KONE Corporation,Inside information, March 23, 2020 at 11:35 a.m.EET
KONE downgrades itsbusiness outlook for 2020 due to the estimated impacts related tothe COVID-19outbreak
KONE downgrades itsbusiness outlook for 2020 due to the estimated impacts related tothe COVID-19 outbreak.
Governments acrossthe world are taking significant and increasing measures to containthe COVID-19 outbreak by restricting the movement of people. Insome places, this has also resulted in measures such as closingdown construction sites, limiting manufacturing operations andlimiting maintenance activities which impact also KONE's business.The extent of the measures varies from one country to another, andthe situation changes on a daily basis. In Q1, the restrictionshave been the most severe in China, but there KONE has already seensignificant recovery after the loosening of the restrictions sinceend of February. In the rest of the world, the measures arecurrently increasing significantly.
KONE's priority isto ensure the health and wellbeing of our people and to minimizeimpact to customers. We are taking strong actions to manage thesituation both at the local and global levels and following theinstructions from the local governments and healthauthorities.
KONE's ability todeliver has remained overall on a good level considering thedemanding operating environment. However, KONE expects theabovementioned measures to increasingly impact the timing of KONE'sdeliveries and pace of installation in many markets and thus KONE'snew equipment and modernization sales.
KONE's maintenancebusiness is by nature very stable and resilient through cycles.During the actions to contain the COVID-19 outbreak, elevator andescalator maintenance has also typically been considered ascritical service and allowed with some limitations. However, inseveral countries, also the maintenance business is impacted tosome extent. Some customer sites are closed and although call-outsand other mandatory maintenance visits continue, there is lessdiscretionary activity such as repairs.
Business outlook for2020:
KONE now estimatesthat in 2020, its sales will decline or be stable at best atcomparable exchange rates as compared to 2019. The rate of declinein sales will depend on the duration and severity of the governmentmeasures and the pace of recovery.
- Stable sales wouldrequire a relatively brisk recovery in the second half of 2020 andsustained positive progress in KONE's largest marketChina.
- KONE's sales areexpected to decline by less than 5% in case the restrictivemeasures would impact KONE's business mainly in the first half of2020 and there would be a gradual recovery in the secondhalf.
- Should the broad andstrict government measures continue to impact KONE's operationswell into the second half of 2020, KONE's sales are expected todecline by 5-10%.
The adjusted EBITmargin is expected to decline somewhat or to be stable atbest.
Profitability isexpected to be burdened by weaker fixed cost absorption due tolower sales, the costs related to the measures to ensure the safetyand wellbeing of KONE's employees, suppliers and customers and thecosts related to the actions in the supply operations to ensuresolid delivery capability among other things. Excluding theCOVID-19 related factors, KONE's profitability outlook has beenpositive.
Demand for KONE'ssolutions and services is also expected to be impacted by theprevailing uncertainty. KONE will give an updated market outlook inconnection to the Q1 interim report.
Despite the shortterm disruptions to its business, KONE expects to come out of thedemanding situation in a position of strength. KONE'scompetitiveness is solid and the balance sheet is strong. KONE alsohas a solid order book and the overall outlook for the servicebusiness is positive.
Previous businessoutlook: KONE previously estimated its sales to grow by 0-6% in2020 at comparable exchange rates as compared to 2019. The adjustedEBIT was expected to be in the range of EUR 1,250-1,400 million,assuming that foreign exchange rates would have remained at theJanuary 2020 level. Foreign exchange rates were estimated to impactEBIT positively by around EUR 15million.
For moreinformation, please contact:
Sanna Kaje,Vice President, Investor Relations, tel. +358 204 754705
Sender:
KONECorporation
HenrikEhrnrooth
President and CEO
Ilkka Hara
CFO
AboutKONE
At KONE, ourmission is to improve the flow of urban life. As a global leader inthe elevator 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. in Finland.
www.kone.com