KONE Oyj - Interim report (Q1 and Q3)

KONE Corporation's Interim Report for January-June 2011

KONE Corporation, stock exchange release, July 19, 2011 at 12:30 p.m. EET

KONE's Q2: Record high order intake and solid growth in operating income

April-June 2011
  * In April-June 2011, orders received totaled EUR 1,226 (4-6/2010: 1,043)
    million. Orders received increased by 17.6% at historical exchange rates and
    by 21.0% at comparable exchange rates.
  * Net sales increased by 2.2% to EUR 1,286 (1,259) million. At comparable
    exchange rates the increase was 4.8%.
  * Operating income was EUR 184.5 (175.7) million or 14.3% (14.0%) of net
    sales.
  * Cash flow from operations was EUR 129.9 (201.7) million.
  * KONE reiterates its outlook for 2011.


January-June 2011
  * In January-June 2011, orders received totaled EUR 2,271 (1-6/2010: 1,938)
    million. Orders received increased by 17.2% at historical exchange rates and
    by 17.5% at comparable exchange rates. The order book stood at EUR 3,948
    (Dec 31, 2010: 3,598) million at the end of June 2011.
  * Net sales increased by 3.5% to EUR 2,340 (2,262) million. At comparable
    exchange rates it increased by 3.8%.
  * Operating income was EUR 303.2 (284.3) million or 13.0% (12.6%) of net
    sales.


Key Figures

                          4-6/    4-6/    1-6/    1-6/   1-12/
                          2011    2010    2011    2010    2010
--------------------------------------------------------------
Orders received   MEUR 1,226.2 1,042.8 2,270.9 1,937.5 3,809.0

Order book        MEUR 3,947.7 3,933.7 3,947.7 3,933.7 3,597.8

Sales             MEUR 1,286.4 1,258.9 2,340.2 2,261.9 4,986.6

Operating income  MEUR   184.5   175.7   303.2   284.3   696.4

Operating income     %    14.3    14.0    13.0    12.6    14.0

Cash flow
from operations
(before financing
items and taxes)  MEUR   129.9   201.7   367.2   419.3   857.2

Net income        MEUR   142.7   135.6   241.7   217.2   535.9

Total
comprehensive
income            MEUR   139.4   174.1   210.3   284.9   577.6

Basic earnings
per share          EUR    0.56    0.53    0.94    0.85    2.10

Interest-bearing
net debt          MEUR  -715.6  -487.6  -715.6  -487.6  -749.8

Total equity/
total assets         %    48.5    43.5    48.5    43.5    49.3

Gearing              %   -45.4   -37.4   -45.4   -37.4   -46.8
--------------------------------------------------------------


Matti Alahuhta, President & CEO, in conjunction with the review:"I am very pleased with the development of our business in the second quarter of
the year. Particularly delightful is the good development in our order intake,
which was at a record level. Orders received grew both in the new equipment and
modernization businesses. Orders received grew the fastest in Asia-Pacific, but
our progress was good also in Central and North Europe. The good development in
our operating income continued regardless of a situation, where the new
equipment markets outside of Asia are still rather weak in many markets. Our
operating income, which was 14.3 percent of sales, was at a higher level than in
any other previous year's second quarter. I want to thank all of our people, who
have again done an excellent job!

The market situation in Asia-Pacific remained very strong, and our good progress
in Asia continued during the second quarter of the year. The growth in orders
received was the fastest during the second quarter in India. India is the
world's second largest new equipment market. Market growth in India is expected
to accelerate as a result of urbanization. Our progress was strong also in
China, where market growth has increasingly moved to the mid-sized cities of the
central parts of China. Asia's share of our sales increased to 29 percent during
the second quarter of the year and to 26 percent during the first half of the
year.

There is continued uncertainty or weakness in many markets outside of Asia-
Pacific. The new equipment markets in the Central and North Europe are in most
countries at a good level, but the situation is weak in most Southern European
markets. There is still significant uncertainty in the North American markets
despite the gradual, slight recovery of these markets.

The growth of our operating income in the past quarter is due particularly to
the continued strong sales growth in Asia-Pacific. Our quarterly result was
burdened to some extent by increases in material costs and an unfavorable
development in translation exchange rates. Especially material costs are
increasingly presenting challenges to the improvement of our result going
forward. In addition, we have further increased growth expenditure in Asia-
Pacific as well as R&D and process development expenditure in order to be able
to take advantage of market growth opportunities in the best possible way.
Entering the second half of the year, our order book is strong and I am
confident that we can make this year again a good one for KONE."

Operating environment in April-June

The development of the operating environment was in line with KONE's
expectations and no substantial changes in the overall market trends were seen
in the second quarter of 2011. In the new equipment markets, rapid growth in the
Asia-Pacific region continued. In the Europe, Middle East and Africa (EMEA)
region, activity in Central and North Europe improved and was at a good level,
while South European markets were stable at a low level. The slight recovery of
the new equipment markets in the Americas region continued. Activity in major
projects grew in particular in Asia-Pacific, Central and North Europe and the
Middle East. Modernization markets grew slightly but with regional variations.
Maintenance markets continued to develop favourably in all regions. The overall
pricing environment remained intense in all businesses.

In the EMEA region, the development in the new equipment markets was good in
many Central and North European countries, in particular due to growth in the
residential segments and good major project activity. Markets grew in Germany,
the United Kingdom, Belgium and the Nordic countries. The market in the
Netherlands stabilized during the second quarter. The new equipment markets in
South Europe remained stable at a low level. The office segment remained
burdened by high vacancy rates, while the infrastructure, hotel and medical
segments developed more positively in some southern European markets. Markets in
the Middle East were mixed with high activity level in Saudi Arabia and Qatar.
Market activity in Russia continued to increase. Modernization markets developed
positively in Central and North Europe. The modernization markets in South
Europe were stable except for the market in France, which continued to weaken.
Maintenance markets continued to develop well in the EMEA region, but price
competition remained strong.

In the Americas region, the slight recovery seen in the new equipment markets
since the end of 2010 continued. The gradual recovery of other than the
infrastructure segment continued in the new equipment market in the United
States, but uncertainty in the market increased. Tendering activity in the
office segment was growing in select markets within the United States. The
decrease of activity in the infrastructure segment continued. Activity in the
modernization market increased. In Canada, the new equipment market remained
active, and the modernization market continued to develop well. The growth of
the new equipment market in Mexico continued to be driven by the residential and
commercial segments. Maintenance markets in the Americas developed well. The
pricing environment remained challenging.

In the Asia-Pacific region, the rapid growth in the new equipment markets
continued during the second quarter. In China, all segments continued to grow.
The residential segment grew rapidly with the affordable housing segment growing
the fastest despite a partial delay in the government's affordable housing
construction plan. The overall new equipment market growth in India remained
strong, in the residential segment in particular. In Australia, the new
equipment market continued to develop well and the modernization market grew
strongly. The Southeast Asian markets remained strong with the Malaysian and
Indonesian new equipment markets growing the fastest. Maintenance markets in
Asia-Pacific continued to develop favorably. The pricing environment remained
intense in all markets.

Market outlook 2011

The new equipment markets in Asia-Pacific are expected to continue to develop
positively, albeit at a lower rate than during the first half of the year. The
good activity level in the new equipment markets in Central and North Europe is
expected to continue in most countries, whereas most markets in South Europe are
expected to be relatively stable at the current low level. The new equipment
markets in North America are expected to recover modestly, although the outlook
has become more uncertain as compared to the first half of the year. The
modernization markets are expected to grow slightly. The maintenance markets are
expected to continue to develop well.

Outlook 2011

KONE's net sales is estimated to grow by 0-5% at comparable exchange rates as
compared to 2010.

The operating income (EBIT) is expected to be in the range of EUR 700-750
million, assuming that translation exchange rates do not deviate materially from
the situation of the beginning of 2011.

Disclosure procedure

KONE Corporation follows the disclosure procedure enabled by Standard 5.2b
published by the Finnish Financial Supervision Authority and hereby publishes
its Interim Report for January-June 2011 enclosed to this stock exchange
release. KONE Corporation's Interim Report for January-June 2011 is attached to
this release in pdf format and is also available on the company's web site at
www.kone.com.

Analyst and media meeting and conference call

A meeting for the press, conducted in Finnish, will be held on Tuesday, July
19, 2011 at 2:15 p.m. Eastern European Time.

A telephone conference and a meeting for analysts, conducted in English, will
begin at 3:45 p.m. Eastern European Time. The meeting can also be followed 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:

Finnish callers: +358 923 101 527
US callers: +1 866 458 4087
Non-US callers: +44 203 043 2436
Participant code: KONE

An on-demand version of the webcast will be available on www.kone.com later
during the same day.

About KONE

KONE is one of the global leaders in the elevator and escalator industry. The
company is committed to understanding the needs of its customers for providing
industry-leading elevators, escalators and automatic building doors as well as
innovative solutions for modernization and maintenance. The company'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. In 2010, KONE
had annual net sales of EUR 5 billion and approximately 33,800 employees. KONE
class B shares are listed on the NASDAQ OMX Helsinki Ltd in Finland.

www.kone.com

For further information please contact:

Henrik Ehrnrooth, CFO, tel. +358 (0) 204 75 4260
Karla Lindahl, Director, Investor Relations, tel. +358 (0) 204 75 4441

Sender:

KONE Corporation

Henrik Ehrnrooth
CFO

Anne Korkiakoski
Executive Vice President,
Marketing and Communications


[HUG#1531893]

Attachments:

KONE Q2 2011 Interim Report.pdf