Slide 1: Interim report for January–March 2017
KONE Interim report for January–March 2017 APRIL 27, 2017 HENRIK EHRNROOTH, PRESIDENT & CEO ILKKA HARA, CFO
Slide 2: Q1 2017 highlights
Q1 2017 highlights Solid start for the year: continued sales growth and strong cash generation Despite good progress, profitability burdened by several headwinds New groundbreaking services launched successfully
Slide 3: Q1 2017 key figures
Q1 2017 key figures CONTINUED SALES GROWTH IN A MIXED OPERATING ENVIRONMENT Historical Comparable Q1/2017 Q1/2016 change change Orders received MEUR 1,913.0 1,942.3 -1.5% -1.2% Order book MEUR 9,129.0 8,529.7 7.0% 5.0% Sales MEUR 1,810.3 1,748.3 3.5% 3.3% Operating income (EBIT) MEUR 217.7 221.4 -1.
Slide 4: Q1 2017 sales split
Q1 2017 sales split SHARE OF SERVICES AND THE AMERICAS OUT OF TOTAL SALES GREW BY BUSINESS BY AREA 14% (13%) 22% (18%) 37% (41%) 47% (49%) 40% (38%) 41% (41%) New equipment Maintenance Modernization Asia-Pacific EMEA (Europe, Middle East and Africa) Americas 1–3/2016 figures in brackets. Figures in
Slide 5: Q1 business overview
Q1 business overview POSITIVES Continued good growth in services in all geographic areas Solid development in orders received in many markets supported by successful 2016 product launches New strategy has been well received and there is good momentum to drive the differentiation in a customer-
Slide 6: Winning with customers: bringing our strategy to life
Winning with customers: bringing our strategy to life 24/7 Connected Services New KONE Care™ We bring more intelligence to maintenance services by using the IBM Watson IoT platform New maintenance services respond to the individual and changing needs of our customers Considerable benefits to o
Slide 7: Market development
Market development
Slide 8: New equipment market development in Q1
New equipment market development in Q1 GLOBAL MARKET VOLUMES WERE RATHER STABLE EMEA market North American market Asia-Pacific market Q1 development (in units) + + Stable Share of global ~20% <5% >2/3 market (in units) • Growth in Central and North • Slight growth in the United • Market in China was
Slide 9: Chinese property market
Chinese property market GOOD START TO THE YEAR IN THE LOWER-TIER CITIES IN PARTICULAR Inventories Housing sales and prices E&E market • Inventories continued to be healthy in • Authorities introduced further restrictions • Real estate investment remained on a higher-tier cities in Q1 to cool down th
Slide 10: Service market development in Q1
Service market development in Q1 CONTINUED GROWTH ACROSS REGIONS EMEA market North American market Asia-Pacific market Maintenance Q1 development + + +++ >40% <10% ~40% Share of global market (in units) • Pricing environment remained • Price competition remained • Continued good growth across tough
Slide 11: The global new equipment market declined slightly in 2016
The global new equipment market declined slightly in 2016 NEW EQUIPMENT MARKET 825,000 units (2015: 840,000 units) In monetary value, the global new equipment market 4% declined clearly in 2016 due to a significant decrease 3% (4%) in the average selling price per unit in China. (3%) 3% China re
Slide 12: The service markets continued to grow in 2016
The service markets continued to grow in 2016 EQUIPMENT BASE >14 M (13.5 M) units The global maintenance market continued to grow driven by China in particular 9% 4% (9%) KONE improved its market position in maintenance to 8% (4%) 31% (9%) (28%) shared #3 globally 7% Also the global modernizat
Slide 13: KONE's market positions in 2016
KONE’s market positions in 2016 STRONG MARKET POSITIONS IN NEW EQUIPMENT; CHALLENGER IN MAINTENANCE Market position, North Rest of Asia- EMEA China KONE’s estimate America Pacific New equipment #2 #4 #1 #1 Maintenance #3 #4 #1 #2 13 April 27, 2017 Interim Report January-March 2017 | © KONE Corporati
Slide 14: Q1 Financials
Q1 Financials
Slide 15: Orders received
Orders received GOOD DEVELOPMENT IN AMERICAS AND EMEA The relative margin of orders received declined slightly but MEUR remained at a good level 2,500 -1.5% -1.2% 1,942 2,000 1,913 7 1,913 1,500 + Modernization 1,000 + New equipment in EMEA and Americas 500 - New equipment in Asia-Pacific 0 2010 Q
Slide 16: Sales
Sales SOLID SALES GROWTH DRIVEN BY SERVICES At comparable exchange rates: MEUR +3.3% 3,000 +9.5% 1,810 4 2,500 +7.1% +3.5% -1.3% 2,000 1,810 1,748 1,500 EMEA: +5.0% 1,000 Americas: +19.6% Asia-Pacific: -5.8% 500 0 New equipment Maintenance Modernization 2010 Q1 2017 Q2 Q3 Q4 Q1 FX Q1 2016 2017
Slide 17: Operating income
Operating income CONTINUED STRONG EXECUTION; SEVERAL HEADWINDS BURDENED PROFITABILITY MEUR 500 221 218 0 -1.7% 250 218 + Services growth + Good execution - R&D and IT - Raw materials, margin pressure in China 0 2010 Q1 2017 Q2 Q3 Q4 Q1 2016 Growth Profitability FX Q1 2017 At historical exchange rate
Slide 18: IFRS 15: Heads-up on upcoming changes
IFRS 15: Heads-up on upcoming changes Sales recognition will change in 2018 due to the adoption of CURRENTLY new IFRS 15 principles CUMULATIVE SALES Profit The change concerns the volume new equipment and modernization businesses (close to half of KONE’s sales Costs impacted) Work in progress –
Slide 19: IFRS 15: Main impacts on KONE financials
IFRS 15: Main impacts on KONE financials Part of the profits from ongoing projects booked straight to equity • Order book decreases by roughly EUR 1 billion* • Inventory decreases by over 50%* • Equity increases This impacts also other working capital items • Advance payments decrease by roughly 30%
Slide 20: Market and business outlook for 2017
Market and business outlook for 2017
Slide 21: Market outlook for 2017
Market outlook for 2017 NEW EQUIPMENT MARKETS Asia-Pacific: The market in China is expected to decline by 0–5% in units ordered, intense competition to continue. In the rest of Asia-Pacific, the market is expected to grow. Europe, Middle East and Africa: the market is expected to grow slightly.
Slide 22: Business outlook for 2017 (specified)
Business outlook for 2017 (specified) SALES KONE’s net sales is estimated to grow by 0 –3% at comparable exchange rates as compared to 2016 (previously -1–3%). OPERATING INCOME The operating income (EBIT) is expected to be in the range of EUR 1,200–1,290 million, assuming that translation exchan
Slide 23: Q1 summary
Q1 summary Solid start to the year in a mixed operating environment There are both headwinds and tailwinds for the remainder of 2017 New strategy has been well received and there is good momentum to drive the differentiation in a customer-centric way SAVE THE DATE KONE CAPITAL MARKETS DAY SEPT
Slide 24: Dedicated to People Flow
Dedicated to People Flow" KOIN|E
Slide 25: APPENDIX
APPENDIX 25 April 27, 2017
Slide 26: 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 In monetary value 50 KONE ~25% 45 <35% Market <35% ~30% 40 >35% 35 30 The China market was stable 25 in units. <20% 20 KONE’s orders were stable in units. 15 10 <
Slide 27: Currencies
Currencies SALES BY CURRENCY 1–12/2016 CURRENCY IMPACT MAIN CURRENCIES, RATES USD (MEUR) Q1 2016 Q1 2016 2016 average average end Others rates rates rates Sales +4 -195 EUR / RMB 7.3399 7.3199 7.3202 EUR / USD 1.0646 1.1021 1.0541 EBIT -0.3 -44 EUR / GBP 0.8565 0.8159 0.8562 RMB Orders -7 -211 recei
Slide 28: Q1 2017 Balance sheet – assets employed
Q1 2017 Balance sheet – assets employed MEUR Mar 31, 2017 Mar 31, 2016 Dec 31, 2016 Assets employed Goodwill 1,369.9 1,300.0 1,371.8 Other intangible assets 287.2 266.8 292.9 Tangible assets 369.7 347.4 368.3 Investments 134.2 125.4 129.9 Net working capital -1,148.0 -1,107.9 -1,054.8 Assets employe
Slide 29: Q1 2017 Net working capital
Q1 2017 Net working capital MEUR Mar 31, 2017 Mar 31, 2016 Dec 31, 2016 Net working capital Inventories 1,516.2 1,428.6 1,373.5 Advance payments received -2,182.7 -2,044.7 -1,976.9 Accounts receivable 1,502.5 1,421.6 1,573.7 Other non-interest-bearing assets 488.0 493.6 429.8 Net deferred tax assets
Slide 30: Q1 2017 Consolidated cash flow
Q1 2017 Consolidated cash flow MEUR 1–3/2017 1–3/2016 1–12/2016 Operating income 217.7 221.4 1,293.3 Change in working capital before financing items and taxes 59.2 58.8 109.7 Depreciation and amortization 28.4 25.5 106.5 Cash flow from operations before financing items and taxes 305.3 305.7 1,509.5