2008-10-21 11:23:06 CEST
2008-10-21 11:24:14 CEST
REGULATED INFORMATION
KONE Oyj - Interim report (Q1 and Q3)
KONE Corporation's Interim Report for January-September 2008
KONE Corporation, stock exchange release, October 21, 2008 at 12:30
p.m.
KONE Q3: KONE's good EBIT growth continued
July-September
- In July-September 2008, orders received decreased by 3.7%. At
comparable exchange rates, the growth was 0.5%. Orders received
totaled EUR 892.4 (7-9/2007: 926.3) million.
- Net sales increased by 16% to EUR 1,124 (971.6) million. At
comparable exchange rates, the growth was 20%.
- Operating income was EUR 146.0 (126.7) million or 13.0% (13.0%) of
net sales.
January-September
- In January-September 2008, orders received growth was 12%, or 17%
at comparable exchange rates. Orders received totaled EUR 3,102
(1-9/2007: 2,773) million. At the end of September 2008, the order
book stood at a record high of EUR 4,003 (Dec 31, 2007: 3,282)
million.
- Net sales increased by 14% to EUR 3,171 (2,785) million. At
comparable exchange rates, the growth was 19%.
- Operating income was EUR 369.2 (312.4) million or 11.6% (11.2%) of
net sales (1-9/2007 figures exclude an expense of EUR 142.0 million
related to the European Commission's fine decision)
- KONE reiterates its outlook for 2008.
Key Figures
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
2008 2007 2008 2007 2007
Orders received MEUR 892.4 926.3 3,102.3 2,772.8 3,674.7
Order book MEUR 4,002.8 3,473.6 4,002.8 3,473.6 3,282.3
Sales MEUR 1,123.8 971.6 3,171.2 2,784.7 4,078.9
Operating income MEUR 146.0 126.7 369.2 312.4 1) 473.2 2)
Operating income % 13.0 13.0 11.6 11.2 1) 11.6 2)
Cash flow from
operations
(before financing
items and taxes) MEUR 153.4 158.7 438.9 264.0 380.0
Net income MEUR 107.5 91.8 270.2 79.7 180.3
Basic earnings per
share EUR 0.42 0.37 1.07 0.32 0.72
Interest-bearing net
debt MEUR -9.3 168.5 -9.3 168.5 91.7
Total equity/total
assets % 34.0 27.9 34.0 27.9 31.7
Gearing % -1.1 25.9 -1.1 25.9 12.2
1) Excluding an expense of EUR 142.0 million related to the
European Commission's fine decision
2) Excluding an expense of EUR 142.0 million related to the
European Commission's fine decision, a EUR 22.5 million provision for
the Austrian Cartel Court's fine decision and a EUR 12.1 million
profit from the sale of the KONE Building.
KONE President & CEO, Matti Alahuhta, in conjunction with the review:"Our people have continued to do a good job. Even with the negative
impact of raw material prices, KONE succeeded to grow its operating
income (EBIT) by 15%. In the current demanding market environment,
our service business is a major asset to us. The new equipment market
faced increasing uncertainty especially in Western Europe and North
America. We continue to be very determined in working with our five
development programs; our attitude is to take also this demanding
market phase as an opportunity to continue to gain market share as
well as further improve KONE's quality and productivity."
Analyst and media meeting and telephone conference
A meeting for the press, conducted in Finnish, will be held on
Tuesday, October 21, 2008 at 2:00 p.m. Finnish time.
A telephone conference and a meeting for analysts, conducted in
English, will begin at 3:30 p.m. Finnish time. The telephone
conference will also be available as a webcast on www.kone.com.
Both meetings will take place in the KONE Building, located at
Keilasatama 3, Espoo, Finland.
Telephone conference numbers:
US callers: +1 334 323 6201
Non-US callers: +44 (0)20 7162 0025
Participant code: KONE
An on demand version of the telephone conference will be available at
www.kone.com later the same day.
About KONE
KONE's objective is to offer the best people flow experience by
developing and delivering solutions that enable people to move
smoothly, safely, comfortably and without waiting in buildings in an
increasingly urbanizing environment. KONE provides its customers with
industry-leading elevators, escalators and innovative solutions for
modernization and maintenance, and is one of the global leaders in
its industry. In 2007, KONE had annual net sales of EUR 4.1 billion
and over 32,500 employees. KONE class B shares are listed on the
NASDAQ OMX Helsinki in Finland.
www.kone.com
For further information please contact:
Aimo Rajahalme, Executive Vice President, Finance, tel. +358 (0) 204
75 4484
Sender:
KONE Corporation
Aimo Rajahalme
Executive Vice President,
Finance
Anne Korkiakoski
Executive Vice President,
Marketing and Communications
Accounting Principles
KONE Corporation's Interim Report for January 1-September 30, 2008
has been prepared in line with IAS 34, `Interim Financial Reporting'.
KONE has applied the same accounting principles in the preparation of
the interim report as in its financial statements for 2007. The
accounting principles for the financial statements have been
presented in the Annual Report 2007 published on January 25, 2008.
The information presented in this Interim Report has not been
audited.
July-September 2008 review
Operating environment in July-September
In the third quarter of 2008, the new equipment market situation
differed a great deal from market to market, due to the demanding
environment. The modernization market continued to provide good
growth opportunities for KONE. The global maintenance market
continued to grow but remained very competitive.
In the European, Middle East and African region (EMEA), the business
environment was very mixed. The North European market experienced
increasing hesitation in the residential sector. In the United
Kingdom, the residential market continued to weaken and the
commercial market weakened somewhat. The overall Southern European
residential market activity declined in Italy, France and
particularly in Spain. The commercial and hospital sectors still
grew. In the Middle East and especially in Saudi Arabia, construction
markets continued to grow but some hesitation in decision making
occurred in Qatar for example.
Faced with a broad economic slowdown, the Americas market still
provided growth opportunities for KONE. The new equipment market has
decreased year on year in the United States. Building activity in the
United States remained best in the Northeast and the West.
Modernization activity stayed at a relatively good level in the
United States and also the maintenance market continued to develop
well. In Canada, the construction market was still resilient, while
Mexico's construction market followed market trends in the United
States.
In the Asia-Pacific region, good growth continued in most markets,
even though investment decisions were becoming somewhat slower in
some markets. In China, the new equipment market sustained to be
active with some cooling in the costal regions, but the North and
Central provinces experienced high growth. In India, good market
growth continued, however market activity suffered somewhat from high
interest rates and cost inflation. In Australia, the commercial
segment activity sustained some growth while the residential segment
continued to slow down.
Financial performance in July-September
KONE's orders received in the third quarter of 2008 declined by 3.7%
and totaled EUR 892.4 (7-9/2007: 926.3) million. At comparable
exchange rates, the growth was 0.5%. Orders decreased in the United
Kingdom and Ireland. The growth in orders was strongest in the
Americas and Asia-Pacific. In the Americas, KONE succeeded to further
gain market share. In the Asia-Pacific region, orders received growth
was best in China, South Asia and Australia. In the EMEA region,
France, Scandinavia, Russia and the Middle East contributed with good
growth. Only new equipment orders and modernization orders are
included in orders received.
The largest orders received in the July-September period included an
order to supply and install KONE EcoSystem MR(TM) elevators, KONE
ECO3000® transit escalators and KONE autowalks for the new Terminal 3
at the McCarran International Airport in Las Vegas, USA.
KONE's net sales grew by 16% compared with July-September 2007 and
totaled EUR 1,124 (971.6) million. At comparable exchange rates, the
growth was 20%. Sales growth was strongest in Asia-Pacific.
New equipment sales accounted for 551.6 (430.1) million of the total
and represented an approximate growth of 28% over the comparison
period. At comparable exchange rates, the growth was approximately
33%.
Service sales (maintenance and modernization) increased by
approximately 6% and totaled EUR 572.2 (541.5) million. At comparable
exchange rates, the growth was approximately 10%.
Operating income for the July-September period totaled EUR 146.0
(126.7) or 13.0% (13.0%) of net sales. The cost increase in hot
rolled steel and cast iron had a negative impact on the profit level.
The intensive implementation of KONE's development programs
continued to increase the company's competitiveness.
Sales by geographical areas, MEUR
Sales by
geographical 7-9/ 7-9/ 1-9/ 1-9/ 1-12/
areas MEUR 2008 % 2007 % 2008 % 2007 % 2007 %
EMEA 1) 702.4 62 621.0 64 2,067.4 65 1,808.2 65 2,675.3 65
Americas 234.0 21 211.9 22 609.7 19 595.6 21 840.8 21
Asia-Pacific 187.4 17 138.7 14 494.1 16 380.9 14 562.8 14
Total 1,123.8 971.6 3,171.2 2,784.7 4,078.9
1) EMEA = Europe, Middle East, Africa
January-September 2008 review
KONE's Orders received and Order book in January-September
During the latter part of January-September 2008, the overall market
situation became more demanding in many new equipment markets. In the
maintenance and modernization markets, where demand is by nature less
cyclical, growth continued while the overall market environment
became increasingly competitive, especially in maintenance.
In January-September 2008, KONE's orders received increased by
approximately 12% and totaled EUR 3,102 (1-9/2007: 2,773) million. At
comparable exchange rates, the growth was approximately 17%. Only new
equipment and modernization orders are included in orders received.
The growth in orders received was strongest in the Asia-Pacific
region. The growth was also very good in the Americas. Good growth in
orders received in a declining new equipment market, such as in the
United States, is strong evidence of KONE's improving
competitiveness.
The order book increased from the end of 2007 by 22% and stood at a
record high of EUR 4,003 (December 31, 2007: 3,282) million at the
end of September 2008. KONE did not receive any major cancellations
during the period under review. As earlier, the margin of the order
book continued to be at a good level.
In the EMEA region, most markets contributed positively to KONE's
orders received in January-September 2008. KONE performed
particularly well in France, Netherlands, Eastern Europe and the
Middle East. KONE also showed good progress in the modernization
market, driven by SNEL (European Safety Norms for Existing Lifts).
KONE's orders received in modernization were particularly good in
France and Scandinavia.
In the Americas, KONE has experienced a very good order intake
growth. KONE's advanced elevator and escalator solutions and improved
competitiveness continued to increase customer awareness. In
addition, an improvement in customer focus continued to bring
results, which enabled KONE to gain market share during
January-September 2008.
In the Asia-Pacific region, KONE's new equipment order intake was
good and proceeded well in China, India, South Asia and Australia.
Net sales
In January-September 2008, KONE's net sales rose by approximately
14%, compared to last year, and totaled EUR 3,171 (1-9/2007: 2,785)
million. Growth at comparable currency rates was approximately 19%.
New equipment sales accounted for EUR 1,484 (1,195) million of the
total and represented an approximate growth of 24% over the
comparison period. At comparable exchange rates, the growth was
approximately 30%.
KONE's business logic spans the entire lifecycle of a customer's
investment. This creates growth in KONE's business operations and a
less cyclical stream of profits. Service sales (maintenance and
modernization) increased by approximately 6% and totaled EUR 1,687
(1,590) million. At comparable exchange rates, the growth was
approximately 11%.
Of the sales, 65% (65%) were generated from EMEA, 19% (21%) by the
Americas and 16% (14%) by Asia-Pacific. The weakened US dollar had an
impact on the geographical sales mix.
Financial result
KONE's operating income was EUR 369.2 million (1-9/2007: 312.4
million, excluding an expense of EUR 142.0 million related to the
European Commission's fine decision) or 11.6% (11.2% excluding an
expense of EUR 142.0 million related to the European Commission's
fine decision) of net sales. The rapid price growth in hot rolled
steel and cast iron in May-June, which we have estimated to have an
impact of EUR 15-20 million during the second half of the year, had a
negative impact on the operating income (EBIT) level during the third
quarter. Net financing items were EUR -6.8 (-7.1) million.
KONE's income before taxes for January-September 2008 was EUR 364.1
(164.2) million. Taxes totaled EUR 93.9 (84.5) million, taking into
account taxes proportionate to the amount estimated for the financial
year. This represents an effective tax rate of 25.8%. In
January-December 2007, the effective tax rate was 27.9% excluding the
result impact of EUR -164.5 million relating to the fine decisions of
the European Commission and the Austrian Cartel Court. Net income for
the period under review was EUR 270.2 (79.7) million.
Earnings per share were EUR 1.07 (0.32). Equity per share was EUR
3.47 (2.58).
Balance sheet and Cash flow
In January-September 2008, cash flow generated from operations
(before financing items and taxes) was EUR 438.9 (1-9/2007: 264.0)
million. At the end of September, net working capital was negative at
EUR -156.2 (Dec 31, 2007: -121.8) million, including financing items
and taxes.
At the end of September 2008, interest-bearing net debt totaled EUR
-9.3 (Dec 31, 2007: 91.7) million, gearing was -1.1% (12.2%) and
total equity/total assets ratio was 34.0% (31.7%).
Capital expenditure, acquisitions and divestments
KONE's capital expenditure, including acquisitions, totaled EUR 96.9
(1-9/2007: 78.9) million. Capital expenditure, excluding
acquisitions, was mainly related to R&D, IT and installation devices,
and production. Acquisitions accounted for EUR 49.6 (40.6) million of
this figure. Acquisitions made in January-September will have no
material effect on the 2008 full-year figures.
In January-September, KONE acquired the French elevator company ARA
Lyon. ARA Lyon maintains and modernizes elevators in the area of
Lyon. KONE has also acquired the Arundel Elevator Company, a full
service elevator company based in Baltimore, Maryland, USA. This
acquisition significantly increased KONE's customer base in Maryland
and the neighboring Mid-Atlantic states. In Murcia, Spain, KONE
acquired RPG Mantenimiento S.L. that maintains and modernizes
elevators. In addition, KONE acquired the International Elevator
Company (IEC), a full service elevator company based in New Jersey,
USA. The acquisition significantly increases KONE's maintenance base
in northern New Jersey. IEC excels in elevator installation,
maintenance, modernizations and repairs.
Research and development
Research and development expenses totaled EUR 40.7 (1-9/2007: 36.2)
million, representing 1.3% (1.3%) of net sales. R&D expenses include
the development of new concepts and further development of existing
solutions and services.
During the period under review, KONE's new offering development
continued strongly in the areas of performance, visual design, user
experience and in further improving the company's eco-efficiency.
In Europe, KONE's counterweight-less offering was expanded with a new
release of KONE MaxiSpaceTM, an elevator solution especially designed
for the modernization market. In the Asia-Pacific region, a new
elevator release expands KONE's standard offering with improved ride
quality, user experience and energy efficiency as well as new designs
and options.
In addition, KONE launched earlier in 2008 a next generation
equipment monitoring system which is able, with an almost unlimited
capacity, to monitor and manage large building complexes and
geographically remote buildings from a single location. The system is
easily integrated with a building's facility management systems.
Personnel
The main goals of KONE's personnel strategy are to further increase
the interest in KONE as an employer and to secure the availability,
commitment and continuous development of its personnel. KONE's
activities are also guided by ethical principles. The personnel's
rights and responsibilities include the right to a safe and healthy
working environment, personal wellbeing as well as the prohibition of
any kind of discrimination.
KONE had 34,548 (December 31, 2007: 32,544) employees at the end of
September 2008. The average number of employees was 33,658 (1-9/2007:
30,365). Additional recruitments were carried out in the production,
installation and maintenance operations due to growth in volumes.
The geographical distribution of KONE employees was 56% (56%) in
EMEA, 17% (18%) in the Americas and 27% (26%) in Asia-Pacific.
People Leadership is one of KONE's five development programs. KONE is
increasingly investing in people development programs, personal
coaching and change management.
Environment
KONE's aim is to be an eco-efficiency leader in its industry. During
2008, eco-efficiency has been integrated as part of KONE's overall
technology roadmap; eco-efficiency improvement targets are now
covering its solutions offering, its operations as well as the
requirements for suppliers.
KONE is focusing on minimizing the carbon (CO2) footprint of its
operations. Improvements cover manufacturing, logistics, installation
and maintenance. Recent focus has been on developing stand-by energy
saving solutions and regenerative units for elevators, on integrating
eco-efficiency in the maintenance and modernization offering and on
initiating projects aiming at minimizing KONE's overall carbon
footprint. The development of new volume elevator releases target a
50% improvement in energy efficiency by 2010. Additionally, KONE aims
to continuously raise awareness of the advantages of KONE's
pioneering energy-efficient product offering and services, like
Remote Monitoring and Care for LifeTM (optimizing service visits),
which support eco-efficiency.
Furthermore, KONE is increasingly requiring its suppliers globally to
operate in an eco-efficient way. For instance, the ISO 14001
environmental standard and tighter environmental requirements are
more and more included in KONE's supplier contracts.
Capital and risk management
The ultimate goal of capital and risk management in the KONE Group is
to contribute to the creation of shareholder value.
Capital is managed in order to maintain a strong financial position
and to ensure that the Group's funding needs can be optimized in a
cost-efficient way even in a critical funding environment. In such a
weak economic environment, having no debt is a special strength.
The economic turmoil has been extremely severe in the last months and
weeks. KONE will focus on two major issues regarding its capital and
risk management. Firstly, the capability to adapt its cost structure
in changing volumes in order to stay competitive, and secondly, to
ensure that the Group's liquidity is guaranteed to cover both
short-term and long-term funding needs.
The Group's cost structure is flexible because of outsourcing in
different areas of the business. Furthermore, overall cost control
has been tightened to avoid unnecessary cost burdens in this phase
with increasing uncertainty in the market environment.
The key area in guaranteeing good liquidity in the short run is to
keep the present working capital position. In a difficult economic
situation, it is increasingly important to maintain a healthy order
book without deterioration in payment terms, and to improve credit
control and collection activities. Long-term funding is guaranteed by
existing committed lines.
Appointment to the Executive Board
KONE appointed Anne Korkiakoski, M.Sc. (Econ) Executive Vice
President, Marketing & Communications and Member of the Executive
Board as of September 1, 2008. She is responsible for KONE
Corporation's Marketing, External and Internal Communications as well
as Investor Relations.
Decisions of the Annual General Meeting
KONE Corporation's Annual General Meeting in Helsinki on February 25,
2008 confirmed the number of members of the Board of Directors to be
seven and the number of deputy members to be one. Re-elected as full
members of the Board were Matti Alahuhta, Reino Hanhinen, Antti
Herlin, Sirkka Hämäläinen-Lindfors, Sirpa Pietikäinen, Masayuki
Shimono and Iiro Viinanen, and as a deputy member Jussi Herlin. The
term of the Board ends at the next Annual General Meeting.
At its meeting held after the Annual General Meeting, the Board of
Directors elected Antti Herlin as its Chairman and Sirkka
Hämäläinen-Lindfors as the Vice Chairman of the Board.
The Annual General Meeting decided to amend the Articles of
Association due to the new Companies Act, which entered into force on
September 1, 2006. The new Articles of Association can be found at
www.kone.com.
In addition, the Annual General Meeting decided to increase the
number of shares in the company by issuing new shares to the
shareholders without payment in proportion to their holdings so that
one class A share was be given for each class A share and one class B
share was given for each class B share. The new shares were admitted
to public trading and entered into the book-entry system on February
29, 2008.
The Annual General Meeting decided that the share subscription period
for the 2005C option rights will begin on April 1, 2008. In addition,
it was decided that EUR 0.25 of the subscription price to be paid for
the new shares issued based on the 2005A, 2005B, 2005C, and 2007
option rights will be credited to the share capital, and that the
remaining part will be credited to the paid-up unrestricted equity
reserve. Due to the increase in the number of shares, the Annual
General Meeting decided that the number of shares to be subscribed
for based on the 2005A, 2005B, 2005C and 2007 option rights will
increase, and the share subscription price will decrease in the same
proportion.
In addition, the Annual General Meeting authorized the Board of
Directors to repurchase KONE's own shares with assets distributable
as profit. The shares may be repurchased in order to develop the
capital structure of the Company, finance or carry out possible
acquisitions, implement the Company's share-based incentive plans, or
to be transferred for other purposes or to be cancelled. Altogether
no more than 25,570,000 shares may be repurchased, of which no more
than 3,810,000 may be class A shares and 21,760,000 class B shares.
The Annual General Meeting also authorized the Board of Directors to
decide on the distribution of any shares repurchased by the company.
The authorization is limited to a maximum of 3,810,000 class A shares
and 21,760,000 class B shares. The Board shall have the right to
decide to whom to issue the shares, i.e. to issue shares in deviation
from the pre-emptive rights of shareholders.
The repurchased shares may be used as compensation in acquisitions
and in other arrangements as well as to implement the Company's
share-based incentive plans in the manner and to the extent decided
by the Board of Directors. The Board of Directors also has the right
to decide on the distribution of the shares in public trading on the
NASDAQ OMX Helsinki Ltd for the purpose of financing possible
acquisitions. The shares shall be distributed at least at the market
price at the moment of their transfer determined on the basis of the
trading price for class B shares determined in public trading on the
NASDAQ OMX Helsinki Ltd.
These authorizations shall remain in effect for a period of one year
from the date of the decision of the Annual General Meeting.
PricewaterhouseCoopers Oy, Authorized Public Accountants and Heikki
Lassila, APA, were re-elected as the Company's auditors.
Dividend
The Annual General Meeting approved the Board's proposal for a
dividend of EUR 1.29 for each class A share and EUR 1.30 for each
outstanding class B share before the increase in the number of shares
due to the share issue without payment. This amounted to EUR
163,619,671.52 for the financial year, which ended December 31, 2007.
The date of the dividend payment was March 6, 2008.
Share capital and market capitalization
The KONE 2005A and KONE 2005B options based on the KONE Corporation
option program 2005 were listed on the main list of the NASDAQ OMX
Helsinki Ltd on June 1, 2005. Each option entitles its holder to
subscribe for twelve (12) class B shares at a price of EUR 4.02 per
share.
In 2005, KONE also granted a conditional option program, 2005C. The
2005C stock options were listed on the NASDAQ OMX Helsinki in Finland
as of April 1, 2008. The total number of 2005C stock options is
2,000,000 of which 522,000 are owned by a subsidiary of KONE
Corporation. Each option right entitles its owner to subscribe for
two (2) KONE Corporation class B shares at a price of EUR 12.55 per
share.
As of September 30, 2008, 1,969,360 shares have been subscribed for
with the options, raising KONE's share capital to EUR 64,247,095.00.
The share capital comprises 218,884,024 listed class B shares and
38,104,356 unlisted class A shares.
At the end of September 2008, the remaining number of shares that can
be subscribed for was 4,647,660. The remaining 2005B options entitle
their holders to subscribe for 666,960 and the remaining 2005C for
3,980,700 class B shares. The share subscription period for series A
options ended on March 31, 2008. The share subscription period for
series B and series C options will end on March 31, 2009, and April
30, 2010, respectively. As the 2005A options subscription period
ended on March 31, 2008, all remaining series A options have been
used and the shares were entered in the Finnish Trade Register in
April.
In December 2007, KONE Corporation's Board of Directors decided to
grant stock option rights to approximately 350 employees of the
global organization of KONE based on the authorization granted by the
Annual General Meeting on February 26, 2007. A maximum of 2,000,000
options in total can be granted. The share subscription period for
stock option 2007 will be April 1, 2010-April 30, 2012. The share
subscription period begins only if the average turnover growth of the
KONE Group for the 2008 and 2009 financial years exceeds the market
growth and if the earnings before interest and taxes (EBIT) of the
KONE Group for the financial year 2008 exceeds the EBIT for the 2007
financial year, and the EBIT for the 2009 financial year exceeds the
EBIT for the 2008 financial year.
The share issue without payment approved by KONE Corporation's Annual
General Meeting on February 25, 2008 was entered in the Trade
Register on February 28, 2008. The share issue without payment has
the same effect as a share split. The number of shares in the company
was increased by issuing new shares to the shareholders without
payment in proportion to their holdings so that one class A share was
given for each class A share and one class B share for each class B
share.
KONE's market capitalization was EUR 4,790 million as of September
30, 2008, disregarding own shares in the Group's possession.
Share buy-back
On the basis of the Annual General Meeting's authorization, KONE
Corporation's Board of Directors decided to commence repurchasing
shares at the earliest on March 7, 2008.
During January 1-September 30, 2008 KONE did not use its
authorization to repurchase its own shares.
In April, 326,000 class B shares assigned to the share-based
incentive plan for the the company's senior management were
transferred from KNEBV Incentive Ky to the participants due to
achieved targets for the financial year 2007. At the end of
September, the group had 4,905,506 class B shares in its possession.
The shares in the group's possession represent 2.2% of the total
number of class B shares. This corresponds to 0.8% of the total
voting rights.
Shares traded on NASDAQ OMX Helsinki
The NASDAQ OMX Helsinki traded 151.5 million (the number of shares
has been adjusted to the increase in the number of shares due to the
share issue without payment) KONE Corporation's class B shares in
January-September, equivalent to a turnover of EUR 3,348 million. The
daily average trading volume was 805,448 (1-9/2007: 800,422) (the
numbers of shares have been adjusted to the increase in the number of
shares due to the share issue without payment). The share price on
September 30, 2008 was EUR 19.00. The volume weighted average share
price during the period was EUR 22.59. The highest quotation during
the January-September was EUR 27.87 and the lowest 17.91.
The number of registered shareholders at the beginning of the review
period was 13,650 and 14,655 at its end. The number of private
households holding shares totaled 13,176 or 11.5% of the listed class
B shares at the end of the period.
According to the nominee registers, approximately 44.8% of the listed
class B shares were owned by foreigners at September 30, 2008. Other
foreign ownership at the end of the period totaled 7.6%; thus a total
of approximately 52.4% of the company's listed class B shares were
owned by international investors, corresponding to approximately 20%
of the total votes in the company.
Flagging notifications
Tweedy Brown Company LLC (Reg. no. 801/10669) announced on April 30,
2008, pursuant to the Securities Markets Act chapter 2, section 9,
that its holding in KONE Corporation was below five (5) % (1/20) of
the share capital on March 9, 2007.
Market outlook
We estimate that the demand for new equipment will further decline in
many markets during the final quarter of 2008, whilst the
modernization and maintenance markets will grow. We believe that KONE
has opportunities to reach a higher growth in orders received during
Q4 than in Q3 2008, provided that the global financial markets will
continue to function.
Outlook
KONE reiterates its outlook given on July 22, 2008.
KONE's target for 2008 is to achieve, at comparable exchange rates, a
growth of more than 10% in net sales, compared to 2007. The operating
income (EBIT) target is to achieve a growth close to 20% compared to
the 2007 figure of EUR 473 million. This corresponds to an operating
income (EBIT) margin of at least 12.0%.
KONE defined its vision and redefined its strategy at the end of 2007
to better respond to current changes in the business environment and
to deepen the customer focus in all operations. In May 2008, KONE
defined its new long-term financial targets. These new financial
targets replace the targets set in May 2005. The new long-term
objectives are: Growth: faster than market; Profitability: EBIT 14%;
Cash flow: Improving working capital.
Helsinki, October 21, 2008
KONE Corporation
Board of Directors
This Interim Report contains forward-looking statements that are
based on the current expectations, known factors, decisions and plans
of the management of KONE. Although management believes that the
expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will
prove to be correct. Accordingly, results could differ materially
from those implied in the forward-looking statements as a result of,
among other factors, changes in economic, market and competitive
conditions, changes in the regulatory environment and other
government actions and fluctuations in exchange rates.
Consolidated statement of income
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
MEUR 2008 % 2007 % 2008 % 2007 % 2007 %
Sales 1,123.8 971.6 3,171.2 2,784.7 4,078.9
Costs and
expenses -958.0 -830.4 -2,752.5 -2,571.5 -3,699.8
Deprecia-tion -19.8 -14.5 -49.5 -42.8 -58.3
Operating
income 146.0 13.0 126.7 13.0 369.2 11.6 170.4 6.1 320.8 7.9
Share of
associated
companies' net
income 0.9 0.7 1.7 0.9 1.7
Financing
income 5.3 2.7 12.8 11.8 16.6
Financing
expenses -8.8 -6.9 -19.6 -18.9 -25.1
Income before
taxes 143.4 12.8 123.2 12.7 364.1 11.5 164.2 5.9 314.0 7.7
Taxes -35.9 -31.4 -93.9 -84.5 -133.7
Net income 107.5 9.6 91.8 9.4 270.2 8.5 79.7 2.9 180.3 4.4
Net income
attribute-able
to:
Shareholders
of the parent
company 107.5 91.4 269.8 79.4 180.1
Minority
interests 0.0 0.4 0.4 0.3 0.2
Total 107.5 91.8 270.2 79.7 180.3
Earnings per
share for
profit
attribute-able
to the
Share-holders
of the parent
company, EUR
Basic earnings
per share 0.42 0.37 1.07 0.32 0.72
Diluted
earnings per
share 0.42 0.37 1.06 0.32 0.71
The result for the comparison period of 1-9/2007 includes an expense
of MEUR 142.0 related to the European Commission's fine decision. In
addition to this, the result for the comparison period of 1-12/2007
includes a MEUR 22.5 provision for the Austrian Cartel Court's fine
decision and a MEUR 12.1 profit from the sale of the KONE Building.
Condensed consolidated balance sheet
Assets
MEUR 30.9.2008 30.9.2007 31.12.2007
Non-current assets
Intangible assets 663.6 626.1 630.4
Tangible assets 210.1 223.6 201.0
Loans receivable and other
interest-bearing assets 1.8 2.8 1.7
Deferred tax assets 112.7 133.7 118.6
Investments 148.2 133.4 131.3
Total non-current assets 1,136.4 1,119.6 1,083.0
Current assets
Inventories 986.4 867.5 773.2
Advance payments received -919.2 -801.1 -694.6
Accounts receivable and other non
interest-bearing assets 1,037.3 878.7 924.5
Current loans and receivables 150.6 135.9 118.9
Cash and cash equivalents 183.5 129.0 154.9
Total current assets 1,438.6 1,210.0 1,276.9
Total assets 2,575.0 2,329.6 2,359.9
Equity and liabilities
MEUR 30.9.2008 30.9.2007 31.12.2007
Equity 875.0 650.8 749.2
Non-current liabilities
Loans 222.5 177.2 175.8
Deferred tax liabilities 30.2 33.8 25.9
Employee benefits 126.1 142.8 131.9
Total non-current liabilities 378.8 353.8 333.6
Provisions 68.6 63.2 86.6
Current liabilities
Loans 104.1 259.0 191.4
Accounts payable and other liabilities 1,148.5 1,002.8 999.1
Total current liabilities 1,252.6 1,261.8 1,190.5
Total equity and liabilities 2,575.0 2,329.6 2,359.9
Consolidated statement of changes in equity
1) Share capital
2) Share premium account *)
3) Fair value and other reserves
4) Translation differences
5) Own shares
6) Retained earnings
7) Minority interests
8) Total equity
MEUR 1) 2) *) 3) 4) 5) 6) 7) 8)
1 Jan, 2008 64.2 100.2 5.5 -31.3 -87.8 698.1 0.3 749.2
Net income for the
period 269.8 0.4 270.2
Items booked directly
into equity:
Transactions with
shareholders and
minority shareholders:
Dividends paid -163.6 -163.6
Issue of shares (option
rights) 0.0 1.2 1.2
Purchase of own shares -
Sale of own shares -
Change in minority
interests 0.3 0.3
Cash flow hedge -3.1 -3.1
Translation differences 20.4 20.4
Hedging of foreign
subsidiaries -10.0 -10.0
Tax impact of hedging 2.6 2.6
Option and share based
compensation 4.7 3.1 7.8
30 Sep, 2008 64.2 101.4 2.4 -18.3 -83.1 807.4 1.0 875.0
*) For share subscriptions after February 25, the remaining part of
the share subscription price after share capital has been credited to
paid-up unrestricted equity reserve, which is included in the share
premium account. The amount credited in the paid-up equity reserve is
EUR 1.1 million.
MEUR 1) 2)*) 3) 4) 5) 6) 7) 8)
1 Jan, 2007 64.0 98.0 -0.5 -14.0 -91.2 638.8 3.5 698.6
Net income for the
period 79.4 0.3 79.7
Items booked directly
into equity:
Transactions with
shareholders
and minority
shareholders:
Dividends paid -125.1 -125.1
Issue of shares (option
rights) 0.1 0.8 0.9
Purchase of own shares -0.3 -0.3
Sale of own shares -
Change in minority
interests -1.4 -1.4
Cash flow hedge 3.8 3.8
Translation differences -10.7 -10.7
Hedging of foreign
subsidiaries -1.0 -1.0
Tax impact of hedging 0.3 0.3
Option and share based
compensation 3.7 2.3 6.0
30 Sep, 2007 64.1 98.8 3.3 -25.4 -87.8 595.4 2.4 650.8
MEUR 1) 2) *) 3) 4) 5) 6) 7) 8)
1 Jan, 2007 64.0 98.0 -0.5 -14.0 -91.2 638.8 3.5 698.6
Net income for the
period 180.1 0.2 180.3
Items booked directly
into equity:
Transactions with
shareholders and
minority shareholders:
Dividends paid -125.1 -125.1
Issue of shares
(option rights) 0.2 2.2 2.4
Purchase of own shares -0.3 -0.3
Sale of own shares -
Change in minority
interests -3.4 -3.4
Cash flow hedge 6.0 6.0
Translation
differences -18.4 -18.4
Hedging of foreign
subsidiaries 1.5 1.5
Tax impact of hedging -0.4 -0.4
Option and share based
compensation 3.7 4.3 8.0
31 Dec, 2007 64.2 100.2 5.5 -31.3 -87.8 698.1 0.3 749.2
Condensed consolidated statement of cash flow
1-9/ 1-9/ 1-12/
MEUR 2008 2007 2007
Operating income 369.2 170.4 320.8
Change in working capital 20.2 50.8 0.9
Depreciation 49.5 42.8 58.3
Cash flow from operations 438.9 264.0 380.0
Cash flow from financing items and taxes -86.7 -77.5 -134.0
Cash flow from operating activities 352.2 186.5 246.0
Cash flow from investing activities -96.9 -108.4 -94.6
Cash flow after investing activities 255.3 78.1 151.4
Purchase and sale of own shares - -0.3 -0.3
Issue of shares 1.2 0.9 2.4
Dividends paid -163.3 -125.1 -125.1
Change in loans receivable -27.7 27.0 42.0
Change in loans payable -40.0 38.9 -24.0
Cash flow from financing activities -229.8 -58.6 -105.0
Change in cash and cash equivalents 25.5 19.5 46.4
Cash and cash equivalents at end of period 183.5 129.0 154.9
Translation difference -3.1 0.0 1.0
Cash and cash equivalents at beginning of
period 154.9 109.5 109.5
Change in cash and cash equivalents 25.5 19.5 46.4
Change in interest-bearing net debt
1-9/
MEUR 1-9/2008 2007 1-12/2007
Interest-bearing net debt at beginning of
period 91.7 124.9 124.9
Interest-bearing net debt at end of period -9.3 168.5 91.7
Change in interest-bearing net debt -101.0 43.6 -33.2
The EUR 142.0 million fine for the European Commission's decision is
included in the interest-bearing net debt.
Key figures
1-9/ 1-9/ 1-12/ 2008 2007 2007
Basic earnings per share EUR 1.07 0.32 0.72
Diluted earnings per share EUR 1.06 0.32 0.71
Equity per share EUR 3.47 2.58 2.98
Interest-bearing net debt MEUR -9.3 168.5 91.7
Total equity/total assets % 34.0 27.9 31.7
Gearing % -1.1 25.9 12.2
Return on equity % 44.4 15.8 24.9
Return on capital employed % 33.3 12.0 18.6
Total assets MEUR 2,575.0 2,329.6 2,359.9
Assets employed MEUR 865.7 819.3 840.9
Working capital (including financing and
tax items) MEUR -156.2 -163.8 -121.8
Sales by geographical areas
1-9/ 1-9/ 1-12/
MEUR 2008 % 2007 % 2007 %
EMEA *) 2,067.4 65 1,808.2 65 2,675.3 65
Americas 609.7 19 595.6 21 840.8 21
Asia-Pacific 494.1 16 380.9 14 562.8 14
Total 3,171.2 2,784.7 4,078.9
*) EMEA = Europe, Middle East,
Africa
Quarterly Key Figures
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
2008 2008 2008 2007 2007 2007 2007
Orders
received MEUR 892.4 1,092.4 1,117.5 901.9 926.3 944.4 902.1
Order
book MEUR 4,002.8 3,838.7 3,617.4 3,282.3 3,473.6 3,318.0 3,105.7
Sales MEUR 1,123.8 1,142.1 905.3 1,294.2 971.6 1,001.9 811.2
Operating 160.8 69.3
income MEUR 146.0 136.7 86.5 1) 126.7 116.4 2)
Operating %
income 13.0 12.0 9.6 12.4 1) 13.0 11.6 8.5 2)
Q4/ Q3/ Q2/ Q1/ 2006 2006 2006 2006
Orders received MEUR 712.1 742.0 821.9 840.3
Order book MEUR 2,762.1 2,951.0 2,818.0 2,654.0
Sales MEUR 1,145.6 879.8 840.4 735.0
Operating income MEUR 123.4 101.1 83.9 51.7
Operating income % 10.8 11.5 10.0 7.0
1) Excluding a MEUR 22.5 provision for the Austrian Cartel Court's
fine decision and a MEUR 12.1 profit from the sale of the KONE
Building.
2) Excluding an expense of MEUR 142.0 related to the European
Commission's fine decision.
Orders received
MEUR 1-9/2008 1-9/2007 1-12/2007
3,102.3 2,772.8 3,674.7
Order book
MEUR 30.9.2008 30.9.2007 31.12.2007
4,002.8 3,473.6 3,282.3
Capital expenditure
MEUR 1-9/2008 1-9/2007 1-12/2007
In fixed assets 38.8 30.2 58.1
In leasing agreements 8.5 8.1 9.2
In acquisitions 49.6 40.6 49.6
Total 96.9 78.9 116.9
R&D expenditure
MEUR 1-9/2008 1-9/2007 1-12/2007
40.7 36.2 50.7
R&D Expenditure as percentage of sales 1.3 1.3 1.2
Number of employees 1-9/2008 1-9/2007 1-12/2007
Average 33,658 30,365 30,796
At the end of the period 34,548 31,383 32,544
Notes on the Interim Report
Commitments
MEUR 30.9.2008 30.9.2007 31.12.2007
Mortgages
Group and parent company 0.7 30.7 0.7
Pledged assets
Group and parent company 5.1 4.8 4.8
Guarantees
Associated companies 4.0 1.7 5.3
Others 6.2 1.0 6.3
Operating leases 157.4 119.3 148.9
Total 173.4 157.5 166.0
The future minimum lease
payments under non-cancellable
operating leases
MEUR 30.9.2008 30.9.2007 31.12.2007
Less than 1 year 41.9 33.5 39.0
1-5 years 99.8 76.3 91.2
Over 5 years 15.7 9.5 18.7
Total 157.4 119.3 148.9
Derivatives
Fair values of derivative financial instruments
Posit. Neg. Net Net Net
fair fair fair fair fair
value value value value value
MEUR 30.9.2008 30.9.2008 30.9.2008 30.9.2007 31.12.2007
FX Forward
contracts 9.6 7.4 2.2 3.1 6.0
Currency options 0.7 0.7 0.0 0.0 0.0
Cross-currency
swaps, due
under one year - - - 2.7 2.9
Cross-currency
swaps, due in 1-3
years 2.3 3.9 -1.6 7.8 8.9
Electricity
derivatives 0.9 0.1 0.8 0.7 0.9
Total 13.5 12.1 1.4 14.3 18.7
Nominal values of derivative financial instruments
MEUR 30.9.2008 30.9.2007 31.12.2007
FX Forward contracts 588.7 553.2 527.3
Currency options 125.7 30.8 15.6
Cross-currency swaps, due under one
year - 20.0 20.0
Cross-currency swaps, due in 1-3 years 136.7 136.7 136.7
Electricity derivatives 4.5 3.9 2.5
Total 855.6 744.6 702.1
Share and shareholders on September 30, 2008
Class A Class B shares shares Total
Number of shares 38,104,356 218,884,024 256,988,380
Own shares in
possession 1) 4,905,506
Share capital, EUR 64,247,095
Market capitalization, MEUR 4,790
Number of shares traded,
million, 1-9/2008 151.5
Value of shares traded MEUR,
1-9/2008 3,348
Number of shareholders 3 14,655 14,655
Close High Low
Class B share price,
EUR, 1-9/2008 19.00 27.87 17.91
1) During the third quarter of 2008, the authorization to repurchase
shares was not used. In April, 326,000 class B shares assigned to the
share-based incentive plan for the company's senior management were
transferred from KNEBV Incentive Ky to the participants due to
achieved targets for the financial year 2007. Due to the share issue
without payment (registered on February 28, 2008) the number of
shares in the company was increased by issuing new shares to the
shareholders without payment in proportion to their holdings so that
one class A share was given for each class A share and one class B
share for each class B share.
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