2007-10-23 11:31:34 CEST
2007-10-23 11:31:34 CEST
REGLERAD INFORMATION
KONE Oyj - Quarterly report
KONE Corporation s Interim Report for January-September 2007
KONE Corporation, Stock Exchange Release, October 23, 2007 at 12:30
PM
KONE Q3: Strong Growth in Orders Received and Profit
- Orders received growth was 15 percent in January-September, or 18
percent at comparable exchange rates. Orders received totaled EUR
2,773 (2,404) million. In the third quarter, orders received growth
was 25 percent, or 27 percent at comparable exchange rates. Orders
received totaled EUR 926.3 (742.0) million.
- Net sales grew by 13 percent to EUR 2,785 (2,455) million in
January-September; at comparable exchange rates, growth was 16
percent. In the third quarter, net sales grew by 10 percent to EUR
971.6 (879.8) million. At comparable exchange rates, the growth was
13 percent.
- Operating income was EUR 170.4 (236.7) million in
January-September. Excluding the EUR 142.0 million fine for the
European Commission's decision, operating income was EUR 312.4
million or 11.2 (9.6) percent of net sales. In the third quarter,
operating income was EUR 126.7 (101.1) million or 13.0 (11.5) percent
of net sales.
- KONE specifies 2007 outlook. KONE's target for 2007 is to achieve a
growth close to 15 percent in net sales, calculated at comparable
exchange rates, compared to 2006. The operating income (EBIT) target
is to achieve a growth close to 30 percent from the comparable 2006
figure of EUR 360 million. This target excludes the EUR 142.0 million
fine for the European Commission's decision and the possible fine
from Austria.
Key Figures
7-9/2007 7-9/2006 1-9/2007 1-9/2006 1-12/2006
Orders received MEUR 926.3 742.0 2,772.8 2,404.2 3,116.3
Order book MEUR 3,473.6 2,951.0 3,473.6 2,951.0 2,762.1
Sales MEUR 971.6 879.8 2,784.7 2,455.2 3,600.8
Operating income MEUR 126.7 101.1 312.4 1) 236.7 360.1
Operating income % 13.0 11.5 11.2 1) 9.6 10.0
Cash flow from
operations
(before
financing items
and taxes) MEUR 158.7 127.4 264.0 274.0 371.7
Net income MEUR 91.8 70.3 79.7 154.2 234.4
Interest-bearing
net debt MEUR 168.5 138.8 168.5 138.8 124.9
Total
equity/total
assets % 27.9 29.0 27.9 29.0 30.5
Gearing % 25.9 21.1 25.9 21.1 17.9
1) Excluding the EUR 142.0 million fine for the European Commission's
decision.
KONE President & CEO, Matti Alahuhta, in conjunction with the review:"I am pleased with our progress in profitable growth. Our strong
growth both in orders received and operating income are clear signs
of our improving competitiveness. We continue to have a lot of
opportunities to improve our activities and we are in a great
position to do that. I want to thank all KONE employees for their
energized efforts."
Analyst and Media Conference and Conference Call
A meeting for the press, conducted in Finnish, will be held on
October 23, 2007 at 2:00 PM at KONE Building, Keilasatama 3, Espoo.
A combined analyst meeting and conference call/web cast, conducted in
English, will be held on October 23, 2007 at 4:00 PM at KONE
Building, Keilasatama 3, Espoo. Conference call participants may
access the conference directly at the following telephone numbers:
US callers: +1 334 323 6201
Non-US callers: +44 (0)20 7162 0025
Participant code: KONE
The conference call will also be available as a web cast on the
company website. An on demand version of the conference will be
available at www.kone.com later the same day.
About KONE
KONE is one of the world's leading elevator and escalator companies.
It provides its customers with industry-leading elevators and
escalators, with innovative solutions for their maintenance and
modernization. KONE also provides maintenance of automatic building
doors. In 2006, KONE had annual net sales of EUR 3.6 billion and
approximately 29,000 employees. Its class B shares are listed on the
OMX Nordic Exchange in Helsinki, 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
Review for January-September 2007
Accounting Principles
KONE Corporation's interim report for January 1-September 30, 2007
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 annual financial statements for 2006.
The information presented in the interim report has not been audited.
KONE's Operating Environment during January-September
Overall demand remained strong for new equipment and modernization in
most markets and hence continued to create favorable conditions for
KONE's growth. The price environment for new equipment was
competitive in all geographical areas. The global maintenance market
remained good, but price competition was still tough.
In the European, Middle East and African region (EMEA), the business
environment was strong during the third quarter. The new equipment
market continued to be strong for KONE particularly in Scandinavia,
Germany, Belgium, Netherlands, the United Kingdom, Eastern Europe and
the Middle East. The Southern European new equipment market activity
remained rather stable on the same level as during the first half of
the year - the office market was active, while the residential market
showed some weakness. The Eastern European and Middle East
construction markets experienced continuous strong growth.
Modernization demand sustained at a good level, mainly driven by the
European Safety Norms (SNEL).
The North American new equipment market remained relatively stable.
The residential apartment segment remained relatively flat in the
United States, while the single-family home market weakened. Demand
and investments in the hotel and office segments continued at good
level. In Canada, the solid market development continued both in the
residential and office segments. The stable economic environment in
Mexico supported strong investment in hotel and retail properties.
The modernization market growth in North America continued due to
aging equipment and tenant demands for improved services.
In the Asia-Pacific region, most markets maintained a high activity
level. The Chinese market continued to grow fast. India and Australia
also experienced a growing and active market. In Australia, both the
volume and major project markets developed favorably.
Orders Received and Order Book
KONE's market position continued to strengthen in the third quarter
of 2007. The value of orders received during January-September
increased by approximately 15 percent and totaled EUR 2,773
(1-9/2006: 2,404) million. At comparable exchange rates, the growth
was approximately 18 percent. Only new equipment orders and
modernization orders are included in orders received.
The order book increased from the end of 2006 by 26 percent and stood
at EUR 3,474 (December 31, 2006: 2,762) million at the end of
September. Compared with the order book on September 30, 2006 there
was an increase of approximately 18 percent. At comparable exchange
rates, the growth was about 22 percent. The margin of the order book
remained at a good level.
Orders received during July-September totaled EUR 926.3 (742.0)
million, an increase of approximately 25 percent. At comparable
exchange rates, growth was approximately 27 percent. During the third
quarter, Asia-Pacific and the Americas recorded the highest growth in
new orders.
In the EMEA region, most markets contributed positively to orders
received. KONE received several major orders during the third
quarter. In the United Kingdom, KONE signed a contract with Land
Securities for the delivery and installation of all elevators and
escalators for the One New Change multi-purpose development in
London's Square Mile district. KONE also signed a contract with
British Land for the design, delivery and installation of all
elevators and escalators for The Leadenhall Building, also situated
in London. In Germany, KONE was awarded an order to supply 24
elevator and escalator units for Opern Turm, a multi-purpose
high-rise building in Frankfurt. In addition, KONE signed a contract
with Arabian Construction Company (ACC) for the delivery of all
elevators and escalators for the Etihad Towers development in Abu
Dhabi, United Arab Emirates. The building complex will feature a
five-star hotel, a boutique shopping mall, a hypermarket, an office
tower and luxury residential apartments and is set to be one of the
most prestigious projects in Abu Dhabi. In the marine business, KONE
received a major order from Aker Yards for the design, supply and
installation of all elevators in Royal Caribbean International's
Genesis 2 luxury passenger cruise ship.
In the Americas, and especially in the United States, KONE
experienced a very strong order intake in the new equipment and
modernization market. New equipment orders received for KONE in
Canada and Mexico also continued to develop well. The biggest order
KONE received in the Americas was a contract for the design, delivery
and installation of all elevators for the new Mandarin Oriental
Tower, a multi-purpose building in Chicago.
In the Asia-Pacific region, KONE's new equipment order intake
continued to develop very strongly. KONE is the market leader in the
machine-room-less (MRL) segment In China. Among the largest orders
during the third quarter was an order to supply and install elevators
for the new Shanghai International Finance Centre (IFC) in the heartof the Lujiazui financial centre in Pudong. In addition, KONE
received an order to supply and install all the elevators for a
project located in the Brisbane Central Business District as well as
an order to supply and install all elevators in the Southern Cross
West Tower project in Melbourne, Australia.
Sales by geographical areas MEUR
7-9/2007 % 7-9/2006 % 1-9/2007 % 1-9/2006 % 1-12/2006 %
EMEA 1) 621.0 64 539.2 61 1,808.2 65 1,557.3 64 2,319.4 65
Americas 211.9 22 213.3 24 595.6 21 573.0 23 805.1 22
Asia-Pacific 138.7 14 127.3 15 380.9 14 324.9 13 476.3 13
Total 971.6 879.8 2,784.7 2,455.2 3,600.8
1) EMEA = Europe, Middle East, Africa
Net Sales
In comparison to January-September 2006, KONE's net sales increased
by approximately 13 percent and totaled EUR 2,785 (2,455) million.
Growth at comparable currency rates was approximately 16 percent.
New equipment sales in January-September accounted for EUR 1,195
(963.6) million of the total and represented an approximate 24
percent growth over the comparison period. At comparable currency
rates the growth was approximately 27 percent.
KONE's business logic spans the entire lifecycle of customer
investments, and KONE's customer focus and lifetime strategy seeks to
provide a better service capability. This also creates growth in
KONE's business operations and a less cyclical stream of profits.
Service sales increased by almost 7 percent and totaled EUR 1,590
(1,492) million. At comparable currency rates the growth was
approximately 9 percent.
Of the sales, 65 (64) percent were generated from EMEA, 21 (23)
percent by the Americas and 14 (13) percent by Asia-Pacific.
In the third quarter, KONE's net sales totaled EUR 971.6 (879.8)
million, an approximate 10 percent growth over the same period in
2006. At comparable exchange rates, the growth was approximately 13
percent. New equipment sales grew approximately 15 percent and
accounted for EUR 430.1 (375.1) million. At comparable currency
rates, the growth was approximately 17 percent. Service sales grew by
7 percent and totaled EUR 541.5 (504.7) million. At comparable
currency rates, the growth was approximately 10 percent.
Result
The fine of EUR 142.0 million for the European Commission's decision
was recognized in the first quarter. KONE's operating income,
excluding the fine, improved by approximately 32 percent in
comparison to January-September of 2006 and was EUR 312.4 (236.7)
million or 11.2 (9.6) percent of net sales. Net financing items were
EUR -7.1 (-3.8) million.
KONE's income before taxes for the January-September period was EUR
164.2 (232.4) million. Taxes totaled EUR 84.5 (78.2) million, taking
into account taxes proportionate to the amount estimated for the
financial year. Excluding the result impact of the EUR 142.0 million
fine this represents a tax rate of 27.6 (1-12/2006: 34.2) percent.
Net income for the period was EUR 79.7 (154.2) million.
Earnings per share were EUR 0.63 (1.22). Equity per share was EUR
5.16 (5.19).
Third quarter operating income was EUR 126.7 (101.1) million, or 13.0
(11.5) percent of net sales.
Cash Flow and Financing
Cash flow from operations (before financing items and taxes) for the
period January-September was EUR 264.0 (274.0) million. At the end of
September, net working capital was negative at EUR -163.8 (December
31, 2006: -139.5) million, including financing items and taxes. The
EUR 142.0 million fine for the European Commission's decision was
recognized as a provision in the first quarter and booked into
interest-bearing debts in the balance sheet during the second
quarter. As KONE has appealed the decision, the amount of the fine
may change.
Interest-bearing net debt totaled EUR 168.5 (December 31, 2006:
124.9) million. Gearing was 25.9 percent compared with 17.9 percent
at the end of the previous accounting period. KONE's total
equity/total assets ratio was 27.9 (December 31, 2006: 30.5) percent
at the end of September.
Capital Expenditures
KONE's capital expenditure, including acquisitions, totaled EUR 78.9
(113.9) million. Acquisitions accounted for EUR 40.6 (69.9) million
of this figure. Acquisitions made during the reporting period have no
material effect on January-September or full year 2007 figures.
During the third quarter, capital expenditure totaled EUR 38.4 (59.7)
million of which acquisitions accounted for EUR 24.1 (44.8) million.
During the third quarter, KONE continued to acquire small elevator
service companies from i.e. Russia, the Baltic region and France.
During January-September, one of the most notable acquisitions was
the acquisition of MIRO Elevators Limited, a Canadian service
company. The share capital of MIRO Elevators Limited was transferred
to KONE in January.
During the third quarter, KONE signed an agreement to acquire UAB
Elektros Pavara ir Ko, a Lithuanian elevator company. The ownership
of the shares of Elektros Pavara was transferred to KONE immediately.
The company installs, maintains and modernizes elevators and
escalators. Elektros Pavara has about 1,350 elevators and escalators
in its maintenance base. KONE also acquired Cierma, a French service
company. The ownership of the shares was also transferred in July.
Cierma has approximately 2,000 elevators and doors in its maintenance
base and is active mainly in the area of Nice and Cannes. In
addition, KONE acquired the remaining 90 percent of a St. Petersburg
based elevator service company called RSU5. Since 2006, KONE has had
a holding of 10 percent in the company. KONE now has full ownership.
RSU5 has 5,600 elevators in its maintenance base in the City of St.
Petersburg.
Organizational Development
In the spring of 2007, KONE initiated an organizational change
project in the United States. The objective is to improve customer
focus, increase cross-functional synergies and raise productivity. As
part of the development, KONE will move its North American
headquarters to Chicago in the beginning of 2008.
Research and Product Development
Product development expenses in January-September totaled EUR 36.2
(36.9) million, representing 1.3 (1.5) percent of net sales. R&D
expenses include development of new product concepts and further
developments of existing products and services.
In Europe, a new release of the KONE MonoSpace® elevator was launched
to improve the offering. This release added further flexibility to
the product. KONE's competitiveness in Russia's residential segment
was improved by a new product release in July. This further supports
the unit growth KONE is experiencing in the Russian market.
In the North American market, product enhancements and installation
improvements have made KONE products even more attractive for its
customers. The KONE EcoSpace® elevator continues to experience strong
growth and opens a good market opportunity for the machine-room-less
technology (MRL) in the modernization of hydraulic elevators.
In the Asia-Pacific region, new functional and cost effective
solutions especially for the residential market were introduced, as
well as designed solutions for the hotel and high-end commercial
segments. In addition, a collection of different designs and feature
options were released to increase the flexibility in visual offerings
and product enhancements.
European Commission Investigation
In 2004, the European Commission started an investigation concerning
anticompetitive practices in the elevator and escalator market in
Europe. The outcome of the three-year process was announced on
February 21, 2007. The Commission found KONE's subsidiaries in
Belgium, Luxembourg, Germany and the Netherlands to have been
involved in local anticompetitive practices prior to early 2004, and
imposed a EUR 142 million fine on KONE. The fine was imposed for
anticompetitive practices in Germany and the Netherlands. KONE did
not receive a fine in relation to Belgium and Luxembourg, as KONE was
the first company to cooperate with the Commission regarding these
countries.
In May, KONE appealed the European Commission's decision. A provision
of EUR 142.0 million for the European Commission's decision was
recognized in the first quarter results and booked into
interest-bearing debts in the balance sheet during the second
quarter. As KONE has appealed the decision, the amount of the fine
may change.
Other Events during the Reporting Period
In September, KONE announced that it is looking to sell its KONE
Building in the Keilaniemi business district in Espoo, Finland. In
the case of a sale, the current operations would continue under the
new tenancy.
Events after the Reporting Period
In February, KONE's Austrian subsidiary was notified by the Austrian
cartel court of the initiation of proceedings for the imposition of
fines against companies operating in the Austrian elevator and
escalator market including KONE's Austrian subsidiary. The case
relates to alleged anticompetitive practices in the local market
before mid-2004. KONE immediately initiated a thorough internal
investigation.
In October, the legal process progressed to a phase where the
Austrian competition authority submitted to the cartel court its
proposal for fines. The authority proposed that the cartel court
would impose a fine of EUR 26 million on KONE's Austrian subsidiary.
The cartel court cannot impose a fine higher that the amount proposed
by the authority. KONE has not recognized a provision in this respect
into the result of the period under review.
Personnel
KONE had 31,383 (31 December, 2006: 29,321) employees at the end of
September 2007. The average number of employees during
January-September 2007 was 30,365 (28,081).
The geographical distribution of KONE employees was 56 (58) percent
in EMEA, 18 (18) percent in the Americas and 26 (24) percent in
Asia-Pacific.
Operational Risks
KONE's business activities are exposed to risks, of which the most
significant are fluctuations in currency rates and increases in raw
material prices and personnel costs.
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.
Subsidiary investments are hedged from currency risks in accordance
with the hedging policy to ensure that the total effect of foreign
exchange rates on the Corporation's gearing is neutral. 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 Vance Tang as the Executive Vice President and Area
Director responsible for the Americas and a member of the Executive
Board as of February 19, 2007.
Annual General Meeting
KONE Corporation's Annual General Meeting in Helsinki on February 26,
2007 confirmed the number of members of the Board of Directors as
seven and it was decided to elect one deputy member. 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. Jussi Herlin was elected as deputy member.
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 Vice Chairman of the Board.
In addition, the Board of Directors' proposal that the Annual General
Meeting authorize it to repurchase KONE's own shares with assets
distributable as profit was approved. Altogether, no more than
12,785,000 shares may be repurchased, of which no more than 1,905,000
are to be class A shares and 10,880,000 class B shares, taking into
consideration the provisions of the Companies Act regarding the
maximum amount of treasury shares the Company is allowed to possess.
The proposed amount corresponds to nearly 10 percent of the share
capital of the Company and the total voting rights.
In addition, the Board of Directors was authorized to decide on the
distribution of any shares repurchased by the company. The
authorization is limited to a maximum of 1,905,000 class A shares and
10,880,000 class B shares. The Board of Directors is authorized to
decide to whom and in which order the repurchased shares are
distributed. The Board of Directors may decide on the distribution of
repurchased shares otherwise than in proportion to the existing
pre-emptive right of shareholders to purchase the Company's own
shares.
The repurchased shares may be used as compensation in acquisitions
and in other arrangements as well as to implement the Company's
share-based incentive plans in the manner and to the extent decided
by the Board of Directors. The Board of Directors also has the right
to decide on the distribution of the shares in public trading on the
OMX Nordic Exchange in Helsinki, Finland 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 decision of the Annual General Meeting.
In addition, The Board of Directors was authorized to grant options.
On the basis of this authorization, the Board of Directors may decide
to grant to key personnel of the group or to the company's wholly
owned subsidiary, Kone Capital Oy, options which entitle them to
subscribe for a maximum of 2,000,000 new class B shares. The company
has a valid financial reason to grant options, because the options
are intended to form a part of the group's incentive and commitment
plan for key personnel.
This authorization will remain in force for one year following the
decision of the Annual General Meeting.
In addition, the Annual General Meeting nominated
PricewaterhouseCoopers Oy, Authorized Public Accountants, as the
Company's auditor, with Heikki Lassila, APA, as the principally
responsible auditor.
Dividend
The Annual General Meeting approved the Board's proposal for a
dividend of EUR 0.99 per class A share and EUR 1.00 per class B share
or in total EUR 125.5 million. The date of the dividend payment was
set for March 8, 2007. The rest of the distributable equity, EUR
1,146 million, was retained and carried forward.
Share Capital and Shares
Option Subscription and Share Capital
The KONE 2005A and 2005B options based on the KONE Corporation option
program 2005 were listed on the main list of the OMX Nordic Exchange
in Helsinki, Finland on June 1, 2005. Each option entitles its holder
to subscribe for six (6) class B shares at a price of EUR 8.04 per
share.
As of September 30, 2007, 664,800 shares have been subscribed for
with the options, raising KONE's share capital to EUR 64,087,155.00,
comprising 109,122,132 listed class B shares and 19,052,178 unlisted
class A shares.
During January-September 45,492 shares were subscribed for with the
2005A options and 62,190 with the 2005B options.
The remaining 2005A options entitle their holders to subscribe for
181,080 class B shares, while the remaining 2005B options entitle
their holders to subscribe for 462,630 class B shares. The share
subscription period for series A options and series B options ends on
March 31, 2008 and March 31, 2009 respectively. The remaining number
of shares that can be subscribed for is 643,710. The subscription
price is EUR 8.04 per share.
In 2005, KONE also granted a conditional option program, 2005C, and a
conditional share-based incentive plan. The share subscription period
of the 2005C option program will begin April 1, 2008, only if the
average net sales growth of the group for the 2006 and 2007 financial
years exceeds market growth, the operating income (EBIT) of the 2006
financial year exceeds EBIT for the 2005 financial year, and EBIT for
the 2007 financial year exceeds EBIT for the 2006 financial year.
In April 2007, 129,000 B-shares assigned to the share-based incentive
plan for the company's senior management were transferred to the
participants due to achieved targets for the financial year 2006.
Shares and Trading Volume
At the end of the reporting period, KONE's share closed at EUR 51.15.
The volume weighted average share price during the period was EUR
45.51. The period high was EUR 53.30 and period low EUR 39.52.
Share turnover during the period amounted to EUR 3,437 (1,995)
million, with 75,641,767 (58,140,096) shares being traded. This
represents approximately 69 percent of the company's listed class B
shares. The daily average trading volume was 400,221 (307,620)
shares, representing a daily average turnover of approximately EUR 18
million. KONE Corporation's market capitalization at the end of the
period was EUR 6,422 (4,104) million, disregarding the group's
treasury shares.
The number of registered shareholders at the beginning of the review
period was 13,673 and 13,544 at its end. The number of private
households totaled at the end of the period 12,130.
According to the nominee registers, approximately 44.8 percent of the
listed class B shares were owned by foreigners at the beginning of
the period and approximately 45.3 at the end. Other foreign ownership
at the end of the period totaled approximately 6.0 percent; thus a
total of approximately 51.3 percent of the company's listed class B
shares were owned by international investors, corresponding to
approximately 18.7 percent of the total votes in the company.
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 8, 2007. The repurchasing of shares
will continue until otherwise announced.
During January 1-September 30, 2007, KONE used its authorization and
bought back 6,000 of its own shares in February. In April 2007,
129,000 B-shares assigned to the share-based incentive plan for the
company's senior management were transferred to the participants due
to achieved targets for the financial year 2006. At the end of
September, the group had 2,615,753 class B shares in its possession.
The shares in the group's possession represent 2.4 percent of the
total number of class B shares. This corresponds to 0.8 percent of
the total voting rights.
At the end of the reporting period September 30, 2007, KONE's Board
of Directors had no current authorization to raise the share capital
or to issue convertible or warrant loans.
Flagging Notifications
On March 8, 2007 Morgan Stanley Investment Management Limited
disclosed to KONE Corporation pursuant to the Securities Markets Act,
chapter 2, section 9, that its holding in KONE Corporation had
exceeded five (5) percent of the share capital. The date of change in
the holdings was November 29, 2005.
On September 13, 2007 Morgan Stanley Investment Management Limited
disclosed to KONE Corporation pursuant to the Securities Markets Act,
chapter 2, section 9, that it's holding in KONE Corporation was less
than five (5) percent of the share capital. The date of change in the
holdings was September 11, 2007.
Outlook
KONE's target for 2007 is to achieve a growth close to 15 percent in
net sales, calculated at comparable exchange rates, compared to 2006.
The operating income (EBIT) target is to achieve a growth close to 30
percent from the comparable 2006 figure of EUR 360 million. This
target excludes the EUR 142.0 million fine for the European
Commission's decision and the possible fine from Austria.
In 2008, KONE's objective is to achieve an operating income (EBIT)
margin of about 12 percent.
Helsinki, October 23, 2007
KONE Corporation
Board of Directors
Enclosures
1 Consolidated Statement of Income
2 Condensed Consolidated Balance Sheet
3 Consolidated Statement of Changes in Equity
4 Condensed Consolidated Statement of Cash Flow
5 Notes for the Interim Report
This Interim report and the presentation used in the Analyst and
Media Conference will be available on the company web site at
www.kone.com.
This Interim Report contains forward-looking statements that are
based on the current expectations, known factors, decisions and plans
of the management of KONE. Although management believes that the
expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will
prove to be correct. Accordingly, results could differ materially
from those implied in the forward-looking statements as a result of,
among other factors, changes in economic, market and competitive
conditions, changes in the regulatory environment and other
government actions and fluctuations in exchange rates.
Consolidated Statement of Income
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
MEUR 2007 % 2006 % 2007 % 2006 % 2006 %
Sales 971.6 879.8 2,784.7 2,455.2 3,600.8
Costs and
expenses -830.4 -763.7 -2,429.5 -2,174.5 -3,182.4
Depreciation -14.5 -15.0 -42.8 -44.0 -58.3
Fine for the
European
Commission's
decision - - -142.0 - -
Operating
income 126.7 13.0 101.1 11.5 170.4 6.1 236.7 9.6 360.1 10.0
Share of
associated
companies'
net income 0.7 0.1 0.9 -0.5 -0.3
Financing
income 2.7 4.7 11.8 11.3 16.1
Financing
expenses -6.9 -4.7 -18.9 -15.1 -19.6
Income
before taxes 123.2 12.7 101.2 11.5 164.2 5.9 232.4 9.5 356.3 9.9
Taxes -31.4 -30.9 -84.5 -78.2 -121.9
Net income 91.8 9.4 70.3 8.0 79.7 2.9 154.2 6.3 234.4 6.5
Net income
attributable
to:
Shareholders
of the
parent
company 91.4 70.3 79.4 154.7 234.8
Minority
interests 0.4 0.0 0.3 -0.5 -0.4
Total 91.8 70.3 79.7 154.2 234.4
Earnings per
share for
profit
attributable
to the
shareholders
of the
parent
company, EUR
Basic
earnings per
share 0.73 0.56 0.63 1.22 1.86
Diluted
earnings per
share 0.73 0.55 0.63 1.21 1.85
Condensed Consolidated Balance Sheet
Assets
MEUR 30.9.2007 30.9.2006 31.12.2006
Non-current assets
Intangible assets 626.1 600.3 615.7
Tangible assets 223.6 226.0 217.7
Loans receivable and other
interest-bearing assets 2.8 22.5 5.1
Deferred tax assets 133.7 130.4 134.1
Investments 133.4 134.4 129.6
Total 1,119.6 1,113.6 1,102.2
Current assets
Inventories 867.5 762.7 668.8
Advance payments received -801.1 -627.5 -552.1
Loans receivable and other non
interest-bearing assets 1.4 39.4 44.6
Accounts receivable and other non
interest-bearing assets 878.7 767.9 805.1
Cash, cash equivalents and financial
assets 263.5 209.8 223.8
Total 1,210.0 1,152.3 1,190.2
Total assets 2,329.6 2,265.9 2,292.4
Equity and liabilities
MEUR 30.9.2007 30.9.2006 31.12.2006
Equity 650.8 658.1 698.6
Non-current liabilities
Loans 177.2 102.5 100.2
Deferred tax liabilities 33.8 28.0 30.3
Employee benefits 142.8 147.2 145.0
Total 353.8 277.7 275.5
Provisions 63.2 80.2 71.8
Current liabilities
Loans 259.0 308.0 298.2
Accounts payable and other liabilities 1,002.8 941.9 948.3
Total 1,261.8 1,249.9 1,246.5
Total equity and liabilities 2,329.6 2,265.9 2,292.4
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
Total
MEUR 1) 2) 3) 4) 5) 6) 7) equity
1 Jan, 2007 64.0 98.0 -0.5 -14.0 -91.2 638.8 3.5 698.6
Net income for the
period 79.4 0.3 79.7
Items booked directly
into equity:
Transactions with
shareholders and
minority shareholders:
Dividends paid -125.1 -125.1
Issue of shares (option
rights) 0.1 0.8 0.9
Purchase of own shares -0.3 -0.3
Sales of own shares -
Change in minority
interests -1.4 -1.4
Cash flow hedge 3.8 3.8
Translation differences -10.7 -10.7
Hedging of foreign
subsidiaries -1.0 -1.0
Tax impact of hedging 0.3 0.3
Option and share based
compensation 3.7 2.3 6.0
30 Sep, 2007 64.1 98.8 3.3 -25.4 -87.8 595.4 2.4 650.8
Total
MEUR 1) 2) 3) 4) 5) 6) 7) equity
1 Jan, 2006 63.9 96.4 -5.1 9.9 -21.9 523.2 2.8 669.2
Net income for the
period 154.7 -0.5 154.2
Items booked directly
into equity:
Transactions with
shareholders and
minority shareholders:
Dividends paid -126.9 -126.9
Issue of shares (option
rights) 0.1 0.7 0.8
Purchase of own shares -36.6 -36.6
Sales of own shares -
Change in minority
interests 1.4 1.4
Cash flow hedge 2.9 2.9
Translation differences -13.4 -13.4
Hedging of foreign
subsidiaries 1.7 1.7
Tax impact of hedging -0.4 -0.4
Option and share based
compensation 5.2 5.2
30 Sep, 2006 64.0 97.1 -2.2 -2.2 -58.5 556.2 3.7 658.1
Total
MEUR 1) 2) 3) 4) 5) 6) 7) equity
1 Jan, 2006 63.9 96.4 -5.1 9.9 -21.9 523.2 2.8 669.2
Net income for the
period 234.8 -0.4 234.4
Items booked directly
into equity:
Transactions with
shareholders and
minority shareholders:
Dividends paid -126.9 -126.9
Issue of shares (option
rights) 0.1 1.6 1.7
Purchase of own shares -69.3 -69.3
Sales of own shares -
Change in minority
interests 1.1 1.1
Cash flow hedge 4.6 4.6
Translation differences -30.4 -30.4
Hedging of foreign
subsidiaries 8.8 8.8
Tax impact of hedging -2.3 -2.3
Option and share based
compensation 7.7 7.7
31 Dec, 2006 64.0 98.0 -0.5 -14.0 -91.2 638.8 3.5 698.6
Condensed Consolidated Cash Flow
MEUR 1-9/2007 1-9/2006 1-12/2006
Operating income 170.4 236.7 360.1
Change in working capital 50.8 -6.7 -46.7
Depreciation 42.8 44.0 58.3
Cash flow from operations 264.0 274.0 371.7
Cash flow from financing items and taxes -77.5 -69.2 -105.9
Cash flow from operating activities 186.5 204.8 265.8
Cash flow from investing activities -108.4 -81.7 -96.4
Cash flow after investing activities 78.1 123.1 169.4
Purchase and sale of own shares -0.3 -36.6 -69.3
Share issue 0.9 0.8 1.7
Dividends paid -125.1 -126.8 -126.8
Change in loans receivable 27.0 -30.9 -14.3
Change in loans payable 38.9 54.9 38.2
Cash flow from financing activities -58.6 -138.6 -170.5
Change in cash and cash equivalents 19.5 -15.5 -1.1
Cash and cash equivalents at the
beginning of the period 109.5 113.5 113.5
Translation difference 0.0 -2.2 -2.9
Cash and cash equivalents at the end of
the period 129.0 95.8 109.5
Change in cash and cash equivalents 19.5 -15.5 -1.1
Change in interest-bearing net debt
MEUR 1-9/2007 1-9/2006 1-12/2006
Interest-bearing net debt at the
beginning of the period 124.9 99.3 99.3
Interest-bearing net debt at the end of
the period 168.5 138.8 124.9
Change in interest-bearing net debt -43.6 -39.5 -25.6
The EUR 142.0 million fine for the European Commission's decision is
included in the interest-bearing net debt of September 30, 2007. KONE
has appealed the decision and therefore the amount of the fine may
change.
Key Figures
1-9/2007 1-9/2006 1-12/2006
Basic earnings per share EUR 0.63 1.22 1.86
Diluted earnings per share EUR 0.63 1.21 1.85
Equity per share EUR 5.16 5.19 5.55
Interest-bearing net debt MEUR 168.5 138.8 124.9
Total equity/total assets % 27.9 29.0 30.5
Gearing % 25.9 21.1 17.9
Return on equity % 15.8 31.0 34.3
Return on capital employed % 21.9 31.1 35.4
Total assets MEUR 2,329.6 2,265.9 2,292.4
Assets employed MEUR 819.3 796.9 823.5
Working capital (including financing
and tax items) MEUR -163.8 -163.8 -139.5
Sales by Geographical Areas, MEUR
1-9/2007 % 1-9/2006 % 1-12/2006 %
EMEA 1) 1,808.2 65 1,557.3 64 2,319.4 65
Americas 595.6 21 573.0 23 805.1 22
Asia-Pacific 380.9 14 324.9 13 476.3 13
Total 2,784.7 2,455.2 3,600.8
1) EMEA = Europe, Middle East, Africa
Quarterly Figures
Q3/2007 Q2/2007 Q1/2007 Q4/2006 Q3/2006 Q2/2006 Q1/2006
Orders
received MEUR 926.3 944.4 902.1 712.1 742.0 821.9 840.3
Order
book MEUR 3,473.6 3,318.0 3,105.7 2,762.1 2,951.0 2,818.0 2,654.0
Sales MEUR 971.6 1,001.9 811.2 1,145.6 879.8 840.4 735.0
Operating 69.3 1)
income MEUR 126.7 116.4 123.4 101.1 83.9 51.7
Operating
income % 13.0 11.6 8.5 1) 10.8 11.5 10.0 7.0
Q4/2005 Q3/2005
Orders received MEUR 702.5 649.4
Order book MEUR 2,326.8 2,371.7
Sales MEUR 1,013.4 804.7
Operating income MEUR 93.6 79.1
Operating income % 9.2 9.8
1) Excluding the MEUR 142.0 fine for the European Commission's
decision
Notes for the Interim Report
Orders received MEUR 1-9/2007 1-9/2006 1-12/2006
2,772.8 2,404.2 3,116.3
Order book MEUR 30.9.2007 30.9.2006 31.12.2006
3,473.6 2,951.0 2,762.1
Capital expenditure MEUR 1-9/2007 1-9/2006 1-12/2006
In fixed assets 30.2 35.8 51.3
In leasing agreements 8.1 8.2 9.1
In acquisitions 40.6 69.9 90.1
Total 78.9 113.9 150.5
R&D Expenditure MEUR 1-9/2007 1-9/2006 1-12/2006
36.2 36.9 50.3
R&D Expenditure as percentage of sales 1.3 1.5 1.4
Number of employees 1-9/2007 1-9/2006 1-12/2006
Average 30,365 28,081 28,366
At the end of the period 31,383 28,896 29,321
Commitments
MEUR 30.9.2007 30.9.2006 31.12.2006
Mortgages
Group and parent company 30.7 30.7 30.7
Pledged assets
Group and parent company 4.8 5.5 5.4
Guarantees
Associated companies 1.7 1.9 1.8
Others 1.0 3.6 3.4
Operating leases 119.3 115.7 115.8
Total 157.5 157.4 157.1
The future minimum lease payments
under non-cancellable operating leases 30.9.2007 30.9.2006 31.12.2006
Less than 1 year 33.5 30.8 34.6
1-5 years 76.3 74.8 72.5
Over 5 years 9.5 10.1 8.7
Total 119.3 115.7 115.8
In February 2007, KONE's Austrian subsidiary was notified by the
Austrian cartel court of the initiation of proceedings for the
imposition of fines against companies operating in the Austrian
elevator and escalator market including KONE's Austrian subsidiary.
The case relates to alleged anticompetitive practices in the local
market before mid-2004. KONE immediately initiated a thorough
internal investigation.
In October, the legal process progressed to a phase where the
Austrian competition authority submitted to the cartel court its
proposal for fines. The authority proposed that the cartel court
would impose a fine of EUR 26 million on KONE's Austrian subsidiary.
KONE has not recognized a provision in this respect into the result
of the period under review.
Derivatives
Fair Values of Derivative Financial Instruments, MEUR
positive negative net fair net fair net fair
fair value fair value value value value
30.9.2007 30.9.2007 30.9.2007 30.9.2006 31.12.2006
FX Forward
contracts 8.0 4.9 3.1 0.1 1.2
Currency options 0.1 0.1 0.0 0.0 0.0
Cross-currency
swaps, due under
one year 2.7 - 2.7 38.1 43.2
Cross-currency
swaps, due in
1-3 years 7.8 - 7.8 1.9 2.8
Electricity
derivatives 0.7 0.0 0.7 1.3 0.3
Total 19.3 5.0 14.3 41.4 47.5
Nominal Values of Derivative Financial Instruments, MEUR
30.9.2007 30.9.2006 31.12.2006
FX Forward contracts 553.2 493.9 392.8
Currency options 30.8 38.2 32.3
Cross-currency swaps, due under one
year 20.0 153.8 153.8
Cross-currency swaps, due in 1-3 years 136.7 20.0 43.6
Electricity derivatives 3.9 2.6 2.9
Total 744.6 708.5 625.4
Shares and Shareholders
30 September 2007 Class A shares Class B shares Total
Number of shares 19,052,178 109,122,132 128,174,310
Own shares in possession 1) 2,615,753
Share capital, EUR 64,087,155
Market capitalization, MEUR 6,422
Number of shares traded,
1-9/2007 75,641,767
Value of shares traded,
MEUR, 1-9/2007 3,437
Number of shareholders 3 13,673 13,673
Close High Low
Class B share price,
EUR, 1-9/2007 51.15 53.30 39.52
During the third quarter of 2007, the authorization to repurchase
shares was not used. During the second quarter of 2007, 129,000
shares were assigned to the share-based incentive plan. During the
first quarter of 2007, KONE Corporation repurchased 6,000 own class B
shares. During the reporting period 1 January-31 December, 2006, KONE
Corporation repurchased a total of 1,963,913 own class B shares.
During the accounting period 1 June-31 December, 2005, KONE
Corporation repurchased a total of 374,840 own class B shares. In
addition, relating to the share-based incentive plan, a company
included in the consolidated financial statements acquired 400,000
KONE class B shares in December 2005.
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