KONE Oyj - Interim report (Q1 and Q3)

KONE Corporation's Interim Report for January-June 2012

KONE Corporation, stock exchange release, July 19, 2012 at 12:30 p.m. EET

KONE's Q2: Continued strong progress

April-June 2012
-In April-June 2012, orders received totaled EUR 1,513 (4-6/2011: 1,226)
million. Orders received grew by 23.4% at historical exchange rates and by
16.1% at comparable exchange rates.
- Net sales grew by 20.0% to EUR 1,544 (1,286) million. At comparable exchange
rates the growth was 13.6%.
- Operating income excluding one-time costs was EUR 208.5 (184.5) million or
13.5% (14.3%) of net sales. The operating income, including the one-time cost of
EUR 37.3 related to the support function development and cost adjustment
programs, was EUR 171.2 million.
- Cash flow from operations was EUR 192.4 (129.9) million.
- Plans for the support function development and cost adjustment programs have
now been defined and KONE has decided to proceed with the plans. The target of
the programs is to increase competitiveness through improved quality and
productivity of KONE's support functions and appropriate resourcing for each
market. The programs are expected to bring annualized cost savings of
approximately EUR 35 million. The corresponding run rate for the cost savings
will be achieved by the end of 2013. The total one-time cost relating to these
programs, EUR 37.3 million, was booked in the second quarter of 2012.
- KONE upgrades its outlook slightly for 2012. KONE's net sales is estimated to
grow by 12-17% at comparable exchange rates as compared to 2011. The operating
income (EBIT), excluding one-time costs, is expected to be in the range of EUR
760-820 million. The upgrade of the outlook is due to stronger than expected
orders received and sales growth in Asia-Pacific, and with regard to the
operating income outlook also due to favorable translation exchange rate
movements. KONE previously estimated its net sales to grow by 10-15% at
comparable exchange rates as compared to 2011. The previous operating income
(EBIT) outlook was EUR 750-800 million, assuming that translation exchange rates
do not materially deviate from the situation of the beginning of 2012.

January-June 2012

- In January-June 2012, orders received totaled EUR 2,879 (1-6/2011: 2,271)
million. Orders received grew by 26.8% at historical exchange rates and by
21.1% at comparable exchange rates. The order book stood at EUR 5,305 (Dec
31, 2011: 4,348) million at the end of June 2012.
- Net sales grew by 19.0% to EUR 2,785 (2,340) million. At comparable exchange
rates the growth was 14.3%.
- Operating income excluding one-time costs was EUR 341.2 (303.2) million or
12.2% (13.0%) of net sales. The operating income, including the one-time cost of
EUR 37.3 related to the support function development and cost adjustment
programs, was EUR 303.9 million.

Key Figures

                                          4-6/    4-6/     1-6/    1-6/   1-12/
                                          2012    2011     2012    2011    2011
-------------------------------------------------------------------------------
 Orders received                 MEUR  1,513.4 1,226.2  2,879.3 2,270.9 4,465.1

 Order book                      MEUR  5,305.3 3,947.7  5,305.3 3,947.7 4,348.2

 Sales                           MEUR  1,544.1 1,286.4  2,785.4 2,340.2 5,225.2

 Operating income (EBIT)         MEUR 208.5 1)   184.5 341.2 1)   303.2   725.1

 Operating income (EBIT)            %  13.5 1)    14.3  12.2 1)    13.0    13.9

 EBITA                           MEUR 217.1 1)   188.0 358.5 1)   310.1   741.2

 EBITA                              %  14.1 1)    14.6  12.9 1)    13.3    14.2

 Cash flow from operations
 (before financing items and
 taxes)                          MEUR    192.4   129.9    440.7   367.2   819.8

 Net income                      MEUR    134.0   142.7    243.5   241.7   644.4

 Basic earnings per share         EUR     0.52    0.56     0.94    0.94    2.52

 Interest-bearing net debt       MEUR   -805.1  -715.6   -805.1  -715.6  -829.1

 Total equity/total assets          %     49.9    48.5     49.9    48.5    54.0

 Gearing                            %    -41.7   -45.4    -41.7   -45.4   -40.8


1) Excluding a MEUR 37.3 one-time cost related to the support function
development and cost adjustment programs.

Matti Alahuhta, President & CEO, in conjunction with the review:"Our business progressed well in the second quarter of the year. Orders received
growth was strong in particular due to our continued good development in Asia-
Pacific. Order intake grew by 23% at historical rates and 16% at comparable
rates. I am particularly pleased with the continued improvement of the orders
received margins. Sales grew in all businesses. The growth was 20% at historical
rates and close to 14% at comparable rates. New equipment sales grew very
rapidly, as a result of which the share of new equipment sales grew to 51% of
total sales. Asia-Pacific accounted for 36% of our total sales in the second
quarter.

In April we communicated that we would commence the planning of two programs.
The target of the first program is to improve the quality and productivity of
our support functions through the clarification of roles and simplification of
processes, and the target of the second program is to adjust our resourcing in
some countries, where the markets have dropped to a clearly lower level in the
past years. The plans for these programs have now been defined. We expect these
programs to reduce approximately 550 jobs globally during the next 18 months.
Our objective is to manage this change through natural attrition and reduced
temporary labor to the largest extent possible. We expect to get annualized cost
savings of approximately EUR 35 million. The corresponding run rate for the cost
savings will be achieved by the end of 2013. The total one-time cost relating to
the programs, which was booked in the second quarter, is EUR 37.3 million.

Our operating income for the April-June 2012 period excluding the one-time cost
totaled EUR 208.5 (184.5) million or 13.5% (14.3%) of net sales. Operating
income grew as a result of continued strong new equipment sales growth in Asia-
Pacific and a good development in the maintenance business. In addition, the
favorable development of translation exchange rates as compared to the prior
year contributed to the improvement. The growth of the operating income remained
burdened by intangible asset amortizations resulting from the consolidation of
GiantKONE as a subsidiary, intense price competition, increased labor costs
inAsiaand higher raw material costs. Cash flow was strong at EUR 192.4 (129.9)
million. I am very pleased with the development of our business, and I want to
thank all of our people, who have again done a good job.

We announced in June the introduction of a new innovative global volume elevator
offering. This is KONE's most important product launch in 16 years. We expect
this new offering to cover a very significant part of KONE's new elevator and
full elevator replacement volumes in the coming years. We will start selling the
new elevator offering in Europe and Asia-Pacific during the second half of 2012
and in theAmericasin the first half of 2013. With the new offering, we take
major steps forward in the areas of eco-efficiency, ride comfort, visual design
and space efficiency. We are very excited about this development, in particular
as we are introducing these new elevators while our current product
competitiveness is already strong.

We have upgraded our business outlook slightly for 2012 due to stronger than
expected orders received and sales growth in Asia-Pacific as well as favorable
translation exchange rate movements. While we look forward with confidence
thanks to our competitiveness and strong order book, the uncertainty in the
development of the global economy has clearly increased during the last few
months. We have to be prepared for increasingly challenging market scenarios. We
aim to again take the difficult market situation as an opportunity - as we did
already in 2008-2009."

Operating environment in April-June

The development of the operating environment was largely in line with KONE's
expectations and no substantial changes in the overall market trends were seen
in the second quarter of 2012. In the Europe, Middle East and Africa (EMEA)
region, the new equipment market declined somewhat in Central andNorth Europe,
but remained at a relatively good level. The new equipment market declined
further from an already weak level inSouth Europe. The new equipment market in
theAmericas region continued to gradually recover. The market in Asia-Pacific
continued to grow, although the growth rate slowed down somewhat as compared to
the first quarter of 2012. The major projects segment remained active, in
particular in Asia-Pacific and theMiddle East. The global modernization market
declined slightly, although with regional variations. Maintenance markets
continued to develop favorably in all regions. The pricing environment continued
to be challenging in all businesses, in particular in markets suffering from a
prolonged weakness in the new equipment market.

Operating environment in January-June

During January-June 2012, the new equipment market declined slightly in Central
and North Europe but remained at a relatively good level, whereas the market
situation inSouth Europeweakened further. The gradual recovery of the new
equipment market in theAmericascontinued to progress. The growth of the new
equipment markets in Asia-Pacific continued, albeit at a clearly lower rate than
in the previous year. Modernization markets declined slightly. Maintenance
markets continued to grow. The pricing environment was challenging in all
businesses, in particular in markets suffering from a prolonged weakness in the
new equipment market.

Market outlook 2012

In new equipment, the markets in Asia-Pacific are expected to be relatively
stable or grow somewhat as compared with the second half of 2011. The markets in
Central and North Europe are expected to decline slightly, and the markets in
South Europe are expected to further decline from an already weak level. The
market in North America is expected to continue to gradually recover from a low
level. The modernization markets are expected to be at about the same level or
decline slightly as compared to the second half of 2011. The maintenance markets
are expected to continue to develop well.

Business outlook 2012

KONE upgrades its outlook slightly for 2012. The upgrade of the outlook is due
to stronger than expected orders received and sales growth in Asia-Pacific, and
with regard to the operating income outlook also due to favorable translation
exchange rate movements.

KONE's net sales is estimated to grow by 12-17% at comparable exchange rates as
compared to 2011.

The operating income (EBIT), excluding one-time costs, is expected to be in the
range of EUR 760-820 million.

Previous business outlook 2012

KONE's net sales is estimated to grow by 10-15% at comparable exchange rates as
compared to 2011.

The operating income (EBIT) is expected to be in the range of EUR 750-800
million, assuming that translation exchange rates do not materially deviate from
the situation of the beginning of
2012.

Analyst and media meeting and conference call
A meeting for the press, conducted in Finnish, will be held on Thursday, July
19, 2012 at 2:15 p.m. EET.

A meeting for analysts, conducted in English, will begin at 3:45 p.m. EET. The
meeting will be available as a live webcast on www.kone.com. The meeting
participants can also join a telephone conference that will be arranged in
conjunction with the meeting. The telephone conference details can be found
below.

Both meetings will take place in theKONEBuilding, located at Keilasatama
3,Espoo,Finland.
Telephone conference numbers:

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

An on-demand version of the webcast will be available on www.kone.com later the
same day.
For further information, please contact:

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

KONE is one of the global leaders in the elevator and escalator industry. The
company has been committed to understanding the needs of its customers for the
past century, providing industry-leading elevators, escalators and automatic
building doors as well as innovative solutions for modernization and
maintenance. The company's objective is to offer the best People Flow®
experience by developing and delivering solutions that enable people to move
smoothly, safely, comfortably and without waiting in buildings in an
increasingly urbanizing environment. In 2011, KONE had annual net sales of EUR
5.2 billion and on average 35,000 employees. KONE class B shares are listed on
the NASDAQ OMX Helsinki Ltd inFinland.

www.kone.com

Sender:


KONE Corporation

Henrik Ehrnrooth
CFO

Anne Korkiakoski
Executive Vice President
Marketing & Communications



[HUG#1627876]

Attachments:

KONE_Interim_Report_Q22012.pdf