Slide 1: KONE H1 2020
KONE H1 2020 JULY 17, 2020 HENRIK EHRNROOTH, PRESIDENT & CEO ILKKA HARA, CFO
Slide 2: Q2 2020 Highlights
Q2 2020 Highlights ▪ Strong recovery in China ▪ Orders received impacted by high level of uncertainty ▪ Growing earnings and strong cash flow in a tough environment ▪ Employee engagement improved from an already high level
Slide 3: Q2 2020 Key figures
Q2 2020 Key figures GROWING EARNINGS AND STRONG CASH FLOW, INCREASED UNCERTAINTY VISIBLE IN ORDERS RECEIVED Comparable 4-6/2020 4-6/2019 Change change Orders received MEUR 2,075.4 2,310.1 -10.2% -9.4% Order book MEUR 8,307.3 8,407.1 -1.2% -0.3% Sales MEUR 2,532.1 2,540.8 -0.3% -0.1% Operating income
Slide 4: 1-6/2020 Key figures
1-6/2020 Key figures RESILIENT SALES AND ADJUSTED EBIT, INCREASED UNCERTAINTY VISIBLE IN ORDERS RECEIVED Comparable 1-6/2020 1-6/2019 Change change Orders received MEUR 4,184.7 4,404.1 -5.0% -4.8% Order book MEUR 8,307.3 8,407.1 -1.2% -0.3% Sales MEUR 4,730.3 4,739.6 -0.2% -0.3% Operating income (EB
Slide 5: How has the COVID-19 crisis impacted KONE?
How has the COVID-19 crisis impacted KONE? New equipment and modernization KONE’s sales growth at comparable FX rates in Q2 ▪ Strong recovery in China in Q2 New equipment Modernization Maintenance ▪ Some construction sites and buildings closed China → significant impact on sales especially in some A
Slide 6: Restrictions in many markets with varying pace of easing
Restrictions in many markets with varying pace of easing Impact of restrictions on maintenance and installation Central and Illustrative North Europe Q1 Q2 China North America Q1 Q2 Q1 Q2 South Europe and Middle East Rest of APAC Q1 Q2 Q1 Q2 6 July 17, 2020 Half-year Financial Report January-June 20
Slide 7: Focus areas during the COVID-19 crisis
Focus areas during the COVID-19 crisis WE ENSURE THE HEALTH AND WELLBEING OF OUR EMPLOYEES. WE SUPPORT OUR CUSTOMERS AND WE WILL FIND OPPORTUNITIES TO BECOME EVEN STRONGER Safe working and Wellbeing, Cost containment Customer activity Mid- and long-term business engagement and care and financial ris
Slide 8: Helping make cities and buildings smarter and safer
Helping make cities and buildings smarter and safer Free KONE 24/7 Connected KONE DX Class elevators, Helping our customers with Services for hospital facilities New range of KONE Health planning for a safe return to and care homes during the and well-being solutions office premises pandemic 8 July
Slide 9: Employee engagement improved from an already high level
Employee engagement improved from an already high level Employee engagement index ▪ Employee engagement strong and above the high performing norm ▪ 92% participation ▪ High scores for strategy and direction of High performing norm innovation General industry norm 2010 2011 2012 2013 2014 2015 2016-
Slide 10: Market development
Market development
Slide 11: New equipment market development in Q2/2020
New equipment market development in Q2/2020 DEMAND DECREASED IN MANY PARTS OF THE WORLD, DUE TO THE INCREASED UNCERTAINTY North American market EMEA market Asia-Pacific market --- -- ++ <5% of ~20% of >2/3 of global global global market market market (in units) (in units) (in units) ▪ Market decline
Slide 12: Service market development in Q2/2020
Service market development in Q2/2020 GLOBAL MAINTENANCE MARKET WAS RESILIENT, WHEREAS INCREASED UNCERTAINTY HAD A SIGNIFICANT IMPACT ON THE MODERNIZATION MARKETS North American market EMEA market Asia-Pacific market Maintenance Modernization Maintenance Modernization Maintenance Modernization Stabl
Slide 13: Chinese property market in Q2/2020
Chinese property market in Q2/2020 ▪ In units ordered, the new equipment market grew significantly y-o-y ▪ Intensifying competition affected the pricing environment adversely ▪ Infrastructure investments expected to grow significantly to boost economic activity ▪ Government continues to restrict the
Slide 14: Q2 Financials
Q2 Financials
Slide 15: Orders received
Orders received ORDERS RECEIVED WERE STABLE IN APAC BUT DECLINED SIGNIFICANTLY IN EMEA AND THE AMERICAS ▪ In Q2, the margin of MEUR orders received improved slightly 9,000 8,400 7,959 7,797 -9.4% 8,000 7,621 7,554 2,310 7,000 6,813 216 6,151 2,075 Q2 growth 18 6,000 5,496 -10.2% 5,000 4,465 4,185 4,
Slide 16: Sales
Sales STRONG RECOVERY IN CHINA OFFSET THE SALES DECLINES ELSEWHERE Growth at comp. FX MEUR -0.1% 9,982 10,000 9,071 4.9% -15.3% 9,000 8,647 8,784 8,797 -1.7% 8,000 13 7,334 6,933 Q2 growth 7,000 6,277 68 6,000 -0.3% 56 4,987 5,225 5,000 4,730 2,541 7 2,532 4,000 2,541 2,532 3,000 EMEA -8.9% 2,000 AP
Slide 17: Profitability
Adjusted EBIT SOLID EXECUTION OF A HEALTHY ORDER BOOK IN A TOUGH ENVIRONMENT Adjusted EBIT* and adjusted EBIT margin Q2 adj. ▪ In Q2, restructuring MEUR; % EBIT margin costs related to the 12.6% 12.8% Accelerate program: 1,600 EUR 9.1 million 1,400 1,293 1,241 1,206 1,237 1,200 1,112 -1 325 1,036 1,
Slide 18: Cash flow
Cash flow EXCEPTIONALLY STRONG CASH FLOW Cash flow from operations* ▪ Net working capital MEUR contributed positively to the cash flow in 1,600 1,550 1,474 1,509 1-6/2020 1,400 1,346 1,263 ▪ Increase in accounts 1,213 payable due to strong 1,200 1,150 1,071 recovery in China, 1,000 939 impact of aro
Slide 19: Market and business outlook for 2020
Market and business outlook for 2020
Slide 20: Market outlook for 2020
Market outlook for 2020 New equipment markets ▪ The Chinese market is expected to be relatively stable ▪ In other regions, the new equipment market is expected to decline as a result of the increased economic uncertainty Maintenance markets ▪ The maintenance markets are expected to be resilient, exc
Slide 21: Business outlook for 2020 (specified)
Business outlook for 2020 (specified) Sales Supporting our performance Burdening our result ▪ KONE estimates that in 2020, its sales growth will be in the range of -4 to 0% at comparable Solid order book and Impacts of COVID-19 exchange rates as compared to 2019 maintenance base outbreak - Weaker co
Slide 22: Summary
Summary ▪ Solid performance in challenging environment ▪ Driving differentiation by investing in new solutions and services ▪ Facing the weaker business environment from a position of strength
Slide 23: Dedicated to People Flow
Dedicated to People Flow" KOIN|E
Slide 24: Appendix
Appendix
Slide 25: KONE's global supply chain has remained robust during the crisis
KONE’s global supply chain has remained robust during the crisis KONE’s key manufacturing units Status as on July 17, 2020 Hyvinkää, Finland Coal Valley, Usti nad Labem, USA Czech Republic Kunshan & Nanxun, China Allen, USA Pero & Cadrezzate, Italy Closed after Chinese New Year for >1 week with Torr
Slide 26: Q2/2020 Sales split
Q2/2020 Sales split By business By area 12% 19% (14%) (20%) 45% (41%) 31% 57% (31%) (55%) 36% (40%) New equipment Asia-Pacific Maintenance EMEA (Europe, Middle East and Africa) Modernization Americas 4-6/2019 figures in brackets. Figures in charts are rounded and at historical exchange rates. 26 Jul
Slide 27: 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 Market >25% 40 >35% ~30% >35% The market grew significantly in ~40% units 30 New equipment orders grew <20% significantly in units
Slide 28: 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 Q2/2020: 20 5/2020: Significant 30 20 6/2020: growth 24.4% 10 8.0% 20 0 2.1% 13.1% 0 10 10.1% -20 0 -40 -10 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
Slide 29: Currencies
Currencies Sales by currencies 1-12/2019 Currency impact Main currencies USD Q2/2020 2019 Jun 30, MEUR Q2/2020 1-12/2019 average average 2020 spot Others EUR / 7.7808 7.7353 7.9219 Sales -6.9 153.4 RMB EUR / 1.1061 1.1214 1.1198 USD EBIT -1.3 23.3 EUR / 0.8735 0.8773 0.9124 RMB GBP Orders -18.4 134.
Slide 30: Balance sheet – assets employed
Balance sheet – assets employed MEUR Jun 30, 2020 Jun 30, 2019 Dec 31, 2019 Assets employed Goodwill 1,361.1 1,343.5 1,366.5 Other intangible assets 219.4 251.2 248.2 Tangible assets 708.0 747.6 742.2 Investments 130.9 151.3 139.2 Net working capital -1,057.7 -805.4 -856.0 Assets employed total 1,36
Slide 31: Net working capital
Net working capital MEUR Jun 30, 2020 Jun 30, 2019 Dec 31, 2019 Net working capital Inventories 672.1 643.3 648.6 Advance payments received and deferred revenue -1,811.3 -1,699.4 -1,753.8 Accounts receivable 2,200.9 2,126.1 2,232.3 Deferred assets and income tax receivables 751.0 759.8 669.6 Accrual
Slide 32: How is the COVID-19 crisis impacting KONE?
How is the COVID-19 crisis impacting KONE? New equipment and modernization KONE’s exposure to different customer segments Illustrative ▪ Some construction sites and buildings closed due to the lockdowns ▪ KONE’s robust global supply chain has enabled minimal Other disruptions for customers Hotels, l