In retail, experience is everything. Keeping visitors and shop owners happy is about delivering the best possible shopping experience. When people can move effortlessly, they are more likely to stay and shop for longer. KONE’s people flow expertise, combined with preventive maintenance solutions, helps business run smoothly year after year. KONE’s Interim Report for January-March 2015 April 22, 2015 Henrik Ehrnrooth, President & CEO Q1 2015: A good start to the year Q1/2015 Q1/2014 Historical change Comparable change Orders received MEUR 2,053.8 1,729.7 18.7% 5.5% Order book MEUR 8,529.6 6,175.4 38.1% 15.6% Sales MEUR 1,690.9 1,441.8 17.3% 7.1% Operating income (EBIT) MEUR 211.9 179.6 18.0% Operating income (EBIT) % 12.5 12.5 MEUR 212.2 325.4 EUR 0.29 0.28 Cash flow from operations (before financing items and taxes) Basic earnings per share 2 April 22, 2015 Interim report January-March 2015 | © KONE Corporation Q1 2015 Orders received: Good growth driven by strong development in North America 18.7% MEUR 2,200 2,054 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 3 2009 April 22, 2015 Q1 2015 Q2 Interim report January-March 2015 | © KONE Corporation Q3 Q4 Growth in historical exchange rates. Q1 2015 Sales: Growth in all geographic regions MEUR 2,200 17.3% 2,000 1,800 1,691 1,600 1,400 1,200 1,000 800 600 400 200 0 4 2009 April 22, 2015 Q1 2015 Q2 Interim report January-March 2015 | © KONE Corporation Q3 Q4 Growth in historical exchange rates. Q1 2015 Operating income: Growth driven by good development across businesses and favorable translation exchange rates MEUR 350 300 18.0% 250 212 200 150 100 50 0 5 2009 April 22, 2015 Q1 2015 Q2 Interim report January-March 2015 | © KONE Corporation Q3 Q4 Operating income excluding one-time items. Growth in historical exchange rates. 1-3/2015: The share of new equipment as well as AsiaPacific out of total sales continued to grow Sales by business Sales by market 38% (39%) 51% (48%) 41% 42% (38%) (47%) 17% (15%) 11% (13%) 6 April 22, 2015 New equipment EMEA (Europe, Middle East and Africa) Maintenance Americas Modernization Asia-Pacific Interim report January-March 2015 | © KONE Corporation (1-3/2014 figures in brackets) Figures in charts are rounded and in historical exchange rates. New equipment The global new equipment market was rather stable; KONE’s development was solid in key markets KONE’s Q1 in new equipment  Orders received grew strongly in North America and slightly in Asia-Pacific.  In China, KONE continued faster than market growth. Development of the new equipment market  Markets declined slightly in Central and North Europe, remained weak in South Europe and stable at a good level in the Middle East.  In North America, the market continued to grow.  In Asia-Pacific, the new equipment market was rather stable, with market volumes in China approximately at the previous year’s level. 7 April 22, 2015 Interim report January-March 2015 | © KONE Corporation Maintenance The global maintenance market continued to grow KONE’s Q1 in maintenance  Maintenance sales developed positively in all geographic regions.  Sales growth was the fastest in Asia-Pacific. Development of the maintenance market  In Europe and North America, the maintenance markets grew, but the pricing environment remained competitive in many markets.  The market in Asia-Pacific continued to develop positively. 8 April 22, 2015 Interim report January-March 2015 | © KONE Corporation Modernization The modernization market grew in North America, more stable development in Europe KONE’s Q1 in modernization  Orders received grew clearly, with strong growth in North America and some growth in the EMEA region.  Modernization sales grew clearly in North America, but declined clearly in the EMEA region. Development of the modernization market  Clear market growth continued in North America.  In Central and North Europe the market grew, but in South Europe it remained weak. 9 April 22, 2015 Interim report January-March 2015 | © KONE Corporation Elevator and escalator market in 2014 (2013 FIGURES IN BRACKETS) New equipment market: 815,000 (750,000) units 8% (8%) Maintenance base: >12.5M units (~12M) 7% (6%) 15% (15%) 3% (3%) 2% (3%) 26% (23%) 3% (4%) 9% (10%) 69% (67%) 4% (4%) KONE’s estimated market share globally (in new equipment units) 10 April 22, 2015 45% (47%) 19% Interim report January-March 2015 | © KONE Corporation 9% (10%) EMEA South America China North America Japan & Korea Rest of APAC EMEA = Europe, Middle East and Africa. APAC = Asia-Pacific Based on KONE’s estimate. All estimates are rounded figures. Our Development Programs are delivering results First in Customer Loyalty A Winning Team of True Professionals The Most Competitive People Flow® Solutions Preferred Maintenance Partner Top Modernization Provider 11 April 22, 2015 Interim report January-March 2015 | © KONE Corporation KONE’s annual employee survey was conducted in Q1 2015  Record-high response rate of 93%  Survey results showed a broad-based improvement in employee engagement globally Market outlook 2015 New equipment markets  Asia-Pacific: the market is expected to grow slightly in 2015, with the expectation that the market in China will remain at the good level of 2014 or grow slightly.  Europe, Middle East and Africa: the market is expected to be rather stable. In Central and North Europe, a stable market or slight growth is expected, while South Europe is expected to remain weaker. In the Middle East, the market is expected to be stable at the previous year’s level.  North America: the market is expected to continue to grow. Maintenance markets  The maintenance markets are expected to develop rather well in most countries. Modernization markets  The modernization market is expected to remain rather stable in Europe, but to continue to grow in North America and Asia-Pacific. This is expected to result in a rather stable or slightly growing market globally. 12 April 22, 2015 Interim report January-March 2015 | © KONE Corporation Business outlook 2015 (specified) Sales  KONE’s net sales is estimated to grow by 6–9% at comparable exchange rates as compared to 2014. Operating income  The operating income (EBIT) is expected to be in the range of EUR 1,140–1,230 million, assuming that translation exchange rates would remain at approximately the average level of January– March 2015. 13 April 22, 2015 Interim report January-March 2015 | © KONE Corporation KONE’s Capital Markets Day 2015  KONE’s Capital Markets Day will be held on September 25, 2015  The event will be held in Shanghai and Kunshan, China  More information to follow soon 14 April 22, 2015 Interim report January-March 2015 | © KONE Corporation E&E market and KONE’s performance in China in Q1/2015 China’s share of total OR and sales New equipment growth New equipment orders received in units KONE In monetary value Market ~44% <35% <45% ~23% Market in China was rather stable in Q1 /2015 ~20% 15+% >30% ~40% >15% ~10% >5% CAGR 2006-2012 2013 2014 Q1/2015 April 22, 2015 Share of sales Q1/2015 Based on KONE estimate 16 Share of orders received Interim report January-March 2015 | © KONE Corporation Share of orders received Share of sales FY2014 Q1 2015: Balance Sheet - Assets Employed MEUR Mar 31, 2015 Mar 31, 2014 Dec 31, 2014 1,306.8 1,099.9 1,208.9 Other intangible assets 274.7 222.7 261.8 Tangible assets 339.2 271.4 317.1 Investments 126.2 114.2 112.5 Net working capital -880.2 -756.0 -749.7 Assets employed total 1,166.8 952.3 1,150.5 1,751.2 1,323.6 2,062.4 -584.4 -371.3 -911.8 1,166.8 952.3 1,150.5 Assets employed Goodwill Financed by Equity Net debt Equity and net debt total 17 April 22, 2015 Interim report January-March 2015 | © KONE Corporation Q1 2015: Net working capital MEUR Mar 31, 2015 Mar 31, 2014 Dec 31, 2014 1,438.7 1,203.8 1,211.8 -1,955.5 -1,578.1 -1,628.7 Accounts receivable 1,472.1 1,195.5 1,368.3 Other non IB assets 469.5 323.3 331.9 Net deferred tax assets / liabilities 165.1 117.0 152.2 Provisions -141.3 -135.7 -137.4 Accounts payable -610.3 -507.5 -597.1 Other non IB liabilities -1,718.6 -1,374.3 -1,450.6 Net working capital total -880.2 -756.0 -749.7 Net working capital Inventories Advance payments received 18 April 22, 2015 Interim report January-March 2015 | © KONE Corporation Q1 2015: Cash flow MEUR 1-3/2015 1-3/2014 1-12/2014 Operating income 211.9 179.6 1,035.7 Change in working capital before financing items and taxes -24.2 125.3 225.5 24.4 20.4 84.2 212.2 325.4 1 345.4 35.2 -31.0 -221.1 Cash flow from operating activities 247.4 294.4 1 124.3 Cash flow from investing activities -31.8 -24.6 -145.9 Purchase of own shares - - -32.8 Increase in equity (option rights) - - 21.8 -563.7 -495.7 -537.5 - -0.4 -12.3 -348.1 -226.2 417.6 Depreciation and amortization Cash flow from operations before financial items and taxes Cash flow from financing items and taxes Profit distribution Changes in non-controlling interests Free cash flow 19 April 22, 2015 Interim report January-March 2015 | © KONE Corporation As approximately 70% of KONE’s revenues are in other currencies than the euro, currency fluctuations have a translation impact Sales by currency 1–12/2014 Others EUR Transaction risk A substantial part of KONE operations are denominated in local functional currencies and do not therefore give rise to transaction risk. In addition, KONE’s policy is to hedge the foreign exchange exposure of the order book. Translation risk USD/CAD RMB 20 April 22, 2015 Interim report January-March 2015 | © KONE Corporation As approximately 70% of KONE’s revenues occur in functional currencies other than the euro, the translation risk is significant for KONE. In 2014, KONE’s biggest geographical market areas outside the eurozone in terms of net sales included China, United States, Great Britain, Australia, and Sweden. Sales by market 2005–2014 (MEUR) CAGR,% 7,334 9.5% 44% 4.5% 15% 5.2% 38% 41% 25.4% 6,933 6,277 4,603 4,744 4,987 5,225 49% 4,079 3,242 66% 3,601 65% 65% 65% 62% 46% 58% 55% 16% 16% 19% 21% 21% 18% 35% 22% 12% 22% 13% 21% 14% 16% 17% 21% 27% 2005* 2006 2007 2008 2009 2010 2011 2012 2013 2014 8.4% 10.0% 11.6% 12.1% 12.7% 14.0% 13.9% 13.2% 13.8% 14.1% EMEA Americas EBIT margin (%)¹ Asia-Pacific *) 2005 figures are pro forma 21 April 22, 2015 Interim report January-March 2015 | © KONE Corporation ¹ excluding one-time items Sales by business 2005–2014 (MEUR) CAGR,% 6,933 7,334 9.5% 6,277 4,603 4,744 48% 47% 4,987 50% 4,079 3,242 40% 19% 3,601 45% 41% 19% 19% 19% 5,225 46% 54% 55% 46% 16% 14% 13% 19% 17% 17% 37% 34% 32% 32% 41% 40% 36% 33% 34% 37% 2005* 2006 2007 2008 2009 2010 2011 2012 2013 2014 8.4% 10.0% 11.6% 12.1% 12.7% 14.0% 13.9% 13.2% 13.8% 14.1% New equipment 13.3% Modernization 5.7% 6.4% EBIT margin (%)¹ Maintenance *) 2005 figures are pro forma 22 April 22, 2015 Interim report January-March 2015 | © KONE Corporation ¹ excluding one-time items Our absolute EBIT has continued to grow faster than sales Improvement in both absolute EBIT and EBIT margin 12 months quarterly rolling absolute EBIT & margin progression, Q2/2009-Q1/2015 EBIT EBIT-% MEUR 1,100 16% 1,000 14.1 900 14% 800 700 12.1 12% 600 500 400 10% 300 200 100 0 Q2/2009 23 April 22, 2015 0% Q2/2010 Q2/2011 Interim report January-March 2015 | © KONE Corporation Q2/2012 Q2/2013 Q2/2014 Q1/2015 Note: Excluding one-time items.