Interim Report of KONE Corporation for January-June 2014

KONE Corporation, stock exchange release, July 18, 2014 at 12:30 p.m. EET KONE's Q2: Strong development of orders received in all geographic regions April-June 2014 -       In April-June 2014, orders received totaled EUR 1,802 (4-6/2013: 1,638) million. Orders received grew by 10.0% at historical exchange rates and by 15.3% at comparable exchange rates. -       Net sales grew by 5.0% to EUR 1,849 (1,762) million. At comparable exchange rates the growth was 9.0%. -       Operating income was EUR 263.2 (242.8) million or 14.2% (13.8%) of net sales. -       Cash flow from operations (before financing items and taxes) was EUR 280.2 (325.4) 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 1,000-1,050 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 990-1,050 million. January-June 2014 -       In January-June 2014, orders received totaled EUR 3,532 (1- 6/2013: 3,351) million. Orders received grew by 5.4% at historical exchange rates and by 10.1% at comparable exchange rates. The order book stood at EUR 6,537 (Jun 30, 2013: 5,874) million at the end of June 2014. -       Net sales grew by 4.1% to EUR 3,291 (3,160) million. At comparable exchange rates the growth was 7.9%. -       Operating income was EUR 442.9 (403.2) million or 13.5% (12.8%) of net sales. -       Cash flow from operations (before financing items and taxes) was EUR 605.6 (623.2) million. Key Figures   4-6/ 4-6/ 1-6/ 1-6/ 1-12/   2014 2013 2014 2013 2013 Orders received MEUR 1,801.9 1,638.2 3,531.6 3,350.6 6,151.0 Order book MEUR 6,537.2 5,874.4 6,537.2 5,874.4 5,587.5 Sales MEUR 1,848.9 1,761.7 3,290.7 3,160.4 6,932.6 Operating income (EBIT) MEUR 263.2 242.8 442.9 403.2 953.4 Operating income (EBIT) % 14.2 13.8 13.5 12.8 13.8 Cash flow from operations (before financing items and taxes) MEUR 280.2 325.4 605.6 623.2 1,213.1 Net income MEUR 204.7 193.7 348.0 319.5 713.1 Basic earnings per share EUR 0.39 0.37 0.67 0.62 1.37 Interest-bearing net debt MEUR -520.6 -613.3 -520.6 -613.3 -622.0 Total equity/total assets % 38.7 41.4 38.7 41.4 43.7 Gearing % -33.8 -35.3 -33.8 -35.3 -36.1 Henrik Ehrnrooth, President & CEO, in conjunction with the review: "I am happy with our performance in the second quarter of the year. Order intake was again at a record high level at EUR 1,802 million, with a growth of 10.0% at historical and 15.3% at comparable exchange rates. Sales grew by 5.0% at historical and 9.0% at comparable currencies to EUR 1,849 million. I am pleased that when measured in comparable currencies, all of our geographic regions grew, with strong growth in Asia-Pacific and good growth in EMEA. Changes in translation exchange rates had a significant negative impact on our reported sales growth in all geographic regions, especially in Asia-Pacific and in the Americas. We continued our profitable growth. Operating income grew to EUR 263.2 million, 14.2% of sales. Growth in operating income was driven by strong sales growth in Asia-Pacific, China in particular, and an overall positive development in North America. Profitable growth in the maintenance business also contributed to the growth in operating income. Additionally, the pricing actions taken during the past two years had a positive impact by offsetting some of the pressure from the intense price competition seen in many markets. We again achieved a strong cash flow from operations of EUR 280.2 million. Globally, there were no major changes in the market environment during the second quarter of the year. In Europe, the new equipment market in South Europe remained weak, but demand in Central and Northern Europe showed a slightly better development compared to the previous quarter. In Asia-Pacific, North America and the Middle East, the new equipment market continued to develop positively and the outlook for each of these regions is good also for the full year. We continue to expect to see a rather good development on the maintenance market in most countries, and the global modernization market to grow slightly. In a business like ours, with a global reach but with very local customer relationships, a consistent, solid execution in our daily work is essential in order to achieve long-term profitable growth. I want to thank all of KONE's employees for their great efforts and mindset to develop continuously. This was again reflected in our performance this quarter. At the core of our strategy are our new Development Programs, which were launched in the first quarter of this year. We have gotten off to a good start and I am convinced that these programs will drive a continued strengthening of our competitiveness and differentiation. " Operating environment in April-June 2014 In the second quarter of 2014, good growth in new equip­ment markets continued. Markets in Asia-Pacific and North America continued to grow, while the development in the EMEA region was mixed. The major projects segment was stable compared to the previous year, but with good activity in North America and China. The modernization market was rather weak overall in Europe, developed positively in North America and saw a quite stable development in Asia-Pacific. Maintenance markets grew globally, although at low rates in such countries, where new equipment activity has been weak for the past years. Operating environment in January-June 2014 During January-June 2014, the new equipment market in Asia-Pacific continued to grow, driven by clear growth in China. In the EMEA region, the development of new equip­ment markets was varied. The market grew slightly in Cen­tral and North Europe and saw good growth in the Middle East, but remained on a declining trend in South Europe. In North America, strong development in new equipment demand continued. In modernization, the market in Central and North Europe saw some growth, but declined in South Europe. In North America the modernization market devel­oped very positively, and growth was seen also in Asia-Pacific. The maintenance market continued to grow globally, driven by Asia-Pacific following the positive development of the new equipment market in the region. The pricing environment was challenging in all businesses, in particular in countries suffering from a prolonged weakness in the new equipment market. 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 slight growth 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 1,000-1,050 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2014. Previous business outlook 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. Press and analyst meetings A meeting for the press, conducted in Finnish, will be held on Friday, July 18, 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 can be found below. Both meetings will take place in the KONE Building, located at Keilasatama 3, Espoo, Finland. Telephone conference numbers: US callers: +1 334 323 6203 UK callers: +44 (0)207 1620 177 Finnish callers: +358 (0)9 2313 9202 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: Katri Saarenheimo, Investor Relations Manager, tel. +358 (0) 204 75 4705 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#1830659]