Slide 1: KONE Q3 2018
KONE Q3 2018 OCTOBER 25, 2018 HENRIK EHRNROOTH, PRESIDENT & CEO ILKKA HARA, CFO
Slide 2: Q3 2018 Highlights
Q3 2018 Highlights ▪ Orders received and sales grew in all regions and all businesses ▪ EBIT margin still burdened by several headwinds ▪ Our strategy continues to strengthen our differentiation
Slide 3: Q3 2018 Key figures
Q3 2018 Key figures CONTINUED GROWTH IN ORDERS RECEIVED THE KEY POSITIVE, ADJUSTED EBIT MARGIN STILL DOWN Y/Y Comparable Q3/2018 Q3/2017 Change change Orders received MEUR 1,831.9 1,739.0 5.3% 7.3% Order book MEUR 7,791.6 7,473.5 4.3% 5.5% Sales MEUR 2,288.7 2,209.7 3.6% 5.6% Operating income (EBIT)
Slide 4: January-September 2018 Key figures
January-September 2018 Key figures SOLID GROWTH IN BOTH SERVICES AND NEW EQUIPMENT, ADJUSTED EBIT BURDENED BY SEVERAL HEADWINDS Comparable 1-9/2018 1-9/2017 Change change Orders received MEUR 5,859.1 5,708.2 2.6% 6.8% Order book MEUR 7,791.6 7,473.5 4.3% 5.5% Sales MEUR 6,627.3 6,490.3 2.1% 6.2% Ope
Slide 5: A changing environment creates opportunities to differentiate
A changing environment creates opportunities to differentiate CHANGING USE OF BUILDINGS EASE & CONVENIENCE SPEED Focus on what drives our New services and solutions to We drive speed and efficiency in customers’ success in a changing provide ease and convenience for construction with solid execution
Slide 6: New services help us differentiate in both new equipment and in services
New services help us differentiate in both new equipment and in services NEW KONE 24/7 RESIDENTIAL PEOPLE FLOW PLANNING KONE CARE CONNECTED SERVICES FLOW AND CONSULTING New way of selling maintenance; Predictability, safety and Simpler homecomings, visitor Making buildings more functional contracts
Slide 7: Market development
Market development
Slide 8: New equipment market development in Q3 2018
New equipment market development in Q3 2018 GLOBAL NEW EQUIPMENT MARKET GREW SLIGHTLY IN UNITS ORDERED North American market EMEA market Asia-Pacific market + Stable + <5% of ~20% of >2/3 of global global global market market market (in units) (in units) (in units) ▪ Market continued to grow ▪ Centr
Slide 9: Service market development in Q3 2018
Service market development in Q3 2018 GROWTH CONTINUED ACROSS REGIONS North American market EMEA market Asia-Pacific market Maintenance Modernization Maintenance Modernization Maintenance Modernization + + + Stable ++ ++ <10% of ~25% of <50% of ~1/3 of ~1/3 of ~15% of global market global market glo
Slide 10: Chinese property market
Chinese property market GOVERNMENT CONTINUES TO HAVE A RESTRICTIVE POLICY Housing inventories Housing sales and prices E&E market ▪ Housing inventories at a healthy level ▪ Government’s restrictive measures have ▪ Growth in real estate investment mainly cooled down the housing market driven by land
Slide 11: Q3 Financials
Q3 Financials
Slide 12: Orders received
Orders received ORDERS RECEIVED GREW IN ALL REGIONS AND BUSINESSES IN Q3 2018 ▪ In Q3, the margin of orders was MEUR stable y-o-y 8,000 7.3% 7,000 Q3 growth 5.3% 32 1,832 6,000 5,000 1,739 1,832 4,000 1,739 3,000 + Growth in all 2,000 regions and 1,000 businesses 0 2010 2011 2012 2013 2014 2015 2016
Slide 13: Sales
Sales BROAD-BASED GROWTH IN SALES IN Q3 2018 At comp. FX MEUR 5.6% 9,000 Q3 growth 8.1% 8,000 4.9% 3.6% 7,000 5.4% 42 2,289 6,000 2,210 2,289 5,000 2,210 4,000 3,000 EMEA 2.4% 2,000 APAC 8.2% Americas 6.7% 1,000 0 Modernization New equipment Maintenance 2010 2011 2012 2013 2014 2015 2016 2017 1-9/ Q
Slide 14: EBIT
EBIT PROFITABILITY CONTINUED TO BE BURDENED BY SEVERAL HEADWINDS IN Q3 2018 Adjusted EBIT* and adjusted EBIT margin ▪ Restructuring costs related to the MEUR, % Q3 margin Accelerate program were EUR 1 400 14,5% 15 15.7 million in Q3 2018 12,0% 1 200 321 Q3 growth 1 000 -14.8% 10 274 11 800 321 274 6
Slide 15: Cash flow
Cash flow CASH CONVERSION WAS AT A HEALTHY LEVEL IN Q3 Cash flow from operations* ▪ The decrease in cash flow was MEUR mostly driven by the decrease in operating income 1 600 ▪ Net working capital increased 1 400 slightly 1 200 1 000 800 303 273 600 400 200 0 2010 2011 2012 2013 2014 2015 2016 2017
Slide 16: Market and business outlook for 2018
Market and business outlook for 2018
Slide 17: Market outlook for 2018
Market outlook for 2018 NEW EQUIPMENT MARKETS ▪ Asia-Pacific: The market in China is expected to be stable or to grow slightly in units ordered and competition to remain intense. In the rest of Asia- Pacific, the market is expected to grow ▪ Europe, Middle East and Africa: The market is expected to
Slide 18: Business outlook for 2018 (specified)
Business outlook for 2018 (specified) Sales Boosting our performance Burdening our result In 2018, KONE’s sales is estimated to grow by 4–7% at comparable exchange rates as compared to the restated Solid order book Price pressure in earlier 2017 sales orders received in China Services business growt
Slide 19: Summary
Summary ▪ Continued good growth in orders received with improved pricing ▪ Improved differentiation the key lever in improving our performance ▪ Adjusted EBIT margin trend expected to improve in the final quarter
Slide 20: Dedicated to People Flow
Dedicated to People Flow" KOIN|E
Slide 21: APPENDIX
APPENDIX
Slide 22: Q3 2018 Sales split
Q3 2018 Sales split By business By area 14% 20% (13%) (20%) 41% (40%) 54% 32% (55%) (32%) 39% (41%) New equipment Maintenance Modernization Asia-Pacific Americas EMEA (Europe, Middle East and Africa) Q3/2017 figures in brackets. Figures in charts are rounded and at historical exchange rates. 22 Octo
Slide 23: KONE in China
KONE in China New equipment market China’s share of KONE’s orders and sales New equipment orders received in units vs. market Monetary value development 50 KONE 45 Market >25% >25% <35% <35% 40 >35% The China market grew 35 slightly in units 30 KONE’s orders grew clearly 25 in units and significantl
Slide 24: Currencies
Currencies Sales by currency 1–12/2017 Currency impact Main currencies USD 1-9/ 2018 2017 Sep 30, MEUR Q3/2018 1-9/2018 average average 2018 spot Others EUR / Sales -42 248 7.7934 7.6299 7.9662 RMB EUR / 1.1938 1.1307 1.1576 USD EBIT -11 43 RMB EUR / 0.8845 0.8742 0.8873 GBP Orders -32 223 received
Slide 25: Q3 2018 Balance sheet – assets employed
Q3 2018 Balance sheet – assets employed MEUR Sep 30, 2018 Sep 30, 2017 Dec 31, 2017 Assets employed Goodwill 1,321.6 1,324.1 1,325.5 Other intangible assets 260.5 272.4 274.5 Tangible assets 378.5 368.5 377.0 Investments 138.3 140.0 134.3 Net working capital -719.0 -782.2 -772.6 Assets employed tota
Slide 26: Q3 2018 Net working capital
Q3 2018 Net working capital MEUR Sep 30, 2018 Sep 30, 2017 Dec 31, 2017 Net working capital Inventories 648.5 638.5 626.8 Advance payments received and deferred revenue -1,531.7 -1,376.7 -1,404.6 Accounts receivable 1,910.8 1,779.5 1,910.8 Other non-interest-bearing assets 715.3 579.0 472.0 Other no
Slide 27: Q3 2018 Consolidated cash flow
Q3 2018 Consolidated cash flow MEUR 1-9/2018 1-9/2017 1-12/2017 Operating income 750.0 899.5 1,192.3 Change in working capital before financing items and taxes -19.7 -56.0 -43.3 Depreciation and amortization 88.2 84.8 114.3 Cash flow from operations before financing items and taxes 818.5 928.4 1,263