Slide 1: KONE Q3 2019
KONE Q3 2019 OCTOBER 23, 2019 HENRIK EHRNROOTH, PRESIDENT & CEO ILKKA HARA, CFO
Slide 2: Q3 2019 Highlights
Q3 2019 Highlights ▪ Continued good growth in orders received with improving margin ▪ Solid growth in services ▪ Improving adjusted EBIT margin ▪ Strong cash flow
Slide 3: Q3 2019 Key figures
Q3 2019 Key figures SOLID GROWTH, IMPROVING MARGIN AND STRONG CASH FLOW Comparable Q3/2019 Q3/2018 Change change Orders received MEUR 2,007.3 1,831.9 9.6% 6.8% Order book MEUR 8,399.8 7,791.6 7.8% 4.2% Sales MEUR 2,557.6 2,288.7 11.7% 9.4% Operating income (EBIT) MEUR 314.2 258.0 21.8% Operating inc
Slide 4: January-September 2019 Key figures
January-September 2019 Key figures SOLID GROWTH IN ALL BUSINESSES, STRONG CASH CONVERSION Comparable 1-9/2019 1-9/2018 Change change Orders received MEUR 6,411.5 5,859.1 9.4% 7.6% Order book MEUR 8,399.8 7,791.6 7.8% 4.2% Sales MEUR 7,297.2 6,627.3 10.1% 8.3% Operating income (EBIT) MEUR 836.1 750.0
Slide 5: Q3 2019 Business highlights
Q3 2019 Business highlights ▪ Continued faster than market growth in all businesses – Broad-based competitiveness – NPS on a good level ▪ Solid overall execution – Strong deliveries to customers – Strong cash conversion ▪ Actions to improve profitability starting to show results 5 October 23, 2019
Slide 6: Visible benefits from Accelerate program
Visible benefits from Accelerate program 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 end of 2020 Customer Solutions HR Customer Ser
Slide 7: Market development
Market development
Slide 8: New equipment market development in Q3 2019
New equipment market development in Q3 2019 NEW EQUIPMENT MARKET WAS STABLE North American market EMEA market Asia-Pacific market Stable + Stable <5% of ~20% of >2/3 of global global global market market market (in units) (in units) (in units) ▪ Market was stable on a high ▪ Market grew slightly wit
Slide 9: Service market development in Q3 2019
Service market development in Q3 2019 CONTINUED POSITIVE DEVELOPMENT North American market EMEA market Asia-Pacific market Maintenance Modernization Maintenance Modernization Maintenance Modernization + + + ++ ++ ++ <10% of >25% of ~40% of >1/3 of >40% of >15% of global market global market global m
Slide 10: Chinese property market in Q3 2019
Chinese property market in Q3 2019 GOVERNMENT BALANCING BETWEEN SUPPORTING THE ECONOMY AND RESTRICTIONS IN THE RESIDENTIAL MARKET ▪ In units ordered, the new equipment market grew slightly y-o-y ▪ Pricing was fairly stable ▪ Government continued to support the economic activity through infrastructur
Slide 11: Q3 Financials
Q3 Financials
Slide 12: Orders received
Orders received ORDERS RECEIVED GREW IN ALL REGIONS ▪ In Q3, the margin of MEUR orders received improved slightly 8,000 Q3 growth 7,000 9.6% 6.8% 2,007 6,000 48 2,007 5,000 1,832 128 4,000 1,832 3,000 2,000 1,000 0 FX Growth at comp. FX Q3 2018 Q3 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 1-
Slide 13: Sales
Sales STRONG SALES GROWTH IN ALL BUSINESSES Growth at comp. FX MEUR 9.4% 10,000 9,000 Q3 growth 10.9% 2,558 8,000 11.7% 7.4% 49 7,000 10.2% 6,000 2,558 2,289 5,000 2,289 4,000 3,000 EMEA 8.1% 2,000 APAC 11.5% Americas 7.6% 1,000 0 Modernization Maintenance New equipment Q3 2018 Q3 2019 2010 2011 201
Slide 14: Adjusted EBIT
Adjusted EBIT ADJUSTED EBIT MARGIN IMPROVED IN Q3 Adjusted EBIT* and adjusted EBIT margin ▪ Restructuring costs MEUR; % Q3 adjusted related to the EBIT margin Accelerate program: 1,400 14 12.6% EUR 8 million 12.0% 1,200 12 Q3 growth 322 1,000 10 2 17.6% 8 800 8 322 274 600 6 400 4 274 200 2 0 0 Prof
Slide 15: Cash flow
Cash flow STRONG CASH CONVERSION Cash flow from operations* ▪ Net working capital MEUR contributed positively to the cash flow driven 1,600 by strong development 1,400 in advances received and progress 1,200 1,164 payments 1,000 818 463 ▪ Adoption of IFRS 16 800 had a positive impact 273 of EUR 87 m
Slide 16: Market and business outlook
Market and business outlook
Slide 17: Market outlook for 2019
Market outlook for 2019 New equipment markets ▪ The new equipment market is expected to be relatively stable or to grow slightly ▪ In China, the market is expected to grow slightly in units ordered, while in the rest of the Asia-Pacific, the market is expected to be stable ▪ The new equipment market
Slide 18: Business outlook for 2019 (specified)
Business outlook for 2019 (specified) Sales Boosting our performance Burdening our result ▪ In 2019, KONE’s sales is estimated to grow by 5–8% (4–7%) at comparable exchange rates as Solid order book Raw material prices and compared to 2018 trade tariffs Services business (MEUR <50) growth Adjusted E
Slide 19: Headwinds and tailwinds impacting our business in 2020
There are both headwinds and tailwinds impacting our business in 2020 BOOSTING OUR PERFORMANCE Strong order book with recently improved margin in the orders received Solid growth in service business Accelerate savings and performance improvements BURDENING OUR RESULT Labor and subcontracting cost in
Slide 20: Summary
Summary ▪ Broad-based good development in all businesses ▪ Entering 2020 in a strong position
Slide 21: Dedicated to People Flow
Dedicated to People Flow" KOIN|E
Slide 22: Appendix
Appendix
Slide 23: Q3 2019 Sales split
Q3 2019 Sales split By business By area 14% 20% (14%) (20%) 42% (41%) 55% 31% (54%) (32%) 38% (39%) New equipment Asia-Pacific Maintenance EMEA (Europe, Middle East and Africa) Modernization Americas 7-9/2018 figures in brackets. Figures in charts are rounded and at historical exchange rates. 23 Oct
Slide 24: IFRS 16
IFRS 16 IMPACT IN Q3 Balance sheet Income statement Cash flow statement ▪ EUR 358 million increase in the ▪ EUR 2 million positive impact on ▪ EUR 30 million positive impact on 2019 opening interest-bearing EBIT cash flow from operations (before debt financing items and taxes) ▪ EUR 3 million increa
Slide 25: 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 KONE 45 Market >25% <30% 40 <35% >35% >35% 35 The market grew slightly in units 30 New equipment orders grew 25 significantly in units
Slide 26: Chinese property market
Chinese property market Housing inventories Housing sales E&E market Newly built area for sale / monthly sales 3-m MVA Sales area growth, change Y-o-Y 50 60 30 40 40 20 30 8/2019: 9/2019: Q3/2019: 20 10 9.9% 21.7 20 Slight 10.7 0 2.9% 0 growth 10 8.4 0 -20 -10 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1Q2 Q1 Q3 Q1 Q
Slide 27: Currencies
Currencies Sales by currencies 1-12/2018 Currency impact Main currencies USD 1-9/19 2018 Sep 30, MEUR Q3 2019 1-12/2018 average average 2019 spot Others EUR / Sales 49 -260 7.7167 7.8148 7.7784 RMB EUR / 1.1241 1.1809 1.0889 USD EBIT 8 -41 EUR / RMB 0.8841 0.8861 0.8857 GBP Orders 48 -239 received E
Slide 28: Balance sheet – assets employed
Balance sheet – assets employed MEUR Sep 30, 2019 Sep 30, 2018 Dec 31, 2018 Assets employed Goodwill 1,379.2 1,321.6 1,333.4 Other intangible assets 254.4 260.5 260.2 Tangible assets 758.2 378.5 397.4 Investments 152.3 138.3 143.3 Net working capital -871.5 -719.0 -757.8 Assets employed total 1,672.
Slide 29: Net working capital
Net working capital Sep 30, 2019 Sep 30, 2018 Dec 31, 2018 MEUR Net working capital Inventories 700.0 648.5 624.1 Advance payments received and deferred revenue -1,808.8 -1,531.7 -1,562.2 Accounts receivable 2,182.0 1,910.8 1,988.3 Other non-interest-bearing assets 815.4 715.3 660.5 Other non-intere
Slide 30: Consolidated statement of cash flows
Consolidated statement of cash flows MEUR 1-9/2019 1-9/2018 1-12/2018 Operating income 836.1 750.0 1,042.4 Change in working capital before financing items and taxes 151.6 -19.7 -11.2 Depreciation and amortization 176.2 88.2 118.9 Cash flow from operations before financing items and 1,163.9 818.5 1,