KONE Oyj - Interim report (Q1 and Q3)

Interim Report of KONE Corporation for January-March 2017

KONE Corporation, stock exchange release, April 27, 2017 at 12.30 p.m. EEST

Interim Report of KONE Corporation for January-March 2017

January-March 2017: Continued sales growth in a mixed operating environment

-Orders  received  declined  by  1.5% to EUR 1,913 (1-3/2016: 1,942 million). At
comparable exchange rates, the decline was 1.2%.

-Net  sales grew  by 3.5% to  EUR 1,810 (1,748)  million. At comparable exchange
rates, the growth was 3.3%.

-Operating  income (EBIT) was EUR 217.7 (221.4)  million or 12.0% (12.7%) of net
sales.

-Cash  flow from  operations (before  financing items  and taxes) was EUR 305.3
(305.7) million.



-KONE  specifies its  business outlook  for 2017. In  2017, KONE's net  sales is
estimated  to grow by 0-3% at comparable exchange rates as compared to 2016. The
operating  income (EBIT)  is expected  to be  in the  range of  EUR 1,200-1,290
million,  assuming that translation exchange rates would remain at approximately
the average level of January-March 2017.

KONE  previously estimated its net sales to grow by -1-3% at comparable exchange
rates  as compared  to 2016. KONE's  previous outlook  for its  operating income
(EBIT)  was EUR  1,180-1,300 million, assuming  that translation  exchange rates
would have remained at approximately the average level of January 2017.


                                             1-3/     1-3/   Change  1-12/
Key figures                                  2017     2016            2016
-----------------------------------------------------------------------------
Orders received                       MEUR 1,913.0  1,942.3  -1.5%  7,621.0

Order book                            MEUR 9,129.0  8,529.7   7.0%  8,591.9

Sales                                 MEUR 1,810.3  1,748.3   3.5%  8,784.3

Operating income (EBIT)               MEUR  217.7    221.4   -1.7%  1,293.3

Operating income (EBIT) margin        %      12.0     12.7            14.7

Income before tax                           243.7    242.7    0.4%  1,330.3

Net income                            MEUR  187.7    188.1   -0.2%  1,022.6

Basic earnings per share              EUR    0.36     0.37   -1.3%    2.00

Cash flow from operations
(before financing items and taxes)    MEUR  305.3    305.7          1,509.5

Interest-bearing net debt             MEUR -1,182.8 -1,037.6        -1,687.6

Total equity/total assets             %      40.7     38.6            46.8

Return on equity                      %      30.1     33.1            38.1

Net working capital (including
financial items and taxes)            MEUR -1,148.0 -1,107.9        -1,054.8

Gearing                               %     -53.9    -52.7           -60.4




 Henrik Ehrnrooth, President and CEO, in conjunction with the review:

"I am pleased with the solid start to the year in a mixed operating environment.
Our  performance was strong on a broad basis although the result was burdened by
price  pressures seen in  2016 and by increasing  raw material costs.  I am also
happy  that  the  active  development  of  our  services  business is delivering
continued  good growth. Our cash flow remained  strong, which shows that we have
maintained  healthy business  fundamentals and  strong execution  throughout our
businesses.  We  saw  good  developments  in  the new equipment business in many
regions.  In the Americas, the new equipment orders grew significantly supported
by  the well-received  2016 product launches  and positive development continued
also  in EMEA. In China, our sales and orders continued to decline year-on-year.
However,  order volumes were stable year-on-year and prices started to stabilize
after having declined throughout 2016.

The  new phase in our  strategy has begun with  good momentum. It is still early
days  in the new strategic phase, but so far our Winning with Customers strategy
has  been well received by  both the customers and  KONE's employees. During the
quarter,  we launched new ground-breaking services for elevators and escalators.
Our  new KONE Care(TM) service offering is  an improved way of bringing value to
our  customers. It  provides the  ability to  tailor services  to the individual
needs  of customers.  We also  launched our  new 24/7 Connected  Services, which
utilize  the IBM Watson IoT platform. With  these launches, we started a new era
in  services  by  bringing  intelligence  and  predictability to the maintenance
business.  For  our  customers,  it  means  a significant improvement in safety,
transparency  and predictability. These are some of  the first steps that we are
taking to drive even stronger differentiation in the service business. Thanks to
the encouraging results of our new services and product launches, we continue to
increase our development activity throughout KONE.

For  2017, we have specified  our business outlook  as the first  quarter of the
year  is now behind us. We now  expect sales growth of 0-3% at comparable rates,
and the operating income to be in the range of EUR 1,200-1,290 million, assuming
that  the  translation  exchange  rates  would  remain  at  the average level of
January-March  2017. I am convinced that as  a result of our development actions
and  strong  execution,  we  will  continue  our solid performance in the coming
quarters despite the headwinds we are facing this year."

Operating environment in January-March 2017

The  global new equipment market was rather stable compared to the first quarter
of  2016 when measured in units. In Asia-Pacific, the new equipment volumes were
stable.  The new equipment market in China was stable in units, but continued to
decline  year-on-year in  monetary value.  The residential  segment in China was
impacted by the government's housing restriction measures, while the development
in  the  commercial  segment  was  slightly  better.  The infrastructure segment
continued to grow driven by stimulus measures. Demand remained relatively stable
in  the higher-tier  cities despite  restrictions and  there were  some signs of
improving  demand in the lower-tier cities. In the rest of Asia-Pacific, the new
equipment  markets  declined  slightly.  In  the  EMEA region, the new equipment
market  developed positively. New  equipment demand in  Central and North Europe
grew   with  the  residential  segment  continuing  to  see  the  most  positive
development.  In South Europe, the market continued  to see slight growth from a
low  level, whereas  the picture  remained mixed  in the  Middle East.  In North
America,  the new equipment  market growth was  driven by the  U.S., which saw a
positive development across segments and areas.

Global  service markets continued to grow.  In modernization, the large European
and  North American modernization markets continued  to see slight growth, while
the  smaller Asia-Pacific market grew significantly. Also the maintenance market
continued  to see growth across regions, with  the strongest rate of growth seen
in the Asia-Pacific region and slight growth in Europe and North America.

Pricing  trends remained varied during the  first quarter. In China, competition
remained  intense  in  new  equipment,  but  pricing  stabilized compared to the
previous  quarter. In the EMEA region,  pricing in new equipment remained rather
challenging  in the South European markets  in particular. In North America, new
equipment  pricing  continued  to  develop  positively. In services, the pricing
environment  continued to  be characterized  by strong  competition in  the EMEA
region,  particularly in South Europe and also  in some of the Central and North
European  markets. In  North America,  pricing competition  also remained rather
intense in maintenance but continued to develop positively in modernization.

Market outlook 2017

In  new equipment, the market  in China is expected  to decline by 0-5% in units
ordered  and also  the competition  to continue  intense. In  the rest  of Asia-
Pacific, the market is expected to grow. The market in North America and Europe,
Middle East and Africa region is expected to grow slightly.

The  modernization market is  expected to grow  slightly in Europe  and in North
America, and to develop strongly in Asia-Pacific.

Maintenance  markets  are  expected  to  see  the strongest growth rate in Asia-
Pacific, and to grow slightly also in other regions.

Business outlook 2017 (specified)

KONE's  net sales is estimated  to grow by 0-3% at  comparable exchange rates as
compared to 2016.

The  operating income (EBIT) is expected to  be in the range of EUR 1,200-1,290
million,  assuming that translation exchange rates would remain at approximately
the average level of January-March 2017.

The  sales outlook is based on KONE's maintenance base and order book as well as
the market outlook.

KONE's  operating income outlook is based on the current sales forecast combined
with  factors impacting profitability. In  2017, profitability is expected to be
impacted  by  factors  such  as  improved  quality and productivity, pricing and
business mix, a slight decrease in the margin of orders received in 2016 as well
as  cost pressures resulting from increased material costs and R&D and IT spend.
The  negative factors are expected to be  more pronounced in the coming quarters
than during the first quarter.

Previous business outlook

KONE's  net sales is estimated to grow  by -1-3% at comparable exchange rates as
compared to 2016.

The  operating income (EBIT) is expected to  be in the range of EUR 1,180-1,300
million,  assuming that translation exchange rates would remain at approximately
the average level of January 2017.

Press and analyst meetings

A meeting for the press, conducted in Finnish, will be held on Thursday, April
27, 2017 at 2:15 p.m. EEST.

A meeting for analysts, conducted in English, will begin at 3:45 p.m. EEST and
will be available as a live webcast on www.kone.com. An on-demand version of the
webcast will be available on www.kone.com later the same day. The meeting can
also be joined via a telephone conference.

US: +1 719 325 4759
UK: +44 (0)330 336 9412
Finland: +358 (0)9 7479 0404
Participant code: KONE

Both meetings will take place in KONE Building, located at Keilasatama 3, Espoo,
Finland.

For further information, please contact:
Sanna Kaje, Vice President, Investor Relations, tel. +358 204 75 4705

Sender:

KONE Corporation

Henrik Ehrnrooth
President and CEO

Ilkka Hara
CFO

About KONE

At KONE, our mission is to improve the flow of urban life. As a global leader in
the elevator and escalator industry, KONE provides elevators, escalators and
automatic building doors, as well as solutions for maintenance and modernization
to add value to buildings throughout their life cycle. Through more effective
People Flow®, we make people's journeys safe, convenient and reliable, in
taller, smarter buildings. In 2016, KONE had annual net sales of EUR 8.8
billion, and at the end of the year over 52,000 employees. KONE class B shares
are listed on the Nasdaq Helsinki Ltd. in Finland.

www.kone.com


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KONE_Q1_2017_Interim_Report.pdf