Slide 1: KONE Q3 2022
KONE Q3 2022 OCTOBER 27, 2022 HENRIK EHRNROOTH, PRESIDENT & CEO ILKKA HARA, CFO
Slide 2: Q3 2022 Highlights
Q3 2022 Highlights ▪ Weak new equipment market in China ▪ Strong performance in services driven by robust development in both maintenance and modernization ▪ Improved margin on orders received demonstrates progress in profitability actions
Slide 3: Q3 2022 Key figures
Q3 2022 Key figures SERVICES CONTRIBUTED TO SALES GROWTH, PROFITABILITY BURDENED BY CONTINUED COST HEADWINDS Comparable Q3/2022 Q3/2021 Change change Orders received MEUR 2,155.5 2,211.1 -2.5% -10.0% Order book MEUR 9,890.5 8,436.9 17.2% 8.4% Sales MEUR 2,998.2 2,610.0 14.9% 6.5% Operating income (E
Slide 4: 1–9 2022 Key figures
1–9 2022 Key figures ORDER BOOK GROWTH PROVIDES A SOLID FOUNDATION GOING FORWARD Comparable 1–9/2022 1–9/2021 Change change Orders received MEUR 7,187.1 6,697.7 7.3% 0.1% Order book MEUR 9,890.5 8,436.9 17.2% 8.4% Sales MEUR 7,995.2 7,747.3 3.2% -3.4% Operating income (EBIT) MEUR 664.0 943.4 -29.6%
Slide 5: Strong momentum in Services continues
Strong momentum in Services continues Strong trends supporting Providing more insights to customers with 24/7 Connected Services growth in modernization ▪ 24/7 Connected Services penetration 24/7 increases safety, transparency ▪ Improved pricing on new orders on KONE equipment close to 20% and uptim
Slide 6: We are taking strong actions to drive improved financial performance
We are taking strong actions to drive improved financial performance Pricing improvement Sourcing and offering Good progress in improving continues, dynamic contract models adopted in developments reducing order book margins with Simplifying our product costs productivity operating model selected co
Slide 7: Market development
Market development
Slide 8: New equipment market development in Q3 2022
New equipment market development in Q3 2022 MARKETS EX CHINA GREW IN MONETARY VALUE, UNIT GROWTH AFFECTED BY ECONOMIC OUTLOOK North American market EMEA market China market Rest of Asia-Pacific market - - --- ++ <5% of ~15% of >65% of ~10% of global global global global market market market market (
Slide 9: Chinese property market in Q3 2022
Chinese property market in Q3 2022 ▪ Market conditions deteriorated further as liquidity constraints affected both new projects and construction site progress ▪ COVID-19 restrictions, although less severe than in the previous quarter, increased uncertainty ▪ Maintenance markets remained resilient, m
Slide 10: Service market development in Q3 2022
Service market development in Q3 2022 BROAD-BASED GROWTH IN MAINTENANCE AND MODERNIZATION North American market EMEA market China market Rest of Asia-Pacific market Maintenance Modernization Maintenance Modernization Maintenance Modernization Maintenance Modernization + +++ + ++ ++ -- ++ +++ <10% of
Slide 11: Q3 Financials
Q3 Financials
Slide 12: Orders received
Orders received SLIGHT DECLINE IN Q3 ORDERS DRIVEN BY CHINA, MARGIN OF ORDERS RECEIVED IMPROVED MEUR MEUR 10,000 -2.5% 8,853 2,211 9,000 +7.3% 8,400 2,155 8,185 8,000 7,797 7,554 7,187 239 184 7,000 6,698 6,000 5,000 EMEA: + Asia-Pacific: - - - 4,000 Americas: +++ 3,000 -10.0% 2,000 Orders received
Slide 13: Sales
Sales GROWTH IN ALL REGIONS AND BUSINESSES MEUR MEUR +14.9% 11,000 10,514 9,982 9,939 2,998 10,000 +3.2% 9,071 9,000 8,797 206 7,995 +8.6% 8,000 7,747 +8.0% 7,000 +5.0% 73 33 6,000 2,610 76 5,000 4,000 EMEA +7.0% 3,000 Asia-Pacific +7.0% 2,000 Americas +4.5% 1,000 +6.5% at comp. FX 0 2017 2018 2019
Slide 14: Adjusted EBIT and profitability
Adjusted EBIT and profitability PROFITABILITY BURDENED BY CONTINUED COST HEADWINDS MEUR, % MEUR, % 13.7% 1,600 12.3% 12.4% 12.6% 12.5% 12.3% + Sales growth in all 12.5% regions and businesses 10.2% 1,400 1,310 1,237 1,251 1,206 1,200 1,112 327 1,000 950 8.9% 306 21 800 712 600 + Improvements in prod
Slide 15: Cash flow from operations
Cash flow from operations* CASH FLOW IMPACTED BY DECLINE IN OPERATING INCOME AND MODERATE INCREASE IN WORKING CAPITAL MEUR MEUR 2 000 1,908 1,829 365 1 600 1,550 23 5 336 1,263 1,304 11 1 200 1,150 − Decreased advances − Increased accounts receivable 800 + Increased payables 721 400 0 2017 2018 2019
Slide 16: Market and business outlook
Market and business outlook
Slide 17: Market outlook for 2022 (updated)
Market outlook for 2022 (updated) New equipment markets ▪ The Chinese new equipment market is expected to decline by over 20% due to the tightened liquidity situation in the property markets and the impact of COVID-19 related restrictions ▪ In EMEA, the new equipment market is expected to be stable
Slide 18: Business outlook for 2022 (revised)
Business outlook for 2022 (revised) Sales Supporting our performance Burdening our result ▪ KONE estimates that in 2022, its sales will decline by -1% to -4% at comparable exchange rates as Positive outlook for Approx. MEUR 200 services and strong headwind in 2022 from compared to 2021 order book in
Slide 19: Headwinds and tailwinds going into 2023
Headwinds and tailwinds going into 2023 BOOSTING OUR PERFORMANCE Strong order book and improving margin on orders received Positive momentum in Services Easing commodity cost headwinds and improving component availability BURDENING OUR RESULT Slowing order book rotation Risk of continued liquidity c
Slide 20: Summary
Summary ▪ New equipment market impacted by weak environment in China ▪ Continued strong momentum in Services drives resilience ▪ Progress in actions to improve profitability remains a priority ▪ Simplifying our operating model to drive long-term financial performance
Slide 21: Dedicated to People Flow
Dedicated to People Flow" KOIN|E
Slide 22: Appendix
Appendix
Slide 23: KONE in China
KONE in China New equipment market China’s share of KONE’s orders received and sales New equipment orders received in units vs. market development Monetary value 50 40 >35% KONE’s new equipment orders >30% declined significantly in both >40% <40% ~35% 30 units and in monetary value. <20% 20 >10% 10
Slide 24: 7–9/2022 Sales split
7–9/2022 Sales split By business By region 14% 19% (14%) (18%) 46% 53% (45%) 33% (53%) (33%) 35% (37%) New equipment Asia-Pacific Maintenance EMEA (Europe, Middle East and Africa) Modernization Americas 7–9/2021 figures in brackets. Figures in charts are rounded and at historical exchange rates. 24
Slide 25: Currencies
Currencies Sales by currencies 1–9/2022 Currency impact* Main currencies Q3/2022 2021 Sep 30, EUR MEUR Q3 Full year average average 2022 spot Other EUR / 7.0147 7.6388 6.9368 Sales 205.6 627.6 CNY EUR / 1.0637 1.1851 0.9748 USD EBIT 21.3 70.0 EUR / 0.8485 0.8615 0.8830 GBP Orders 183.8 551.2 USD rec
Slide 26: Balance sheet – assets employed
Balance sheet – assets employed MEUR Sep 30, 2022 Sep 30, 2021 Dec 31, 2021 Assets employed Goodwill 1,465.9 1,384.3 1,405.2 Other intangible assets 211.0 216.7 216.9 Tangible assets 744.5 720.9 736.7 Investments 135.0 142.0 144.6 Net working capital -1,318.9 -1,356.9 -1,468.2 Assets employed total
Slide 27: Net working capital
Net working capital MEUR Sep 30, 2022 Sep 30, 2021 Dec 31, 2021 Net working capital Inventories 935.9 673.7 717.8 Advance payments received and deferred revenue -2,153.3 -1,893.7 -1,957.0 Accounts receivable 2,656.4 2,317.9 2,421.4 Deferred assets and income tax receivables 1,002.1 854.0 898.1 Accru