Slide 1: KONE Result presentation 2018
KONE Result presentation 2018 JANUARY 24, 2019 HENRIK EHRNROOTH, PRESIDENT & CEO ILKKA HARA, CFO
Slide 2: Q4 2018 Highlights
Q4 2018 Highlights ▪ Orders received and sales grew in all regions and all businesses ▪ Adjusted EBIT returned to growth ▪ We are halfway through our strategy period – Winning with Customers continues to strengthen our differentiation ▪ Dividend proposal EUR 1.65 per class B share
Slide 3: Q4 2018 Key figures
Q4 2018 Key figures CONTINUED GROWTH IN ORDERS RECEIVED, ADJUSTED EBIT RETURNED TO GROWTH Comparable Q4/2018 Q4/2017 Change change Orders received MEUR 1,937.9 1,845.8 5.0% 5.9% Order book MEUR 7,950.7 7,357.8 8.1% 8.0% Sales MEUR 2,443.4 2,306.3 5.9% 6.5% Operating income (EBIT) MEUR 292.5 292.8 -0
Slide 4: 1-12 2018 Key figures
1-12 2018 Key figures SOLID GROWTH IN BOTH SERVICES AND NEW EQUIPMENT, ADJUSTED EBIT BURDENED BY SEVERAL HEADWINDS Comparable 1-12/2018 1-12/2017 Change change Orders received MEUR 7,797.0 7,554.0 3.2% 6.6% Order book MEUR 7,950.7 7,357.8 8.1% 8.0% Sales MEUR 9,070.7 8,796.7 3.1% 6.3% Operating inco
Slide 5: Business highlights in 2018
Business highlights in 2018 New equipment orders units 5% ▪ Record high new equipment orders 200,000 ~166k received 150,000 158k ▪ Actions to offset the margin headwinds 100,000 showing positive results 50,000 ▪ Solid development in the service business 0 2011 2012 2013 2014 2015 2016 2017 2018 with
Slide 6: Dividend proposal: EUR 1.65 per class B share
Dividend proposal: EUR 1.65 per class B share Split-adjusted dividend per class B share ▪ Dividend payout in EUR, 2006-2018 2018: 101% of earnings per share ▪ Effective dividend yield, 2018: 4.0% CAGR +17% 0.65 0.75 1.65 1.65 1.55 1.40 1.20 0.33 1.00 0.88 0.70 0.45 0.33 0.33 0.33 Ordinary dividend 0
Slide 7: We are now halfway through the strategy period, good progress towards our strategic targets
We are now halfway through the strategy period, good progress towards our strategic targets Continued improvement in Net Promotor Score in 2018 Employee engagement on a strong level in 2018 Strong development in both new equipment and services Profitability burdened by several headwinds Leader in ec
Slide 8: Winning with Customers through our Ways to Win
Winning with Customers through our Ways to Win ▪ Increased innovation speed through co- ▪ 24/7 Connected Services available in countries creation covering ~85% of the maintenance base ▪ Competences for new businesses and ways of ▪ New KONE Care provides clear differentiation working with customers c
Slide 9: With Accelerate, we are adjusting our ways of working to better support our strategy
With Accelerate, we are adjusting our ways of working to better support our strategy Harmonizing roles and processes, leveraging scale & building expertise in Accelerate program targets many key functions Customer centricity Speed Efficiency ▪ Estimated total savings somewhat over MEUR 100 by the en
Slide 10: Market development
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Slide 11: New equipment market development in Q4 2018
New equipment market development in Q4 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 12: Service market development in Q4 2018
Service market development in Q4 2018 CONTINUED POSITIVE DEVELOPMENT North American market EMEA market Asia-Pacific market Maintenance Modernization Maintenance Modernization Maintenance Modernization + + + - ++ ++ <10% of ~25% of <50% of ~1/3 of ~1/3 of ~15% of global market global market global ma
Slide 13: Chinese property market
Chinese property market GOVERNMENT CONTINUES TO HAVE A RESTRICTIVE POLICY Housing inventories Housing sales and prices E&E market ▪ Housing inventories continued to be at a ▪ Government’s restrictive measures have ▪ Growth in real estate investment mainly healthy level cooled down the housing market
Slide 14: Q4 and 2018 financials
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Slide 15: Orders received
Orders received ORDERS RECEIVED GREW IN ALL REGIONS IN Q4 2018 ▪ In Q4, the margin of orders was MEUR stable y-o-y Q4 growth 5.0% 8,000 5.9% 7,000 1,938 1,938 1,846 -16 6,000 5,000 4,000 1,846 3,000 + Growth in all 2,000 regions and 1,000 businesses 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q4
Slide 16: Sales
Sales GOOD GROWTH IN BOTH NEW EQUIPMENT AND SERVICES CONTINUED IN Q4 At comp. FX MEUR 6.5% Q4 growth 10,000 5.9% 7.1% 9,000 5.0% 2,443 8,000 -12 2,306 2,443 7.3% 7,000 6,000 2,306 5,000 4,000 3,000 EMEA 3.8% 2,000 APAC 9.0% Americas 7.9% 1,000 0 Modernization New equipment Maintenance 2010 2011 2012
Slide 17: Adjusted EBIT
Adjusted EBIT ADJUSTED EBIT RETURNED TO GROWTH IN Q4 Adjusted EBIT* and adjusted EBIT margin ▪ Restructuring costs related to the MEUR, % Q4 margin Accelerate program were EUR 1,400 13.1% 13.1% 14 27.1 million in Q4 2018 1,200 12 -2 320 303 10 1,000 320 303 800 8 Q4 growth 600 5.9% 6 400 4 200 2 0 0
Slide 18: 2018 adjusted EBIT bridge
2018 adjusted EBIT bridge SEVERAL FACTORS BURDENED THE PROFITABILITY IN 2018 >40 1,206 ~100 Biggest impact from Sales grew in all EUR strengthening against RMB and USD 1,112 businesses + Productivity improvements + Focused pricing actions - Price pressure in earlier orders received in China - Increa
Slide 19: Cash flow
Cash flow CASH CONVERSION WAS AT A HEALTHY LEVEL IN 2018 Cash flow from operations* ▪ The decrease in cash flow in 2018 MEUR was driven by the decrease in operating income 1,600 ▪ Net working capital was relatively 1,400 stable compared to the end of 1,200 2017 335 1,000 332 800 600 400 200 0 2010 2
Slide 20: IFRS 16
IFRS 16 ▪ IFRS 16 introduces a new on-balance sheet lease accounting model ▪ Effective on January 1, 2019 ▪ KONE applies the modified retrospective approach, i.e. we will not publish restated figures Estimated impact Balance sheet Income statement Cash flow statement ▪ Increase of MEUR 330-380 ▪ Inc
Slide 21: Market and business outlook for 2019
Market and business outlook for 2019
Slide 22: Market outlook for 2019
Market outlook for 2019 New equipment markets ▪ Asia-Pacific: The market in China is expected to decline slightly or to be stable in units ordered. In the rest of Asia-Pacific, the market is expected to grow slightly ▪ More stable development in North America and Europe, Middle East and Africa Maint
Slide 23: Business outlook for 2019
Business outlook for 2019 Sales Boosting our performance Burdening our result In 2019, KONE’s sales is estimated to grow by 2–7% at comparable exchange rates as Solid order book Raw material prices and trade tariffs compared to 2018 Services business (MEUR ~50) growth Labor and Continued performance
Slide 24: Summary
Summary ▪ Good growth in orders received and continued growth outlook in services - solid basis for 2019 ▪ Adjusted EBIT returning to growth ▪ Winning with Customers is taking us towards our strategic targets
Slide 25: Dedicated to People Flow
Dedicated to People Flow" KOIN|E
Slide 26: APPENDIX
APPENDIX
Slide 27: 1-12/2018 Sales split
1-12/2018 Sales split By business By area 14% 20% (14%) (20%) 38% (39%) 53% 33% (53%) (33%) 42% (41%) New equipment Maintenance Modernization Asia-Pacific Americas EMEA (Europe, Middle East and Africa) 1-12/2017 figures in brackets. Figures in charts are rounded and at historical exchange rates. 27
Slide 28: 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 development Monetary value 50 KONE 45 Market >25% >25% >30% >30% 40 >35% The China market grew 35 slightly in units 30 KONE’s orders grew clearly 25 in units and in monetary
Slide 29: Currencies
Currencies Sales by currency 1–12/2018 Currency impact Main currencies USD 2018 2017 Dec 31, MEUR Q4/2018 1-12/2018 average average 2018 spot Others EUR / Sales -12 -260 7.8148 7.6299 7.8751 RMB EUR / 1.1809 1.1307 1.1450 USD EBIT -2 -41 RMB EUR / 0.8861 0.8742 0.8945 GBP Orders -16 -239 received EU
Slide 30: Balance sheet – assets employed
Balance sheet – assets employed MEUR Dec 31, 2018 Dec 31, 2017 Assets employed Goodwill 1,333.4 1,325.5 Other intangible assets 260.2 274.5 Tangible assets 397.4 377.0 Investments 143.3 134.3 Net working capital -757.8 -772.6 Assets employed total 1,376.6 1,338.7 Financed by Equity 3,080.6 3,028.9 N
Slide 31: Net working capital
Net working capital MEUR Dec 31, 2018 Dec 31, 2017 Net working capital Inventories 624.1 626.8 Advance payments received and deferred revenue -1,562.2 -1,404.6 Accounts receivable 1,988.3 1,910.8 Other non-interest-bearing assets 660.5 472.0 Other non-interest-bearing liabilities -1,647.3 -1,654.3 P
Slide 32: Consolidated cash flow
Consolidated cash flow MEUR 1-12/2018 1-12/2017 Operating income 1,042.4 1,192.3 Change in working capital before financing items and taxes -11.2 -43.3 Depreciation and amortization 118.9 114.3 Cash flow from operations before financing items and 1,150.1 1,263.3 taxes Financing items and taxes -180.