Interim Report of KONE Corporation for January–March 2021

KONE Corporation, stock exchange release, April 28, 2021 at 12.30 p.m. EEST

Interim Report of KONE Corporation for January-March 2021

Strong start to the year with growth in sales and earnings

January-March 2021

• Orders received declined by 1.6% to EUR 2,075.9 (1-3/2020: 2,109.3) million. At comparable exchange rates, orders grew by 1.3%.
• Sales grew by 5.8% to EUR 2,326.4 (2,198.3) million. At comparable exchange rates, sales grew by 9.1%.
• Operating income (EBIT) was EUR 249.8 (197.2) million or 10.7% (9.0%) of sales. The adjusted EBIT was EUR 249.8 (205.6) million or 10.7% (9.4%) of sales.* 
• Cash flow from operations (before financing items and taxes) was EUR 425.5 (346.9) million.

Business outlook for 2021 (specified)

In 2021, KONE's sales growth is estimated to be in the range of 2% to 6% at comparable exchange rates as compared to 2020. The adjusted EBIT margin is expected to be in the range of 12.4% to 13.2%. Assuming that foreign exchange rates remain at the April 2021 level, the impact of foreign exchange rates on the adjusted EBIT would be limited.

KONE previously estimated its sales growth to be in the range of 0% to 6% at comparable exchange rates as compared to 2020. The adjusted EBIT margin was expected to be in the range of 12.4% to 13.4%. Assuming that foreign exchange rates would have remained at the January 2021 level, foreign exchange rates were estimated to impact the adjusted EBIT negatively by around EUR 20 million.

KEY FIGURES		1-3/2021	1-3/2020	Change	1-12/2020
Orders received	MEUR	2,075.9	2,109.3	-1.6%	8,185.1
Order book	MEUR	8,180.4	8,386.4	-2.5%	7,728.8
Sales	MEUR	2,326.4	2,198.3	5.8%	9,938.5
Operating income	MEUR	249.8	197.2	26.7%	1,212.9
Operating income margin	%	10.7	9.0		12.2
Adjusted EBIT*	MEUR	249.8	205.6	21.5%	1,250.5
Adjusted EBIT margin*	%	10.7	9.4		12.6
Income before tax	MEUR	252.2	197.2	27.9%	1,224.2
Net income	MEUR	195.5	152.8	27.9%	947.3
Basic earnings per share	EUR	0.37	0.29	26.7%	1.81
Cash flow from operations (before financing items and taxes)	MEUR	425.5	346.9		1,907.5
Interest-bearing net debt	MEUR	-1,375.3	-970.2		-1,953.8
Equity ratio	%	36.6	39.4		45.5
Return on equity	%	28.2	21.6		29.7
Net working capital (including financing items and taxes)	MEUR	-1,467.7	-964.3		-1,160.1
Gearing	%	-58.6	-39.2		-61.1

* KONE presents adjusted EBIT as an alternative performance measure to enhance comparability of the business performance between reporting periods. Restructuring costs related to significant restructuring programs are excluded from the calculation of the adjusted EBIT. During 2017-2020, all restructuring costs excluded from adjusted EBIT related to the Accelerate program.

Henrik Ehrnrooth, President and CEO:

"Our strong performance continued in Q1. Orders received were stable, largely thanks to continued growth in China. When considering the comparison period where the effects of the pandemic were yet to be seen in many parts of the world, this was a solid achievement. With good sales growth and margin expansion, our EBIT grew significantly. Our strong cash flow was again a highlight for the quarter. I am very pleased with how we have started the year and would like to extend a big thank you to our customers for their trust and to KONE's employees for the fantastic work they have done to deliver on our customer promises.

We are driving differentiation through adaptability and sustainability. This is the cornerstone of our new strategy phase and central to how we add value to our customers. Adaptability to changing user needs and to how buildings are used has become a critical success factor for many of our customers. Through our connected solutions, we enable an array of our own and third-party services to meet these requirements. Ensuring the sustainability of their buildings, as well as healthy and safe environments, is also high on our customers' agenda. Our focus has long been on environmental performance and securing market leading offering in terms of energy efficiency. We are now taking this to the next level with our commitment to embedding sustainability in all aspects of our business. Illustrating this is our recently launched D&I pledge where we commit to increase our actions around diversity, inclusion and equity at KONE. One of the specific goals includes making a step-change in the share of women at director level from 19% last year to 35% by 2030.

We are fully focused on capturing growth opportunities from the emerging recovery that we are seeing. I am encouraged by the recovery that we are starting to see in many markets and the continued strength of activity in China. During the first quarter, we completed the roll-out of our DX class elevators throughout EMEA and Asia-Pacific. We also had strong demand for our Office Flow solution that was launched late last year and the sales of our 24/7 Connected Services continues to accelerate. I am confident that these new solutions will create growth opportunities and provide support in an environment characterized by intense competition and rising material costs.  

I am optimistic about the important role offices play to the success of companies. Flexible working arrangements are here to stay, and offices will need to transform to attract current and future employees. Key elements of this transformation will include creating an environment that promotes wellbeing, flexibility and sustainability. These changes will foster innovation and more inclusive ways of working. The vision paper we published in March, jointly with Accenture and Amazon Web Services, explores how the office could be reimagined.

With the first quarter behind us, we have specified our business outlook for 2021. We now expect sales to grow by 2-6% and the adjusted EBIT margin to be 12.4-13.2%. Despite headwinds from increased material prices, we are well on track to continue on the path of profitable growth."

Operating environment in January-March 2021

In the first quarter of 2021, the global elevator and escalator market continued to be impacted by the COVID-19 pandemic and the measures taken to contain its spread. Compared to the previous quarter, there started to be early signs of recovery, especially in the residential and infrastructure segments thanks to the demand for affordable housing and anticipated investments.

Demand in the new equipment market decreased in most parts of the world from a high comparison period, where the negative effects of the pandemic were mainly visible in China. In Asia-Pacific, the new equipment markets grew clearly thanks to high level of activity in China.In the rest of Asia-Pacific, the new equipment markets declined clearly. In the EMEAregion, the new equipment market declined slightly. The new equipment market in Central and North Europe declined slightly whereas in South Europe, the market declined clearly. In the Middle East, the market was stable. In North America, the market declined significantly.

In the service market, maintenance  activity was resilient globally, while modernization remained impacted by delayed decision-making. 

Competition remained intense, which affected the pricing environment adversely.

Market outlook 2021 (updated)

The new equipment market is expected to grow slightly in China. In the rest of the world, the markets are expected to gradually recover.

The maintenance markets are expected to be resilient, excluding the direct impacts of the lockdown measures.

In the modernization markets, activity is expected to gradually recover supported by improving confidence.

Business outlook 2021 (specified)

In 2021, KONE's sales growth is estimated to be in the range of 2% to 6% at comparable exchange rates as compared to 2020. The adjusted EBIT margin is expected to be in the range of 12.4% to 13.2%. Assuming that foreign exchange rates remain at the April 2021 level, the impact of foreign exchange rates on the adjusted EBIT would be limited.

KONE has a solid order book and maintenance base for 2021. The improvement seen in the margin of orders received is expected to support profitability together with continual improvements in quality and productivity.

The key headwinds for 2021 results are the increased material and logistics costs. KONE also continues to invest actively in building the capability to sell and deliver digital services and solutions.

Press and analyst meetings

A Microsoft Teams call for the press, conducted in English, will be held on Wednesday, April 28, 2021 at 2:15 p.m. EEST. Journalists are kindly asked to sign up to media@kone.com, and they will receive a link to the call upon registration.

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

U.S.: +1 323-794-2423
UK: +44 (0)330 336 9105
Finland: +358 (0)9 7479 0361
Participant code: 6013837

For further information, please contact:
Natalia Valtasaari, Vice President, Investor Relations, KONE Corporation, 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 2020, KONE had annual sales of EUR 9.9 billion, and at the end of the year over 60,000 employees. KONE class B shares are listed on the Nasdaq Helsinki Ltd. in Finland.

www.kone.com

KONE Q1 2021 Interim Report