Interim Report of KONE Corporation for January-June 2013

KONE Corporation, stock exchange release, July 19, 2013  at 12:30 p.m. EET KONE's Q2: Continued strong progress on a broad basis April-June 2013 * In April-June 2013, orders received totaled EUR 1,638 (4-6/2012: 1,513) million. Orders received grew by 8.2% at historical exchange rates and by 8.7% at comparable exchange rates. * Net sales grew by 14.1% to EUR 1,762 (1,544) million. At comparable exchange rates the growth was 14.8%. * Operating income was EUR 242.8 (210.3) million or 13.8% (13.6%) of net sales (4-6/2012 figures exclude a one-time cost of EUR 37.3 million related to the support function development and cost adjustment programs). * Cash flow from operations (before financing items and taxes) was EUR 325.4 (196.2) million. * KONE specifies its outlook for 2013. KONE's net sales is estimated to grow by 9-11% at comparable exchange rates as compared to 2012. The operating income (EBIT) is expected to be in the range of EUR 890-920 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2013. KONE previously estimated its net sales to grow by 7-10% at comparable exchange rates as compared to 2012. The previous operating income (EBIT) outlook was EUR 870-920 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2013. January-June 2013 * In January-June 2013, orders received totaled EUR 3,351 (1-6/2012: 2,879) million. Orders received grew by 16.4% at historical exchange rates and by 16.3% at comparable exchange rates. The order book stood at EUR 5,874 (Dec 31, 2012: 5,050) million at the end of June 2013. * Net sales grew by 13.5% to EUR 3,160 (2,785) million. At comparable exchange rates the growth was 13.7%. * Operating income was EUR 403.2 (344.9) million or 12.8% (12.4%) of net sales (1-6/2012 figures exclude a one-time cost of EUR 37.3 million related to the support function development and cost adjustment programs). * Cash flow from operations (before financing items and taxes) was EUR 623.2 (448.4) million. Key Figures Comparative figures for 2012 have been restated according to the revised IAS 19 "Employee benefits". 4-6/ 4-6/ 1-6/ 1-6/ 1-12/     2013 2012 2013 2012 2012 Orders received MEUR 1,638.2 1,513.4 3,350.6 2,879.3 5,496.2 Order book MEUR 5,874.4 5,305.3 5,874.4 5,305.3 5,050.1 Sales MEUR 1,761.7 1,544.1 3,160.4 2,785.4 6,276.8 Operating income (EBIT) MEUR 242.8 210.3 (1)) 403.2 344.9 (1)) 828.7 (1)) Operating income (EBIT) % 13.8 13.6 (1)) 12.8 12.4 (1)) 13.2 (1)) EBITA MEUR 247.9 218.9 (1)) 413.1 362.2 (1)) 861.5 (1)) EBITA % 14.1 14.2 (1)) 13.1 13.0 (1)) 13.7 (1)) Cash flow from operations (before financing items and taxes) MEUR 325.4 196.2 623.2 448.4 1,070.8 Net income MEUR 193.7 134.0 319.5 243.5 611.0 Total comprehensive 591.7 income MEUR 206.4 155.3 349.4 249.9 Basic earnings per share EUR 0.74 0.52 1.23 0.94 2.35 Interest-bearing net -574.0 debt MEUR -613.3 -612.4 -613.3 -612.4 Total equity/total 47.1 assets % 41.4 47.9 41.4 47.9 Gearing % -35.3 -32.8 -35.3 -32.8 -31.3 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 progress continued to be strong in the second quarter of the year. Orders received grew by 8% to EUR 1,638 million, which is KONE's second highest quarterly order level ever, right after the exception­ally high order intake of the first quarter of this year. I am also very pleased with the continued slight margin improvement of our orders received in a highly competitive market environment. Sales grew by 14% with particularly strong growth in the new equipment business. Growth was strongest in Asia-Pacific. Operating income grew by 16% to EUR 243 million. Cash flow was very strong at EUR 325 million. We have worked very actively to be able to further differentiate from our competition with our product and service offerings. Last year we launched a new global volume elevator offering, and the latest inspiring result of our R&D work is the KONE UltraRope(TM) hoisting technology introduced during the second quarter. This innovative technology brings significant benefits for elevator solutions to buildings higher than 150 meters. It decreases the required space and energy as well as the life-cycle costs, and on the other hand makes the life-cycle longer. It also makes the installation faster, and additionally reduces elevator downtime caused by building sway. KONE UltraRope(TM) has already received the Council of Tall Buildings and Urban Habitat 2013 Innovation Award. I would like to take this opportunity to again thank all of our people for their continued good work in all areas of our business. The good spirit within the company and the desire to learn and develop our competitiveness have continuously improved. Our operating environment developed in line with our expectations in the second quarter. The growth in China slowed down somewhat from the first quarter's level as we expected but the market growth rate was above 10%, and our expectation is that in 2013 the new equipment market in China will grow by 10-15%. Our long- term view on the market in China also remains favorable, although we believe that its development is transitioning from the very fast growth phase of the past years towards a phase of more moderate growth. Also other markets in Asia- Pacific developed positively during the quarter. In North America, market growth contin­ued. Europe remains challenging, and very few new equipment markets in Europe are experiencing growth. In addition to the weakness in Europe, the pricing environment continues to intensify in many countries around the world in both the new equipment and service markets. We continue to actively develop KONE in the long-term in this globally diverse market situation. We build new strengths in our development programs all the time, we develop the quality and productivity of all of our operations, and we invest increasingly in the development of our personnel as we strive for catching the full potential of growth opportunities." Operating environment in April-June 2013 In the second quarter of 2013, the new equipment market in Asia-Pacific continued to grow rapidly, although growth slowed down clearly from the previous quarter's rate. In other regions, market development remained largely unchanged. New equipment demand in the EMEA region declined slightly in Central and North Europe but remained at a relatively good level, and declined further in South Europe. Market growth continued in North America. The major projects segment grew driven by high activity levels in China and Southeast Asia. The global modernization market was relatively stable, although with regional variation. Maintenance markets grew in most countries, although at low rates in countries where new equipment activity has been weak over the past years. Price competition remained very intense, particularly in regions where the overall market was at a low level. Operating environment in January-June 2013 During January-June 2013, the new equipment market declined slightly in Central and North Europe but remained at a relatively good level, whereas the market situation in South Europe weakened further. Market recovery contin­ued in the Americas. The market in Asia-Pacific continued to grow. The Chinese market grew rapidly, although the growth rate slowed down as expected in the second quarter of the year. The global modernization market was relatively stable, although with clear regional variation. The maintenance mar­ket 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 2013 In new equipment, the market in Asia-Pacific is expected to grow clearly in 2013. The new equipment market in China is expected to grow by 10-15% in 2013. The market in Central and North Europe is expected to decline slightly, and the mar­ket in South Europe to further decline from an already weak level. The market in North America is expected to continue to grow. The modernization market is expected to be at about the same level as in 2012 or decline slightly. The maintenance market is expected to continue to develop rather well in most countries. Business outlook 2013 KONE specifies its outlook for 2013. KONE's net sales is estimated to grow by 9-11% at com­parable exchange rates as compared to 2012. The operating income (EBIT) is expected to be in the range of EUR 890-920 million, assuming that translation exchange rates do not materially deviate from the situation of the begin­ning of 2013. Previous business outlook KONE's net sales is estimated to grow by 7-10% at comparable exchange rates as compared to 2012. The operating income (EBIT) is expected to be in the range of EUR 870-920 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2013. Press and analyst meetings A meeting for the press, conducted in Finnish, will be held on Friday, July 19, 2013 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 KONE's investor website. 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 during the same day. For further information, please contact: Karla Lindahl, Director, Investor Relations, tel. +358 (0) 204 75 4441 Sender: KONE Corporation Henrik Ehrnrooth CFO Anne Korkiakoski Executive Vice President Marketing & Communications 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 2012, KONE had annual net sales of EUR 6.3 billion and approximately 40,000 employees. KONE class B shares are listed on the NASDAQ OMX Helsinki Ltd in Finland. www.kone.com [HUG#1717589]