 2012. The share subscription
period begins only if the average turnover growth of the KONE Group
for the 2008 and 2009 financial years exceeds the market growth and
if the earnings before interest and taxes (EBIT) of the KONE Group
for the financial year 2008 exceeds the EBIT for the 2007 financial
year, and the EBIT for the 2009 financial year exceeds the EBIT for
the 2008 financial year.
As of June 30, 2009, KONE's share capital was EUR 64,417,742.50,
comprising 219,566,614 listed class B shares and 38,104,356 unlisted
class A shares.
KONE's market capitalization was EUR 5,522 million on June 30, 2009,
disregarding own shares in the Group's possession.
Repurchase of KONE shares
On the basis of the Annual General Meeting's authorization, KONE
Corporation's Board of Directors decided to commence repurchasing
shares at the earliest on March 3, 2009.
During January 1-June 30, 2009, KONE did not use its authorization to
repurchase its own shares. In April 2009, 195,264 KONE class B shares
assigned to the share-based incentive plan for the company's senior
management were transferred from KNEBV Incentive Oy to the
participants due to achieved targets for the financial year 2008. At
the end of June, the Group had 4,710,242 class B shares in its
possession. The shares in the Group's possession represent 2.1% of
the total number of class B shares. This corresponds to 0.8% of the
total voting rights.
Shares traded on the NASDAQ OMX Helsinki Ltd.
The NASDAQ OMX Helsinki traded 92.6 million of KONE Corporation's
class B shares in January-June, equivalent to a turnover of EUR 1,677
million. The daily average trading volume was 759,261 (1-6/2008:
778,000; the numbers of shares have been adjusted to the increase in
the number of shares due to the share issue without payment). The
share price on June 30, 2009 was EUR 21.83. The volume weighted
average share price during the period was EUR 18.14. The highest
quotation during the period under review was EUR 22.67 and the lowest
13.80.
The number of registered shareholders at the beginning of the review
period was 16,354 and 19,263 at its end. The number of private
households holding shares totaled 17,394 at the end of the period,
which corresponds to approximately 12% of the listed B-shares.
According to the nominee registers, 44.3% of the listed class B
shares were owned by foreigners as of June 30, 2009. Other foreign
ownership at the end of the period totaled 7.7%; thus a total of
52.0% of the company's listed class B shares were owned by
international investors, corresponding to approximately 19% of the
total votes in the company.
Market outlook
In 2009, the maintenance market will continue to develop well. The
modernization market will be at about last year's level. The rate of
decline will decrease in the new equipment market.
Outlook
KONE further specifies its outlook for 2009.
KONE's objective in net sales is to grow 2-5% as compared to net
sales in 2008.
In operating income (EBIT), the objective is EUR 570-595 million
excluding the one-time cost of EUR 33.6 million.
Previous outlook
In 2009, KONE's objective in net sales is to reach a growth of 5
percent or at least approximately the net sales level of 2008.
In operating income (EBIT), the objective is to reach a growth of 5
percent or at least approximately the operating income level of 2008.
Helsinki, July 21, 2009
KONE Corporation
Board of Directors
This Interim Report contains forward-looking statements that are
based on the current expectations, known factors, decisions and plans
of the management of KONE. Although management believes that the
expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will
prove to be correct. Accordingly, results could differ materially
from those implied in the forward-looking statements as a result of,
among other factors, changes in economic, market and competitive
conditions, changes in the regulatory environment and other
government actions and fluctuations in exchange rates.
Consolidated income statement
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
MEUR 2009 % 2008 % 2009 % 2008 % 2008 %
Sales 1,168.6 1,142.1 2,189.6 2,047.4 4,602.8
Costs and
expenses -1,040.4 -990.4 -1,954.7 -1,794.5 -3,979.6
Depreciation -15.5 -15.0 -31.0 -29.7 -64.8
Operating
income 112.7 9.6 136.7 12.0 203.9 9.3 223.2 10.9 558.4 12.1
Share of
associated
companies'
net income 1.5 0.4 1.6 0.8 2.6
Financing
income 3.0 1.9 21.7 7.5 24.4
Financing
expenses -1.7 -5.3 -6.1 -10.8 -21.6
Income
before
taxes 115.5 9.9 133.7 11.7 221.1 10.1 220.7 10.8 563.8 12.2
Taxes -29.0 -34.9 -55.9 -58.0 -145.7
Net income 86.5 7.4 98.8 8.7 165.2 7.5 162.7 7.9 418.1 9.1
Net income
attributable
to:
Shareholders
of the
parent
company 86.1 98.7 164.7 162.3 417.3
Minority
interests 0.4 0.1 0.5 0.4 0.8
Total 86.5 98.8 165.2 162.7 418.1
Earnings per share for profit attributable to the shareholders of the
parent company, EUR
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
2009 2008 2009 2008 2008
Basic earnings
per share 0.34 0.39 0.65 0.65 1.66
Diluted earnings
per share 0.34 0.39 0.65 0.64 1.65
Consolidated statement of comprehensive income
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
MEUR 2009 2008 2009 2008 2008
Net income 86.5 98.8 165.2 162.7 418.1
Other
comprehensive
income,
net
of tax:
Translations
difference -7.1 6.6 1.5 -14.3 38.0
Hedging of
foreing
subsidiaries 0.9 -1.6 -1.0 2.5 -22.9
Cash flow
hedges -0.9 -3.9 -6.1 1.7 3.5
Other
comprehensive
income,
net of tax -7.1 1.1 -5.6 -10.1 18.6
Total
comprehensive
income 79.4 99.9 159.6 152.6 436.7
Total
comprehensive
income
attributable
to:
Shareholders of
the parent
company 79.0 99.8 159.1 152.2 435.9
Minority
interests 0.4 0.1 0.5 0.4 0.8
Total 79.4 99.9 159.6 152.6 436.7
Condensed consolidated statement of financial position
Assets
Jun 30, Jun 30, Dec 31,
MEUR 2009 2008 2008
Non-current assets
Intangible assets 699.0 644.2 670.2
Tangible assets 209.5 203.7 214.7
Loans receivable and other
interest-bearing assets 1.8 1.7 2.3
Deferred tax assets 126.7 110.5 122.1
Investments 142.8 135.2 169.1
Total non-current assets 1,179.8 1,095.3 1,178.4
Current assets
Inventories 936.9 896.6 885.5
Advance payments received -926.9 -842.5 -805.4
Accounts receivable and other non
interest-bearing assets 1,134.6 1,049.2 1,046.5
Current loans and receivables 177.0 121.5 204.0
Cash and cash equivalents 170.3 162.0 147.8
Total current assets 1,491.9 1,386.8 1,478.4
Total assets 2,671.7 2,482.1 2,656.8
Equity and liabilities
Jun 30, Jun 30, Dec 31,
MEUR 2009 2008 2008
Equity 1,036.6 745.3 1,035.9
Non-current liabilities
Loans 28.9 219.6 172.4
Deferred tax liabilities 39.5 28.3 39.7
Employee benefits 119.0 124.9 115.8
Total non-current liabilities 187.4 372.8 327.9
Provisions 79.4 76.9 49.9
Current liabilities
Loans 153.1 152.6 123.4
Accounts payable and other liabilities 1,215.2 1,134.5 1,119.7
Total current liabilities 1,368.3 1,287.1 1,243.1
Total equity and liabilities 2,671.7 2,482.1 2,656.8
Consolidated statement of changes in equity
1) Share capital
2) Share premium account
3) Paid-up unrestricted equity reserve
4) Fair value and other reserves
5) Translation differences
6) Own shares
7) Retained earnings
8) Net income for the period
9) Minority interests
10) Total equity
MEUR 1) 2) 3) 4) 5) 6) 7) 8) 9) 10)
Jan 1, 2009 64.4 100.4 3.3 9.0 -16.2 -83.1 957.2 0.9 1,035.9
Total
comprehensive
income for
the period -6.1 0.5 164.7 0.5 159.6
Transactions
with
shareholders
and
minority
shareholders:
Dividends
paid -164.1 -164.1
Issue of
shares
(option
rights) 0.0 0.9 0.9
Purchase of
own shares -
Sale of
own shares -
Change in
minority
interests -
Option and
share-based
compensation 3.0 1.3 4.3
Jun 30, 2009 64.4 100.4 4.2 2.9 -15.7 -80.1 794.4 164.7 1.4 1,036.6
MEUR 1) 2) 3) 4) 5) 6) 7) 8) 9) 10)
Jan 1, 2008 64.2 100.2 - 5.5 -31.3 -87.8 698.1 0.3 749.2
Total
comprehensive
income
for the
period 1.7 -11.8 162.3 0.4 152.6
Transactions
with
shareholders
and
minority
shareholders:
Dividends
paid -163.6 -163.6
Issue of
shares
(option
rights) 0.0 0.2 0.7 0.9
Purchase of
own shares -
Sale of
own shares -
Change in
minority
interests 0.5 0.5
Option and
share-based
compensation 4.7 1.0 5.7
Jun 30, 2008 64.2 100.4 0.7 7.2 -43.1 -83.1 535.5 162.3 1.2 745.3
MEUR 1) 2) 3) 4) 5) 6) 7) 8) 9) 10)
Jan 1, 2008 64.2 100.2 - 5.5 -31.3 -87.8 698.1 0.3 749.2
Total
comprehensive
income for
the period 3.5 15.1 417.3 0.8 436.7
Transactions
with
shareholders
and minority
shareholders:
Dividends
paid -163.6 -163.6
Issue of
shares
(option
rights) 0.2 0.2 3.3 3.7
Purchase of
own shares -
Sale of
own shares -
Change in
minority
interests -0.2 -0.2
Option and
share-based
compensation 4.7 5.4 10.1
Dec 31, 2008 64.4 100.4 3.3 9.0 -16.2 -83.1 539.9 417.3 0.9 1,035.9
Condensed consolidated statement of cash flows
MEUR 4-6/2009 4-6/2008 1-6/2009 1-6/2008 1-12/2008
Operating income 112.7 136.7 203.9 223.2 558.4
Change in working
capital 72.9 -32.8 136.5 32.6 -95.8
Depreciation 15.5 15.0 31.0 29.7 64.8
Cash flow from
operations 201.1 118.9 371.4 285.5 527.4
Cash flow
from financing
items and taxes -49.9 -35.2 -65.6 -50.6 -99.5
Cash flow
from
operating
activities 151.2 83.7 305.8 234.9 427.9
Cash flow
from investing
activities -10.2 -25.5 -32.5 -61.3 -128.6
Cash flow
after
investing
activities 141.0 58.2 273.3 173.6 299.3
Purchase and
sale of own shares - - - - -
Issue of shares 0.6 0.7 0.9 0.9 3.7
Dividends paid -12.1 -12.2 -164.0 -163.3 -163.3
Change in
loans receivable -1.5 -10.4 26.2 -5.6 -82.7
Change in
loans payable -133.1 -75.6 -114.2 1.5 -62.7
Cash flow
from
financing
activities -146.1 -97.5 -251.1 -166.5 -305.0
Change in cash
and cash
equivalents -5.1 -39.3 22.2 7.1 -5.7
Cash and cash
equivalents at
end of period 170.3 162.0 170.3 162.0 147.8
Translation
difference -2.1 -0.9 -0.3 0.0 1.4
Cash and cash
equivalents at
beginning
of period 173.3 200.4 147.8 154.9 154.9
Change in
cash and cash
equivalents -5.1 -39.3 22.2 7.1 -5.7
Change in interest-bearing net debt
MEUR 4-6/2009 4-6/2008 1-6/2009 1-6/2008 1-12/2008
Interest-bearing
net debt at
beginning of period -40.3 137.8 -58.3 91.7 91.7
Interest-bearing
net debt at
end of period -167.1 87.0 -167.1 87.0 -58.3
Change in
interest-bearing
net debt -126.8 -50.8 -108.8 -4.7 -150.0
Key figures
1-6/2009 1-6/2008 1-12/2008
Basic earnings
per share EUR 0.65 0.65 1.66
Diluted earnings
per share EUR 0.65 0.64 1.65
Equity per share EUR 4.09 2.96 4.10
Interest-bearing
net debt MEUR -167.1 87.0 -58.3
Total equity/
total assets % 38.8 30.0 39.0
Gearing % -16.1 11.7 -5.6
Return on equity % 31.9 43.5 46.8
Return on
capital employed % 26.9 31.1 35.9
Total assets MEUR 2,671.7 2,482.1 2,656.8
Assets employed MEUR 869.5 832.3 977.6
Working capital
(including
financing and
tax items) MEUR -181.8 -150.8 -76.4
Sales by geographical regions
MEUR 1-6/2009 % 1-6/2008 % 1-12/2008 %
EMEA 1) 1,374.9 63 1,365.0 67 3,001.5 65
Americas 456.4 21 375.7 18 888.3 19
Asia-Pacific 358.3 16 306.7 15 713.0 16
Total 2,189.6 2,047.4 4,602.8
1= EMEA = Europe, Middle East, Africa
Quarterly Key Figures
Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
2009 2009 2008 2008 2008 2008
Orders
received MEUR 953.9 898.5 845.2 892.4 1,092.4 1,117.5
Order book MEUR 3,754.1 3,753.1 3,576.7 4,002.8 3,838.7 3,617.4
Sales MEUR 1,168.6 1,021.0 1,431.6 1,123.8 1,142.1 905.3
Operating
income MEUR 146.3 1) 91.2 189.2 146.0 136.7 86.5
Operating %
income 12.5 1) 8.9 13.2 13.0 12.0 9.6
Q4/ Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
2007 2007 2007 2007 2006 2006 2006 2006
Orders
received MEUR 901.9 926.3 944.4 902.1 712.1 742.0 821.9 840.3
Order
book MEUR 3,282.3 3,473.6 3,318.0 3,105.7 2,762.1 2,951.0 2,818.0 2,654.0
Sales MEUR 1,294.2 971.6 1,001.9 811.2 1,145.6 879.8 840.4 735.0
Operating 160.8
income MEUR 2) 126.7 116.4 69.3 3) 123.4 101.1 83.9 51.7
Operating %
income 12.4 2) 13.0 11.6 8.5 3) 10.8 11.5 10.0 7.0
1) Excluding a MEUR 33.6 one-time cost related to the fixed cost
adjustment program.
2) Excluding a MEUR 22.5 provision for the Austrian cartel court's
fine decision and a MEUR 12.1 sales profit from the sale of KONE
Building.
3) Excluding a MEUR 142.0 fine for the European Commission's
decision.
Orders received
MEUR 1-6/2009 1-6/2008 1-12/2008
1,852.4 2,209.9 3,947.5
Order book
Jun 30, Jun 30, Dec 31,
MEUR 2009 2008 2008
3,754.1 3,838.7 3,576.7
Capital expenditure
MEUR 1-6/2009 1-6/2008 1-12/2008
In fixed assets 16.3 23.6 65.1
In leasing agreements 3.1 3.5 9.3
In acquisitions 29.0 37.6 60.0
Total 48.4 64.7 134.4
R&D expenditure
MEUR 1-6/2009 1-6/2008 1-12/2008
30.9 29.9 58.3
R&D Expenditure as percentage of sales 1.4 1.5 1.3
Number of employees
1-6/2009 1-6/2008 1-12/2008
Average 34,461 33,301 33,935
At the end of the period 34,285 34,013 34,831
Notes on the consolidated financial statements
Commitments
Jun 30, Dec 31,
MEUR 2009 Jun 30, 2008 2008
Mortgages
Group and parent company 0.7 0.7 0.7
Pledged assets
Group and parent company 1.9 4.8 2.0
Guarantees
Associated companies 3.6 3.7 4.1
Others 6.7 6.1 7.2
Operating leases 172.7 149.0 171.7
Total 185.6 164.3 185.7
The future minimum lease payments under non-cancellable operating
leases
Jun 30, Jun 30, Dec 31,
MEUR 2009 2008 2008
Less than 1 year 41.6 39.2 43.3
1-5 years 98.7 90.6 96.9
Over 5 years 32.4 19.2 31.5
Total 172.7 149.0 171.7
Derivatives
Fair values of derivative financial instruments
positive negative net net net
fair fair fair fair fair
value value value value value
Jun 30, Jun 30, Jun 30, Jun 30, Dec 31,
MEUR 2009 2009 2009 2008 2008
FX Forward contracts 8.7 10.2 -1.5 12.6 10.9
Currency options 1.6 1.0 0.6 0.0 0.4
Cross-currency swaps,
due under one year 2.3 13.5 -11.2 - 1.8
Cross-currency swaps,
due in 1-3 years - - - 10.4 -22.7
Electricity derivatives 0.0 0.8 -0.8 1.7 -1.0
Total 12.6 25.5 -12.9 24.7 -10.6
Nominal values of derivative financial instruments
Jun 30, Jun 30, Dec 31,
MEUR 2009 2008 2008
FX Forward contracts 472.8 603.8 615.7
Currency options 99.8 46.0 90.4
Cross-currency swaps,
due under one year 136.7 - 23.6
Cross-currency swaps,
due in 1-3 years - 136.7 113.1
Electricity
derivatives 4.3 3.0 4.7
Total 713.6 789.5 847.5
Share and shareholders June 30, 2009
Class A Class B
shares shares Total
Number of shares 38,104,356 219,566,614 257,670,970
Own shares in
possession 1) 4,710,242
Share capital, EUR 64,417,743
Market capitalization, MEUR 5,522
Number of shares traded,
million, 1-6/2009 92.6
Value of shares traded MEUR,
1-6/2009 1,677
Number of shareholders 3 19,263 19,263
Close High Low
Class B share price,
EUR, 1-6/2009 21.83 22.67 13.80
1) During January-June 2009, the authorization to repurchase shares
was not used. In April 2009, 195,264 KONE class B shares assigned to
the share-based incentive plan for the company's senior management
were transferred from KNEBV Incentive Oy to the participants due to
achieved targets for the financial year 2008. During 2008, the
authorization to repurchase shares was not used. In April 2008,
326,000 class B shares assigned to the share-based incentive plan for
the company's senior management were transferred from KNEBV Incentive
Ky to the participants due to achieved targets for the financial year
2007. Due to the share issue without payment (registered on February
28, 2008) the number of shares in the company was increased by
issuing new shares to the shareholders without payment in proportion
to their holdings so that one class A share was given for each class
A share and one class B share for each class B share.
