FINANCIAL STATEMENT BULLETIN 2010 KONE Q4 KONE signalization, winner of 2009 Good Design Award Designed for an increasingly urbanizing world. After 100 years in business we still have a challenger’s mindset that drives our continuous improvement and innovation.
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KONE Q4 · Q4 2 KONE’s January–December 2010 review October–December 2010: Strong order intake and record operating income In October–December 2010, orders received totaled
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FINANCIAL sTATEMENT BULLETIN 2010KONE Q4
KONE signalization,winner of 2009 good Design Award
Designed for an increasingly urbanizing world.After 100 years in business we still have a challenger’s mindset that drives our continuous improvement and innovation.
Q4 2
KONE’s January–December 2010 review
October–December 2010: Strong order intake and record operating income In October–December 2010, orders received totaled EUR 1,006 (10–12/2009: 813.5) million. Orders
received increased by 23.7% at historical exchange rates and by 16.0% at comparable exchange rates.
Net sales increased by 4.3% to EUR 1,489 (1,427) million. At comparable exchange rates net sales decreased by 1.4%.
Operating income was EUR 227.3 (202.7) million or 15.3% (14.2%) of net sales.
Cash flow from operations reached EUR 195.1 (198.2) million.
January–December 2010: Strong performance throughout the year In January–December 2010, orders received totaled EUR 3,809 (2009: 3,432) million. Orders received
increased by 11.0% at historical exchange rates and by 6.0% at comparable exchange rates. The order book stood at EUR 3,598 (3,309) million at the end of December 2010.
Net sales increased by 5.1% to EUR 4,987 (4,744) million. At comparable exchange rates it increased by 0.6%.
Operating income was EUR 696.4 (600.3) million or 14.0% (12.7%) of net sales (2009 figures exclude a one-time cost of EUR 33.6 million related to the fixed cost adjustment program). Earnings per share were 2.10 (1.84).
Cash flow from operations was EUR 857.2 (825.1) million.
In 2011, KONE’s net sales is estimated to grow 0–5% at comparable exchange rates as compared to 2010. The operating income (EBIT) is expected to be in the range of EUR 700–750 million, assuming that transla-tion exchange rates do not deviate materially from the situation of the beginning of 2011.
The Board proposes a dividend of EUR 0.90 per class B share for the year 2010.
Orders received MEUR 1,006.3 813.5 23.7 3,809.0 3,432.4 11.0
Order book MEUR 3,597.8 3,309.1 8.7 3,597.8 3,309.1 8.7
sales MEUR 1,488.8 1,426.8 4.3 4,986.6 4,743.7 5.1
Operating income MEUR 227.3 202.7 12.1 696.4 600.3 1) 16.0
Operating income % 15.3 14.2 14.0 12.7 1)
Cash flow from operations (before
financing items and taxes) MEUR 195.1 198.2 857.2 825.1
Net income MEUR 173.8 166.6 535.9 466.4
Total comprehensive income MEUR 190.1 165.9 577.6 449.5
Basic earnings per share EUR 0.68 0.66 2.10 1.84
Interest-bearing net debt MEUR -749.8 -504.7 -749.8 -504.7
Total equity/total assets % 49.3 47.0 49.3 47.0
gearing % -46.8 -37.7 -46.8 -37.7 1) Excluding a MEUR 33.6 one-time restructuring cost related to the fixed costs adjustment program, which was booked in the second
quarter.
Q4 3
Matti Alahuhta, President and CEO, in conjunction with the review:
“In 2010, our performance was strong throughout the year and I am very pleased with our results in a chal-lenging operating environment. Our operating income and cash flow were again at a record level and the growth in orders received was encouraging towards the end of the year. I want to thank all of our people for a work well done!
Our development was good in many respects. The quality of our products and operations as well as our pro-ductivity improved and we continued to progress well in the Asia-Pacific markets. I am also pleased with us reaching our long-term operating income goal of 14%. We achieved this goal by the systematic development work in our entire business system during the last several years. In 2010, external factors, such as foreign exchange translation rates and favorable sourcing costs, also contributed to our strong improvement in oper-ating income.
Our strong progress in 2010 lays a good foundation for the future. We have again chosen five development programs, which will help us develop KONE to become an even stronger company within our industry. Our operating environment remains mixed. Asia-Pacific continues to develop positively. There is still uncertainty in the EMEA region and the Americas, but the trend also in these regions looks somewhat more positive.”
KONE’s January–December 2010 review
Q4 4
Accounting PrinciplesThe information presented in this report is based on the
audited KONE 2010 Financial statements which have been
released together with this report. KONE Corporation’s finan-
cial statement bulletin has been prepared in line with IAs 34,
`Interim Financial Reporting´. KONE has applied the same
accounting principles in the preparation of the interim report
as in its financial statements for 2010.
October–December 2010 review
Operating environment in October–DecemberThe trends in KONE’s principal markets remained largely
unchanged from the previous quarter. The markets in Asia-
Pacific continued to grow rapidly, although at a somewhat
lower rate than earlier in the year. In the Europe, Middle East
and Africa (EMEA) region and in the Americas the situation
continued to be mixed with some markets gradually recover-
ing and other markets remaining stable at a low level. The
major projects markets were rather active. The modernization
markets were overall quite stable but with regional variations.
The maintenance markets continued to develop favorably.
The overall pricing environment remained intense in all busi-
nesses.
In the EMEA region, the business environment in the new
equipment markets continued to be mixed with the residential
markets developing positively in North and Central Europe,
but with most south European markets remaining stable at
a low level. The residential markets in the United Kingdom,
sweden and Norway grew. Market activity in germany and
Finland remained at the earlier good level. The residential
markets in France and Italy remained stable at a low level.
The market continued to decline in spain. The commercial
segment remained burdened by high vacancy rates in south
Europe with the infrastructure, medical and hotel segments
showing a modest recovery. Markets in the Middle East con-
tinued to develop positively, particularly in Abu Dhabi, saudi
Arabia and Qatar. The markets in Russia remained stable at a
low level. The modernization markets were at about last year’s
level with most European markets developing positively but
with France declining. The maintenance markets continued
to develop well in the EMEA region, but price competition
remained strong.
In the Americas region, the new equipment markets were
mixed. The new equipment market in the United states
remained stable at a low level, but showed some early signs
of improved activity. The tendering activity in infrastructure
and publicly funded projects declined. Modernization activity
increased slightly and continued to present growth opportu-
nities. The pricing environment in both the new equipment
and the modernization markets continued to be very intense.
In Canada, the new equipment market remained rather active
and activity in the modernization market increased slightly.
The gradual recovery of the market in Mexico continued to
progress. Maintenance markets in the Americas developed
rather well, but were very competitive.
In the Asia-Pacific region, the good growth in the new
equipment markets continued during the fourth quarter
although at a somewhat lower rate than earlier in the year.
The pricing environment was intense. The most favorable
development was seen in southeast Asia and China. In China,
all segments grew, with the residential segment, affordable
housing in particular, being the fastest growing segment.
growth in southeast Asia was primarily driven by the residen-
tial markets. The growth in the Indian market slowed down
due to increasing interest rates and constraints in the availabil-
ity of financing. growth was driven by the affordable hous-
ing segment. Activity in the commercial segment remained
stable at a low level with the office segment showing signs
of gradual recovery. In Australia, although tendering activity
remained at a healthy level, funding constraints continued to
negatively influence the development of the new equipment
market. Tendering activity in the modernization market con-
tinued to improve. Maintenance markets in Asia-Pacific con-
tinued to develop favorably.
Financial performance in October–December KONE’s orders received increased by 23.7% as compared
to October–December 2009, and totaled EUR 1,006 (10–
12/2009: 813.5) million. At comparable exchange rates,
orders received increased by 16.0%. Orders received grew in
all regions. The development in orders received was strongest
in Asia-Pacific and in the Americas. In Asia-Pacific, southeast
Asia and China developed the most positively. Orders received
grew in the Americas in all countries where KONE is present.
In the EMEA region, orders received development was positive
with good development in the North and Central European
markets but a decline in the order intake in some southern
European markets. Maintenance contracts are not included in
orders received.
The largest orders received in October–December 2010
included an order to supply elevators, escalators and auto-
walks on the West Island Line railway extension in Hong Kong,
an order to supply all elevators and escalators for two luxury
KONE’s January–December 2010 review
Q4 5
KONE’s January–December 2010 review
cruise ships to be built for Norwegian Cruise Line, an order to
supply elevators for the Jaber Al Ahmad Al Jaber Al sabah Hos-
pital project in south surra, Kuwait, an order to supply eleva-
tors and escalators to the new World Trade Center tower in
Doha, Qatar and an order to supply escalators to the renewal
project of ghent’s main railway station in Belgium.
KONE’s net sales increased by 4.3% as compared to Octo-
ber–December 2009, and totaled EUR 1,489 (1,427) million.
At comparable exchange rates, net sales decreased by 1.4%.
New equipment sales amounted to EUR 696.2 (686.5) mil-
lion which represented an increase of 1.4% over the compari-
son period. At comparable currency rates, new equipment
sales decreased by 5.2%.
service sales (maintenance and modernization) increased
by 7.1% and totaled EUR 792.6 (740.3) million. At compara-
ble currency rates, the increase was 2.2%. Maintenance sales
continued to grow at the prior good rate, whereas modern-
ization sales declined somewhat.
The operating income for the October–December 2010
period totaled EUR 227.3 (202.7) million or 15.3% (14.2%)
of net sales. The growth in operating income was primarily
a result of improved operational quality and productivity, a
continued good sales growth in the Asia-Pacific region as well
as favorable translation exchange rates and sourcing costs
as compared to the comparison period. Cash flow was very
strong at EUR 195.1 (198.2) million, which was a result of the
improved operating income and good working capital man-
agement.
Review January–December 2010
KONE’s operating environmentIn 2010, KONE’s operating environment was twofold. The
new equipment markets in the Asia-Pacific region developed
well throughout the year, whereas the situation in the Europe,
Middle East and Africa (EMEA) region as well as the Americas
was mixed with some markets recovering and others having a
low level of activity. The size of the modernization market was
approximately at the prior year’s level. Maintenance markets
continued to grow supported by continued good new equip-
ment delivery volumes. Price competition remained intense in
all businesses.
In the EMEA region, the new equipment markets were
mixed. good development was seen in the residential markets
in Finland, sweden and Norway. The new equipment market
in the United Kingdom showed signs of modest recovery in the
second half of the year. The market in germany remained at a
good level throughout the year. The new equipment markets
in southern Europe were challenging. The markets in France
and Italy weakened in the beginning of the year but stabilized
to a low level towards the end of the year. The market in spain
declined throughout the year. The commercial segments in
southern Europe were burdened by high vacancy rates. The
market in Russia was challenging and uncertain, whereas the
development of the markets in the Middle East, in Abu Dhabi
and saudi Arabia in particular, was positive throughout the
year. The modernization markets in Europe declined slightly
as a result of the decline in France. Most North and Central
European markets developed positively. Despite the imple-
mentation deadline in December 2010 for the national first
phase requirements of the European safety Norms for Exist-
ing Lifts (sNEL) in France, a considerable part of the required
upgrades of the aging equipment base remains uncompleted.
The modernization market developed well in Belgium sup-
ported by the national implementation of the sNEL require-
ments. The maintenance markets in the EMEA region contin-
ued to grow, but remained highly competitive.
In the Americas region, the new equipment market sta-
bilized at a low level in the United states, but recovered in
both Canada and Mexico. The new equipment market in
the United states has been demanding since the beginning
of 2008. The market decline seen in 2009 continued in the
beginning of 2010, but the market started to show signs of
stabilization in the second quarter of the year and stabilized at
Operating income 227.3 15.3 202.7 14.2 696.4 14.0 566.7 11.9
share of associated companies' net income 3.3 3.5 12.3 8.1Financing income 3.2 3.0 14.7 28.8Financing expenses -2.2 -1.5 -9.0 -9.0
Income before taxes 231.6 15.6 207.7 14.6 714.4 14.3 594.6 12.5
Taxes -57.8 -41.1 -178.5 -128.2 Net income 173.8 11.7 166.6 11.7 535.9 10.7 466.4 9.8 Net income attributable to:
shareholders of the parent company 173.9 166.5 535.3 465.6Non-controlling interests -0.1 0.1 0.6 0.8
Total 173.8 166.6 535.9 466.4 Earnings per share for profit attributable to the shareholders of the parent company, EURBasic earnings per share, EUR 0.68 0.66 2.10 1.84Diluted earnings per share, EUR 0.68 0.65 2.09 1.83
Consolidated statement of comprehensive income
MEUR 10–12/2010 10–12/2009 1–12/2010 1–12/2009 Net income 173.8 166.6 535.9 466.4
Other comprehensive income:Translation differences 45.5 45.5Hedging of foreign subsidiaries 0.5 0.5Cash flow hedges -4.3 -4.3
Transactions with shareholders and non-controlling interests:
Profit distribution 1.3 -334.5 -333.2Issue of shares (option rights) 0.5 21.8 22.3Purchase of own shares -16.9 -16.9sale of own shares -Change in non-controlling interests -1.1 -0.1 -1.2Option and share-based compensation 0.1 4.3 8.4 12.8
Other comprehensive income:Translation differences -7.3 -7.3Hedging of foreign subsidiaries -1.0 -1.0Cash flow hedges -8.6 -8.6
Transactions with shareholders and non-controlling interests:
Profit distribution -164.1 -164.1Issue of shares (option rights) 0.2 9.7 9.9Purchase of own shares -sale of own shares -Change in non-controlling interests -0.9 -0.9Option and share-based compensation 3.0 5.9 8.9
1) Excluding a MEUR 33.6 one-time restructuring cost related to the fixed cost adjustment program.2) Excluding a MEUR 22.5 provision for the Austrian cartel court’s fine decision and a MEUR 12.1 sales profit from the sale of
KONE Building.3) Excluding a MEUR 142.0 fine for the European Commission’s decision.
Notes for the interim report
20Q4
ORDERs RECEIVED
MEUR 1–12/2010 1–12/2009
3,809.0 3,432.4
ORDER BOOK
MEUR Dec 31, 2010 Dec 31, 2009
3,597.8 3,309.1
CAPITAL EXPENDITURE
MEUR 1–12/2010 1–12/2009
In fixed assets 32.0 40.9
In leasing agreements 11.5 5.6
In acquisitions 167.2 46.0
Total 210.7 92.5
R&D EXPENDITURE
MEUR 1–12/2010 1–12/2009
70.9 62.0
R&D Expenditure as percentage of sales 1.4 1.3
NUMBER OF EMPLOyEEs
1–12/2010 1–12/2009
Average 33,566 34,276
At the end of the period 33,755 33,988
Notes for the interim report
21Q4
COMMITMENTs
MEUR Dec 31, 2010 Dec 31, 2009
Mortgages
group and parent company - -
Pledged assets
group and parent company 2.0 1.9
guarantees
Associated companies 3.5 3.5
Others 6.0 6.4
Operating leases 179.0 162.0
Total 190.5 173.8
Banks and financial institutions have guaranteed obligations arising in the ordinary course of business of KONE companies up to a
maximum of EUR 699.3 (638.3) million as of December 31, 2010.
Possible unidentified debts and liabilities of the in 2005 demerged Kone Corporation were transferred to the new KONE Corpora-
tion according to the demerger plan.
KONE leases cars, machinery & equipment and buildings under operating leases with varying terms.
The future minimum lease payments under non-cancellable operating leasesMEUR Dec 31, 2010 Dec 31, 2009
Less than 1 year 44.5 41.0
1–5 years 100.7 91.6
Over 5 years 33.8 29.4
Total 179.0 162.0
DERIVATIVEs
Fair values of derivative financial instruments positivefair value
negativefair value
netfair value
netfair value
MEUR Dec 31, 2010 Dec 31, 2010 Dec 31, 2010 Dec 31, 2009
Foreign exchange forward contracts and swaps 6.1 9.0 -2.9 -2.6
Nominal values of derivative financial instrumentsMEUR Dec 31, 2010 Dec 31, 2009
Foreign exchange forward contracts and swaps 534.7 488.4
Cross-currency swaps 139.3 113.1
Electricity price forward contracts 5.6 5.3
Total 679.6 606.8
Notes for the interim report
22Q4
Dec 31, 2010 Class A shares Class B shares Total
Number of shares 38,104,356 222,431,764 260,536,120
Own shares in possession 1) 4,849,035
share capital, EUR 65,134,030
Market capitalization, MEUR 10,637
Number of B shares traded (millions), 1–12/2010 134.6
Value of B shares traded, MEUR, 1–12/2010 4,533
Number of shareholders 3 29,772 29,772
Close High Low
Class B share price, EUR, Jan-Dec 2010 41.60 43.20 27.72
1) During 2010, KONE used its authorization to repurchase own shares and bought back 550,000 of its own class B shares in May. In March 2010, 100,000 treasury class B shares of KONE Corporation were distributed without compensation to the KONE Corporation Centennial Foundation. In April 2010, 311,375 KONE class B shares assigned to the share-based incentive plan for the company’s senior management were transferred due to achieved targets for the financial year 2009. 290,639 of the shares were transferred by KONE Corporation and 20,736 were transferred by KNEBV Incentive Oy, subsidiary of KONE Corporation. In October 2010, a total of 4,568 KONE class B shares were returned free of consideration to KONE Corporation by virtue of the terms of KONE Corporation´s share-based incentive program for the years 2008–2009. In December 2010, 4,400 KONE class B shares held by KONE Corporation were assigned for the subscriptions with 2007 option rights.
shares and shareholders
KONE Corporation
Corporate Offices
Keilasatama 3
P.O. Box 7
FI-02151 Espoo, Finland
Tel. +358 (0)204 751
Fax +358 (0)204 75 4496
www.kone.com
For further information please contact:
Henrik Ehrnrooth
CFO
Tel. +358 (0)204 75 4260
Karla Lindahl
Director, Investor Relations
Tel. +358 (0)204 75 4441
KONE is one of the global leaders in the elevator and escalator industry. The company has been committed to under-
standing 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, comfor-
tably and without waiting in buildings in an increasingly urbanizing environment. In 2010, KONE had annual net sales
of EUR 5.0 billion and approximately 33,800 employees. KONE class B shares are listed on the NASDAQ OMX Helsinki
Ltd in Finland.
This bulletin contains forward-looking statements that are based on the current expectations, known factors, decisions and plans of the management of KONE. Although management believes that the expectations reflected in such forward-looking statements are reason-able, no assurance can be given that such expectations will prove to be correct. Accordingly, results could differ materially from those implied in the forward-looking statements as a result of, among other factors, changes in economic, market and competitive conditions, changes in the regulatory environment and other government actions and fluctuations in exchange rates.