KONE Corporation, stock exchange release, April 20, 2010 at 12:30 p.m. EET
KONE's Q1: The year started strongly
January-March 2010
- In January-March 2010, orders received totaled EUR 894.7 (1-3/2009: 898.5)
million. Orders received declined by 0.4% at historical exchange rates and by
0.9% at comparable exchange rates. The order book stood at EUR 3,638 (Dec
31, 2009: 3,309) million at the end of March 2010.
- Net sales declined by 1.8% to EUR 1,003 (1,021) million. At comparable
exchange rates it declined by 2.5%.
- Operating income was EUR 108.6 (91.2) million or 10.8% (8.9%) of net sales.
- Cash flow from operations was very strong and reached EUR 217.6 (170.3)
million.
- KONE upgrades its outlook for 2010. KONE's net sales is estimated to decline
by 0-5% compared to 2009. The operating income (EBIT) is expected to be in the
range of EUR 580-620 million. KONE previously estimated its net sales to decline
approximately by 5% at comparable exchange rates. The previous operating income
(EBIT) outlook was EUR 560-610 million.
Key Figures
1-3/ 1-3/ 1-12/
2010 2009 2009
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Orders received MEUR 894.7 898.5 3,432.4
Order book MEUR 3,638.5 3,753.1 3,309.1
Sales MEUR 1,003.0 1,021.0 4,743.7
Operating income MEUR 108.6 91.2 600.3 1)
Operating income % 10.8 8.9 12.7 1)
Cash flow from operations
(before financing items and taxes) MEUR 217.6 170.3 825.1
Net income MEUR 81.6 78.7 466.4
Total comprehensive income MEUR 110.8 80.2 449.5
Basic earnings per share EUR 0.32 0.31 1.84
Interest-bearing net debt MEUR -360.0 -40.3 -504.7
Total equity/ total assets % 41.2 34.9 47.0
Gearing % -32.1 -4.2 -37.7
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1) Excluding a MEUR 33.6 one-time restructuring cost related to the fixed costs
adjustment program, which was booked in the second quarter in 2009.
KONE President & CEO, Matti Alahuhta, in conjunction the review:
"I am very pleased with our performance in the first quarter. Orders received
was approximately at the same level as a year ago, even though new equipment
markets continued to be weak in Europe and the Americas. Operating income grew
by 19.1% and both operating income and cash flow were at record high first
quarter levels.
This means that we have so far managed to improve our performance all the time
in the weak environment. Our approach of being market opportunity oriented, of
focusing in areas which have profit improvement potential and of developing
people leadership has worked well. Our personnel has done a great job. I want to
thank them for their efforts."
Analyst and media meeting and conference call
A meeting for the press, conducted in Finnish, will be held on Tuesday, April
20, 2010 at 2:15 p.m. Eastern European Time.
A telephone conference and a meeting for analysts, conducted in English, will
begin at 3:45 p.m. Eastern European Time. The meeting can also be followed 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: +1 866 458 4087
Non-US callers: +44 203 043 2436
Participant code: KONE
An on demand version of the telephone conference will be available on
www.kone.com later the same day.
About KONE
KONE is one of the global leaders in the elevator and escalator industry. The
company has been committed to understanding the needs of its customers for the
past century, providing industry-leading elevators, escalators and automatic
building doors as well as innovative solutions for modernization and
maintenance. The company'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. In 2009, KONE had annual net sales of EUR 4.7 billion
and approximately 34,000 employees. KONE class B shares are listed on the NASDAQ
OMX Helsinki Ltd in Finland. Founded in 1910, KONE celebrates its centennial
anniversary in 2010.
www.kone.com
For further information please contact:
Henrik Ehrnrooth, CFO, tel. +358 (0) 204 75 4260
Sender:
KONE Corporation
Henrik Ehrnrooth
CFO
Anne Korkiakoski
Executive Vice President,
Marketing and Communications
Interim Report for January-March 2010
Accounting Principles
KONE Corporation's Interim Report for January-March 2010 has been prepared in
line with IAS 34, `Interim Financial Reporting´. KONE has applied the same
accounting principles in the preparation of this interim report as in its
financial statements for 2009, published on January 26, 2010. Additionally the
changes according to revised IAS/IFRS standards have been adopted. Out of these
relevant changes are IFRS 3 (revised) Business combinations and IAS 27 (revised)
Consolidated and separate financial statements. The information presented in
this Interim Report has not been audited.
Operating environment in January-March
In the first quarter of 2010, the new equipment markets continued to be
challenging in most geographical regions. The Asia-Pacific region developed
favorably with China showing strong growth. The residential segment in North
Europe has started to recover whereas activity in South Europe and in the
Americas continued to decline. The activity level in major projects increased in
most regions. The modernization markets were quite stable and provided selective
growth opportunities, but continued to be competitive. Maintenance markets,
which are less cyclical by nature, continued to grow, but became increasingly
competitive. The growth was supported by high conversions of installed equipment
into the maintenance base which was due to strong new equipment deliveries in
prior years. The lag between the installation of new equipment and the
conversion into the maintenance base is typically 12 months but can be up to 30
months.
In the Europe, Middle East and Africa (EMEA) region, the business environment in
new equipment markets continued to be challenging, but varied from country to
country. The residential market activity started to recover in some countries,
particularly in Sweden, Finland and Belgium. Russia, Spain, the United Kingdom
and Ireland remained weak and activity in Italy and France declined. The market
in Germany continued to be fairly stable. Markets in the Middle East developed
positively. The modernization markets were mixed with Belgium, Sweden and
Finland showing growth, and France and Italy declining. The maintenance markets
continued to develop well in the EMEA region, but were competitive.
In the Americas region, the new equipment markets continued to be challenging.
In the United States, activity in the office, residential, retail and hotel
segments remained very weak, while medical, infrastructure and publicly funded
projects developed favorably. Price competition especially in major projects
remained intense in the United States. Modernization activity remained
relatively stable. Infrastructure related projects were driving the new
equipment market in the United States. In Canada, private sector activity
increased and government-funded activity remained at a good level in the new
equipment market. In Mexico, the new equipment market showed signs of slow
recovery, while modernization activity continued to be weak. Maintenance markets
in the Americas remained relatively stable, but were increasingly competitive.
In the Asia-Pacific region, activity in the new equipment market grew clearly
during the first quarter. The pricing environment continued to be intensive. In
China, the public transportation segment and the residential segment,
particularly affordable housing, continued to grow. The commercial segment was
also quite active. In India, tendering activity continued to grow and the
residential, medical and public transportation segments were strong, while the
commercial segment remained flat at a low level. In Australia, the new equipment
and modernization markets in the residential segment showed clear signs of
improvement and the markets in Southeast Asia also started to pick up.
Maintenance markets in Asia-Pacific developed favorably.
Orders received and Order book
KONE's orders received decreased by 0.4% as compared to January-March 2009, and
totaled EUR 894.7 (1-3/2009: 898.5) million. At comparable exchange rates,
orders received decreased 0.9%. KONE was successful in particular in the volume
business. The performance in orders received was strongest in Asia-Pacific, with
China developing most positively. Maintenance contracts are not included in
orders received.
The order book increased from the end of 2009 by 10.0% and stood at EUR 3,638
(Dec 31, 2009: 3,309) million at the end of March 2010. At comparable exchange
rates, the increase was 4.5%. As earlier, the margin of the order book remained
at a good level.
In the EMEA region, orders received declined slightly during the first quarter
as compared to January-March 2009. In new equipment, KONE's orders received
declined compared to the strong January-March period in 2009. The development
varied from country to country. KONE performed well in the Middle East, Sweden
and Finland, where the orders received development was positive compared to the
year before. The most negative development during the first quarter of 2010 was
seen in Italy, France and the United Kingdom. In the modernization market KONE's
orders received grew. The development was best in the Netherlands, Belgium,
Austria and the United Kingdom.
In the EMEA region, one of KONE's largest orders during the first quarter was a
ten-year partnership contract signed in the Netherlands between KONE and ProRail
for the installation of new KONE elevators and their maintenance. The contract
defines KONE as one of two preferred suppliers for the installation of 175 new
elevators. The maintenance contract covers 25 years.
In the Americas, KONE's orders received declined during January-March because of
the weak new equipment market environment especially in the United States.
During the first quarter, competition continued to increase and aggressive
pricing behavior became apparent especially in major projects. In the
modernization market, KONE's orders received grew slightly. The margin in the
order book remained at the earlier healthy level.
In the Asia-Pacific region, new equipment orders received increased
significantly. All main markets in Asia-Pacific grew strongly with China showing
a particularly strong performance. The orders received growth was also good in
India, Australia and Southeast Asia.
KONE received two major orders in China during the first quarter. KONE won an
order to supply 90 machine-room-less elevators and 16 autowalks to Kunming's new
international airport. KONE also won an order to supply 38 elevators, 22
escalators and 6 autowalks to Raffles City Chengdu, a new landmark building in
the capital of Sichuan Province.
Net sales
KONE's net sales decreased by 1.8% as compared to January-March 2009, and
totaled EUR 1,003 (1-3/2009: 1,021) million. At comparable exchange rates the
decrease was 2.5%.
New equipment sales accounted for EUR 429.6 (445.1) million of the total and
represented a decline of 3.5% over the comparison period. At comparable exchange
rates, new equipment sales declined by 4.0%.
Service (maintenance and modernization) sales decreased by 0.4% and totaled EUR
573.4 (575.9) million. At comparable exchange rates, the decrease was 1.4%.
Maintenance sales continued to grow at its prior good rate, whereas
modernization sales declined clearly due to seasonal factors and changes in the
modernization sales mix. However, modernization orders continued to grow.
The distribution of net sales was 59% (63%) EMEA, 24% (23%) Americas and 17%
(14%) Asia-Pacific.
Sales by geographical regions, MEUR
1-3/ 1-3/ 1-12/
2010 % 2009 % 2009 %
---------------------------------------------
EMEA 1) 593.4 59 638.8 63 2,953.4 62
Americas 236.9 24 234.1 23 970.2 21
Asia-Pacific 172.7 17 148.1 14 820.1 17
---------------------------------------------
Total 1,003.0 1,021.0 4,743.7
---------------------------------------------
1) EMEA = Europe, Middle East, Africa
Financial result
KONE's operating income was strong at EUR 108.6 (1-3/2009: 91.2) million or
10.8% (8.9%) of net sales. The growth in operating income was the result of
improved overall quality and productivity as well as favorable sourcing costs.
In addition, a tight cost control contributed to the positive result
development. Net financing items were EUR 0.2 (14.3) million.
KONE's income before taxes was EUR 109.5 (105.6) million. Taxes totaled EUR
27.9 (26.9) million, taking into account taxes proportionate to the amount
estimated for the financial year. This represents an effective tax rate of
25.5%. Net income for the period under review was EUR 81.6 (78.7) million.
Earnings per share were EUR 0.32 (0.31). Equity per share was EUR 4.42 (3.77).
Consolidated statement of financial position and Cash flow
KONE's financial position was strong and the company had a positive net cash
position at the end of March. Cash flow generated from operations (before
financing items and taxes) in January-March was EUR 217.6 (1-3/2009: 170.3)
million.
The primary drivers of the strong cash flow were the growth in the operating
income and a substantial improvement in net working capital. The progress in net
working capital was largely due to a constant strong focus on payment terms and
an improvement in the ratio of advance payments received relative to
inventories. At the end of March 2010, net working capital was EUR -330.0
(December 31, 2009: -228.7) million, including financing items and taxes.
Interest-bearing assets exceeded interest-bearing debts and the net cash
position totaled EUR 360.0 (December 31, 2009: 504.7) million. Gearing was
-32.1%, compared with -37.7% at the end of 2009. KONE's total equity/total
assets ratio was 41.2% (December 31, 2009: 47.0%) at the end of March.
Capital expenditure and acquisitions
KONE's capital expenditure, including acquisitions, totaled EUR 10.5 (1-3/2009:
31.1) million. Capital expenditure, excluding acquisitions, was mainly related
to facilities and equipment in R&D, IT and production. Acquisitions accounted
for EUR 1.2 (22.3) million of this figure.
During January-March 2010, KONE completed the acquisition of ASBA Mantenimientos
S.L., a Spanish elevator company based in Barcelona, to strenghten KONE's
maintenance and modernization operations in the Catalonia region. This
acquisition has not been consolidated during the reporting period.
Research and development
Research and development expenses totaled EUR 15.0 (1-3/2009: 15.3) million,
representing 1.5% (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.
In January-March 2010, KONE released new offerings in all regions. The new and
improved elevator offering for the Asia-Pacific markets included a wide range of
updated solutions and option extensions as well as a new design collection. In
Europe, KONE introduced an enhanced offering for the medical segment. In
addition, extended solutions for the residential and office segments were
offered with a focus on energy-efficiency. KONE also released an updated
offering for modular elevator modernization and full replacement. In the
Americas, KONE launched for its mid- and high-rise elevators updated car and
signalization design solutions, along with energy-efficient lightning and
improved functionality offerings.
In January 2010, KONE released a new escalator dedicated especially to the
Chinese retail and commercial building segment.
Other important events during the financial period
KONE announced in 2009 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 were communicated in connection with the second quarter result in 2009.
The annual impact of this fixed cost reduction plan is expected to be at least
EUR 40 million starting in 2010. The total one-time restructuring cost relating
to this program was EUR 33.6 million, which was booked in the second quarter of
2009. The fixed cost adjustment program has progressed according to plan during
the first quarter of 2010.
KONE announced in March that certain municipalities, public authorities and
companies in Austria had filed civil damage claims against leading elevator and
escalator companies during the reporting period. The claims have been served on
KONE's Austrian subsidiary KONE AG, and they relate to the 2007 decision of the
Austrian Cartel Court. The total capital amount claimed jointly and severally
from all of the defendants together amounted to EUR 108 million. KONE's position
is that the claims are without merit. No provision has been made.
Personnel
The objective of KONE's personnel strategy is to help the company meet its
business targets. The main goals of this strategy are to further secure the
availability, engagement, motivation and continuous development of its
personnel. All of KONE's activities are 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.
People Leadership is one of KONE's five development programs. During the
reporting period, KONE continued to invest in people development programs and
launched a new leadership program for middle management. KONE's annual employee
survey was conducted during the first quarter and its results will be reported
for actions during the second quarter.
KONE had 33,642 (December 31, 2009: 33,988) employees at the end of March. The
average number of employees was 33,697 (1-3/2009: 34,565).
The geographical distribution of KONE employees was 55% (December
31, 2009: 55%) in EMEA, 17% (17%) in the Americas and 28% (28%) in Asia-Pacific.
Environment
KONE's aim is to be the eco-efficiency leader in its industry. The development
of eco-efficient solutions focuses on stand-by energy saving solutions and
regenerative units for elevators. KONE set an ambitious target for 2010 with the
aim of reducing the electricity consumption of its volume elevators by 50% by
the end of 2010, compared to the 2008 base value. During 2010, KONE's new volume
elevators' energy consumption will be reduced by a further 20% in addition to
the 30% reduction achieved in 2009.
KONE intends to minimize its carbon footprint and to ensure the compliance of
KONE's suppliers with the corresponding requirements and environmental targets.
KONE has set an annual 5% carbon footprint reduction target for its own
operations. The largest part of KONE's entire global impact relates to the
amount of electricity used by KONE equipment in their lifetime, underlining the
importance of energy-efficient innovations for elevators and escalators. The
most significant carbon dioxide (CO2) impact of KONE's own operations relates to
the company's car fleet, electricity consumption and logistics. As a
consequence, projects to renew KONE's global car fleet and to reduce needs for
air travel are ongoing.
Capital and risk management
KONE's business activities are exposed to risks, which may arise from its
operations or changes in the business environment. The risk factors listed below
can potentially have an adverse affect on KONE's business operations and
financial position and hence the shareholder value of the company. Other risks,
which are currently either unknown or considered immaterial to KONE, may,
however, become material in the future.
A continuing global economic slowdown or a renewed weakening of the global
economy after a short period of growth may bring about a further decrease in the
number of new equipment and modernization orders received, cancellation of
agreed deliveries, or delays in the commencement of projects. A significant part
of KONE's sales consists of services which are less susceptible to the effects
of economic cycles, but which are very labor-intensive. The profit development
of the Group could be adversely affected if the productivity targets in the
service business are not met or if it is not possible to efficiently reallocate
personnel resources in response to reduced business opportunities.
A big proportion of KONE's new equipment sales take place in the form of major
construction projects in which KONE is a subcontractor. In these projects,
KONE's project management organization cooperates with the main contractors'
project organization. Supply chains, the high technology featured in components
and technologically demanding installation processes may make it more difficult
to achieve the quality, cost or schedule objectives set for the project. Common
project management methodology and tools together with related global training
programs are used for managing project risks.
KONE's business activities are dependent on the uninterrupted operation and
reliability of sourcing channels, production plants, logistics processes and the
IT systems used. These risks are controlled by analyzing and improving the fault
tolerance of processes and by increasing the readiness for transferring the
manufacturing of critical components from one production line to another. KONE
actively monitors the operations and financial strength of its key suppliers.
The aim is also to secure the availability of alternative sourcing channels for
critical components and services. Additionally, KONE has a global property
damage and business interruption insurance program in place.
A renewed economic downturn may affect the liquidity and payment schedules of
KONE's customers and lead to credit losses. KONE's `tender to cash´ process
defines the rules for tendering, authorizations and credit control. Advance
payments, documentary credits and guarantees are used in the payment terms to
minimize the risks related to accounts receivable. KONE proactively manages its
accounts receivable in order to minimize the risk of customer defaults. The
customer base of KONE consists of a large number of customers in several market
areas.
KONE operates internationally and is thus exposed to currency risks arising from
exchange rate fluctuations related to currency flows from sales and purchases
and from translation of statement of financial position items of foreign
subsidiaries into euros. The KONE Treasury function manages exchange rates and
other financial risks centrally on the basis of principles approved by the Board
of Directors.
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. In order to reduce the fluctuation of raw material prices
and their impact on the price of components, KONE has for 2010 entered into
fixed price contracts for a substantial part of the most significant materials.
The maintenance business deploys a significant fleet of service vehicles, which
explains why oil price fluctuations have an effect on the cost of maintenance.
Decisions of the Annual General Meeting
KONE Corporation's Annual General Meeting was held in Helsinki on March
1, 2010. The meeting approved the financial statements and discharged the
responsible parties from liability for the January 1-December 31, 2009 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, Anne Brunila, Reino Hanhinen, Antti Herlin, Sirkka
Hämäläinen-Lindfors, Juhani Kaskeala, Shunichi Kimura and Sirpa Pietikäinen and
as deputy Member Jussi Herlin.
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 authorized the Board of Directors 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. The authorization shall remain in effect for a period of
one year from the date of the decision of the General Meeting.
In addition, the Annual General Meeting authorized the Board of Directors to
decide on the issuance of options and other special rights entitling to shares
referred to in chapter 10 section 1 of the Companies Act. The authorization is
limited to a maximum of 3,810,000 class A shares and 21,760,000 class B shares.
The Board of Directors decides on all the conditions of the issuance of shares
and of special rights entitling to shares. The authorization concerns both the
issuance of new shares as well as the transfer of treasury shares, and the
issuance of shares and of special rights entitling to shares may be carried out
in deviation from the shareholders' pre-emptive rights. The authorization shall
remain in effect for a period of five years from the date of the decision of the
General Meeting.
The General Meeting decided to establish the KONE Corporation Centennial
Foundation. The purpose of the foundation is to advance and support
developmental, educational and cultural activities for children and youth around
the world. The General Meeting decided to distribute 100,000 treasury class B
shares of KONE Corporation without compensation to the KONE Corporation
Centennial Foundation to be established, and authorized the Board to later grant
no more than EUR 100,000 to the foundation. The General Meeting also decided to
authorize the Board to grant during 2010 no more than EUR 3,500,000 to support
the activities of universities and colleges.
Authorized public accountants Heikki Lassila and PricewaterhouseCoopers Oy were
re-nominated as the Company´s auditors.
Dividend for 2009
The Annual General Meeting approved the Board's proposal for dividends of EUR
1.295 for each of the 38,104,356 class A shares and EUR 1.30 for the
215,633,008 outstanding class B shares. Half of the dividend is an extra
dividend due to KONE's centennial year 2010. The date of record for dividend
distribution was March 4, 2010, and dividends were paid on March 11, 2010.
Share capital and Market capitalization
In 2005, KONE granted a conditional option program, 2005C. The 2005C stock
options were listed on the NASDAQ OMX Helsinki Ltd. 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 10.60
per share. At the end of March 2010, the remaining 2005C options entitled their
holders to subscribe for 3,153,250 class B shares. The subscription period for
series C options will end on April 30, 2010.
In 2007, KONE granted a conditional option program, 2007. The 2007 stock options
were listed on the NASDAQ OMX Helsinki Ltd. as of April 1, 2010. The total
number of stock options is 2,000,000 of which 888,000 are owned by a subsidiary
of KONE Corporation. Each option right will entitle its owner to subscribe for
two (2) class B shares at a price of EUR 22.845 per share. The subscription
period for 2007 stock option will be April 1, 2010-April 30, 2012.
On March 31, 2010, KONE's share capital was EUR 64,606,717.50, comprising
220,322,514 listed class B shares and 38,104,356 unlisted class A shares.
KONE´s market capitalization was EUR 7,767 million on March 31, 2010,
disregarding own shares in the Group's possession. Market capitalization is
calculated on the basis of both the listed B shares and the unlisted A shares
excluding treasury shares. Class A shares are valued at the closing price of the
class B shares at the end of the reporting period.
Repurchase of KONE shares
On the basis of the Annual General Meeting's authorization, KONE Corporation's
Board of Directors decided to commence the possible repurchasing of shares at
the earliest on March 9, 2010.
During January-March 2010, KONE did not use its authorization to repurchase its
own shares. 100,000 treasury class B shares of KONE Corporation were distributed
without compensation to the KONE Corporation Centennial Foundation in March
2010.
At the end of March, the Group had 4,610,242 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 Ltd. traded 41.6 million KONE Corporation's class B
shares in January-March, equivalent to a turnover of EUR 1,237 million. The
daily average trading volume was 670,549 (1-3/2009: 804,738). The share price on
March 31, 2010 was EUR 30.60. The volume weighted average share price during the
period was EUR 29.75. The highest quotation during the first quarter was EUR
31.48 and the lowest EUR 27.72.
The number of registered shareholders was 22,304 at the beginning of the review
period and 26,819 at its end. The number of private households holding shares
totaled 24,376 at the end of the period, which corresponds to approximately 13%
of the listed B shares.
According to the nominee registers, approximately 43.7% of the listed class B
shares were owned by foreigners as per March 31, 2010. Other foreign ownership
at the end of the period totaled approximately 7%. Thus a total of 50.2% of
KONE's listed class B shares were owned by international investors,
corresponding to approximately 18% of the total votes in the company.
Market outlook 2010
The good development is expected to expand in the new equipment market in the
Asia-Pacific region. In EMEA and North America, the market will continue to
decline in most countries, however stabilization is expected towards the end of
the year. The modernization market will be at about last year's level. The
maintenance market will continue to develop well, but remain very competitive.
Outlook 2010
KONE's net sales is estimated to decline by 0-5% compared to 2009.
The operating income (EBIT) is expected to be in the range of EUR 580-620
million.
Previous outlook
KONE's net sales is estimated to decline approximately 5% at comparable exchange
rates.
The operating income (EBIT) is expected to be in the range of EUR 560-610
million.
Helsinki, April 20, 2010
KONE Corporation's 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 statement of income
1-3/ 1-3/ 1-12/
MEUR 2010 % 2009 % 2009 %
-------------------------------------------------------------------
Sales 1,003.0 1,021.0 4,743.7
Costs and expenses -878.8 -914.3 -4,081.2
Depreciation -15.6 -15.5 -62.2
One-time
restructuring cost -33.6
-------------------------------------------------------------------
Operating income 108.6 10.8 91.2 8.9 566.7 11.9
Share of associated
companies' net income 0.7 0.1 8.1
Financing income 5.0 18.7 28.8
Financing expenses -4.8 -4.4 -9.0
-------------------------------------------------------------------
Income before taxes 109.5 10.9 105.6 10.3 594.6 12.5
Taxes -27.9 -26.9 -128.2
-------------------------------------------------------------------
Net income 81.6 8.1 78.7 7.7 466.4 9.8
-------------------------------------------------------------------
Net income attributable to:
Shareholders of
the parent company 81.3 78.6 465.6
Non-controlling
interests 0.3 0.1 0.8
-------------------------------------------------------------------
Total 81.6 78.7 466.4
-------------------------------------------------------------------
Earnings per share for profit attributable to the shareholders of the parent
company, EUR
1-3/ 1-3/ 1-12/
2010 % 2009 % 2009
------------------------------------
Basic earnings
per share, EUR 0.32 0.31 1.84
Diluted earnings
per share, EUR 0.32 0.31 1.83
------------------------------------
Consolidated statement of comprehensive income
1-3/ 1-3/ 1-12/
MEUR 2010 2009 2009
------------------------------------------------
Net income 81.6 78.7 466.4
Other comprehensive income,
net of tax:
Translation differences 33.7 8.6 -7.3
Hedging of
foreign subsidiaries - -1.9 -1.0
Cash flow hedges -4.5 -5.2 -8.6
------------------------------------------------
Other comprehensive income,
net of tax 29.2 1.5 -16.9
------------------------------------------------
Total comprehensive income 110.8 80.2 449.5
------------------------------------------------
Total comprehensive income
attributable to:
Shareholders of
the parent company 110.5 80.1 448.7
Non-controlling interests 0.3 0.1 0.8
------------------------------------------------
Total 110.8 80.2 449.5
Condensed consolidated statement of financial position
Assets
Mar 31, Mar 31, Dec 31,
MEUR 2010 2009 2009
-------------------------------------------------
Non-current assets
Intangible assets 717.3 695.2 706.7
Tangible assets 205.2 213.0 200.5
Loans receivable
and other
interest-bearing assets 1.7 1.9 1.6
Deferred tax assets 168.0 132.7 152.8
Investments 169.9 157.9 156.0
-------------------------------------------------
Total non-current assets 1,262.1 1,200.7 1,217.6
Current assets
Inventories 860.2 933.1 784.6
Advance payments received -948.9 -866.9 -832.4
Accounts receivable
and other
non interest-bearing
assets 1,105.7 1,110.5 1,056.1
Current deposits
and loan receivables 288.8 180.8 421.2
Cash and cash equivalents 157.2 173.3 204.9
-------------------------------------------------
Total current assets 1,463.0 1,530.8 1,634.4
-------------------------------------------------
Total assets 2,725.1 2,731.5 2,852.0
-------------------------------------------------
Equity and liabilities
Mar 31, Mar 31, Dec 31,
MEUR 2010 2009 2009
-------------------------------------------------
Equity 1,122.4 954.4 1,339.2
Non-current liabilities
Loans 28.6 172.0 27.2
Deferred tax liabilities 43.0 41.2 42.4
Employee benefits 112.9 117.2 110.6
-------------------------------------------------
Total non-current
liabilities 184.5 330.4 180.2
Provisions 103.6 49.3 100.3
Current liabilities
Loans 59.1 143.7 95.8
Accounts payable
and other liabilities 1,255.5 1,253.7 1,136.5
-------------------------------------------------
Total current liabilities 1,314.6 1,397.4 1,232.3
-------------------------------------------------
Total equity
and liabilities 2,725.1 2,731.5 2,852.0
-------------------------------------------------
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) Non-controlling interests
10) Total equity
--------------------------------------------------------------------------------
MEUR 1) 2) 3) 4) 5) 6) 7) 8) 9) 10)
--------------------------------------------------------------------------------
Jan 1,
2010 64.6 100.4 13.0 0.4 -24.5 -80.1 1 264.6 0.8 1,339.2
--------------------------------------------------------------------------------
Net income
for the period 81.3 0.3 81.6
Other
comprehensive
income:
Translation
differences 33.7 33.7
Hedging of
foreign subsidiaries -
Cash flow
hedges -4.5 -4.5
Transactions with
shareholders
and non-controlling
interests:
Profit
distribution 1.3 -331.0 -329.7
Issue of shares
(option rights) -
Purchase of
own shares -
Sale of
own shares -
Change in
non-controlling
interests 0.0 0.0
Option and
share-based
compensation 2.1 2.1
--------------------------------------------------------------------------------
Mar 31,
2010 64.6 100.4 13.0 -4.1 9.2 -78.8 935.7 81.3 1.1 1,122.4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
Net income
for the period 78.6 0.1 78.7
Other
comprehensive
income:
Translation
differences 8.6 8.6
Hedging of
foreign
subsidiaries -1.9 -1.9
Cash flow
hedges -5.2 -5.2
Transactions
with
shareholders
and non-
controlling
interests:
Profit
distribution -164.1 -164.1
Issue of shares
(option rights) 0.0 0.3 0.3
Purchase of
own shares -
Sale of
own shares -
Change in
non-controlling
interests -
Option and share-based
compensation 2.1 2.1
--------------------------------------------------------------------------------
Mar 31,
2009 64.4 100.4 3.6 3.8 -9.5 -83.1 795.2 78.6 1.0 954.4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------
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
--------------------------------------------------------------------------
Net income
for the period 465.6 0.8 466.4
Other
comprehensive
income:
Translation
differences -7.3 -7.3
Hedging of
foreign
subsidiaries -1.0 -1.0
Cash flow
hedges -8.6 -8.6
Transactions
with
shareholders
and
non-
controlling
interests:
Profit
distribution -164.1 -164.1
Issue of shares
(option rights) 0.2 9.7 9.9
Purchase of
own shares -
Sale of
own shares -
Change in
non-controlling
interests -0.9 -0.9
Option and
share-based
compensation 3.0 5.9 8.9
--------------------------------------------------------------------------
Dec 31,
2009 64.6 100.4 13.0 0.4 -24.5 -80.1 799.0 465.6 0.8 1,339.2
--------------------------------------------------------------------------
Condensed consolidated statement of cash flows
1-3/ 1-3/ 1-12/
MEUR 2010 2009 2009
----------------------------------------------------
Operating income 108.6 91.2 566.7
Change in working capital
before financial items
and taxes 93.4 63.6 194.2
Depreciation and impairment 15.6 15.5 64.2
----------------------------------------------------
Cash flow from operations 217.6 170.3 825.1
Cash flow from
financing items
and taxes -64.7 -15.7 -123.7
----------------------------------------------------
Cash flow from
operating activities 152.9 154.6 701.4
----------------------------------------------------
Cash flow from
investing activities -16.3 -22.3 -90.6
----------------------------------------------------
Cash flow after
investing activities 136.6 132.3 610.8
----------------------------------------------------
Purchase and
sale of own shares - - -
Issue of shares - 0.3 9.9
Dividends paid -307.1 -151.9 -164.0
Change in deposits
and loans receivable,
net 145.7 27.7 -220.9
Change in
loans payable -31.8 18.9 -181.4
----------------------------------------------------
Cash flow from
financing activities -193.2 -105.0 -556.4
----------------------------------------------------
----------------------------------------------------
Change in cash
and cash equivalents -56.6 27.3 54.4
----------------------------------------------------
Cash and cash
equivalents at
end of period 157.2 173.3 204.9
Translation difference -8.9 1.8 -2.7
Cash and cash
equivalents at
beginning of period 204.9 147.8 147.8
----------------------------------------------------
Change in cash
and cash equivalents -56.6 27.3 54.4
----------------------------------------------------
Change in interest-bearing net debt
1-3/ 1-3/ 1-12/
MEUR 2010 2009 2009
---------------------------------------
Interest-bearing
net debt at
beginning of period -504.7 -58.3 -58.3
Interest-bearing
net debt at
end of period -360.0 -40.3 -504.7
---------------------------------------
Change in
interest-bearing
net debt 144.7 18.0 -446.4
---------------------------------------
Notes for the interim report
Key figures
1-3/ 1-3/ 1-12/
2010 2009 2009
-------------------------------------------------
Basic earnings
per share EUR 0.32 0.31 1.84
Diluted earnings
per share EUR 0.32 0.31 1.83
Equity per share EUR 4.42 3.77 5.28
Interest-bearing
net debt MEUR -360.0 -40.3 -504.7
Total equity/
total assets % 41.2 34.9 47.0
Gearing % -32.1 -4.2 -37.7
Return on equity % 26.5 31.6 39.3
Return on
capital employed % 25.9 25.6 34.0
Total assets MEUR 2,725.1 2,731.5 2,852.0
Assets employed MEUR 762.4 914.1 834.5
Working capital
(including financing
and tax items) MEUR -330.0 -152.0 -228.7
-------------------------------------------------
Sales by geographical regions
1-3/ 1-3/ 1-12/
MEUR 2010 % 2009 % 2009 %
---------------------------------------------
EMEA 1) 593.4 59 638.8 63 2,953.4 62
Americas 236.9 24 234.1 23 970.2 21
Asia-Pacific 172.7 17 148.1 14 820.1 17
---------------------------------------------
Total 1,003.0 1,021.0 4,743.7
---------------------------------------------
1) EMEA = Europe, Middle East, Africa
Quarterly Figures
Q1/ Q4/ Q3/ Q2/ Q1/
2010 2009 2009 2009 2009
--------------------------------------------------------------
Orders received MEUR 894.7 813.5 766.5 953.9 898.5
Order book MEUR 3,638.5 3,309.1 3,603.4 3,754.1 3,753.1
Sales MEUR 1,003.0 1,426.8 1,127.3 1,168.6 1,021.0
Operating income MEUR 108.6 202.7 160.1 146.3 1) 91.2
Operating income % 10.8 14.2 14.2 12.5 1) 8.9
--------------------------------------------------------------
Q4/ Q3/ Q2/ Q1/
2008 2008 2008 2008
-----------------------------------------------------
Orders received MEUR 845.2 892.4 1,092.4 1,117.5
Order book MEUR 3,576.7 4,002.8 3,838.7 3,617.4
Sales MEUR 1,431.6 1,123.8 1,142.1 905.3
Operating income MEUR 189.2 146.0 136.7 86.5
Operating income % 13.2 13.0 12.0 9.6
-----------------------------------------------------
Q4/ Q3/ Q2/ Q1/
2007 2007 2007 2007
------------------------------------------------------
Orders received MEUR 901.9 926.3 944.4 902.1
Order book MEUR 3,282.3 3,473.6 3,318.0 3,105.7
Sales MEUR 1,294.2 971.6 1,001.9 811.2
Operating income MEUR 160.8 2) 126.7 116.4 69.3 3)
Operating income % 12.4 2) 13.0 11.6 8.5 3)
------------------------------------------------------
Q4/ Q3/ Q2/ Q1/
2006 2006 2006 2006
-----------------------------------------------------
Orders received MEUR 712.1 742.0 821.9 840.3
Order book MEUR 2,762.1 2,951.0 2,818.0 2,654.0
Sales MEUR 1,145.6 879.8 840.4 735.0
Operating income MEUR 123.4 101.1 83.9 51.7
Operating income % 10.8 11.5 10.0 7.0
-----------------------------------------------------
1) Excluding a MEUR 33.6 one-time restructuring 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
1-3/ 1-3/ 1-12/
MEUR 2010 2009 2009
----------------------------
894.7 898.5 3,432.4
----------------------------
Order book
Mar 31, Mar 31, Dec 31,
MEUR 2010 2009 2009
--------------------------------
3,638.5 3,753.1 3,309.1
--------------------------------
Capital expenditure
1-3/ 1-3/ 1-12/
MEUR 2010 2009 2009
-------------------------------------
In fixed assets 6.2 7.7 40.9
In leasing agreements 3.1 1.1 5.6
In acquisitions 1.2 22.3 46.0
-------------------------------------
Total 10.5 31.1 92.5
-------------------------------------
R&D expenditure
1-3/ 1-3/ 1-12/
MEUR 2010 2009 2009
-----------------------------------
15.0 15.3 62.0
-----------------------------------
R&D Expenditure as
percentage of sales 1.5 1.5 1.3
-----------------------------------
Number of employees
1-3/ 1-3/ 1-12/
2010 2009 2009
---------------------------------------------
Average 33,697 34,565 34,276
At the end of the period 33,642 34,558 33,988
---------------------------------------------
Commitments
Mar 31, Mar 31, Dec 31,
MEUR 2010 2009 2009
------------------------------------------------
Mortgages
Group and parent company - 0.7 -
Pledged assets
Group and parent company 2.0 2.0 1.9
Guarantees
Associated companies 3.9 3.8 3.5
Others 10.7 6.8 6.4
Operating leases 166.2 171.3 162.0
------------------------------------------------
Total 182.8 184.6 173.8
------------------------------------------------
The future minimum lease payments under non-cancellable operating leases
Mar 31, Mar 31, Dec 31,
MEUR 2010 2009 2009
----------------------------------------
Less than 1 year 43.9 42.9 41.0
1-5 years 91.5 95.4 91.6
Over 5 years 30.8 33.0 29.4
----------------------------------------
Total 166.2 171.3 162.0
----------------------------------------
Derivatives
Fair values of derivative financial instruments
Positive Negative Net Net Net
fair fair fair fair fair
value value value value value
Mar 31, Mar 31, Mar 31, Mar 31, Dec 31,
MEUR 2010 2010 2010 2009 2009
--------------------------------------------------------
FX Forward
contracts 5.6 10.9 -5.3 1.3 -2.6
Currency
options - - - -0.4 -
Cross-currency
swaps,due
under one year - - - -16.0 -17.0
Cross-currency
swaps, due
in 1-3 years 0.9 - 0.9 - -
Electricity
derivatives 0.5 1.1 -0.6 -1.3 -0.4
--------------------------------------------------------
Total 7.0 12.0 -5.0 -16.4 -20.0
--------------------------------------------------------
Nominal values of derivative financial instruments
Mar 31, Mar 31, Dec 31,
MEUR 2010 2009 2009
-----------------------------------------------
FX Forward contracts 622.4 506.4 488.4
Currency options - 213.6 -
Cross-currency swaps,
due under one year - 136.7 113.1
Cross-currency swaps,
due in 1-3 years 139.3 - -
Electricity derivatives 5.2 4.3 5.3
-----------------------------------------------
Total 766.9 861.0 606.8
-----------------------------------------------
Shares and shareholders
Class A Class B
shares shares Total
-------------------------------------------------------
Number of
shares 38,104,356 220,322,514 258,426,870
Own shares
in
possession 1) 4,610,242
Share
capital, EUR 64,606,718
Market
capitalization, MEUR 7,767
Number of
shares traded,
million, 1-3/2010 41.6
Value of
shares traded
MEUR, 1-3/2010 1,237
Number of
shareholders 3 26,819 26,819
Close High Low
-------------------------------------------------------
Class B
share price,
1-3/2010, EUR 30.60 31.48 27.72
-------------------------------------------------------
1) During January-March 2010, the authorization to repurchase shares was not
used. In March 2010, 100,000 treasury class B shares of KONE Corporation were
distributed without compensation to the KONE Corporation Centennial Foundation.
During 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 Oy 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.
[HUG#1405606]
