KONE Oyj - Interim report (Q1 and Q3)

KONE Corporation's Interim Report for January-September 2011

KONE Corporation, stock exchange release, October 20, 2011 at 12:30 p.m. EET

KONE's Q3: Continued positive development

July-September 2011
  * In July-September 2011, orders received totaled EUR 1,095 (7-9/2010: 865.2)
    million. Orders received increased by 26.6% at historical exchange rates and
    by 28.7% at comparable exchange rates.
  * Net sales increased by 4.9% to EUR 1,296 (1,236) million. At comparable
    exchange rates the increase was 6.7%.
  * Operating income was EUR 188.9 (184.8) million or 14.6% (15.0%) of net
    sales.
  * Cash flow from operations was EUR 240.1 (242.8) million.
  * KONE specifies its outlook for 2011. KONE's net sales is estimated to grow
    by 3-6% at comparable exchange rates as compared to 2010. The operating
    income (EBIT) is expected to be in the range of EUR 710-740 million,
    assuming that translation exchange rates do not deviate materially from the
    situation of the beginning of 2011. KONE previously estimated its net sales
    to grow by 0-5% at comparable exchange rates as compared to 2010. The
    previous operating income (EBIT) outlook was EUR 700-750 million, assuming
    that translation exchange rates do not deviate materially from the situation
    of the beginning of 2011.


January-September 2011
  * In January-September 2011, orders received totaled EUR 3,366 (1-
    9/2010: 2,803) million. Orders received increased by 20.1% at historical
    exchange rates and by 20.9% at comparable exchange rates. The order book
    stood at EUR 4,143 (Dec 31, 2010: 3,598) million at the end of September
    2011.
  * Net sales increased by 4.0% to EUR 3,636 (3,498) million. At comparable
    exchange rates it increased by 4.8%.
  * Operating income was EUR 492.1 (469.1) million or 13.5% (13.4%) of net
    sales.


Key Figures

                          7-9/    7-9/    1-9/    1-9/   1-12/
                          2011    2010    2011    2010    2010
--------------------------------------------------------------
Orders received   MEUR 1,095.4   865.2 3,366.3 2,802.7 3,809.0

Order book        MEUR 4,143.2 3,657.9 4,143.2 3,657.9 3,597.8

Sales             MEUR 1,296.2 1,235.9 3,636.4 3,497.8 4,986.6

Operating income  MEUR   188.9   184.8   492.1   469.1   696.4

Operating income     %    14.6    15.0    13.5    13.4    14.0

Cash flow
from operations
(before financing
items and taxes)  MEUR   240.1   242.8   607.3   662.1   857.2

Net income        MEUR   156.2   144.9   397.9   362.1   535.9

Total
comprehensive
income            MEUR   191.5   102.6   401.8   387.5   577.6

Basic earnings
per share          EUR    0.61    0.57    1.56    1.42    2.10

Interest-bearing
net debt          MEUR  -823.2  -610.7  -823.2  -610.7  -749.8

Total equity/
total assets         %    50.4    45.3    50.4    45.3    49.3

Gearing              %   -47.2   -43.3   -47.2   -43.3   -46.8
--------------------------------------------------------------

Matti Alahuhta, President & CEO, in conjunction with the review:"The development in our markets is divided to the strongly growing Asia-Pacific
region and to the European and North American regions where new equipment
markets remain at a weak level in many countries. In this situation, I am very
satisfied with the 27 percent growth in our order intake in the third quarter of
the year. This has been made possible by the active work of our salespeople, the
competitiveness of our products and the strong market positions we have built in
the key growth markets in the past years. The development was clearly positive
in all geographic areas.

Growth in our operating income continued. However, in line with what we
forecasted already in the beginning of the year, the growth has been slower than
last year. The growth in operating income was burdened by increased raw material
costs, wage and salary costs in Asia as well as price pressures. In addition, we
have continued to increase fixed costs in areas that support growth, in
particular in Asia, research and development, and process development.

Cash flow returned to a very good level, and overall KONE's situation in the
current very uncertain economic environment is strong. Our objective is again to
take this difficult market situation as an opportunity. We continue our active
work with our development programs in order to continuously improve our
competitiveness."

Operating environment in July-September

In the third quarter of the year, KONE's operating environment remained divided
to the strongly growing Asia-Pacific region and to the European and North
American regions where new equipment markets remained at a weak level in many
countries. In the Europe, Middle East and Africa (EMEA) region, activity in the
new equipment markets in Central and North Europe declined slightly from a
relatively good level, while South European markets remained stable at a weak
level. The new equipment market in the Americas region continued to gradually
recover but remained at a low level. In Asia-Pacific, rapid growth continued in
all markets. Activity in major projects was at a high level in Asia-Pacific and
the Middle East. Modernization markets grew slightly but with regional
variations. Maintenance markets continued to develop favourably in all regions.
The prolonged weakness in the new equipment markets in particular in South
Europe and the Americas has further intensified price competition.

In the EMEA region, the overall new equipment market declined slightly in many
Central and North European countries and remained weak in South Europe. The new
equipment markets developed favourably in Sweden, Germany and Belgium. Activity
in France grew slightly. In many South European markets, the office segment
remained burdened by high vacancy rates, while the infrastructure, hotel,
medical and educational segments offered selected opportunities. The overall
activity in the Middle East was at a good level but the market situation varied
across the region. The new equipment market grew the fastest in Saudi Arabia
driven primarily by major projects in the infrastructure, medical and
educational segments. The new equipment market in Russia continued to grow
driven by the residential and office segments. Modernization markets developed
positively in Central and North Europe with the highest activity level in the
office segment and with growing modernization activity also in the residential
segment. The modernization markets in South Europe were stable. Maintenance
markets continued to develop well in the EMEA region, but the pricing
environment remained challenging.

In the Americas region, the new equipment market continued to gradually recover
from a low level. The overall new equipment market in the United States remained
at a low level although it has gradually recovered. The market situation varied
significantly across the United States. The development was the most favorable
on the East and West Coast as well as in Texas. Tendering activity in the office
segment continued to grow in select markets. The infrastructure segment's
activity remained at a low level in most parts of the United States. In Canada,
the new equipment market remained stable at a good level. The growth of the new
equipment market in Mexico was driven by the residential, office and multi-use
building segments. Modernization markets grew slightly. Maintenance markets in
the Americas developed well. Price competition remained intense.

In the Asia-Pacific region, the rapid growth in the new equipment markets
continued during the third quarter. In China, all segments except the
infrastructure segment continued to grow strongly. The residential segment grew
rapidly driven by the affordable housing segment as well as the other
residential segments in the inland lower-tier cities. The retail, office, hotel
and medical segments continued to develop well, while the public transport
segment was impacted negatively by the re-evaluation of high-speed rail
investments. The overall new equipment market activity in India remained at a
good level, in particular in the residential and hotel segments, but due to
financing constraints the market growth rate was not as high as during the first
half of the year. In Australia, the new equipment market remained active and the
positive development of the modernization market continued. The Southeast Asian
markets remained strong with the new equipment markets in Malaysia, Singapore
and Indonesia growing the fastest. The growth was primarily driven by the
residential and multi-use building segments. Maintenance markets in Asia-Pacific
continued to develop favorably. The pricing environment remained intense in all
markets.

Market outlook 2011

The new equipment markets in Asia-Pacific are expected to continue to develop
positively, albeit at a lower rate than during January-September 2011. The
overall activity level in the new equipment markets in Central and North Europe
is expected to remain relatively stable. Markets in South Europe are expected to
remain weak. The new equipment markets in North America are expected to continue
to gradually recover from a low level, but the outlook remains uncertain. The
modernization markets are expected to grow slightly. The maintenance markets are
expected to continue to develop well.

Outlook 2011

KONE specifies its outlook for 2011.

KONE's net sales is estimated to grow by 3-6% at comparable exchange rates as
compared to 2010.

The operating income (EBIT) is expected to be in the range of EUR 710-740
million, assuming that translation exchange rates do not deviate materially from
the situation of the beginning of 2011.

Previous outlook

KONE's net sales is estimated to grow by 0-5% at comparable exchange rates as
compared to 2010.

The operating income (EBIT) is expected to be in the range of EUR 700-750
million, assuming that translation exchange rates do not deviate materially from
the situation of the beginning of 2011.

Disclosure procedure

KONE Corporation follows the disclosure procedure enabled by Standard 5.2b
published by the Finnish Financial Supervision Authority and hereby publishes
its Interim Report for January-September 2011 enclosed to this stock exchange
release. KONE Corporation's Interim Report for January-September 2011 is
attached to this release in pdf format and is also available on the company's
website at www.kone.com.

Analyst and media meeting and conference call

A meeting for the press, conducted in Finnish, will be held on Thursday, October
20, 2011 at 2:15 p.m. Eastern European Time.

A telephone conference and a meeting for analysts, conducted in English, will
begin at 3:45 p.m. Eastern European Time. The meeting can also be followed 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:

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
during the same day.

About KONE

KONE is one of the global leaders in the elevator and escalator industry. The
company is committed to understanding the needs of its customers for 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 2010, KONE
had annual net sales of EUR 5 billion and approximately 33,800 employees. KONE
class B shares are listed on the NASDAQ OMX Helsinki Ltd in Finland.

www.kone.com

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

Sender:

KONE Corporation

Henrik Ehrnrooth
CFO

Anne Korkiakoski
Executive Vice President,
Marketing and Communications

[HUG#1556447]

Attachments:

KONE_Q3_2011_Interim Report.pdf