2008-07-22 11:30:00 CEST
2008-07-22 11:31:23 CEST
REGULATED INFORMATION
KONE Oyj - Interim report (Q1 and Q3)
KONE Corporation's Interim Report for January-June 2008
KONE Corporation, stock exchange release, July 22, 2008 at 12:30 p.m.
KONE's Q2: Good growth in orders received and operating income
continued
April-June
- In April-June 2008, the growth in orders received was 16%, or 22%
at comparable exchange rates. Orders received was strong in all
geographical regions and totaled EUR 1,092 (4-6/2007: 944.4) million.
- Net sales increased by 14% to EUR 1,142 (1,002) million. At
comparable exchange rates, the growth was 20%.
- Operating income was EUR 136.7 (116.4) million or 12.0% (11.6%) of
net sales.
January-June
- In January-June 2008, orders received growth was 20%, or 26% at
comparable exchange rates. Orders received totaled EUR 2,210
(1-6/2007: 1,847) million. At the end of June 2008, the order book
was EUR 3,839 (Dec 31, 2007: 3,282) million.
- Net sales increased by 13% to EUR 2,047 (1,813) million. At
comparable exchange rates, the growth was 18%.
- Operating income was EUR 223.2 (185.7) million or 10.9% (10.2%) of
net sales (1-6/2007 figures exclude an expense of EUR 142.0 million
related to the European Commission's fine decision).
- KONE adjusts its outlook for sales growth in 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%.
Key Figures
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
2008 2007 2008 2007 2007
Orders received MEUR 1,092.4 944.4 2,209.9 1,846.5 3,674.7
Order book MEUR 3,838.7 3,318.0 3,838.7 3,318.0 3,282.3
Sales MEUR 1,142.1 1,001.9 2,047.4 1,813.1 4,078.9
Operating income MEUR 136.7 116.4 223.2 185.7 1) 473.2 2)
Operating income % 12.0 11.6 10.9 10.2 1) 11.6 2)
Cash flow
from operations
(before financing
items and taxes) MEUR 118.9 -37.4 285.5 105.3 380.0
Net income MEUR 98.8 82.9 162.7 -12.1 180.3
Basic earnings
per share EUR 0.39 0.33 0.65 -0.05 0.72
Interest-bearing
net debt MEUR 87.0 263.4 87.0 263.4 91.7
Total equity/total
assets % 30.0 24.1 30.0 24.1 31.7
Gearing % 11.7 46.7 11.7 46.7 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:"I am very pleased with KONE's progress during the second quarter.
KONE's development programs continued to bring excellent results. We
are now much more customer focused and productive, which is
supporting us in an increasingly demanding market environment. Our
continued strong growth in orders received has further increased
KONE's market share in many key markets. Our progress was
particularly strong in the new equipment business in Asia-Pacific and
in the Americas. Furthermore, the development was also good in the
less cyclical service business."
Analyst and media conference and conference call
A meeting for the press, conducted in Finnish, will be held on
Tuesday, July 22, 2008 at 1:00 p.m. Finnish time.
A telephone conference and a meeting for analysts, conducted in
English, will begin at 2:30 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 6203
Non-US callers: +44 (0)20 7162 0125
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 OMX
Nordic Exchange 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
Minna Mars
Senior Vice President,
Corporate Communications & IR
Accounting Principles
KONE Corporation's Interim Report for January 1-June 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.
April-June 2008 review
Operating environment in April-June
In the second quarter of 2008, overall demand for new equipment
continued to be at a relatively good level; however the market
situation differed from market to market. The modernization market
continued to provide good growth opportunities for KONE while the
global maintenance market remained very competitive.
In the European, Middle East and African region (EMEA), the business
environment was mixed. The North European market (especially in
Scandinavia) experienced increasing hesitation in the residential
sector. In the United Kingdom, the residential market continued to
weaken, while the major project market was active. The overall
Southern European market activity remained on the same level as
before, however the residential sector continued to slow down in
Italy and particularly in Spain. The Eastern European and Middle East
construction markets continued to experience strong growth.
In the Americas, the new equipment market decreased somewhat in the
Unites States because the commercial segment no longer compensated
for the slowdown in the residential segment. Modernization remained
at a relatively good level in the United States, while the
maintenance market continued to be very competitive. The markets in
Canada and Mexico were quite stable.
In the Asia-Pacific region, growth was strong in most markets. In
China, the new equipment market continued to be active with high real
estate investments growth. The demand for both residential and office
buildings remained even though the investment climate index has been
dropping since March 2008. Also, the Indian market continued to offer
good growth opportunities for KONE. Order activity continued at a
high level. In Australia, market activity shifted from the
residential market to the commercial segment.
Financial performance in April-June
KONE's orders received in the second quarter of 2008 increased by
approximately 16% and totaled EUR 1,092 (4-6/2007: 944.4) million. At
comparable exchange rates, the growth was approximately 22%. The
growth in orders was strongest in the Asia-Pacific region. At the
same time, orders received growth continued to be very strong in the
Americas and was also good in Europe, especially in Eastern Europe
and the Middle East. Only new equipment orders and modernization
orders are included in orders received.
The largest orders received in the April-June period included an
order for the Marina Bay Sands Integrated Resort in Singapore and an
order to supply all elevators for the new Ministry of Justice and
Internal Affairs building in the Hague, Netherlands.
KONE's net sales grew by 14% compared with April-June 2007 and
totaled EUR 1,142 (1,002) million. At comparable exchange rates, the
growth was 20%. Growth was strongest in Asia-Pacific.
New equipment sales accounted for EUR 549.1 (457.5) million of the
total and represented an approximate growth of 20% over the
comparison period. At comparable currency rates, the growth was
approximately 26%.
Service sales (maintenance and modernization) increased by 9% and
totaled EUR 593.0 (544.4) million. At comparable currency rates, the
growth was approximately 14%.
Operating income for the April-June period totaled EUR 136.7 (116.4)
or 12.0% (11.6%) of net sales. The intensive work done with the
development programs continued to contribute to the good development
of KONE.
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.
Sales by geographical areas, MEUR
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
2008 % 2007 % 2008 % 2007 % 2007 %
EMEA 1) 747.3 65 651.7 65 1,365.0 67 1,187.2 66 2,675.3 65
Americas 214.0 19 206.1 21 375.7 18 383.7 21 840.8 21
Asia-Pacific 180.8 16 144.1 14 306.7 15 242.2 13 562.8 14
Total 1,142.1 1,001.9 2,047.4 1,813.1 4,078.9
1) EMEA = Europe, Middle East, Africa
January-June 2008 review
KONE's operating environment in January-June
In January-June 2008, the overall market situation was favorable for
new equipment and modernization even though some markets softened. In
the maintenance markets, where demand is by nature non-cyclical,
growth continued while the overall market environment became
increasingly competitive.
In Europe, the Middle East and Africa (EMEA), the business
environment remained favorable. The new equipment market was
especially good in Eastern Europe as well as in the Middle East. In
the United Kingdom and Scandinavia, the residential market weakened,
but the commercial market activity continued at a good level. In
Southern Europe, the new equipment market remained fairly stable due
to activity in the commercial segment, although the residential
market continued to slow down in both Italy and especially in Spain.
The modernization market, which is driven by the European Safety
Norms (SNEL) and the need for upgrades resulting from the ageing of
the existing equipment base, created favorable opportunities for KONE
to grow.
In the Americas, the economic environment continued to weaken. The
new equipment market decreased somewhat in the United States because
the commercial segment no longer compensated for the slowdown in the
residential segment. Overall construction activity in the United
States has declined year on year. The building activity remained
strongest in the Northeast, South Central and Western areas.
Modernization remained at a relatively good level in the United
States, while the maintenance market continued to be very
competitive. The markets in Canada and Mexico were quite stable.
In the Asia-Pacific region, market growth was strong in most markets.
Particularly, the new equipment market continued to grow fast. The
Chinese and Indian markets sustained high growth levels. Market
development in Southeast Asia was also encouraging. On the other
hand, the Australian residential market has weakened, but the
activity in the commercial has been relatively good.
Orders Received and Order Book
In January-June 2008, KONE's orders received increased by
approximately 20% and totaled EUR 2,210 (1-6/2007: 1,847) million. At
comparable exchange rates, the growth was approximately 26%. Only new
equipment and modernization orders are included in orders received.
The growth in orders received was strongest in the Asia-Pacific
region, but growth was also very good in the Americas and EMEA. High
growth in orders received is a strong evidence of KONE's improving
competitiveness.
The order book increased from the end of 2007 by 17% and stood at EUR
3,839 (Dec 31/2007: 3,282) million at the end of June 2008. 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-June 2008. KONE performed particularly
well in the United Kingdom and the Middle East. KONE also showed good
progress in the modernization market. KONE's orders received in
modernization have been particularly good in France and Scandinavia.
In the Americas, KONE experienced a good order intake. KONE's
advanced elevator and escalator solutions and improved
competitiveness continued to increase customer awareness. In
addition, improved customer focus has started to increasingly bring
results.
In the Asia-Pacific region, KONE's new equipment order intake was
exceptionally strong and continued to progress especially well in
China and India.
Net Sales
In January-June 2008, KONE's net sales rose by approximately 13%,
compared to last year, and totaled EUR 2,047 (1-6/2007: 1,813)
million. Growth at comparable currency rates was approximately 18%.
New equipment sales accounted for EUR 932.5 (764.5) million of the
total and represented an approximate growth of 22% over the
comparison period. At comparable currency rates, the growth was
approximately 28%.
Service sales (maintenance and modernization) increased by 6% and
totaled EUR 1,115 (1,049) million. At comparable currency rates, the
growth was approximately 11%.
Of the sales, 67% (66%) were generated from EMEA, 18% (21%) by the
Americas and 15% (13%) by Asia-Pacific. The weakened US dollar had an
impact on the geographical sales mix. At comparable exchange rates,
the Americas also had a positive sales growth.
Financial Result
KONE's operating income was EUR 223.2 million (1-6/2007: 185.7
million, excluding an expense of EUR 142.0 million related to the
European Commission's fine decision) or 10.9% (10.2% excluding an
expense of EUR 142.0 million related to the European Commission's
fine decision) of net sales. The strong growth was the result of
sales growth, healthy sales margins and improved productivity. The
rapid price growth in hot rolled steel and cast iron in May-June had
some negative impact in June and is estimated to have an impact
during the second half of the year. Net financing items were EUR -3.3
(-2.9) million. Operating income included EUR 5.9 (3.2) million other
income which is related to earlier divested businesses.
KONE's income before taxes for January-June 2008 was EUR 220.7 (41.0)
million. Taxes totaled EUR 58.0 (53.1) million, taking into account
taxes proportionate to the amount estimated for the financial year.
This represents an effective tax rate of 26.3%. 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 162.7 (-12.1) million.
Earnings per share were EUR 0.65 (-0.05). Equity per share was EUR
2.96 (2.24).
Balance Sheet and Cash Flow
In January-June 2008, cash flow generated from operations (before
financing items and taxes) was EUR 285.5 (1-6/2007: 105.3) million.
At the end of June, net working capital was negative at EUR -150.8
(Dec 31, 2007: -121.8) million, including financing items and taxes.
At the end of June 2008, interest-bearing net debt totaled EUR 87.0
(Dec 31, 2007: 91.7) million, gearing was 11.7% (12.2%) and total
equity/total assets ratio was 30.0% (31.7%).
Capital expenditure, acquisitions and divestments
KONE's capital expenditure, including acquisitions, totaled EUR 64.7
(1-6/2007: 40.5) million. Capital expenditure, excluding
acquisitions, was mainly related to R&D, IT and production.
Acquisitions accounted for EUR 37.6 (16.5) million of this figure.
Acquisitions made in January-June will have no material effect on the
2008 full-year figures.
In January-June, KONE acquired the French elevator company ARA Lyon.
ARA Lyon maintains and modernizes elevators in the area of Lyon. KONE
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 addition, KONE acquired RPG
Mantenimiento S.L., an elevator company based in Murcia, Spain. RPG
maintains and modernizes elevators.
Research and development
Research and development expenses totaled EUR 28.2 (1-6/2007: 25.4)
million, representing 1.4% (1.4%) 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 offering in space efficiency,
performance and visual as well as eco-efficient features was
expanded. A new system providing regenerative drive technology in
modernization was also launched.
In addition, KONE launched in the first quarter of 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 34,013 (December 31, 2007: 32,544) employees at the end of
June 2008. The average number of employees was 33,301 (1-6/2007:
29,987). In the period under review, most of the personnel growth was
in the fastest growing markets such as Asia-Pacific and the Middle
East. Additional recruitment in other markets was carried out mainly
in installation and modernization operations due to growing volumes.
The geographical distribution of KONE employees was 56% (57%) in
EMEA, 17% (18%) in the Americas and 27% (25%) 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 aims to be a leader in eco-efficiency by further strengthening
its product offering. The company is developing new volume elevator
releases which will achieve significant progress in energy
efficiency. The target is to reach a 50% improvement in this area by
2010.
KONE is also focusing on minimizing the carbon footprint of all its
operations. Improvements cover manufacturing, logistics and
installation throughout the product's entire life-cycle, including
its modernization and maintenance.
Globally, KONE is increasingly requiring its suppliers to operate in
an eco-efficient way. For instance, the ISO 14001 environmental
standard and tighter environmental requirements are increasingly
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, a low debt level is a strenght. KONE's
philosophy is to take an aggregated view of share price development,
dividends and the possible purchase of own shares as components of
the total shareholder return.
KONE's business activities are exposed to risks, of which the most
significant are increases in personnel costs and raw material costs,
fluctuations in currencies and changes in the world economy's
development.
Labor costs and related employment costs amount to approximately a
third of sales. Inflation has had an impact on higher increases in
salaries and wages worldwide. On an annual basis, a one percentage
increase represents approximately EUR 10-15 million.
A rise in raw material prices is 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 price of oil
also affects maintenance costs. Direct materials, supplies and other
related direct costs represent more than a third of total sales.
As a global group, KONE is exposed to foreign currency fluctuations
and currencies. The Group Treasury function manages currency and
other financial risks centrally based on principles approved by the
Board of Directors. As the expenses and income of the elevator and
escalator business occur mainly in the same currency, exchange rate
movements are reflected mostly in the translation of the achieved
result into euros.
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 will be 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 in the
OMX Nordic Exchange Helsinki 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 in the
OMX Nordic Exchange Helsinki.
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 OMX Nordic
Exchange Helsinki 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 OMX Nordic Exchange 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 June 30, 2008, 1,916,104 shares have been subscribed for with
the options, raising KONE's share capital to EUR 64,233,781.00. The
share capital comprises 218,830,768 listed class B shares and
38,104,356 unlisted class A shares.
At the end of June 2008, the remaining number of shares that can be
subscribed for was 4,700,916. The remaining 2005B options entitle
their holders to subscribe for 707,916 and the remaining 2005C for
3,993,000 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 authorizaion 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 5,630 million as of June 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-June 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
mamagement were transferred from KNEBV Incentive Ky to the
participants due to achieved targets for the financial year 2007. At
the end of June, 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 the OMX Nordic Exchange Helsinki
The OMX Nordic Exchange Helsinki traded 97.6 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-June, equivalent to a turnover of EUR 2,245 million. The
daily average trading volume was 778,000 (1-6/2007: 840,096) (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
June 30, 2008 was EUR 22.34. The volume weighted average share price
during the period was EUR 23.76. The highest quotation during the
January-June was EUR 27.87 and the lowest 18.77.
The number of registered shareholders at the beginning of the review
period was 13,650 and 14,101 at its end. The number of private
households holding shares totaled 12,656 at the end of the period.
According to the nominee registers, approximately 43.7% of the listed
class B shares were owned by foreigners at June 30, 2008. Other
foreign ownership at the end of the period totaled approximately 7%;
thus a total of approximately 51.7% of the company's listed class B
shares were owned by international investors, corresponding to
approximately 19% 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.
Outlook
We estimate that the market continues to provide favorable
opportunities for KONE to continue to grow in 2008 although market
growth is weaker this year than in 2007, due to the weakened economic
outlook.
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%.
Previous outlook
We estimate that the market will continue to create favorable
opportunities for KONE to grow in 2008 although market growth will
not be equally strong in all markets this year as in 2007, due to the
weakened economic outlook.
KONE's target for 2008 is to achieve, at comparable exchange rates, a
growth of about 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%.
Helsinki, July 22, 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
4-6/ 4-6/ 1-6/ 1-6/ 1-12/
MEUR 2008 % 2007 % 2008 % 2007 % 2007 %
Sales 1,142.1 1,001.9 2,047.4 1,813.1 4,078.9
Costs and
expenses -990.4 -871.4 -1,794.5 -1,741.1 -3,699.8
Depreciation -15.0 -14.1 -29.7 -28.3 -58.3
Operating
income 136.7 12.0 116.4 11.6 223.2 10.9 43.7 2.4 320.8 7.9
Share of
associated
companies'
net income 0.4 0.4 0.8 0.2 1.7
Financing
income 1.9 5.7 7.5 9.1 16.6
Financing
expenses -5.3 -6.8 -10.8 -12.0 -25.1
Income
before
taxes 133.7 11.7 115.7 11.5 220.7 10.8 41.0 2.3 314.0 7.7
Taxes -34.9 -32.8 -58.0 -53.1 -133.7
Net income 98.8 8.7 82.9 8.3 162.7 7.9 -12.1 -0.7 180.3 4.4
Net income
attributable
to:
Shareholders
of the
parent
company 98.7 82.9 162.3 -12.0 180.1
Minority
interests 0.1 0.0 0.4 -0.1 0.2
Total 98.8 82.9 162.7 -12.1 180.3
Condensed consolidated balance sheet
Assets
MEUR 30.6.2008 30.6.2007 31.12.2007
Non-current assets
Intangible assets 644.2 619.9 630.4
Tangible assets 203.7 225.6 201.0
Loans receivable and other
interest-bearing assets 1.7 2.9 1.7
Deferred tax assets 110.5 138.1 118.6
Investments 135.2 125.5 131.3
Total non-current assets 1,095.3 1,112.0 1,083.0
Current assets
Inventories 896.6 825.9 773.2
Advance payments received -842.5 -730.7 -694.6
Accounts receivable and other
non interest-bearing assets 1,049.2 910.7 924.5
Current loans and receivables 121.5 116.9 118.9
Cash and cash equivalents 162.0 108.2 154.9
Total current assets 1,386.8 1,231.0 1,276.9
Total assets 2,482.1 2,343.0 2,359.9
Equity and liabilities
MEUR 30.6.2008 30.6.2007 31.12.2007
Equity 745.3 564.4 749.2
Non-current liabilities
Loans 219.6 180.9 175.8
Deferred tax liabilities 28.3 32.4 25.9
Employee benefits 124.9 145.4 131.9
Total non-current liabilities 372.8 358.7 333.6
Provisions 76.9 65.9 86.6
Current liabilities
Loans 152.6 310.5 191.4
Accounts payable and other liabilities 1,134.5 1,043.5 999.1
Total current liabilities 1,287.1 1,354.0 1,190.5
Total equity and liabilities 2,482.1 2,343.0 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 162.3 0.4 162.7
Items booked
directly
into equity:
Transactions with
shareholders and
minority shareholders:
Dividends paid -163.6 -163.6
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
Cash flow hedge 1.7 1.7
Translation
differences -14.3 -14.3
Hedging of foreign
subsidiaries 3.4 3.4
Tax impact of
hedging -0.9 -0.9
Option and
share based
compensation 4.7 1.0 5.7
30 Jun, 2008 64.2 101.1 7.2 -43.1 -83.1 697.8 1.2 745.3
*) 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
premioun account. The amount credited in the paid-up equity reserve
is EUR 0.8 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 -12.0 -0.1 -12.1
Items booked directly
into equity:
Transactions with
shareholders and
minority shareholders:
Dividends paid -125.1 -125.1
Issue of shares
(option rights) 0.0 0.6 0.6
Purchase of own
shares -0.3 -0.3
Sale of own shares -
Change in minority
interests -1.1 -1.1
Cash flow hedge 0.6 0.6
Translation
differences 2.4 2.4
Hedging of foreign
subsidiaries -4.2 -4.2
Tax impact of hedging 1.0 1.0
Option and share based
compensation 3.7 0.3 4.0
30 Jun, 2007 64.0 98.6 0.1 -14.8 -87.8 502.0 2.3 564.4
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
MEUR 1-6/2008 1-6/2007 1-12/2007
Operating income 223.2 43.7 320.8
Change in working capital 32.6 33.3 0.9
Depreciation 29.7 28.3 58.3
Cash flow from operations 285.5 105.3 380.0
Cash flow from financing items and taxes -50.6 -57.9 -134.0
Cash flow from operating activities 234.9 47.4 246.0
Cash flow from investing activities -61.3 -67.0 -94.6
Cash flow after investing activities 173.6 -19.6 151.4
Purchase and sale of own shares - -0.3 -0.3
Issue of shares 0.9 0.6 2.4
Dividends paid -163.3 -125.1 -125.1
Change in loans receivable -5.6 47.3 42.0
Change in loans payable 1.5 94.9 -24.0
Cash flow from financing activities -166.5 17.4 -105.0
Change in cash and cash equivalents 7.1 -2.2 46.4
Cash and cash equivalents at end of
period 162.0 108.2 154.9
Translation difference 0.0 -0.9 1.0
Cash and cash equivalents at beginning of
period 154.9 109.5 109.5
Change in cash and cash equivalents 7.1 -2.2 46.4
Change in interest-bearing net debt
MEUR 1-6/2008 1-6/2007 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 87.0 263.4 91.7
Change in interest-bearing net debt -4.7 138.5 -33.2
The EUR 142.0 million fine for the European Commisions's decision is
included in the interest-bearing net debt.
Key figures
1-6/2008 1-6/2007 1-12/2007
Basic earnings per share EUR 0.65 -0.05 0.72
Diluted earnings per share EUR 0.64 -0.05 0.71
Equity per share EUR 2.96 2.24 2.98
Interest-bearing net debt MEUR 87.0 263.4 91.7
Total equity/total assets % 30.0 24.1 31.7
Gearing % 11.7 46.7 12.2
Return on equity % 43.5 neg. 24.9
Return on capital employed % 31.1 0.1 18.6
Total assets MEUR 2,482.1 2,343.0 2,359.9
Assets employed MEUR 832.3 827.8 840.9
Working capital (including
financing and tax items) MEUR -150.8 -143.2 -121.8
Sales by geographical areas
MEUR 1-6/2008 % 1-6/2007 % 1-12/2007 %
EMEA1) 1,365.0 67 1,187.2 66 2,675.3 65
Americas 375.7 18 383.7 21 840.8 21
Asia-Pacific 306.7 15 242.2 13 562.8 14
Total 2,047.4 1,813.1 4,078.9
* EMEA = Europe, Middle East, Africa
Quarterly Key Figures
Q2/2008 Q1/2008 Q4/2007 Q3/2007 Q2/2007 Q1/2007
Orders received MEUR 1,092.4 1,117.5 901.9 926.3 944.4 902.1
Order book MEUR 3,838.7 3,617.4 3,282.3 3,473.6 3,318.0 3,105.7
Sales MEUR 1,142.1 905.3 1,294.2 971.6 1,001.9 811.2
Operating
income MEUR 136.7 86.5 160.8 1) 126.7 116.4 69.3 2)
Operating %
income 12.0 9.6 12.4 1) 13.0 11.6 8.5 2)
Q4/2006 Q3/2006 Q2/2006 Q1/2006
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 1-6/2008 1-6/2007 1-12/2007
2,209.9 1,846.5 3,674.7
Order book
MEUR 30.6.2008 30.6.2007 31.12.2007
3,838.7 3,318.0 3,282.3
Capital expenditure
MEUR 1-6/2008 1-6/2007 1-12/2007
In fixed assets 23.6 17.2 58.1
In leasing agreements 3.5 6.8 9.2
In acquisitions 37.6 16.5 49.6
Total 64.7 40.5 116.9
R&D expenditure
MEUR 1-6/2008 1-6/2007 1-12/2007
28.2 25.4 50.7
R&D Expenditure as percentage of sales 1.4 1.4 1.2
Number of employees 1-6/2008 1-6/2007 1-12/2007
Average 33,301 29,987 30,796
At the end of the period 34,013 30,665 32,544
Commitments
MEUR 30.6.2008 30.6.2007 31.12.2007
Mortgages
Group and parent company 0.7 30.7 0.7
Pledged assets
Group and parent company 4.8 5.4 4.8
Guarantees
Associated companies 3.7 1.8 5.3
Others 6.1 0.9 6.3
Operating leases 149.0 119.6 148.9
Total 164.3 158.4 166.0
The future minimum lease payments under non-cancellable operating
leases
MEUR 30.6.2008 30.6.2007 31.12.2007
Less than 1 year 39.2 34.5 39.0
1-5 years 90.6 75.0 91.2
Over 5 years 19.2 10.1 18.7
Total 149.0 119.6 148.9
Derivatives
Fair values of derivative financial instruments
Positive Negative net net net
fair fair fair fair fair
value value value value value
MEUR 30.6.2008 30.6.2008 30.6.2008 30.6.2007 31.12.2007
FX Forward
contracts 18.3 5.7 12.6 -2.3 6.0
Currency options 0.2 0.2 0.0 0.0 0.0
Cross-currency
swaps,
due under one year - - - 2.0 2.9
Cross-currency
swaps,
due in 1-3 years 10.4 - 10.4 8.6 8.9
Electricity
derivatives 1.8 0.1 1.7 0.4 0.9
Total 30.7 6.0 24.7 8.7 18.7
Nominal values of derivative financial instruments
MEUR 30.6.2008 30.6.2007 31.12.2007
FX Forward contracts 603.8 525.7 527.3
Currency options 46.0 11.1 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 3.0 2.9 2.5
Total 789.5 696.4 702.1
Share and shareholders June 30, 2008
Class A Class B
shares shares Total
Number of shares 38,104,356 218,830,768 256,935,124
Own shares in
possession 1) 4,905,506
Share capital, EUR 64,233,781
Market capitalization, MEUR 5,630
Number of shares traded,
million, 1-6/2008 97.6
Value of shares traded MEUR,
1-6/2008 2,245
Number of shareholders 3 14,101 14,101
Close High Low
Class B share price,
EUR, 1-6/2008 22.34 27.87 18.77
1) During the first half of 2008, the authorization to repurchase
shares was not used. 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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