KONE Oyj - Interim report (Q1 and Q3)

Interim Report of KONE Corporation for January–September 2021

KONE Corporation, stock exchange release, October 28, 2021 at 12.30 p.m. EEST

Interim Report of KONE Corporation for January–September 2021

Strong growth in orders received, supply chain environment remains challenging

July–September 2021

  · Orders received grew by 14.5% to EUR 2,211.1 (7–9/2020: 1,931.7) million. At
comparable exchange rates, orders grew by 10.9%.
  · Sales grew by 0.9% to EUR 2,610.0 (2,587.0) million. At comparable exchange
rates, sales declined by 1.3%.
  · Operating income (EBIT) was EUR 326.5 (333.1) million or 12.5% (12.9%) of
sales. The adjusted EBIT was EUR 326.5 (339.8) million or 12.5% (13.1%) of
sales.*
  · Cash flow from operations (before financing items and taxes) was EUR 365.1
(600.2) million.

January–September 2021

  · Orders received grew by 9.5% to EUR 6,697.7 (1–9/2020: 6,116.4) million. At
comparable exchange rates, orders grew by 9.8%.
  · Sales grew by 5.9% to EUR 7,747.3 (7,317.3) million. At comparable exchange
rates, sales grew by 6.6%.
  · Operating income (EBIT) was EUR 943.4 (845.8) million or 12.2% (11.6%) of
sales. The adjusted EBIT was EUR 950.4 (869.9) million or 12.3% (11.9%) of
sales.*
  · Cash flow from operations (before financing items and taxes) was EUR 1,303.7
(1,539.4) million.

Business outlook for 2021 (specified)

In 2021, KONE's sales growth is estimated to be in the range of 4% to 6% at
comparable exchange rates as compared to 2020. The adjusted EBIT margin is
expected to be in the range of 12.4% to 12.8%. Assuming that foreign exchange
rates remain at the October 2021 level, the impact of foreign exchange rates on
the adjusted EBIT would be limited.

KONE previously estimated its sales growth to be in the range of 4% to 6% at
comparable exchange rates as compared to 2020. The adjusted EBIT margin was
expected to be in the range of 12.4% to 13.0%. Assuming that foreign exchange
rates would have remained at the July 2021 level, the impact of foreign exchange
rates on the adjusted EBIT would have been limited.

KEY               7–9/2021  7–9/2020  Change  1–9/2021  1–9/2020  Change
1–12/202
FIGURES

0

Orders      MEUR   2,211.1   1,931.7   14.5%   6,697.7   6,116.4    9.5%
8,185.1
received
Order book  MEUR                               8,436.9   7,914.4    6.6%
7,728.8
Sales       MEUR   2,610.0   2,587.0    0.9%   7,747.3   7,317.3    5.9%
9,938.5
Operating   MEUR     326.5     333.1   -2.0%     943.4     845.8   11.5%
1,212.9
income
Operating   %         12.5      12.9              12.2      11.6
12.2
income
margin
Adjusted    MEUR     326.5     339.8   -3.9%     950.4     869.9    9.3%
1,250.5
EBIT*
Adjusted    %         12.5      13.1              12.3      11.9
12.6
EBIT
margin*
Income      MEUR     336.4     339.2   -0.8%     960.7     851.8   12.8%
1,224.2
before
tax
Net income  MEUR     260.7     262.9   -0.8%     744.5     660.1   12.8%
947.3
Basic       EUR       0.50      0.50   -0.6%      1.43      1.27   12.5%
1.81
earnings
per share
Cash flow   MEUR     365.1     600.2           1,303.7   1,539.4
1,907.5
from
operations
(before
financing
items
and
taxes)
Interest    MEUR                              -1,820.0  -1,732.7
-1,953.8
-bearing
net
debt

Equity      %                                     40.7      42.2
45.5
ratio
Return on   %                                     32.4      28.8
29.7
equity
Net         MEUR                              -1,356.9  -1,200.3
-1,160.1
working
capital
(including
financing
items
and taxes)
Gearing     %                                    -62.2     -59.4
-61.1

* KONE presents adjusted EBIT as an alternative performance measure to enhance
comparability of the business performance between reporting periods.
Restructuring costs related to significant restructuring programs are excluded
from the calculation of the adjusted EBIT. In January–September 2021, the
adjusted EBIT excluded costs of EUR 7.0 million related to restructuring
measures in KONE’s global business lines and functions. During 2017–2020, all
restructuring costs excluded from adjusted EBIT related to the Accelerate
program.

Henrik Ehrnrooth, President and CEO:

“The third quarter saw continued demand recovery across several markets, which
contributed to the strong growth in our orders received. I was pleased to see
our orders increase also in China from a high comparison. That said, activity in
the Chinese property sector showed signs of tempering, as uncertainty around
liquidity constraints increased in the quarter. While visibility is likely to be
lower in the near term, I expect the ongoing deleveraging efforts to strengthen
industry fundamentals and remain confident in future growth opportunities.

Sales was broadly stable compared to the previous year. Momentum in our
maintenance business was strong in all areas and we continued to deliver on our
promises to customers despite the increasingly challenging supply chain
environment. The cost environment did, however, start to impact our earnings and
we expect continued headwinds in the coming quarters. In response, we have taken
actions to reduce our product cost, improve productivity, and are highly focused
on pricing improvements across our businesses. I am encouraged by the progress
we are making in several parts of the market and would like to extend a
heartfelt thank you to everyone in our organization for their commitment and
great work. The spirit and intensity with which our employees are tackling the
challenges we face is admirable.

Strengthening our positioning to capture future growth opportunities is of
utmost importance. We have made good progress in driving differentiation with
our value-added solutions and services. The results of our efforts to enhance
our offering by developing solutions that are tailored to individual customer
needs are visible in improved loyalty. Furthermore, we have succeeded in
accelerating KONE 24/7 Connected Services sales throughout the year and in
growing the penetration of these services in our maintenance base to 10%. I see
this as a compelling demonstration that the investments in our digital offering
are paying off. We will continue to build our portfolio of digital solutions and
services to further strengthen our differentiation and ensure that we remain our
customers partner of choice.

Our business outlook for 2021 has been specified to reflect the increased
headwinds in the cost environment. While our sales growth guidance of 4–6% is
unchanged, our adjusted EBIT margin is now expected to be in the range of
12.4–12.8%. Looking further ahead, I am confident that the strong engagement of
our people and the competitiveness of our offering will support us in achieving
our target of faster than market profitable growth.”

Operating environment in July–September 2021

Recovery continued in the global elevator and escalator market during July
-September. However, the pace of recovery varied and was slower than expected in
certain regions due to global supply chain constraints. Activity was the
strongest in the residential segment across regions.

Demand in the new equipment market was rather stable overall. In Asia-Pacific,
the new equipment market was stable. In China, the market remained on last
year’s high level, but tightened liquidity started to impact activity in the
property sector during the quarter. In the rest of Asia-Pacific, the market
continued to recover strongly. In the EMEA region, the new equipment market was
stable. The market in Central and North Europe grew slightly whereas in South
Europe and in the Middle East the markets were stable. In North America, the
market grew significantly.

The service market developed positively with broad based growth in both
maintenance and modernization.

The pricing environment continued to be adversely affected by intense
competition. That said, market prices have started to improve in several markets
as a response to the increased component and logistics costs.

Operating environment in January–September 2021

Activity in the global elevator and escalator markets was somewhat affected by
the COVID-19 pandemic in the early part of the year but recovered thereafter.
The demand for affordable housing supported activity in the residential segment,
while stimulus measures boosted sentiment in the infrastructure segment.
Activity in the commercial segment remained limited throughout the period.

Demand in the new equipment market increased clearly. In Asia-Pacific, new
equipment volumes grew clearly with China growing strongly in the first half and
the rest of Asia-Pacific recovering as of the second quarter. In the EMEA
region, the new equipment market was stable. The new equipment market grew
slightly in Central and North Europe whereas in South Europe and in the Middle
East the markets were stable. In North America, the new equipment market grew
clearly.

In the service market, maintenance developed positively. Activity picked up in
the second quarter and growth continued thereafter. Similarly, demand has
rebounded in modernization after a slow start to the year.

The pricing environment continued to be adversely affected by intense
competition. That said, market prices have started to improve in several markets
as a response to the increased component and logistics costs.

Market outlook 2021 (updated)

In China, the new equipment market is expected to grow clearly from a high level
thanks to strong activity in the first half of the year. In the rest of the
world, the new equipment markets are expected to recover from a low comparison
period. In Asia-Pacific, excluding China, and in North America the new equipment
markets are expected to grow significantly. The new equipment market in the
Europe, Middle East and Africa region is expected to be stable with growth in
Central and North Europe and stable development in South Europe and in the
Middle East.

With normalizing maintenance activity around the world, the maintenance markets
are expected to grow clearly in Asia-Pacific and grow slightly in other regions.

Similarly, the modernization markets are expected to grow across all regions.

Business outlook 2021 (specified)

In 2021, KONE's sales growth is estimated to be in the range of 4% to 6% at
comparable exchange rates as compared to 2020. The adjusted EBIT margin is
expected to be in the range of 12.4% to 12.8%. Assuming that foreign exchange
rates remain at the October 2021 level, the impact of foreign exchange rates on
the adjusted EBIT would be limited.

KONE has a solid order book and maintenance base for 2021. Continual
improvements in quality and productivity are expected to support profitability.

The key headwinds for 2021 results are the increased component and logistics
costs. KONE also continues to invest actively in building the capability to sell
and deliver digital services and solutions.

KONE previously estimated its sales growth to be in the range of 4% to 6% at
comparable exchange rates as compared to 2020. The adjusted EBIT margin was
expected to be in the range of 12.4% to 13.0%. Assuming that foreign exchange
rates would have remained at the July 2021 level, the impact of foreign exchange
rates on the adjusted EBIT would have been limited.

Press and analyst meetings

A Microsoft Teams call for the press, conducted in English, will be held on
Thursday, October 28, 2021 at 2:15 p.m. EEST. Journalists are kindly asked to
sign up to media@kone.com, and they will receive a link to the call upon
registration.

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

U.S.: +1 323-701-0225

UK: +44 (0)330 336 9105

Finland: +358 (0)9 7479 0361

Participant code: 4180629

For further information, please contact:

Natalia Valtasaari, Vice President, Investor Relations, KONE Corporation, 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 2020, KONE had annual sales of EUR 9.9 billion,
and at the end of the year over 60,000 employees. KONE class B shares are listed
on the Nasdaq Helsinki Ltd. in Finland.

www.kone.com

Attachments:

10287214.pdf