2009-10-20 11:30:00 CEST
2009-10-20 11:33:05 CEST
REGULATED INFORMATION
KONE Oyj - Interim report (Q1 and Q3)
KONE Corporation's Interim Report for January-September 2009
KONE Corporation, stock exchange release, October 20, 2009 at 12:30
p.m.
KONE's Q3: Strong improvement in operating income and cash flow
July-September
- In July-September 2009, orders received totaled EUR 766.5
(7-9/2008: 892.4) million. Orders received declined by 14.1%, or
13.4% at comparable exchange rates. Orders received was negatively
affected by delays in customers' decision making in a few major
projects.
- Net sales increased by 0.3% to EUR 1,127 (1,124) million. At
comparable exchange rates, the growth was 0.5%.
- Operating income was EUR 160.1 (146.0) million or 14.2% (13.0%) of
net sales.
- Cash flow was exceptionally strong and totaled EUR 255.5 (153.4)
million.
- KONE further specifies its operating income outlook for 2009. In
operating income (EBIT), the objective is EUR 580-595 million,
excluding the one-time cost of EUR 33.6 million, which was booked in
the second quarter. The previous operating income (EBIT) outlook was
EUR 570-595 million excluding the one-time cost of EUR 33.6 million.
January-September
- In January-September 2009, orders received totaled EUR 2,619
(1-9/2008: 3,102) million. Orders received declined by 15.6%, or
16.1% at comparable exchange rates. At the end of September 2009, the
order book was EUR 3,603 (Dec 31, 2008: 3,577) million.
- Net sales increased by 4.6% to EUR 3,317 (3,171) million. At
comparable exchange rates, the growth was 4.3%.
- Operating income, excluding one-time costs, was EUR 397.6 (369.2)
million or 12.0% (11.6%) of net sales. The operating income,
including the one-time cost of EUR 33.6 million related to the fixed
cost adjustment program, was EUR 364.0 million.
Key Figures
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
2009 2008 2009 2008 2008
Orders received MEUR 766.5 892.4 2,618.9 3,102.3 3,947.5
Order book MEUR 3,603.4 4,002.8 3,603.4 4,002.8 3,576.7
Sales MEUR 1,127.3 1,123.8 3,316.9 3,171.2 4,602.8
Operating income MEUR 160.1 146.0 397.6 1) 369.2 558.4
Operating income % 14.2 13.0 12.0 1) 11.6 12.1
Cash flow MEUR 255.5 153.4 626.9 438.9 527.4
from operations
(before financing
items and taxes)
Net income MEUR 134.6 107.5 299.8 270.2 418.1
Total MEUR 124.0 127.5 283.6 280.1 436.7
comprehensive
income
Basic earnings EUR 0.53 0.42 1.18 1.07 1.66
per share
Interest-bearing MEUR -358.8 -9.3 -358.8 -9.3 -58.3
net debt
Total equity/ % 42.6 34.0 42.6 34.0 39.0
total assets
Gearing % -30.9 -1.1 -30.9 -1.1 -5.6
1) Excluding a MEUR 33.6 one-time costs related to the fixed costs
adjustment program, which was booked in the second quarter.
Matti Alahuhta, President and CEO, in conjunction with the review:"The service business and operational excellence are key priorities
for us in the current weak economic environment. I am pleased with
our good development in these areas. These have contributed
positively to our profitability and cash flow.
The orders received in the third quarter was a small disappointment.
Customers' decisions in respect of a few major projects were delayed
towards the end of the year. We estimate that orders received in the
fourth quarter will be at a higher level than in the third quarter.
Our teams have again done a good job and I want to thank them for
their efforts. Although the new equipment markets are weak, we are
with our own actions able to influence our business performance even
in this situation, and we therefore look forward with confidence."
Analyst and media conference and conference call
A meeting for the press, conducted in Finnish, will be held on
Tuesday, October 20, 2009 at 1:45 p.m. Eastern European Time.
A telephone conference and a meeting for analysts, conducted in
English, will begin at 3:00 p.m. Eastern European 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 2008, KONE had annual net sales of EUR 4.6 billion
and over 34,800 employees. KONE class B shares are listed on the
NASDAQ OMX Helsinki in Finland.
www.kone.com
For further information please contact:
Henrik Ehrnrooth, Executive Vice President, Finance, tel. +358 (0)
204 75 4260
Sender:
KONE Corporation
Henrik Ehrnrooth
Executive Vice President,
Finance
Anne Korkiakoski
Executive Vice President,
Marketing and Communications
Accounting Principles
KONE Corporation's Interim Report for January 1-September 30, 2009
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 2008. The
accounting principles for the financial statements have been
presented in the KONE 2008 Financials report published on January 23,
2009. Additionally, the changes in the presentation of statement of
comprehensive income and the statement of changes in equity according
to the revised IAS1 have been applied in the Interim Report. The
information presented in this Interim Report has not been audited.
July-September 2009 review
Operating environment in July-September
In the third quarter of 2009, overall demand for new equipment
continued to decline in most geographical regions. However, the
market development in China continued to be strong. The
modernization market was competitive but stable and provided selected
growth opportunities. The global maintenance market, which by nature
is less cyclical, continued to grow.
In the Europe, Middle East and Africa (EMEA) region, the business
environment in new equipment remained very difficult. Most new
equipment markets declined. The weakest markets were Russia, the
Middle East, Spain, the United Kingdom and the Netherlands. In some
countries such as Finland and Sweden, the residential construction
market showed early signs of recovery. The demand for modernization
was stable overall with France and Finland showing good development.
The maintenance markets continued to develop well.
In the Americas region, the new equipment market continued to
decrease. Customers' difficulties to access financing and high
vacancy rates continued to be the principle reasons for the weak
development. The modernization activity remained relatively stable,
and some strength was seen in the public works segment as a result of
federal stimulus money which is available for public housing,
schools, hospitals and government facilities. The market in Canada
was for the most part consistent with the United States. In Mexico,
the market continued to be very weak. The maintenance market in North
America developed well, but was very competitive.
In the Asia-Pacific region, the new equipment markets weakened.
However, the overall market development in China was positive. Real
estate investments increased due to improved lending activity for
home buyers and land developers. The Indian market continued to be
weak, but it has stabilized. The market activity in India varied by
region because of the different funding environments for customers.
In Australia, the new equipment market weakened due to high vacancy
rates. In Southeast Asia, the construction market remained weak.
However, clear signs of a recovery were seen. The maintenance market
in Asia-Pacific developed favorably.
Financial performance in July-September
KONE's orders received in the third quarter of 2009 declined by 14.1%
and totaled EUR 766.5 (7-9/2008: 892.4) million. At comparable
exchange rates, the decline was 13.4%. The orders received level in
the third quarter suffered from delays in customers' decision making
in a few major projects. The Asia-Pacific region showed growth in
orders received. This was achieved especially because of a very
strong development in China, but orders received grew also in India.
The level of orders received in new equipment in China is good
evidence of KONE's continuously improved competitiveness and that
actions taken have been effective. In modernization, KONE's progress
in orders received was particularly good in France and Finland.
Maintenance contracts are not included in orders received.
The largest orders received in the July-September period included an
order from Met.Ro Rome, Metropolitana di Roma S.p.A., Italy, to
modernize escalators and elevators. At the same time, KONE was also
awarded a maintenance contract for all units installed in the Rome
underground lines.
KONE's net sales grew by 0.3% as compared to July-September 2008 and
totaled EUR 1,127 (1,124) million. At comparable exchange rates, the
growth was 0.5%. The decision of some customers to delay the
finalization of projects impacted the net sales to decline in EMEA.
New equipment sales accounted for EUR 531.0 (551.6) million of the
total which represented a decline of 3.7% over the comparison period.
At comparable currency rates, the decline was 3.8%.
Service sales (maintenance and modernization) increased by 4.2% and
totaled EUR 596.3 (572.2) million. At comparable currency rates, the
growth was 4.6%.
The operating income for the July-September period totaled EUR 160.1
(146.0) or 14.2% (13.0%) of net sales. The good operating income was
primarily a result of the development programs that have led to a
favorable progress in the maintenance business, installation
productivity and better quality. In addition, reduced sourcing costs
and tight cost control contributed to the positive result. Cash flow
was EUR 255.5 (153.4) million. The exceptionally strong cash flow was
primarily a result of an improved operating income and a reduced net
working capital. The progress in net working capital was due to a
reduction of accounts receivable and an improved ratio of advanced
payments received relative to inventories.
Sales by geographical regions, MEUR
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
2009 % 2008 % 2009 % 2008 % 2008 %
EMEA 1) 674.5 60 702.4 62 2,049.4 62 2,067.4 65 3,001.5 65
Americas 238.4 21 234.0 21 694.8 21 609.7 19 888.3 19
Asia-Pacific 214.4 19 187.4 17 572.7 17 494.1 16 713.0 16
Total 1,127.3 1,123.8 3,316.9 3,171.2 4,602.8
1) EMEA = Europe, Middle East, Africa
January-September 2009 review
KONE's Orders Received and Order Book in January-September
In the new equipment market, activity in all geographical regions,
excluding China, declined. The modernization market was rather
stable, but became increasingly competitive. The global maintenance
market, which by nature is less cyclical, continued to grow.
In January-September 2009, KONE's orders received declined by 15.6%
and totaled EUR 2,619 (1-9/2008: 3,102) million. At comparable
exchange rates, the decline was 16.1%. Maintenance contracts are not
included in orders received.
KONE's development in maintenance was positive as a result of
continued good conversion levels from KONE installed new equipment
into our maintenance base.
The order book increased from the end of 2008 by 0.7% and stood at
EUR 3,603 (Dec 31, 2008: 3,577) million at the end of September 2009.
As earlier, the margin of the order book continued to be at a good
level. Cancellations of orders have remained at a very low level.
In the EMEA region, orders received declined in the continuously
weakening markets during January-September 2009. In new equipment,
KONE's development in orders received has varied from country to
country, with Germany performing most favorably. In EMEA's
modernization markets KONE's performance has been good. Orders
received in modernization has grown in France, Finland and Sweden.
In the Americas region, KONE also experienced a decline in orders
received. In spite of the weak market, KONE has been able to
strengthen its market position in many segments due to its improved
customer focus, extended geographical reach, and its improved
competitiveness during January-September 2009.
In the Asia-Pacific region, KONE's new equipment orders received
declined year-on-year, but grew strongly in China. In India,
Australia and Southeast Asia, orders received declined year-on-year.
Net Sales
In January-September 2009, KONE's net sales rose by 4.6%, compared to
last year, and totaled EUR 3,317 (1-9/2008: 3,171) million. Growth at
comparable currency rates was 4.3%.
New equipment sales accounted for EUR 1,525 (1,484) million of the
total and represented growth of 2.7% over the comparison period. At
comparable currency rates, the growth was 2.1%.
Service sales (maintenance and modernization) increased by 6.2% and
totaled EUR 1,792 (1,687) million. At comparable currency rates, the
growth was 6.3%, with maintenance growing faster.
Of the sales, 62% (65%) were generated from EMEA, 21% (19%) by the
Americas and 17% (16%) by Asia-Pacific.
Financial Result
KONE's operating income excluding one-time costs was EUR 397.6
million (1-9/2008: 369.2 million) or 12.0% (11.6%) of net sales. The
operating income, including the one-time cost of EUR 33.6 million
related to the fixed cost adjustment program, was EUR 364.0 million.
The strong performance was a result of the favorable progress in the
maintenance business, installation productivity and better quality.
In addition, reduced sourcing costs and tight cost control
contributed to the positive result especially during the second and
third quarter. Net financing items were EUR 18.3 (-6.8) million and
include dividends received from Toshiba Elevator and Building Systems
Corporation (TELC).
KONE's income before taxes for January-September 2009 was EUR 386.9
(364.1) million. The effective tax rate resulting from the operations
for the financial year is estimated to be 25.5%. However, taking into
account prior year tax benefits and reassessment of deferred tax
assets, taxes totaled 87.1 MEUR, representing an effective tax rate
of 22.5% for the financial year. The reassessment of deferred tax
assets is based on the realized and expected profit estimates of the
business operations. In January-December 2008, the effective tax rate
was 25.8%. Net income for the period under review was EUR 299.8
(270.2) million.
Earnings per share were EUR 1.18 (1.07). Equity per share was EUR
4.59 (3.47).
Financial Position and Cash Flow
In January-September 2009, KONE's financial position further
strengthened and the company had a positive net cash position at the
end of September. In January-September 2009, cash flow generated from
operations (before financing items and taxes) was EUR 626.9
(1-9/2008: 438.9) million. The exceptionally strong cash flow was
primarily a result of an improved operating income and a reduced net
working capital. At the end of September, net working capital was
negative at EUR -242.7 (Dec 31, 2008: -76.4) million, including
financing items and taxes.
Interest-bearing assets exceeded interest-bearing net debt and the
net cash position totaled EUR 358.8 (Dec 31, 2008: 58.3) million.
Gearing was -30.9% (Dec 31, 2008: -5.6%) and total equity/total
assets ratio was 42.6% (Dec 31, 2008: 39.0%).
Capital expenditure, acquisitions and divestments
KONE's capital expenditure, including acquisitions, totaled EUR 66.0
(1-9/2008: 96.9) million. Capital expenditure, excluding
acquisitions, was mainly related to facilities and equipment in R&D,
IT and production. Acquisitions accounted for EUR 39.3 (49.6) million
of this figure. Acquisitions made in January-September will have no
material effect on the 2009 full-year figures.
In January-September, KONE completed the acquisition of FairWay
Elevator Inc, an independent elevator service company in the
Philadelphia area of the United States. Through this acquisition,
KONE establishes itself as one of the largest elevator and escalator
companies in the Philadelphia region. In addition, KONE acquired
Excel Elevator Inc, an independent elevator service company based in
Los Angeles. Excel has a great reputation in the Southern California
market for its quality work in modernizing vertical transportation
systems as well as its significant maintenance base.
Research and development
Research and development expenses totaled EUR 44.1 (1-9/2008: 42.9)
million, representing 1.3% (1.4%) of net sales. R&D expenses include
the development of new concepts and further development of existing
solutions and services. KONE's elevators and escalators are based on
energy-efficient technology.
During the reporting period, KONE strengthened its offering to better
meet the requirements of the challenging market.
KONE continued to release new elevator solutions for the
infrastructure, modernization and affordable housing segments. New
solutions for the 2-3 landing machine-room-less segment in the United
States were introduced. KONE's focus has mainly been on solutions
that deliver improved performance, fresh visual options and improved
energy-efficiency. The KONE JumpLift is one example of the expanded
elevator offering. This innovative offering puts the elevator into
operation already as the building is in its construction phase,
enabling a more efficient flow of workers. KONE JumpLift also
delivers improved safety and productivity to the job site.
In addition, KONE launched a new escalator release in response to the
demand of the growing infrastructure segment. The cost structure has
been improved and the application scope has been enlarged by adding a
full outdoor solution package and higher vertical rise alternatives
to the offering.
In January 2009, KONE Corporation was awarded a 2008 GOOD DESIGN
award for its innovative elevator design concept. KONE is the first
elevator and escalator company to ever receive such a prestigious
award. Founded in 1950, GOOD DESIGN is renowned as one of the most
recognized design awards program in the world. The awards are given
by The Chicago Athenaeum and The European Centre for Architecture Art
Design and Urban Studies to highlight the best new designs and design
innovations for products and graphics made between 2006 and 2008.
Other events during the reporting period - The 2010 fixed cost
adjustment program
The fixed cost adjustment program has progressed according to plan
during the reporting period.
In connection with the first quarter result, KONE announced that it
intends to reduce the 2010 run-rate of fixed costs by EUR 40 million
due to the weak new equipment market. The plans for the program were
defined in connection with the second quarter result. The annual
impact of this fixed cost reduction plan is expected to be at least
EUR 40 million starting in 2010. The total one-time cost relating to
this program is EUR 33.6 million, which was booked in the second
quarter 2009.
The majority of the fixed cost savings will be achieved through
organizational development. This development will flatten the
organizational structures to bring management closer to customers,
broaden the span of control for managers to ensure better hands-on
management and uniform structures globally to improve internal
collaboration. The program, which will be implemented by the
beginning of 2010, will improve the efficiency and speed of KONE.
Selective actions will also be taken in the supply chain and
outsourcing. In addition to these actions, an overall tighter cost
control is targeted throughout the company.
The program is estimated to decrease jobs globally by approximately
500. Simultaneously, KONE continues to recruit in certain markets
that are providing growth opportunities, such as China.
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 34,136 (Dec 31, 2008: 34,831) employees at the end of
September 2009. The average number of employees was 34,365 (1-9/2008:
33,658).
The geographical distribution of KONE employees was 56% (56%) in
EMEA, 17% (17%) in the Americas and 27% (27%) 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 published its first Corporate Responsibility Report during the
reporting period.
The development of eco-efficient solutions focused on stand-by energy
saving solutions and regenerative units for elevators. As a result of
these improvement actions, a reduction of 30 percent in the newest
release was accomplished. By next year, an additional 20 percent
reduction will be achieved.
In the service business, eco-efficiency aspects have been included in
the analysis, which provides customers with a comprehensive
recommendation on how to maintain and modernize their equipment in a
cost-effective way.
The most significant Green House Gas emission (CO2) impact of KONE's
own operations relate to the company's vehicle car fleet, electricity
consumption and logistics. As a consequence, projects relating to
KONE's global car fleet and business travel are ongoing. KONE aims to
reduce its operational carbon footprint by 5 percent per unit by
2010.
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 the
present weak economic situation, having no net debt is a strength.
The financial turmoil has been extremely severe since mid-2008. KONE
is focusing on two major issues regarding its capital and risk
management. Firstly, the capability to adapt its cost structure to
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.
To avoid an unnecessary cost burden in this market environment,
overall cost control has been tightened and a program to decrease the
run-rate of fixed costs has been initiated. In addition, the Group's
cost structure is flexible because of outsourcing in different areas
of the business.
The key area in guaranteeing good liquidity in the short-term is to
keep the present good 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.
KONE's business activities are exposed to risks, which may arise from
changes in KONE's business environment or incidents resulting from
operating activities. The most significant risks are increases in
personnel costs and raw material costs, fluctuation in currency and
changes in the development of the world economy.
The global economic slowdown and financial turmoil may bring a
decrease in the number of new equipment orders received by KONE,
cancellations of agreed-on deliveries, or delays in the commencement
of projects. A significant part of KONE's sales consist of services
which are less susceptible to the effects of an economic recession.
The economic recession may affect the liquidity and payment schedules
of KONE's customers and lead to credit losses. Credit risks are
managed by applying advance payments, actively monitoring the
liquidity of customers and active receivable collection efforts.
As a global group, KONE is exposed to foreign exchange fluctuations.
The Group Treasury function manages exchange rates and other
financial risks centrally on the basis of principles approved by the
Board of Directors. The main effect of exchange rate fluctuations is
seen in the consolidated financial statements of the KONE Group
resulting from the translation of financial statements of foreign
subsidiaries into euros.
A significant part of KONE's sales consist of services which are very
labor-intensive. If the increases in labor costs cannot be
transferred to prices or the productivity targets are not met, the
profit development of the Group will be adversely affected. A failure
to efficiently reallocate personnel resources in response to reduced
or changed business opportunities may also have a negative effect on
the profit development.
Changes in raw material prices are reflected directly in the
production costs of components made by KONE, such as doors and cars,
and indirectly in the prices of purchased components. The maintenance
business deploys a significant fleet of service vehicles, and oil
price fluctuations can affect the cost of maintenance.
Appointment to the Executive Board
KONE appointed Henrik Ehrnrooth M.Sc. (Econ) Executive Vice
President, Finance (Chief Financial Officer) and a Member of the
Executive Board as of May 1, 2009. Henrik Ehrnrooth succeeded Aimo
Rajahalme, who served as CFO since 1991.
Decisions of the Annual General Meeting
KONE Corporation's Annual General Meeting was held in Helsinki on
February 23, 2009. The meeting approved the financial statements and
discharged the responsible parties from liability for the January
1-December 31, 2008 financial period.
The number of Members of the Board of Directors was confirmed as
eight and it was decided to elect one deputy Member. Re-elected as
Members of the Board were Matti Alahuhta, Reino Hanhinen, Antti
Herlin, Sirkka Hämäläinen-Lindfors and Sirpa Pietikäinen and as
deputy Member Jussi Herlin. Anne Brunila, Juhani Kaskeala and
Shunichi Kimura were elected as new Members of the Board of
Directors.
At its meeting held after the Annual General Meeting, the Board of
Directors elected, from among its members, Antti Herlin as its Chair
and Sirkka Hämäläinen-Lindfors as Vice Chair.
Antti Herlin was elected as Chairman of the Audit Committee. Sirkka
Hämäläinen-Lindfors and Anne Brunila were elected as independent
Members of the Audit Committee.
Antti Herlin was elected as Chairman of the Nomination and
Compensation Committee. Reino Hanhinen and Juhani Kaskeala were
elected as independent Members of the Nomination and Compensation
Committee.
The Annual General Meeting confirmed an annual compensation of EUR
54,000 for the Chairman of the Board, EUR 42,000 for the Vice
Chairman, EUR 30,000 for Board Members and EUR 15,000 for the deputy
Member. In addition, a compensation of EUR 500 was approved for
attendance at Board and Committee meetings.
The Annual General Meeting approved the Board of Directors proposal
to repurchase KONE's own shares. 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, taking into
consideration the provisions of the Companies Act regarding the
maximum amount of own shares that the Company is allowed to possess.
The minimum and maximum consideration for the shares to be purchased
is determined for both class A and class B shares on the basis of the
trading price for class B shares determined on the NASDAQ OMX
Helsinki Ltd. on the time of purchase.
In addition, the Annual General Meeting 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.
These authorizations shall remain in effect for a period of one year
from the date of the decision of the Annual General Meeting.
Authorized public accountants Heikki Lassila and
PricewaterhouseCoopers Oy were re-nominated as the Company's
auditors.
Dividend for 2008
The Annual General Meeting approved the Board's proposal for
dividends of EUR 0.645 for each of the 38,104,356 class A shares and
EUR 0.65 for the 214,643,060 outstanding class B shares. The date of
record for dividend distribution was February 26, 2009, and dividends
were paid on March 5, 2009.
Share Capital and Market Capitalization
The KONE 2005B options based on the KONE Corporation 2005 option
program were listed on the main list of the NASDAQ OMX Helsinki Ltd.
on June 1, 2005. Each option entitled its holder to subscribe for
twelve (12) class B shares at a price of EUR 4.02 per share. As the
2005B options subscription period ended on March 31, 2009, 4,660
remaining series B options held by the subsidiary expired. The
remaining 12,034 options had been used and the shares were entered in
the Finnish Trade Register in April.
In 2005, KONE also granted a conditional option program, 2005C. The
2005C stock options were listed on the NASDAQ OMX Helsinki Ltd. 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 11.90 per share. At the
end of September 2009, the remaining 2005C options entitled their
holders to subscribe for 3,909,150 class B shares. The subscription
period for series C options will end on April 30, 2010.
In December 2007, KONE Corporation's Board of Directors decided to
grant stock option rights to approximately 350 employees of KONE's
global organization. The share subscription period for 2007 stock
option 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.
As of September 30, 2009, KONE's share capital was EUR 64,417,742.50,
comprising 219,566,614 listed class B shares and 38,104,356 unlisted
class A shares.
KONE's market capitalization was EUR 6,354 million on September 30,
2009, disregarding own shares in the Group's possession.
Repurchase of KONE shares
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 3, 2009.
During January 1-September 30, 2009, KONE did not use its
authorization to repurchase its own shares. In April 2009, 195,264
KONE class B shares assigned to the share-based incentive plan for
the company's senior management were transferred from KNEBV Incentive
Oy to the participants due to achieved targets for the financial year
2008. At the end of September, the Group had 4,710,242 class B shares
in its possession. The shares in the Group's possession represent
2.1% of the total number of class B shares. This corresponds to 0.8%
of the total voting rights.
Shares traded on the NASDAQ OMX Helsinki Ltd.
The NASDAQ OMX Helsinki traded 129.7 million of KONE Corporation's
class B shares in January-September, equivalent to a turnover of EUR
2,569 million. The daily average trading volume was 690,028
(1-9/2008: 805,448; 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, 2009 was EUR 25.12. The
volume weighted average share price during the period was EUR 19.85.
The highest quotation during the period under review was EUR 26.31
and the lowest 13.80.
The number of registered shareholders at the beginning of the review
period was 16,354 and 21,264 at its end. The number of private
households holding shares totaled 19,223 at the end of the period,
which corresponds to approximately 13% of the listed B-shares.
According to the nominee registers, 43.3% of the listed class B
shares were owned by foreigners as of September 30, 2009. Other
foreign ownership at the end of the period totaled 7.6%; thus a total
of 50.8% of the company's listed class B shares were owned by
international investors, corresponding to approximately 19% of the
total votes in the company.
Market outlook
During the last quarter of 2009, the maintenance market will continue
to develop well. The modernization market will be at about last
year's level. The new equipment market will remain weak but the rate
of decline will decrease.
Outlook
KONE further specifies its operating income outlook for 2009.
KONE's objective in net sales is to grow 2-5% as compared to net
sales in 2008.
In operating income (EBIT), the objective is EUR 580-595 million,
excluding the one-time cost of EUR 33.6 million.
Previous outlook
KONE's objective in net sales is to grow 2-5% as compared to net
sales in 2008.
In operating income (EBIT), the objective is EUR 570-595 million
excluding the one-time cost of EUR 33.6 million.
Helsinki, October 20, 2009
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 income statement
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
MEUR 2009 % 2008 % 2009 % 2008 % 2008 %
Sales 1,127.3 1,123.8 3,316.9 3,171.2 4,602.8
Costs and
expenses -951.9 -958.0 -2,906.6 -2,752.5 -3,979.6
Depreciation -15.3 -19.8 -46.3 -49.5 -64.8
Operating
income 160.1 14.2 146.0 13.0 364.0 11.0 369.2 11.6 558.4 12.1
Share of
associated
companies'
net income 3.0 0.9 4.6 1.7 2.6
Financing
income 4.1 5.3 25.8 12.8 24.4
Financing
expenses -1.4 -8.8 -7.5 -19.6 -21.6
Income
before
taxes 165.8 14.7 143.4 12.8 386.9 11.7 364.1 11.5 563.8 12.2
Taxes -31.2 -35.9 -87.1 -93.9 -145.7
Net income 134.6 11.9 107.5 9.6 299.8 9.0 270.2 8.5 418.1 9.1
Net income
attributable
to:
Shareholders
of the
parent
company 134.4 107.5 299.1 269.8 417.3
Minority
interests 0.2 0.0 0.7 0.4 0.8
Total 134.6 107.5 299.8 270.2 418.1
Earnings per share for profit attributable to the shareholders of the
parent company, EUR
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
2009 2008 2009 2008 2008
Basic
earnings
per share 0.53 0.42 1.18 1.07 1.66
Diluted
earnings
per share 0.53 0.42 1.18 1.06 1.65
Consolidated statement of comprehensive income
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
MEUR 2009 2008 2009 2008 2008
Net income 134.6 107.5 299.8 270.2 418.1
Other
comprehensive
income,
net
of tax:
Translations
difference -13.5 34.7 -12.0 20.4 38.0
Hedging of
foreing
subsidiaries 0.0 -9.9 -1.0 -7.4 -22.9
Cash flow
hedges 2.9 -4.8 -3.2 -3.1 3.5
Other
comprehensive
income,
net of tax -10.6 20.0 -16.2 9.9 18.6
Total
comprehensive
income 124.0 127.5 283.6 280.1 436.7
Total
comprehensive
income
attributable
to:
Shareholders of
the parent
company 123.8 127.5 282.9 279.7 435.9
Minority
interests 0.2 0.0 0.7 0.4 0.8
Total 124.0 127.5 283.6 280.1 436.7
Condensed consolidated statement of financial position
Assets
Sep 30, Sep 30, Dec 31,
MEUR 2009 2008 2008
Non-current assets
Intangible assets 697.0 663.6 670.2
Tangible assets 199.1 210.1 214.7
Loans receivable and other
interest-bearing assets 1.6 1.8 2.3
Deferred tax assets 135.0 112.7 122.1
Investments 150.1 148.2 169.1
Total non-current assets 1,182.8 1,136.4 1,178.4
Current assets
Inventories 931.8 986.4 885.5
Advance payments received -945.8 -919.2 -805.4
Accounts receivable and other
non interest-bearing assets 1,087.3 1,037.3 1,046.5
Current loans and receivables 279.1 150.6 204.0
Cash and cash equivalents 192.5 183.5 147.8
Total current assets 1,544.9 1,438.6 1,478.4
Total assets 2,727.7 2,575.0 2,656.8
Equity and liabilities
Sep 30, Sep 30, Dec 31,
MEUR 2009 2008 2008
Equity 1,162.3 875.0 1,035.9
Non-current liabilities
Loans 28.5 222.5 172.4
Deferred tax liabilities 35.6 30.2 39.7
Employee benefits 108.2 126.1 115.8
Total non-current liabilities 172.3 378.8 327.9
Provisions 69.5 68.6 49.9
Current liabilities
Loans 85.9 104.1 123.4
Accounts payable and other
liabilities 1,237.7 1,148.5 1,119.7
Total current liabilities 1,323.6 1,252.6 1,243.1
Total equity and liabilities 2,727.7 2,575.0 2,656.8
Consolidated statement of changes in equity
1) Share capital
2) Share premium account
3) Paid-up unrestricted equity reserve
4) Fair value and other reserves
5) Translation differences
6) Own shares
7) Retained earnings
8) Net income for the period
9) Minority interests
10) Total equity
MEUR 1) 2) 3) 4) 5) 6) 7) 8) 9) 10)
Jan 1, 2009 64.4 100.4 3.3 9.0 -16.2 -83.1 957.2 0.9 1,035.9
Total
comprehensive
income for
the period -3.2 -13.0 299.1 0.7 283.6
Transactions
with
shareholders
and
minority
shareholders:
Dividends
paid -164.1 -164.1
Issue of
shares
(option
rights) 0.0 0.9 0.9
Purchase of
own shares -
Sale of
own shares -
Change in
minority
interests -0.5 -0.5
Option and
share-based
compensation 3.0 3.5 6.5
Sep 30, 2009 64.4 100.4 4.2 5.8 -29.2 -80.1 796.6 299.1 1.1 1,162.3
MEUR 1) 2) 3) 4) 5) 6) 7) 8) 9) 10)
Jan 1, 2008 64.2 100.2 - 5.5 -31.3 -87.8 698.1 0.3 749.2
Total
comprehensive
income for
the period -3.1 13.0 269.8 0.4 280.1
Transactions
with
shareholders
and
minority
shareholders:
Dividends
paid -163.6 -163.6
Issue of
shares
(option
rights) 0.0 0.2 1.0 1.2
Purchase of
own shares -
Sale of
own shares -
Change in
minority
interests 0.3 0.3
Option and
share-based
compensation 4.7 3.1 7.8
Sep 30, 2008 64.2 100.4 1.0 2.4 -18.3 -83.1 537.6 269.8 1.0 875.0
MEUR 1) 2) 3) 4) 5) 6) 7) 8) 9) 10)
Jan 1, 2008 64.2 100.2 - 5.5 -31.3 -87.8 698.1 0.3 749.2
Total
comprehensive
income for
the period 3.5 15.1 417.3 0.8 436.7
Transactions
with
shareholders
and
minority
shareholders:
Dividends
paid -163.6 -163.6
Issue of
shares
(option
rights) 0.2 0.2 3.3 3.7
Purchase of
own shares -
Sale of
own shares -
Change in
minority
interests -0.2 -0.2
Option and
share-based
compensation 4.7 5.4 10.1
Dec 31, 2008 64.4 100.4 3.3 9.0 -16.2 -83.1 539.9 417.3 0.9 1,035.9
Condensed consolidated statement of cash flows
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
MEUR 2009 2008 2009 2008 2008
Operating income 160.1 146.0 364.0 369.2 558.4
Change in working capital 80.1 -12.4 216.6 20.2 -95.8
Depreciation 15.3 19.8 46.3 49.5 64.8
Cash flow
from operations 255.5 153.4 626.9 438.9 527.4
Cash flow
from financing
items and taxes -34.1 -36.1 -99.7 -86.7 -99.5
Cash flow
from
operating
activities 221.4 117.3 527.2 352.2 427.9
Cash flow
from
investing
activities -16.1 -35.6 -48.6 -96.9 -128.6
Cash flow
after
investing
activities 205.3 81.7 478.6 255.3 299.3
Purchase and
sale of
own shares - - - - -
Issue of shares - 0.3 0.9 1.2 3.7
Dividends paid - - -164.0 -163.3 -163.3
Change in
loans receivable -105.6 -22.1 -79.4 -27.7 -82.7
Change in
loans payable -77.6 -41.5 -191.8 -40.0 -62.7
Cash flow
from
financing
activities -183.2 -63.3 -434.3 -229.8 -305.0
Change in
cash and
cash
equivalents 22.1 18.4 44.3 25.5 -5.7
Cash and
cash
equivalents
at end of
period 192.5 183.5 192.5 183.5 147.8
Translation
difference -0.1 -3.1 -0.4 -3.1 1.4
Cash and
cash
equivalents
at beginning
of period 170.3 162.0 147.8 154.9 154.9
Change in
cash and
cash
equivalents 22.1 18.4 44.3 25.5 -5.7
Change in interest-bearing net debt
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
MEUR 2009 2008 2009 2008 2008
Interest-bearing
net debt at
beginning of period -167.1 87.0 -58.3 91.7 91.7
Interest-bearing
net debt at
end of period -358.8 -9.3 -358.8 -9.3 -58.3
Change in
interest-bearing
net debt -191.7 -96.3 -300.5 -101.0 -150.0
Key figures
1-9/ 1-9/ 1-12/
2009 2008 2008
Basic earnings
per share EUR 1.18 1.07 1.66
Diluted earnings
per share EUR 1.18 1.06 1.65
Equity per share EUR 4.59 3.47 4.10
Interest-bearing
net debt MEUR -358.8 -9.3 -58.3
Total equity/
total assets % 42.6 34.0 39.0
Gearing % -30.9 -1.1 -5.6
Return on equity % 36.4 44.4 46.8
Return on
capital employed % 31.4 33.3 35.9
Total assets MEUR 2,727.7 2,575.0 2,656.8
Assets employed MEUR 803.5 865.7 977.6
Working capital
(including
financing and
tax items) MEUR -242.7 -156.2 -76.4
Sales by geographical regions
1-9/ 1-9/ 1-12/
MEUR 2009 % 2008 % 2008 %
EMEA 1) 2,049.4 62 2,067.4 65 3,001.5 65
Americas 694.8 21 609.7 19 888.3 19
Asia-Pacific 572.7 17 494.1 16 713.0 16
Total 3,316.9 3,171.2 4,602.8
1) EMEA = Europe, Middle East, Africa
Quarterly Key Figures
Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
2009 2009 2009 2008 2008 2008 2008
Orders
received MEUR 766.5 953.9 898.5 845.2 892.4 1,092.4 1,117.5
Order
book MEUR 3,603.4 3,754.1 3,753.1 3,576.7 4,002.8 3,838.7 3,617.4
Sales MEUR 1,127.3 1,168.6 1,021.0 1,431.6 1,123.8 1,142.1 905.3
Operating 146.3
income MEUR 160.1 1) 91.2 189.2 146.0 136.7 86.5
Operating %
income 14.2 12.5 1) 8.9 13.2 13.0 12.0 9.6
Q4/ Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
2007 2007 2007 2007 2006 2006 2006 2006
Orders
received MEUR 901.9 926.3 944.4 902.1 712.1 742.0 821.9 840.3
Order
book MEUR 3,282.3 3,473.6 3,318.0 3,105.7 2,762.1 2,951.0 2,818.0 2,654.0
Sales MEUR 1,294.2 971.6 1,001.9 811.2 1,145.6 879.8 840.4 735.0
Operating 160.8
income MEUR 2) 126.7 116.4 69.3 3) 123.4 101.1 83.9 51.7
Operating %
income 12.4 2) 13.0 11.6 8.5 3) 10.8 11.5 10.0 7.0
1) Excluding a MEUR 33.6 one-time cost related to the fixed cost
adjustment program.
2) Excluding a MEUR 22.5 provision for the Austrian cartel court's
fine decision and a MEUR 12.1 sales profit from the sale of KONE
Building.
3) Excluding a MEUR 142.0 fine for the European Commission's
decision.
Orders received
1-9/ 1-9/ 1-12/
MEUR 2009 2008 2008
2,618.9 3,102.3 3,947.5
Order book
Sep 30, Sep 30, Dec 31,
MEUR 2009 2008 2008
3,603.4 4,002.8 3,567.7
Capital expenditure
1-9/ 1-9/ 1-12/
MEUR 2009 2008 2008
In fixed assets 22.1 38.8 65.1
In leasing agreements 4.6 8.5 9.3
In acquisitions 39.3 49.6 60.0
Total 66.0 96.6 134.4
R&D expenditure
1-9/ 1-9/ 1-12/
MEUR 2009 2008 2008
44.1 42.9 58.3
R&D Expenditure as percentage of sales 1.3 1.4 1.3
Number of employees
1-9/ 1-9/ 1-12/
2009 2008 2008
Average 34,365 33,658 33,935
At the end of the period 34,136 34,548 34,831
Commitments
Sep 30, Sep 30, Dec 31,
MEUR 2009 2008 2008
Mortgages
Group and parent company 0.7 0.7 0.7
Pledged assets
Group and parent company 1.9 5.1 2.0
Guarantees
Associated companies 3.4 4.0 4.1
Others 6.6 6.2 7.2
Operating leases 162.3 157.4 171.7
Total 174.9 173.4 185.7
The future minimum lease payments under non-cancellable operating
leases
Sep 30, Sep 30, Dec 31,
MEUR 2009 2008 2008
Less than 1 year 40.7 41.9 43.3
1-5 years 92.8 99.8 96.9
Over 5 years 28.8 15.7 31.5
Total 162.3 157.4 171.7
Derivatives
Fair values of derivative financial instruments positive negative net net net
fair fair fair fair fair
value value value value value
Sep Sep Sep Sep Dec
30, 30, 30, 30, 31,
MEUR 2009 2009 2009 2008 2008
FX Forward contracts 8.9 6.0 2.9 2.2 10.9
Currency options - - - 0.0 0.4
Cross-currency swaps,
due under one year 3.1 18.3 -15.2 - 1.8
Cross-currency swaps,
due in 1-3 years - - - -1.6 -22.7
Electricity derivatives 0.1 1.2 -1.1 0.8 -1.0
Total 12.1 25.5 -13.4 1.4 -10.6
Nominal values of derivative financial instruments
Sep 30, Sep 30, Dec 31,
MEUR 2009 2008 2008
FX Forward contracts 472.6 588.7 615.7
Currency options - 125.7 90.4
Cross-currency swaps,
due under one year 136.7 - 23.6
Cross-currency swaps,
due in 1-3 years - 136.7 113.1
Electricity derivatives 4.7 4.5 4.7
Total 614.0 855.6 847.5
Share and shareholders September 30, 2009
Class A Class B
shares shares Total
Number of shares 38,104,356 219,566,614 257,670,970
Own shares in
possession 1) 4,710,242
Share capital, EUR 64,417,743
Market capitalization, MEUR 6,354
Number of shares traded,
million, 1-9/2009 129.7
Value of shares traded MEUR,
1-9/2009 2,569
Number of shareholders 3 21,264 21,264
Close High Low
Class B share price,
EUR, 1-9/2009 25.12 26.31 13.80
1) During January-September 2009, the authorization to repurchase
shares was not used. In April 2009, 195,264 KONE class B shares
assigned to the share-based incentive plan for the company's senior
management were transferred from KNEBV Incentive Oy to the
participants due to achieved targets for the financial year 2008.
During 2008, the authorization to repurchase shares was not used. In
April 2008, 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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