Financial Statement Bulletin of KONE Corporation for

KONE Corporation, stock exchange release, January 24, 2019 at 12.30 p.m. EET

Financial Statement Bulletin of KONE Corporation for January-December 2018

January-December 2018: Orders received and sales grew in all regions, adjusted EBIT returned to growth in Q4

October-December 2018

• Orders received grew by 5.0% to EUR 1,938 (10-12/2017: 1,846) million. At comparable exchange rates, orders grew by 5.9%.
• Sales grew by 5.9% to EUR 2,443 (2,306) million. At comparable exchange rates, sales grew by 6.5%.
• Operating income (EBIT) was EUR 292.5 (292.8) million or 12.0% (12.7%) of sales. The adjusted EBIT was EUR 319.6 (302.6) million or 13.1% (13.1%) of sales.*
• Cash flow from operations (before financing items and taxes) was EUR 331.6 (335.0) million.

January-December 2018

• Orders received grew by 3.2% to EUR 7,797 (1-12/2017: 7,554) million. At comparable exchange rates, orders grew by 6.6%.
• Sales grew by 3.1% to EUR 9,071 (8,797) million. At comparable exchange rates, sales grew by 6.3%.
• Operating income (EBIT) was EUR 1,042 (1,192) million or 11.5% (13.6%) of sales. The adjusted EBIT was EUR 1,112 (1,206) million or 12.3% (13.7%) of sales.*
• Cash flow from operations (before financing items and taxes) was EUR 1,150 (1,263) million.
• The Board proposes a dividend of EUR 1.65 per class B share for the year 2018.

KONE has adopted the new IFRS 15 and IFRS 9 effective January 1, 2018. In this Financial Statement Bulletin all 2017 financials are restated applying the standards retrospectively.

Business outlook for 2019

In 2019, KONE's sales is estimated to grow by 2-7% at comparable exchange rates as compared to 2018. The adjusted EBIT is expected to be in the range of EUR 1,120-1,240 million, assuming that foreign exchange rates would remain at the January 2019 level. Foreign exchange rates are estimated to impact EBIT positively by less than EUR 10 million.

* In September 2017, KONE introduced a new alternative performance measure, adjusted EBIT, to enhance comparability of the business performance between reporting periods during the Accelerate program. Restructuring costs related to the Accelerate program are excluded from the calculation of the adjusted EBIT.

Henrik Ehrnrooth, President and CEO:

" We saw positive developments on many fronts in the final quarter of 2018. What I'm especially pleased with is that our adjusted EBIT returned to growth after several tough quarters. This was driven by solid sales growth in both new equipment and services and the actions we have taken to offset the margin headwinds. Our orders received continued to grow in all regions with stabilized margins as in the previous quarters.

Winning with Customers strategy is taking us towards our strategic targets. We are now half way through the strategic period and we are seeing good progress towards most of our strategic targets. Our customer loyalty has continued to improve and our employee engagement has remained on a high level. However, the adjusted EBIT margin development has been unsatisfactory in the past two years. What I find encouraging is that we have started to concretely see the impacts of our improved differentiation and this is key in improving our profitability. We are also creating demand for new kinds of services and solutions in a way that has not been done in our industry before. I would like to extend my thanks to our employees for their commitment and hard work in this changing environment.

We have already achieved a lot but at the same time we recognize that we are only at the beginning of the journey. Our approach to provide comprehensive People Flow solutions that meet building users' individual needs is clearly appreciated by our customers. We will continue to invest in R&D and importantly, our people, to support them in building new competences and ways of working to succeed in the transformation we are undergoing. The Accelerate program plays a crucial role in speeding up the execution of our strategy. Through the program, we will improve our capability to execute on new services and solutions that truly help our customers succeed and to bring these faster to the markets. By harmonizing the way we work we aim to be more efficient and improve our profitability. We expect to see continued progress and concrete benefits of these efforts in 2019.

Looking ahead at 2019, there are both tailwinds and headwinds. We expect a lower growth environment in the elevator and escalator market as a result of a slowdown in the global economic growth and general geopolitical uncertainty. However, with our solid order backlog and a continued growth outlook for services, we expect KONE's sales to grow by 2-7% at comparable exchange rates. We also expect our adjusted EBIT to return to growth and to be between EUR 1,120 and 1,240 million. The direction is now right, but our ambitions are clearly higher. I am confident that we can make good overall progress in 2019 given the actions that we have taken and the commitment of our team.

Operating environment in October-December 2018

The global new equipment market grew slightly in units compared to the fourth quarter of 2017. In Asia-Pacific, the new equipment volumes grew slightly. In China, the new equipment market grew slightly in units driven by the residential segment and the infrastructure segment. Government restrictions across city tiers continued to have a cooling effect on the overall markets. In the rest of Asia-Pacific, the new equipment markets grew slightly with clear variation between countries. In the EMEA region, the new equipment market was rather stable. The new equipment market in Central and North Europe was rather stable at a high level, while in South Europe, the market continued to see slight growth from a low level. In the Middle East, the market continued to decline due to uncertainty across the region. In North America, the new equipment market continued to grow slightly from a high level.

Global service markets continued to develop positively. Maintenance continued to see growth across the regions with the strongest rate of growth seen in Asia-Pacific and a more moderate development in Europe and North America. Modernization markets were more varied with strong growth in Asia-Pacific and a decline in some European countries.

Pricing trends remained varied during October-December. Across the regions, cost increases, both for material and labor drove a need to increase prices. In China, competition remained intense but pricing was rather stable in the new equipment market. In the EMEA region, the pricing environment continued to be characterized by strong competition, particularly in the South Europe and Middle East region. In North America, competition increased in some segments but the overall pricing environment was more favorable than in some other regions.

Operating environment in January-December 2018

In 2018, the global new equipment market grew slightly in units compared to the previous year. In Asia-Pacific, the new equipment volumes grew slightly with slight growth in both China and in the rest of Asia-Pacific driven by the Indian market and South-East Asia. In the EMEA region, the new equipment market was rather stable. New equipment market in Central and North Europe was rather stable at a high level, while in South Europe, the market continued to see slight growth from a low level. In the Middle East, the market grew in the first half of the year, but declined in the second half due to increased uncertainty across the region. In North America, the new equipment market continued to grow slightly from a high level.

Global service markets continued to develop positively. Both the maintenance and the modernization markets continued to see growth across the regions, with the strongest rate of growth seen in Asia-Pacific and a more moderate development in Europe and North America.

Pricing trends remained varied during January-December. Across the regions, cost increases, both for material and labor drove a need to increase prices. In China, competition remained intense but pricing was rather stable in the new equipment market. In the EMEA region, the pricing environment continued to be characterized by strong competition, particularly in the South Europe and Middle East region. In North America, competition increased in some segments but the overall pricing environment was more favorable than in some other regions.

Market outlook 2019

The increased uncertainty in many major markets impacts the visibility of the overall market development for 2019. The new equipment market is expected to be stable or to decline slightly. In China the market is expected to decline slightly or to be stable in units ordered, while in the rest of the Asia-Pacific, the market is expected to grow slightly. A more stable development is expected in North America and the Europe, Middle East and Africa region.

Maintenance markets are expected to see the strongest growth rate in Asia-Pacific and to grow slightly in other regions.

The modernization market is expected to be stable in the Europe, Middle East and Africa region, to grow slightly in North America and to develop strongly in Asia-Pacific.

Business outlook 2019

In 2019, KONE's sales is estimated to grow by 2-7% at comparable exchange rates as compared to 2018. The adjusted EBIT is expected to be in the range of EUR 1,120-1,240 million, assuming that foreign exchange rates would remain at the January 2019 level. Foreign exchange rates are estimated to impact EBIT positively by less than EUR 10 million.

The outlook is based on KONE's maintenance base and order book as well as the market outlook. KONE has a solid order book for 2019 in the new equipment business and the service business is expected to continue to grow. Targeted pricing and productivity improvement actions are expected to support profitability together with the savings from the Accelerate program. High component and labor costs together with trade tariffs are the main headwinds for the adjusted EBIT in 2019. The impact of high raw material prices and trade tariffs is estimated to be approximately EUR 50 million.

The Board's proposal for the distribution of profit

The parent company's non-restricted equity on December 31, 2018 was EUR 2,453,122,735.36 of which the net profit for the financial year is EUR 1,067,984,631.14.

The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 1.6475 be paid on the outstanding 76,208,712 class A shares and EUR 1.65 on the outstanding 439,852,141 class B shares, resulting in a total amount of proposed dividends of EUR 851,309,885.67.

The Board of Directors further proposes that the remaining non-restricted equity, EUR 1,601,812,849.69 be retained and carried forward.

The Board proposes that the dividends be payable on March 7, 2019. All the shares existing on the dividend record date are entitled to dividend for the year 2018 except for the own shares held by the parent company.

Press and analyst meetings

A meeting for the press, conducted in Finnish, will be held on Thursday, January 24, 2019 at 2:15 p.m. EET.

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

US callers: +1 323-794-2093 UK callers: +44 (0)330 336 9125 Finnish callers: +358 (0)9 7479 0361  Participant code: 7881144

Both meetings will take place in KONE Building, located at Keilasatama 3, Espoo, Finland.

For further information, please contact: Sanna Kaje, Vice President, Investor Relations, 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 2018, KONE had annual sales of EUR 9.1 billion, and at the end of the year over 57,000 employees. KONE class B shares are listed on the Nasdaq Helsinki Ltd. in Finland.

www.kone.com

Attachment

• KONE_Financial_Statement_Bulletin_2018.pdf