Interim Report of KONE Corporation for January-March 2014

KONE Corporation, stock exchange release, April 23, 2014 at 12:30 p.m. EET January-March 2014: Record-high order intake and solid progress overall -       In January-March 2014, orders received totaled EUR 1,730 (1- 3/2013: 1,712) million. Orders received grew by 1.0% at historical exchange rates and by 5.2% at comparable exchange rates. The order book stood at EUR 6,175 (Mar 31, 2013: 5,823) million at the end of March 2014. -       Net sales grew by 3.1% to EUR 1,442 (1,399) million. At comparable exchange rates the growth was 6.6%. -       Operating income was EUR 179.6 (160.4) million or 12.5% (11.5%) of net sales. -       Cash flow from operations was EUR 325.4 (297.8) million. -       KONE specifies its operating income outlook for 2014. KONE's net sales is estimated to grow by 6-9% at comparable exchange rates as compared to 2013. The operating income (EBIT) is expected to be in the range of EUR 990-1,050 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2014. KONE's previous outlook for its operating income (EBIT) was EUR 980-1,050 million. Key Figures 1-3/ 1-3/ 1-12/     2014 2013 2013 ---------------------------------------------------------------- Orders received MEUR 1,729.7 1,712.4 6,151.0 Order book MEUR 6,175.4 5,823.1 5,587.5 Sales MEUR 1,441.8 1,398.7 6,932.6 Operating income (EBIT) MEUR 179.6 160.4 953.4 Operating income (EBIT) % 12.5 11.5 13.8 Cash flow from operations MEUR 325.4 297.8 1,213.1 (before financing items and taxes) Net income MEUR 143.3 125.8 713.1 Basic earnings per share EUR 0.28 0.24 1.37 Interest-bearing net debt MEUR -371.3 -406.5 -622.0 Total equity/total assets % 35.0 37.7 43.7 Gearing % -28.1 -26.6 -36.1 Henrik Ehrnrooth, President & CEO, in conjunction with the review: "I am very pleased with the start to this year. Our orders received grew from an exceptionally high level of the first quarter of 2013 - order intake was record high and grew by 1.0% at historical exchange rates and 5.2% at comparable rates. Sales grew by 3.1% at historical and 6.6% at comparable rates to EUR 1,442 million. New equipment sales growth was the fastest, and maintenance sales continued to grow at the earlier good rate. Modernization sales declined. Operating income grew to EUR 179.6 million, 12.5% of net sales. The growth in operating income was a result of continued strong new equipment sales growth in Asia-Pacific, China in particular, and positive development in the maintenance business. Cash flow from operations was very strong at EUR 325.4 million. I want to thank KONE's employees, who have once again worked ambitiously to achieve good growth and develop our business on a broad basis. I would like to also take this opportunity to thank my predecessor Matti Alahuhta for leading the business to a good start for this year. We have now started the work with our new set of five Development Programs and got to an encouraging start with them. Our objective is to have the best customer loyalty in our industry, as well as have a winning team of true professionals with a committed and competent employee in every job. Three of the new Development Programs focus on further differentiation from our competition in new equipment, modernization and maintenance. I am convinced that our work with these programs will enable us to capture the significant growth and development opportunities we have as a company. The markets developed largely in line with our expectations in the first quarter of the year. The new equipment market in North America, United States in particular, has developed very positively, while most European markets remain challenging. In Asia-Pacific, rapid growth continued in all key markets. Price competition has continued to gradually intensify in many European markets and China, but positive new equipment pricing development has simultaneously been seen for example in the volume business in the United States. Our market outlook is intact. While there are some short-term uncertainties in the Chinese construction market, our growth estimate for the new equipment market in China for 2014 is unchanged at approximately 10%. We are confident also about the longer-term development of the Chinese market. The new urbanization and green building targets announced recently by the Chinese government support this view." Operating environment in January-March 2014 In the first quarter of 2014, the new equipment markets developed largely in line with KONE's expectations, with good growth in Asia-Pacific and North America and a mixed development in the EMEA region. The major projects segment saw flat development in Europe, but grew in other regions. The modernization market was weak in Europe, but developed positively in North America and Asia- Pacific. Maintenance markets grew in most countries, although at low rates in such countries, where new equipment activity has been weak for the past years. Market outlook 2014 In new equipment, the market in Asia-Pacific is expected to grow clearly in 2014. The market in China is expected to grow by approximately 10%. The market in the EMEA region is expected to grow slightly, with a relatively stable demand in Central and North Europe, a further slight decline in South Europe, and a growing demand in the Middle East. The market in North America is expected to continue to grow. The modernization market is expected to grow slightly. The maintenance markets are expected to develop rather well in most countries. Business outlook 2014 KONE specifies its operating income outlook for 2014. KONE's net sales is estimated to grow by 6-9% at comparable exchange rates as compared to 2013. The operating income (EBIT) is expected to be in the range of EUR 990-1,050 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2014. Previous business outlook 2014 KONE's net sales is estimated to grow by 6-9% at comparable exchange rates as compared to 2013. The operating income (EBIT) is expected to be in the range of EUR 980-1,050 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2014. Press and analyst meetings A meeting for the press, conducted in Finnish, will be held on Wednesday, April 23, 2014 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 are set out below. Both meetings will take place in the KONE Building, located at Keilasatama 3, Espoo, Finland. Telephone conference numbers: Finnish callers: +358 (0)9 2313 9202 US callers: +1 334 323 6203 UK callers: +44 (0)207 1620 177 Participant code: KONE An on-demand version of the webcast will be available on www.kone.com later during the same day. For further information, please contact: Karla Lindahl, Director, Investor Relations, tel. +358 (0) 204 75 4441 Sender: KONE Corporation Eriikka Söderström CFO Anne Korkiakoski Executive Vice President Marketing & Communications About KONE KONE is one of the global leaders in the elevator and escalator industry. KONE'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. KONE provides industry-leading elevators, escalators, automatic building doors and integrated solutions to enhance the People Flow in and between buildings. KONE's services cover the entire lifetime of a building, from the design phase to maintenance, repairs and modernization solutions. In 2013, KONE had annual net sales of EUR 6.9 billion, and at the end of the year over 43,000 employees. KONE class B shares are listed on the NASDAQ OMX Helsinki Ltd in Finland. www.kone.com [HUG#1778969]