KONE Corporation’s Interim Report for January-June 2009 

KONE’s Q2: Continued good performance

April-June

- In April-June 2009, orders received totaled EUR 953.9 (4–6/2008: 1,092) million. Orders received declined by 12.7%, or 13.6% at comparable exchange rates.
- Net sales increased by 2.3% to EUR 1,169 (1,142) million. At comparable exchange rates, the growth was 1.5%.
- Operating income excluding one-time costs was EUR 146.3 (136.7) million or 12.5% (12.0%) of net sales. The operating income, including the one-time cost of EUR 33.6 million related to the fixed cost adjustment program, was EUR 112.7 million.
- The plans for the fixed cost adjustment program have now been defined. The annual fixed cost reduction is expected to be at least EUR 40 million starting in 2010 and the total one-time cost relating to this program is EUR 33.6 million. The program is implemented in response to the weak new equipment market in order to be better prepared for 2010.
- KONE further specifies its full-year outlook for 2009. In net sales, the objective is to grow 2–5% as compared to net sales in 2008. In operating income (EBIT), the objective is EUR 570–595 million excluding the one-time cost of EUR 33.6 million.

January-June

- In January-June 2009, orders received totaled EUR 1,852 (1–6/2008: 2,210) million. Orders received declined by 16.2%, or 17.1% at comparable exchange rates. At the end of June 2009, the order book was EUR 3,754 (Dec 31, 2008: 3,577) million.
- Net sales increased by 6.9% to EUR 2,190 (2,047) million. At comparable exchange rates, the growth was 6.4%.
- Operating income excluding one-time costs was EUR 237.5 (223.2) million or 10.8% (10.9%) of net sales. The operating income, including the one-time cost of EUR 33.6 million related to the fixed cost adjustment program, was EUR 203.9 million.

1) Excluding a EUR 33.6 million one-time cost related to the fixed cost adjustment program.

Matti Alahuhta, President and CEO, in conjunction with the review:

“I am very pleased with our performance in the second quarter. Our Orders Received was higher than in the previous three quarters despite the weakened market environment. This is a result of an improved customer focus and strong actions to improve our solution competitiveness. Our record high cash flow exceeding EUR 200 million was another great achievement.

The new equipment markets continued to be weak. We communicated in April our intentions to adjust our fixed costs by EUR 40 million in order to be better prepared for 2010. We have now defined the plans for this program. Most of the efficiency improvements will be achieved by developing our organization globally to have flatter structures with wider spans of control. This will not only improve our efficiency, but it will also bring us closer to our customers, strengthen hands-on leadership at KONE, enable better internal learning transfer and increase the speed of continuous change.

As a result of the weaker market situation and this organizational development, the number of jobs at KONE is estimated to decrease globally by approximately 500 during the next nine months. The impact will be biggest in those country organizations where the new equipment market has weakened most. Simultaneously, we continue to recruit in those countries which provide growth opportunities.

Our business has developed well during the first half of this year. Our order book is strong and the Operating Income, excluding the one-time item related to the cost adjustment, has developed positively. Our competitiveness has improved in many market segments that provide the best growth opportunities in the current very challenging business environment. Based on this, I have good confidence also for the full-year development and the fixed costs adjustment program is an additional action in preparation for 2010.”

Analyst and media conference and conference call

A meeting for the press, conducted in Finnish, will be held on Tuesday, July 21, 2009 at 1:45 p.m. Eastern European Time.

A telephone conference and a meeting for analysts, conducted in English, will begin at 3:00 p.m. Eastern European Time. The telephone conference will also be available as a webcast on www.kone.com.

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

Telephone conference numbers:
US callers: +1 334 323 6201
Non-US callers: +44 (0)20 7162 0025
Participant code: KONE

An on demand version of the telephone conference will be available at www.kone.com later the same day.

 Read the report >>

About KONE

KONE’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. KONE provides its customers with industry-leading elevators, escalators and innovative solutions for modernization and maintenance, and is one of the global leaders in its industry. In 2008, KONE had annual net sales of EUR 4.6 billion and over 34,800 employees. KONE class B shares are listed on the NASDAQ OMX Helsinki in Finland.
 
www.kone.com

For further information please contact:
Henrik Ehrnrooth, Executive Vice President, Finance, tel. +358 (0) 204 75 4260

Sender:

KONE Corporation

Henrik Ehrnrooth
Executive Vice President,  
Finance

Anne Korkiakoski
Executive Vice President,
Marketing and Communications