KONE Corporation,stock exchange release, January 28, 2020 at 12.30 p.m. EET
Financial Statement Bulletin of KONE Corporation forJanuary-December2019
January-December2019: Solid sales growth in all businesses and profitabilityimproved in Q4
October-December2019
- Orders received grewby 2.6% to EUR 1,988 (10-12/2018: 1,938) million. At comparableexchange rates, orders received grew by0.7%.
- Sales grew by 9.9%to EUR 2,685 (2,443) million. At comparable exchange rates, salesgrew by 7.9%.
- Operating income(EBIT) was EUR 356.4 (292.5) million or 13.3% (12.0%) of sales. Theadjusted EBIT was EUR 367.5 (319.6) million or 13.7% (13.1%) ofsales.* IFRS 16 had a positive impact of EUR 0.1 million on theoperating income.
- Cash flow fromoperations (before financing items and taxes) was EUR 385.7 (331.6)million. IFRS 16 had a positive impact of EUR 32 million to thecash flow from operations (before financing items andtaxes).
January-December2019
- Orders received grewby 7.7% to EUR 8,400 (1-12/2018: 7,797) million. At comparableexchange rates, orders received grew by5.9%.
- Sales grew by 10.0%to EUR 9,982 (9,071) million. At comparable exchange rates, salesgrew by 8.2%.
- Operating income(EBIT) was EUR 1,192 (1,042) million or 11.9% (11.5%) of sales. Theadjusted EBIT was EUR 1,237 (1,112) million or 12.4% (12.3%) ofsales.* IFRS 16 had a positive impact of EUR 6 million on theoperating income.
- Cash flow fromoperations (before financing items and taxes) was EUR 1,550 (1,150)million. IFRS 16 had a positive impact of EUR 119 million to thecash flow from operations (before financing items andtaxes).
- The Board proposes adividend of EUR 1.70 per class B share for the year2019.
KONE has adopted anew IFRS 16 and IFRIC 23 effective January 1, 2019 using themodified retrospective approach and the comparative figures havenot been restated.
Business outlook for2020
In 2020, KONE salesis estimated to grow by 0-6% at comparable exchange rates ascompared to 2019. The adjusted EBIT is expected to be in the rangeof EUR 1,250-1,400 million, assuming that foreign exchange rateswould remain at the January 2020 level. Foreign exchange rates areestimated to impact EBIT positively by around EUR 15million.
| KEYFIGURES | 10-12/2019 | 10-12/2018 | Change | 1-12/2019 | 1-12/2018 | Change | |
| Ordersreceived | MEUR | 1,988.3 | 1,937.9 | 2.6% | 8,399.8 | 7,797.0 | 7.7% |
| Orderbook | MEUR | 8,051.5 | 7,950.7 | 1.3% | 8,051.5 | 7,950.7 | 1.3% |
| Sales | MEUR | 2,684.6 | 2,443.4 | 9.9% | 9,981.8 | 9,070.7 | 10.0% |
| Operating income(EBIT) | MEUR | 356.4 | 292.5 | 21.8% | 1,192.5 | 1,042.4 | 14.4% |
| Operating incomemargin (EBIT margin) | % | 13.3 | 12.0 | 11.9 | 11.5 | ||
| AdjustedEBIT* | MEUR | 367.5 | 319.6 | 15.0% | 1,237.4 | 1,112.1 | 11.3% |
| Adjusted EBITmargin* | % | 13.7 | 13.1 | 12.4 | 12.3 | ||
| Income beforetax | MEUR | 366.0 | 301.2 | 21.5% | 1,217.5 | 1,087.2 | 12.0% |
| Netincome | MEUR | 283.0 | 232.2 | 21.9% | 938.6 | 845.2 | 11.1% |
| Basic earnings pershare | EUR | 0.54 | 0.45 | 21.2% | 1.80 | 1.63 | 10.4% |
| Cash flow fromoperations (before financing items andtaxes) | MEUR | 385.7 | 331.6 | 1,549.6 | 1,150.1 | ||
| Interest-bearing netdebt | MEUR | -1,552.9 | -1,704.0 | -1,552.9 | -1,704.0 | ||
| Equityratio | % | 46.5 | 49.9 | 46.5 | 49.9 | ||
| Return onequity | % | 30.1 | 27.7 | 30.1 | 27.7 | ||
| Net working capital(including financing items andtaxes) | MEUR | -856.0 | -757.8 | -856.0 | -757.8 | ||
| Gearing | % | -48.6 | -55.3 | -48.6 | -55.3 |
* In September 2017,KONE introduced a new alternative performance measure, adjustedEBIT, to enhance comparability of the business performance betweenreporting periods during the Accelerate program. Restructuringcosts related to the Accelerate program are excluded from thecalculation of the adjustedEBIT.
Henrik Ehrnrooth,President and CEO:
"Solid earningsgrowth was the key highlight of the Q4 results.Our good salesgrowth in all of our businesses continued, with strongest growth inthe quarter in the modernization business. Orders received grewslightly as a result of continued good growth in the volumebusiness despite fewer major project orders booked in the quarter.What I am especially happy about is that our adjusted EBIT marginimproved as a result of consistent pricing and productivity actionsand savings from the Accelerate program. This has resulted in apositive development in the margin of orders received. I would liketo thank everyone in the KONE team for their commitment in making2019 a successful year of profitablegrowth.
We aredifferentiating by creating more value forcustomers.During the currentstrategy period we have focused on how to create value forcustomers in new ways. The aim of all of our development is to helpour customers succeed in their business. We have rolled out our newservices, improved our sales approach in modernizations and mostrecently launched an exciting new elevator offering, KONE DX Classelevators. Our renewed portfolio of services and solutions helpsour customers develop, construct and maintain competitive buildingsthat are easily upgradeable to fulfill the latest user requirementsnow and in the future. It is our customers who daily judge ourdifferentiation in relation to our competition. Here we can seevery encouraging results. The value per service contract and theaverage price of new equipment sold has started to increase - thisdemonstrates the success of our approach. The improveddifferentiation together with our reputation as a reliable partneris what has driven this. I am also happy that we have again beenexternally recognized for the work we have done to be the leader insustainability in our industry. Sustainability is an increasinglyimportant focus area for our customers and also a source ofdifferentiation for us.
We enter the year2020 in a good position.Our competitivenessis strong, we have a solid order book and the outlook for servicescontinues to be positive. We expect KONE's sales to grow by 0-6% atcomparable exchange rates in 2020. Earnings growth is expected tocontinue with the adjusted EBIT expected to be between EUR 1,250and 1,400 million. We will continue to invest in renewing ourselvesto be able to deliver better outcomes to our customers every day. Iam confident that we can continue our strong development in2020."
Operatingenvironment in October-December2019
The global newequipment marketgrew slightly inunits compared to the fourth quarter of 2018. InAsia-Pacific, the new equipment market grew slightly.In China, infrastructure and residential segmentsdeveloped positively, while non-residential segment declined.Government continued to balance between supporting the economicactivity and restricting the residential market. Overall, theChinese new equipment market grew slightly in units. In therest of Asia-Pacific, the new equipment market returned toslight growth with slight growth in some Southeast Asian countries,stable development in India and Australian market bottoming out.In the EMEA region, the new equipment market grewslightly. The new equipment market in Central and North Europe grewslightly. In South Europe, the market grew slightly with growth inmost of the countries in the area. In the Middle East, the marketdeclined due to continued uncertainty in the area. In NorthAmerica, the new equipment market was stable on a highlevel.
Global servicemarketscontinued to developpositively. Both the maintenance and the modernization markets sawgrowth across the regions, with the strongest rate of growth seenin Asia-Pacific.
Pricingtrendsremained variedduring October-December. In China, competition remained intense butpricing was rather stable in the new equipment market. In the EMEAregion, the pricing environment improved slightly. In NorthAmerica, competition continued to beintense.
Operatingenvironment in January-December2019
The global newequipment marketgrew slightly inunits compared to the previous year. InAsia-Pacific, the new equipment market grew slightly.In China, infrastructure and residential segmentsdeveloped positively, while non-residential segment declined.Government continued to balance between supporting the economicactivity and restricting the residential market. Overall, theChinese new equipment market grew slightly in units. In therest of Asia-Pacific, the new equipment markets werestable. In the EMEA region, the new equipmentmarket grew slightly. The market grew slightly both in Central andNorth Europe as well as in South Europe. In the Middle East, themarket continued to decline. In North America, thenew equipment market was stable on a highlevel.
Global servicemarketscontinued to developpositively. Both the maintenance and the modernization markets sawgrowth across the regions, with the strongest rate of growth seenin Asia-Pacific.
Pricingtrendsremained variedduring January- December 2019. In China, competition remainedintense but pricing was rather stable in the new equipment market.In the EMEA region, the pricing environment improved gradually. InNorth America, competition intensifiedsomewhat.
Market outlook2020
The new equipmentmarket is expected to be relatively stable or to grow slightly.However, the coronavirus outbreak creates uncertainty to theoutlook. In China the market is expected to be relatively stable orto grow slightly in units ordered, while in the rest of theAsia-Pacific, the market is expected to grow slightly. The newequipment markets in North America and the Europe, Middle East andAfrica region are expected to be ratherstable.
Maintenance marketsare expected to see the strongest growth rate in Asia-Pacific andto grow slightly in otherregions.
The modernizationmarket is expected to grow slightly in North America and in theEurope, Middle East and Africa region and to develop strongly inAsia-Pacific.
Business outlook2020
In 2020, KONE'ssales is estimated to grow by 0-6% at comparable exchange rates ascompared to 2019. The adjusted EBIT is expected to be in the rangeof EUR 1,250-1,400 million, assuming that foreign exchange rateswould remain at the January 2020 level. Foreign exchange rates areestimated to impact EBIT positively by around EUR 15million.
The outlook is basedon KONE's maintenance base and order book as well as the marketoutlook. KONE has a solid order book for 2020 and the servicebusiness is expected to grow driven by KONE's growing and aginginstalled base and overall positive market outlook. Targetedpricing and productivity actions, which have impacted the margin oforders received positively, are expected to support profitabilitytogether with around EUR 50 million of savings from the Accelerateprogram. Increasing labor and subcontracting costs as well as theinvestment in building our capability to sell and deliver digitalservices and solutions are the main headwinds for the adjusted EBITin 2020. Furthermore, the recent coronavirus outbreak createsadditional uncertainty. KONE is also expecting to have aroundEUR 40 million of restructuring costs related to the Accelerateprogram in the final year of the program. These costs are excludedfrom the adjusted EBIT.
The Board's proposalfor the distribution ofprofit
The parent company'snon-restricted equity on December 31, 2019 was EUR 2,508,732,086.60of which the net profit for the financial year is EUR846,898,465.29.
The Board ofDirectors proposes to the Annual General Meeting that a dividend ofEUR 1.6975 be paid on the outstanding 76,208,712 class A shares andEUR 1.70 on the outstanding 441,633,543 class B shares, resultingin a total amount of proposed dividends of EUR880,141,311.72.
The Board ofDirectors further proposes that the remaining non-restrictedequity, EUR 1,628,590,774.88 be retained and carried forward. TheBoard proposes that the dividends be payable on March 5, 2020. Allthe shares existing on the dividend record date are entitled todividend for the year 2019 except for the own shares held by theparent company.
Press and analystmeetings
A meeting for thepress, conducted in Finnish, will be held on Tuesday, January 28,2020 at 2:15 p.m. EET.
A meeting foranalysts, conducted in English, will begin at 3:45 p.m. EET andwill be available as a live webcast on www.kone.com. An on-demandversion of the webcast will be available on www.kone.com later thesame day. The meeting can also be joined via a telephoneconference.
US callers: +1323-794-2551
UK callers: +44 (0)330 336 9105
Finnish callers: +358 (0)9 7479 0361
Participant code: 5050285
Both meetings willtake place in KONE Building, located at Keilasatama 3, Espoo,Finland.
For furtherinformation, please contact:
Sanna Kaje,Vice President, Investor Relations, tel. +358 204 754705
Sender:
KONECorporation
Henrik Ehrnrooth
President and CEO
Ilkka Hara
CFO
AboutKONE
At KONE, our missionis to improve the flow of urban life. As a global leader in theelevator and escalator industry, KONE provides elevators,escalators and automatic building doors, as well as solutions formaintenance and modernization to add value to buildings throughouttheir life cycle. Through more effective People Flow®, we makepeople's journeys safe, convenient and reliable, in taller, smarterbuildings. In 2019, KONE had annual sales of EUR 10 billion, and atthe end of the year approximately 60,000 employees. KONE class Bshares are listed on the Nasdaq Helsinki Ltd. inFinland.
www.kone.com