ANNUAL REVIEW
KONE 2020
CONTENTS
KONE in brief
1
KONE’s strategy
4
Board of Director’s report
6
Shares and shareholders
30
Key figures and financial development
34
Calculation of key figures
36
Consolidated financial statements
37
Consolidated statement of income
37
Consolidated statement of financial position
39
Consolidated statement of changes in equity
40
Consolidated statement of cash flows
41
Notes to the consolidated financial
statements
42
1. Basis of preparation
42
2. Financial performance
44
2.1 Sales
45
2.2 Costs and expenses
46
2.3 Depreciation and amortization
47
2.4 Foreign exchange sensitivity
48
2.5 Financing income and expenses
50
2.6 Income taxes
50
2.7 Earnings per share
51
2.8 Other comprehensive income
52
3. Net working capital
53
3.1 Inventories
54
3.2 Accounts receivable and contract assets and liabilities
55
3.3 Deferred assets
56
3.4 Accruals
57
3.5 Provisions
57
3.6 Deferred tax assets and liabilities
58
4. Acquisitions and capital expenditure
60
4.1 Acquisitions
61
4.2 Goodwill
62
4.3 Intangible assets
63
4.4 Tangible assets
64
5. Capital structure
67
5.1 Capital management
68
5.2 Shareholders’ equity
69
5.3 Financial risks and instruments
71
5.4 Share holdings and other non-current financial assets
75
5.5 Deposits and loans receivable
75
5.6 Commitments
75
5.7 Employee benefits
75
6. Others
79
6.1 Management remuneration
80
6.2 Share -based payments
81
6.3 Related party transactions
81
Parent company financial statements
83
Subsidiaries
95
Board of Director’s dividend proposal and
signatures
99
Auditor’s report
100
Corporate governance
statement
105
Corporate governance principles
105
Board of Directors
111
Executive Board
112
1 KONE ANNUAL REVIEW 2020
KONE IN BRIEF
At KONE, our mission is to improve the flow of urban life. As a
and escalator industry, KONE provides elevators, escalators and automatic building doors,
as well as solutions for maintenance and modernization, which add value to the life cycle
of any building. Through more effective People Flow®, we make people’s journeys safe,
convenient and reliable, in taller, smarter buildings. Together with our partners and
customers around the world, we help cities to become better places to live in.
Sales MEUR
9,939
in 2020
>60,000
employees
We move over
1 billion
people every day
~550,000
customers
>1,400,000
equipment in KONE’s
maintenance base
Operations in over
60
countries
Authorized distributors
and agents in close to
100 countries
KEY FIGURES
2 KONE ANNUAL REVIEW 2020
KEY FIGURES
1–12/2020
1–12/2019
Change
Change at
comparable
exchange
rates
Orders received
MEUR
8,185.1
8,399.8
-2.6%
-0.6%
Order book
MEUR
7,728.8
8,051.5
-4.0%
0.7%
Sales
MEUR
9,938.5
9,981.8
-0.4%
1.4%
Operating income
MEUR
1,212.9
1,192.5
1.7%
Operating income margin
%
12.2
11.9
Adjusted EBIT*
MEUR
1,250.5
1,237.4
1.1%
Adjusted EBIT margin*
%
12.6
12.4
Income before tax
MEUR
1,224.2
1,217.5
0.6%
Net income
MEUR
947.3
938.6
0.9%
Basic earnings per share
EUR
1.81
1.80
0.6%
Cash flow from operations (before financing items and
taxes)
MEUR
1,907.5
1,549.6
Interest-bearing net debt
MEUR
-1,953.8
-1,552.9
Equity ratio
%
45.5
46.5
Return on equity
%
29.7
30.1
Net working capital (including financing items and taxes)
MEUR
-1,160.1
-856.0
Gearing
%
-61.1
-48.6
* In September 2017, KONE introduced a new alternative performance measure, adjusted EBIT, to enhance comparability of the business performance
between reporting periods during the Accelerate program. Restructuring costs related to the Accelerate program are excluded from the calculation of the
adjusted EBIT.
Orders received *, MEUR
*) Orders received do not include
maintenance contracts
Sales , MEUR
Adjusted EBIT, MEUR and adjusted
EBIT margin, %
KEY FIGURES
3 KONE ANNUAL REVIEW 2020
39 %
(41 %)
20 %
(21 %)
41 %
(39 %)
EMEA
Americas
Asia-Pacific
1-12/2020
(1-12/2019)
54 %
(53 %)
32 %
(32 %)
14 %
(15 %)
New equipment
Maintenance
Modernization
1-12/2020
(1-12/2019)
Sales by region
Sales by business
Cash flow*, MEUR
*) Cash flow from operations before financing
items and taxes
Earnings per share, EUR
Dividend per class B share, EUR
*) Board’s proposal. Includes proposed
extraordinary dividend EUR 0.50 per class B
share.
STRATEGY
4 KONE ANNUAL REVIEW 2020
KONE’S STRATEGY
At KONE, our mission is to improve the flow of urban life. We understand urbanization and help our
customers make the best of the world’s cities, buildings and public spaces. Our vision is to create the best
People Flow experience. We believe our vision can be best achieved by working together with our customers
and partners in every step of the process.
KONE’s strategic phase 2021–2024 is called
‘Sustainable success with customers’.
During the four-
year strategy period, KONE will focus on increasing the
value it creates for customers with new intelligent
solutions and will embed sustainability even deeper
across all of its operations.
Urbanization, sustainability and technology are
three megatrends which continue to be key drivers in
the development of the elevator and escalator industry.
Against this backdrop, ‘Sustainable success with
customers’ will address the needs of a digitally enabled
world, where the ways people live, work and commute
continue to change. KONE will focus on developing
smart and sustainable solutions that adapt to future
needs, together with its customers and partners. By
doing this, KONE will enable customers’ facilities to
function more effectively and to deliver an improved
user experience.
KONE MISSION AND VISION
KONE’s mission is to improve the flow of urban life.
This means understanding urbanization and helping
customers make cities better and more sustainable
places to live.
KONE’s vision is to create the best People Flow
experience. The best experience can be created by
working together with customers and partners in every
step of the process, from early engagement to
upgrading equipment.
CLEAR FOCUS AREAS FOR SUCCESS
In order to bring clear direction to our strategy, KONE
has defined four
Where to Win
areas, representing the
biggest opportunities for profitable growth and
differentiation:
◾
Core products and services
,
matching
customer specific needs for a seamless
experience through connectivity and
adaptability. All products and services will be
optimi zed for cost efficiency and sustainability.
◾
New solutions for customer value
,
which
are developed and integrated with core
products and services to create value for
customers in new ways.
◾
Smart and sustainable cities
: becoming the
preferred partner for smart and sustainable city
development.
◾
Service business in China:
becoming a clear
market leader in this very fast-growing and
fragmented market.
In addition, the following
Ways to Win
are KONE-wide
transformation and development initiatives which will
enable us to create ‘Sustainable success with
customers’:
◾
Empowered people:
having the most capable
and engaged team of professionals who
succeed in a changing world and are able to
develop with continuous learning opportunities.
◾
Marketing and sales renewal:
creating a
seamless, unified customer experience across
multiple channels.
◾
Lean KONE:
leveraging Lean skills, practices
and leadership to eliminate waste and ensure
continuous improvement.
◾
Digital + physical enterprise:
having future-
proof technology infrastructure, building the
capabilities to use data and analytics and
further developing the efficiency and resilience
of our supply chain.
KONE’S STRATEGIC AND FINANCIAL
TARGETS
KONE measures progress against five strategic targets:
◾
Great place to work
◾
Most loyal customers
◾
Faster than market growth
◾
Best financial development
◾
Leader in sustainability
The company’s long-term financial targets are:
◾
Growth: Faster than the market
◾
Profitability: To reach an EBIT margin of 16%
◾
Cash flow: Improved working capital rotation
STRATEGY
5 KONE ANNUAL REVIEW 2020
BOARD OF DIRECTORS’ REPORT | KONE’S BUSINESS MODEL
6 KONE ANNUAL REVIEW 2020
BOARD OF DIRECTORS’ REPORT
KONE’s Business model
KONE provides value for the customers during the entire lifespan of the building. In the new equipment
business, we offer innovative , intelligent and sustainable elevators, escalators, automatic building doors and
integrated access control solutions to deliver the best people flow experience. In maintenance, we ensure
the safety and availability of the equipment in operation, and in modernization we offer solutions for aging
equipment ranging from the replacement of components to full replacements.
Materials used 1,514,500 tonnes
Heating and vehicle fleet fuels 428,700
MWh
Electricity and district heat 85,300 MWh
Water consumption 325,600 m3
NATURAL RESOURCES*
Equity EUR 3.2 billion
Interest-bearing net debt EUR -2 billion
Net working capital EUR -1.2 billion
Capital expenditure 2.0% of sales
FINANCIAL
12 manufacturing units in 8 countries
~2,000 component suppliers and
thousands of installation suppliers
Logistics network
Supplier Sustainability Maturity
Assessment
MANUFACTURING AND
DELIVERY CHAIN
*2019 figures. 2020 figures will be
published in the 2020 Sustainability
Report in Q2 2021
.
One of the leading brands in the
elevator and escalator industry
BRAND AND REPUTATION
>5,000 granted or pending patents
globally
R&D spend 1.8% of sales, 8 global
R&D units
~1,400 technology professionals in
R&D
Global KONE way processes and
systems
Safe and efficient maintenance and
installation methods
INNOVATIONS, PROCESSES
AND SYSTEMS
Co-creation with customers
Partnering to develop new technologies
Collaboration with >300 universities and
educational institutes
Distributors and agents important part
of go-to-market
>60,000 employees of 147 different
nationalities, ca. half of employees in
the field
Personnel voluntary turnover rate 5.5%
Wide development opportunities on all
organizational levels around the world
>6,000 courses in 40 different
languages
Management systems and certificates
(e.g. ISO 14001, ISO 9001, OHSAS
18001)
Governance structures, ethical business
practices and compliance, 96% of
employees completed our Code of
Conduct training
SUSTAINABLE SUCCESS
WITH CUSTOMERS
BUSINESS MODEL
INPUTS
PARTNERING
PEOPLE AND LEADERSHIP
CREATING VALUE BY IMPROVING THE FLOW OF
URBAN LIFE
BOARD OF DIRECTORS’ REPORT | KONE’S BUSINESS MODEL
7 KONE ANNUAL REVIEW 2020
Growth drivers
The key growth drivers of the new equipment business
are urbanization and changing demographics. New
equipment deliveries are the main growth driver of the
maintenance business as majority of units delivered will
end up in KONE’s maintenance base. However, KONE
maintains also other OEM’s equipment. The main
growth drivers for modernization are the aging installed
base and higher requirements for efficient people flow,
safety and sustainability. Having a strong maintenance
base is crucial for the growth in modernization. KONE
sees significant growth opportunities also in creating
value for customers in new ways with the help of new
technologies and connectivity.
Business characteristics
KONE’s business model is capital light as the working
capital is negative in all businesses and we work
extensively with component suppliers to complement
our own manufacturing capacity. The maintenance
business is very stable due to high requirements for
safety and reliability. The customer relationships are
also typically long and stable (>90% annual retention
rate). New equipment and modernization are more
cyclical in nature and follow the construction cycles.
Key value drivers
KONE has identified five strategic inputs crucial in
creating value for customers, shareholders and the
society. These are:1) competent and engaged people
and strong leadership, 2) innovative offering and global
processes and systems, 3) best partners, 4) efficient
manufacturing and delivery chain as well as 5) strong
brand and solid reputation. These are described in
more detail in the picture below. In addition to these,
KONE sees that the lifecycle business model and the
existing maintenance base of over 1.4 million units
have a crucial role in value creation. The different
businesses support the growth of each other and
together provide stability for the business.
Operating income EUR 1,213 million
Dividend proposal EUR 2.25 per class B share (incl.
extraordinary dividend), total amount of proposed dividends
MEUR 1,166
Return on equity 29.7%
ENVIRONMENT*
3.1% y/y reduction on operational carbon footprint relative
to sales
5.4% y/y reduction of Scope 1&2 carbon footprint relative to
sales
37% of green electricity
93.9% of waste recycled or incinerated
100% of corporate units, major manufacturing units and
R&D units are ISO 14001 and ISO 9001 certified
91% of strategic suppliers with ISO 14001 certification at
the end of 2019
EMISSIONS AND WASTE*
Carbon footprint from own operations
327,100 tCO
2
e
Waste 42,900 tonnes
Wastewater effluents 8 tonnes
Recognized for our contribution to better societies and
urban environment by several external parties, e.g. CDP,
Forbes and The Financial Times’ Diversity leaders report
Wages, salaries, other employment expenses and pensions
EUR 3.0 billion
Industrial Injury Frequency Rate (IIFR) 1.2
83% of external hires into leadership positions from local
communities
19% of director level positions held by women
Increased amount of skilled workforce
Direct purchases EUR 4.0 billion
Income taxes EUR 276.9 million with effective tax rate
22.6%
~180,000 new elevators and escalators
ordered in 2020
Maintenance and modernization
services, >1.4 million units in
maintenance base
Best in class energy efficiency, ISO
25745 A-class energy rating as the first
elevator company
Up to 70% energy savings through
modernization of elevators
Focus on safety and accessibility
IMPACT
OUTPUTS
SOCIETY
MOVING OVER 1
BILLION PEOPLE
EVERY DAY
SHAREHOLDERS
THE MOST SUSTAINABLE
OFFERING
BOARD OF DIRECTORS’ REPORT
8 KONE ANNUAL REVIEW 2020
Operating environment by region
New equipment market
in units
Maintenance market
in units
Modernization
market
1
–
12/2020
1
–
12/2020
1–12/2020
Total market
Stable
+
Stable
EMEA
–
+
– –
Central and North Europe
Stable
+
– –
South Europe
– –
Stable
– –
Middle East
– –
+
–
North America
– – –
+
+
Asia-Pacific
+
++
+
China
++
++
++
Rest of Asia-Pacific
– – –
+
Stable
– – – Significant decline (>10%), – – Clear decline (5–10%), – Slight decline (<5%), Stable,
+ Slight growth (<5%), ++ Clear growth (5–10%), +++ Significant growth (>10%)
KONE’s operating environment
In 2020, the global elevator and escalator market was
impacted by the COVID-19 pandemic. Governments
across the world were taking significant measures to
contain the outbreak by restricting the movement of
people. In many places, this resulted in actions such as
closing down construction sites and limiting
manufacturing operations especially in the first half of
the year. In most countries, maintenance was deemed
an essential service which was allowed with some
limitations even during lockdowns. In the beginning of
the year, COVID-19 had the biggest impacts on the
market in China, whereas from the second quarter
onwards China was driving the growth and other
markets were more impacted.
new equipment market
, demand decreased
in most parts of the world
.
In Asia-Pacific
, the new
equipment volumes
grew slightly
as a result of high
level of activity
in China
after the challenging first
quarter.
In the rest of Asia-Pacific
, the new equipment
markets declined significantly.
In the EMEA region
, the
new equipment market declined slightly. The new
equipment market in Central and North Europe was
stable,
whereas in South Europe and in the Middle
East, the market declined clearly.
In North America
,
the new equipment market declined significantly.
was resilient during
2020. The increased uncertainty had a bigger impact on
the
modernization markets
due to delayed decision-
making .
pricing
environment
BOARD OF DIRECTORS’ REPORT
9 KONE ANNUAL REVIEW 2020
Orders received
MEUR
2020
2019
Change
Change at
comparable
exchange rates
Orders received
8,185.1
8,399.8
-
2.6%
-
0.6%
Order book
7,728.8
8,051.5
-
4.0%
0.7%
– – – Significant decline (>10 %), – – Clear decline (5–10 %), – Slight decline (<5 %), Stable,
+ Slight growth(<5 %) , ++ Clear growth (5–10 %), +++ Significant growth (>10 %)
Orders received development by region*
New equipment orders
Modernization orders
Total orders
EMEA
– –
– –
– –
Americas
– – –
+++
– –
Asia-Pacific
++
++
++
China
+++
+++
+++
Orders received and order book
Orders received consist predominantly of new equipment and modernization orders. Maintenance contracts are not included in orders received, but the
figure includes orders related to the maintenance business, such as repairs.
Orders received declined by 2.6% as compared to
January –December 2019 and totaled EUR 8,185.1
million. At comparable exchange rates, KONE’s orders
received declined by 0.6%.
At comparable rates, new equipment orders
received declined slightly with slight growth in the
volume business and significant decline in major
projects. In modernization, orders received grew slightly
with slight decline development in the volume business
and significant growth in major projects.
The relative margin of orders received improved
slightly compared to the comparison period. This was a
result of solid pricing supported by new product and
service launches and easing cost pressures.
KONE’s new equipment orders received in elevator
and escalator units amounted to approximately 180,000
units (2019: 173,000).
Orders received in the EMEA region
clearly at comparable exchange rates as compared to
January –December 2019. New equipment orders
declined clearly and modernization orders declined
clearly.
In the Americas region
, orders received declined
clearly at comparable rates as compared to January–
December 2019. New equipment orders declined
significantly and modernization orders grew
significantly.
Orders received in the Asia-Pacific region
clearly at comparable rates as compared to January–
December 2019. In China, new equipment orders grew
significantly in units and grew significantly in monetary
value . Like-for-like prices were slightly higher than in
the comparison period and mix contributed also
positively. In the rest of Asia-Pacific, new equipment
orders received declined significantly. Modernization
orders received grew significantly in China and declined
clearly in the rest of Asia-Pacific.
The order book
end of December 2019 but stood at a strong level of
EUR 7,728.8 million at the end of the reporting period.
Customer cancellations remained at a low level.
Terminology: Slight <5%, clear 5– 10%, significant >10%
BOARD OF DIRECTORS’ REPORT
10 KONE ANNUAL REVIEW 2020
MEUR
2020
2019
Change
Change at
comparable
exchange rates
New equipment sales
5,340.2
5,318.8
0.4%
2.7%
Service sales
4,598.4
4,663.0
-
1.4%
0.1%
Maintenance
3,215.6
3,192.0
0.7%
2.2%
Modernization
1,382.8
1,471.0
-
6.0%
-
4.5%
Total sales
9,938.5
9,981.8
-
0.4%
1.4%
Sales by business
– – – Significant decline (>10 %), – – Clear decline (5–10 %), – Slight decline (<5 %), Stable,
+ Slight growth(<5 %) , ++ Clear growth (5–10 %), +++ Significant growth (>10 %)
Sales development by region and by business*
New equipment
Maintenance
Modernization
EMEA
– –
+
– –
Americas
–
–
– –
Asia-Pacific
++
++
++
MEUR
2020
2019
Change
Change at
comparable
exchange rates
EMEA
3,916.2
4,045.4
-
3.2%
-
2.2%
Americas
1,939.5
2,046.7
-
5.2%
-
2.7%
Asia-Pacific
4,082.8
3,889.7
5.0%
7.5%
Total sales
9,938.5
9,981.8
-
0.4%
1.4%
Sales by region
Sales
KONE’s sales declined by 0.4% as compared to
January –December 2019, and totaled EUR 9,938.5
million. At comparable exchange rates, KONE’s sales
grew by 1.4%. The sales consolidated from the
companies acquired in 2020 had only a minor impact on
KONE’s sales for the financial period.
Sales were impacted by the COVID-19 related
restrictions in many markets.
New equipment sales accounted for EUR 5,340.2
million and grew by 0.4% over the comparison period.
At comparable exchange rates, new equipment sales
grew by 2.7%. The growth in China offset the decline in
activity in many other areas.
Service (maintenance and modernization) sales
declined by 1.4%, and totaled EUR 4,598.4 million. At
comparable exchange rates, service sales grew by
0.1%. Maintenance sales grew by 0.7% (2.2% at
comparable exchange rates) and totaled EUR 3,215.6
million with resilient contract sales but lower
discretionary spend by customers. Modernization sales
were more impacted by the restrictions and declined by
6.0% (declined by 4.5% at comparable exchange rates)
totaling EUR 1,382.8 million.
KONE’s elevator and escalator maintenance base
continued to grow and was over 1.4 million units at the
end of 2020 (over 1.3 million units at the end of 2019).
The growth of the maintenance base was driven, in
particular, by a continued good level of conversions of
new equipment deliveries to the maintenance base.
Acquisitions had only a minor positive contribution to
the growth. In 2020, the balance of maintenance
contracts that were won from or lost to competition was
slightly negative.
The largest individual countries in terms of sales
were China (~30%), The United States (>15%),
Germany (6%) and France (5%).
Sales in the EMEA region
totaled 3,916.2 million. At comparable exchange rates,
sales declined by 2.2%. New equipment sales declined
clearly, maintenance sales grew slightly and
modernization sales declined clearly in the region.
In the Americas
, sales declined by 5.2% and
totaled EUR 1,939.5 million. At comparable exchange
rates, sales declined by 2.7%. New equipment sales
declined slightly, maintenance sales declined slightly
and modernization sales declined clearly in the region.
In Asia-Pacific
, sales grew by 5.0% and totaled EUR
4,082.8 million. At comparable exchange rates, sales
grew by 7.5%. New equipment sales grew clearly,
maintenance sales grew clearly and modernization
sales grew clearly in the region.
Terminology: Slight <5%, clear 5– 10%, significant >10%
BOARD OF DIRECTORS’ REPORT
11 KONE ANNUAL REVIEW 2020
Financial result
Jan 1
–
Dec 31, 2020
Jan 1
–
Dec 31, 2019
Operating income, MEUR
1,212.9
1,192.5
Operating income margin, %
12.2
11.9
Adjusted EBIT, MEUR
1,250.5
1,237.4
Adjusted EBIT margin, %
12.6
12.4
Income before taxes, MEUR
1,224.2
1,217.5
Net income, MEUR
947.3
938.6
Basic earnings per
share, EUR
1.81
1.80
Jan 1
–
Dec 31, 2020
Jan 1
–
Dec 31, 2019
Cash flow from operations (before financing items and
taxes), MEUR
1,907.5
1,549.6
Net working capital (including financing items and taxes),
MEUR
-
1,160.1
-
856.0
Interest
-
bearing net debt, MEUR
-
1,953.8
-
1,552.9
Gearing, %
-
61.1
-
48.6
Equity ratio, %
45.5
46.5
Equity per share, EUR
6.12
6.13
Cash flow and financial position
Financial result
KONE’s operating income (EBIT) was EUR 1,212.9
million or 12.2% of sales. The adjusted EBIT, which
excludes restructuring costs related to the Accelerate
program, was EUR 1,250.5 million or 12.6% of sales.
Going into this year we had an overall positive
outlook for our margins. Despite the uncertain
environment, profitability improved. This was a result of
earlier improved margin of orders and lower
discretionary spend offsetting the negative impacts of
the COVID-19 pandemic.
Translation exchange rates had a negative impact
of 18.4 million on the operating income. Restructuring
costs related to the Accelerate program were EUR 37.7
million and savings from the program were over EUR
50 million.
KONE’s income before taxes was EUR 1,224.2
million. Taxes totaled EUR 276.9 (278.9) million. This
represents an effective tax rate of 22.6% for the full
financial year. Net income for the period was EUR
947.3 million.
Basic earnings per share was EUR 1.81.
Cash flow and financial position
KONE’s financial position was very strong at the end of
December 2020.
Cash flow from operations (before financing items
and taxes) during January–December 2020 was
exceptionally strong at EUR 1,907.5 million.
Net working capital (including financing items and
taxes) was EUR -1,160.1 million at the end of
December 2020. The improvement was driven by a
positive development in several net working capital
items.
Interest -bearing net debt was EUR -1,953.8 million
at the end of December 2020. KONE’s cash and cash
equivalents together with current deposits and loan
receivables were EUR 2,629.4 (Dec 31, 2019: 2,252.0)
million at the end of the reporting period. Interest-
bearing liabilities were EUR 695.8 (Dec 31, 2019:
721.6) million, including a pension liability of EUR 187.2
(Dec 31, 2019: 172.9) million and leasing liability of
EUR 342.9 (Dec 31, 2019: 371.0) million. Additionally,
KONE had an asset on employee benefits, EUR 19.2
(Dec 31, 2019: 21.7) million. Gearing was -61.1% and
equity ratio was 45.5% at the end of December 2020.
Equity per share was EUR 6.12.
BOARD OF DIRECTORS’ REPORT
12 KONE ANNUAL REVIEW 2020
MEUR
Jan 1
–
Dec 31, 2020
Jan
1
–
Dec 31, 2019
On fixed assets
87.5
98.0
On leasing agreements
113.4
102.5
On acquisitions
29.0
36.0
Total
230.0
236.5
Capital expenditure & acquisitions
R&D expenditure
MEUR
Jan 1
–
Dec 31, 2020
Jan 1
–
De
c 31, 2019
R&D expenditure
179.6
170.9
As percentage of sales, %
1.8
1.7
Capital expenditure and acquisitions
KONE’s capital expenditure and acquisitions totaled
EUR 230.0 million in January–December 2020. Capital
expenditure was mainly related to equipment and
facilities in R&D, IT, operations and production. Capital
expenditure on leases consists mainly of maintenance
vehicles and office facilities.
Acquisitions totaled EUR 29.0 million in January–
December 2020. KONE completed small acquisitions of
maintenance businesses in the EMEA region.
In the Financial Statement Bulletin 2019, KONE
mentioned it had been evaluating acquisition
opportunities related to the thyssenkrupp Elevator
Technology business. On February 17, 2020 KONE
published a stock exchange release stating it has
withdrawn from these discussions with thyssenkrupp.
Research and development
KONE’s vision is to create the Best People Flow®
experience . The objective of KONE’s solution and service
development is to drive differentiation further by putting
the needs of customers and users at the center of all
development. By closer collaboration with customers and
partners, KONE will increase the speed of bringing new
services and solutions to the market.
Research and development expenditure totaled EUR
179.6 million, representing 1.8% of sales in January–
December 2020. R&D expenditures include the
development of new product and service concepts as well
as further development of existing solutions and services.
At
KONE, we find it especially important to continue to
invest in research and development in challenging market
conditions and have thus accelerated some development
programs during 2020.
During January–December 2020, KONE launched new
solutions as well as updates to its offering.
In the beginning of 2020, KONE started the launch of a
new elevator series, KONE DX Class elevators, from
Europe and the roll-out continued to Middle East, Russia,
Turkey and countries in the Asia-Pacific region during the
year. This new elevator series featuring built-in
connectivity and an enhanced user experience was
introduced in the end of 2019 and will replace the current
KONE elevator range across areas. In the second quarter,
KONE DX Class elevators won four awards in the
renowned Red Dot Award: Product Design 2020
competition. The KONE DX Class elevator interior
collection and the KONE DX Class digital experience
elevator concept were awarded for their outstanding
design features, innovativeness and smart elements.
During the year, the KONE DX Class elevators were made
available also for modernization in many markets. This
enables customers to access the digital services and
applications offered by KONE and KONE’s ecosystem
partners by modernizing their equipment to DX Class.
In the second quarter, KONE introduced a range of
people flow solutions to help make buildings and cities
safer and healthier places to live, work and commute.
These solutions address the challenges of adapting to a
new way of life in the face of the current pandemic. The
KONE People Flow Planning and Consulting service has
been tailored to better support planning a safe return to
offices and other buildings. By using data, simulation tools,
and expertise from KONE's interior architects and data
scientists, customers can quickly see how to reduce
crowding and bottlenecks and enable people to move
around safely in buildings. In addition, other new solutions
introduced improve air quality in elevators, help disinfect
escalator handrails and reduce the need to touch
surfaces.
In the third quarter, KONE launched KONE
MonoSpace® 300 elevator in the Americas. KONE
MonoSpace 300 is a cost-efficient machine room-less
elevator offering better ride comfort and improved energy-
efficiency for a market segment previously dominated by
hydraulic elevators.
In the fourth quarter, KONE introduced KONE Office
Flow™ for offices in high-rise buildings in selected key
markets in North America, Europe, Middle East and Asia
Pacific. KONE Office Flow™ is a modular, connected
people flow solution delivering personalized access and
enhanced user experiences in smart, adaptive
BOARD OF DIRECTORS’ REPORT
13 KONE ANNUAL REVIEW 2020
workplaces. With touchless access and predictive elevator
calling it integrates with mobile devices, removing the
need for key cards and tags. It features a newly designed
destination control system, visitor management and
guidance to reduce waiting and journey times.
BOARD OF DIRECTORS’ REPORT
14 KONE ANNUAL REVIEW 2020
Non-financial information
Sustainability is a source of innovation and a
competitive advantage for KONE. We want to be the
most trusted partner to our customers throughout the
building life cycle and help them achieve their
sustainability objectives, creating better urban
environments. At KONE, sustainability covers our
offering, operations and culture and encompasses the
environmental aspect, diversity and inclusion, safety,
quality and ethics and compliance. Our strategy and
values reflect our commitment to sustainable practices.
KONE is proud to conduct its
business in a responsible and
sustainable way, and we expect the
same commitment from all our
partners. We are committed to the
laws and regulations of the countries
where we operate. KONE is a
member of the UN Global Compact
and dedicated to upholding its ten
principles, which are aimed at
promoting sustainability and fairness
in the business environment. The
principles are embedded in our
strategy, policies and procedures, such as KONE’s
Code of Conduct, Competition Compliance Policy, and
our Environmental Excellence Program, as well as
related processes. In addition, KONE supports the UN
Sustainable Development agenda and its goals. KONE
has also signed the Paris Pledge for Action climate
initiative and in 2020, set Science Based Targets for its
operations, offering and the value chain, showing
climate leadership and commitment to limiting global
warming to 1.5 degrees Celsius in accordance with the
Paris Climate Agreement. KONE has started applying
the Task Force on Climate-related Financial Disclosure
(TCFD) reporting principles in order to report about
climate -related financial risks and opportunities.
KONE’s initial TCFD reporting will take place within this
Non-Financial information section and in other parts of
this report. The table on in this text maps the pages of
the report where content according to TCFD
requirements can be found.
KONE’s strategy and business model are described
on pages 4–7 of KONE’s Annual Review 2020. Risks
and risk management related to matters below are
described in the risk section under Risks and risk
management related to the reporting of non -financial
information .
More information on KONE’s approach to
sustainability can be found in the Sustainability Report.
KONE published its Sustainability Report for 2019 in
April 2020. KONE’s Sustainability Report for 2020 will
be published during Q2 2021 according to GRI
Standards .
Management and Board of Directors’ oversight of
sustainability
KONE has integrated the management of non-financial
matters and sustainability into operations throughout
the organization. KONE’s management and supervisors
work to ensure that employees are familiar with and
comply with the legislation, regulations, and internal
operating guidelines of their respective areas of
responsibility, and that KONE’s products and services
are in full compliance with all codes and standards
applicable to them.
Ultimately, sustainability and its management are
the responsibilities of KONE’s Executive Board and our
President and CEO. KONE’s Executive Board
discusses sustainability topics, including e.g.
environmental, social and compliance topics, in its
meetings regularly. In 2020, climate related topics alone
were discussed 3-4 times. Furthermore, KONE has
established forums where sustainability
and climate -related topics are regularly
discussed: The Quality and
Environmental Board and the Solution
Board, both chaired by KONE
President and CEO and with Executive
Board level members. In 2020, KONE
also established a Sustainability Board,
a steering committee dedicated to
sustainability topics, climate and
environment among the priority areas.
Several members of KONE’s Executive
Board are members of the
Sustainability Board, chaired by KONE’s EVP of
Operations Development.
KONE’s Board of Directors is responsible for
overseeing and supervising the implementation of
KONE’s strategy, including sustainability topics and
climate change issues. The Board also reviews risks
and risk management of which environmental, social
and anti-corruption matters are a part of.
During 2020, sustainability was on the agenda of
Executive Board and Board of Directors meetings as
part of the preparation of KONE’s new strategy. In
addition, one focus area during the year was Science-
Based Targets, which KONE set in September 2020
(see more information in Environmental matters).
External recognitions
KONE has received external recognition for efforts to
conduct business in a sustainable way. For example, in
early 2020, KONE was ranked as the 32nd most
sustainable company in the world by Corporate Knights
Inc. KONE was second among peer companies in the
machinery manufacturing industry category and the
only elevator and escalator industry company to make
the Global 100 Most Sustainable Corporations in the
World ranking. Furthermore, KONE was again included
in the FTSE4Good index and made CDP’s Climate
Change A List among the top climate change
performers. CDP is an international non-profit
organization that drives engagement for climate action.
This is the eighth consecutive year that KONE has
achieved a leadership score of A or A- in the Climate
Change rating, which describes long-term commitment
to environmental work and sustainability. KONE was
also awarded the best A grade in CDP’s 2019 Supplier
Engagement Rating, demonstrating leadership and best
practice in engaging our suppliers on climate change
issues. In addition, KONE has been awarded the
Eco Vadis platinum medal for our sustainability
performance, placing us among the top 1% of all
assessed companies.
KONE’s Sustainability
Report 2020
●
Will be published during
Q2 2020
●
In the report, you can
find more detailed
information about
sustainability
BOARD OF DIRECTORS’ REPORT
15 KONE ANNUAL REVIEW 2020
Key performance indicator
Target s in 2020*
2020 results
2019 results
Environmental
matters
Annual reduction of KONE’s
carbon footprint relative to
sales, %
1)
3% annual reduction
relative to sales
Will be published in
the Sustainability
Report during Q2
2021.
3.1% reduction relative
to sales
Share of key suppliers ISO
14001 certified, %
100%
90%
91%
Share of green electricity
used in our facilities, %
50% by 2021
Will be published in
the Sustainability
Report during Q2
2021.
37%
Share of landfill waste at our
manufacturing units, %
0% by 2030
Will be published in
the Sustainability
Report during Q2
2021.
0.9%
Personnel and
social matters
Industrial Injury Frequency
Rate (IIFR)
2)
Zero injuries
IIFR 1.2
IIFR 1.7
Employee engagement
Maintain employee
engagement on a
strong level
The response rate in
the Pulse employee
engagement survey
was record high at
92%. The global
survey results took a
great leap up and
engagement was at a
very strong level. All
survey dimensions
improved and the
vast majority of
KONE’s global scores
were above external
high performance
benchmarks.
Focused on completing
the actions agreed
based on 2018
employee engagement
survey and organized
dedicated discussions,
Pulse Talks, across the
organization. Almost
80% of employees
participated in the Pulse
Talks.
Personnel voluntary
turnover rate, %
3)
Maintain voluntary
turnover below
market level
5.5%
7.6%
Gender distribution, %
More balanced
gender split
11% women, 89%
men
11% women, 89% men
Gender distribution in
director level positions, %
20% of director level
positions occupied by
women by 2020
19%
18%
Human rights,
anti-corruption
& bribery
Share of employees with
completed Code of Conduct
training, %
100%
96% of nearly 60,000
employees in 64
countries
90% of nearly 58,000
employees in 64
countries
Share of key suppliers who
have signed the Supplier
Code of Conduct, %
100%
84% (scope
expanded from
previous year)
95%
Share of distributors who
have signed the Distributor
Code of Conduct, %
100%
100% of our
distributors in China
and 88% in the rest of
the world.
100% of distributors in
China, and 87% in the
rest of the world
* Some targets will be updated for 2021 in line with KONE’s new sustainability ambitions.
1)
Corporate Accounting and Reporting Standard and Corporate Value Chain (Scope 3) Accounting and Reporting Standard. The
Scope 2 emissions have been calculated according to the dual reporting principles of the GHG Protocol Scope 2 Guidance
(market- and location-based method). RES-GO guarantees of origin subject to EECS (European Energy Certificate System)
have been acquired for the purchased green electricity, as well as some supplier specific instruments. KONE’s greenhouse gas
emissions and water consumption at KONE’s manufacturing units have been externally assured by Mitopro Oy. The emission
factors are based on the data sources of DEFRA (UK Department for Environment, Food & Rural Affairs), World Resource
Institute GHG Emission Factors Compilation, AIB (Association of Issuing Bodies) European Residual Mix Report, and supplier
specific factors for Finland.
2)
3)
Sum of voluntarily left employees (with permanent contract) over 12 months divided by average closing headcount over 12
months
Non-financial key performance indicators
BOARD OF DIRECTORS’ REPORT
16 KONE ANNUAL REVIEW 2020
TCFD recommended disclosures
Content in KONE’s report
Governance
Board’s oversight of climate-related risks and
opportunities
Non-financial information / Management and
Board of oversight of sustainability, p. 14
Management’s role in assessing and managing
climate-related risks and opportunities
Non-financial information / Management and
Board of oversight of sustainability, p. 14
Strategy
Climate-related risks and opportunities over the
short, medium and long term
Non-financial information / Environmental
matters, p. 17
Impact of climate-related risks and opportunities
on the organization’s businesses, strategy and
financial planning
Strategy, p. 4
Risks and risk management related to the
reporting of non-financial information, p. 24
Resilience of strategy, taking into consideration
different climate-related scenarios
KONE has not conducted scenario work yet.
Risk
management
Processes for identifying and assessing climate-
related risks
Risks and risk management related to the
reporting of non-financial information, p. 24
Processes for managing climate-related risks
Risks and risk management related to the
reporting of non-financial information, p. 24
How processes for identifying, assessing and
managing climate-related risks are integrated into
the organizations overall risk management
Risks and risk management related to the
reporting of non-financial information, p. 24
Metrics and
targets
Metrics used to assess climate-related risks and
opportunities
Non-financial information / Key performance
indicators, p. 15
Non-financial information / Environmental
matters, p. 17
Scope 1, Scope 2 and Scope 3 emissions and
the related risks
Non-financial information / Key performance
indicators, p. 15
Non-financial information / Environmental
matters, p. 17
Targets used to manage climate-related risks and
opportunities and performance against targets
Non-financial information / Key performance
indicators, p. 15
Non-financial information / Environmental
matters, p. 17
KONE’s climate related disclosures according to TCFD
BOARD OF DIRECTORS’ REPORT
17 KONE ANNUAL REVIEW 2020
ENVIRONMENTAL MATTERS
In line with KONE’s strategic target of being a leader in
sustainability, our environmental approach supports the
ongoing green and digital transformation of the built
environment into smart eco -cities, low-carbon
communities, and net zero energy buildings .
We set out the environmental ambition and principles
that guide our work in KONE’s Environmental Policy. We
develop smart and sustainable technologies for People
Flow® and want to be the preferred partner for
environmentally sustainable urban environments. We drive
transformation towards sustainable, circular and carbon
neutral operations, as well as engage our employees,
customers, suppliers and partners on climate and
environmental action. The KONE Code of Conduct, the
Supplier Code of Conduct, the Distributor Code of
Conduct and KONE Global Vehicle Fleet, Facility and
Travel Policies also set out environmental requirements
relevant to the operations of KONE or its partners.
In September 2020, we stepped up our environmental
ambition by announcing KONE’s climate pledge with
science -based targets for significant greenhouse gas
emissions reductions and an aim to have carbon neutral
operations by 2030. KONE commits to a 50% cut in the
emissions from its own operations (scope 1 and 2
emissions) by 2030, compared to a 2018 baseline. This
target is in line with limiting global warming to 1.5°C, which
is currently the most ambitious criteria for setting science-
based targets. On top of the ambitious emissions
reduction targets, KONE will achieve carbon neutral
operations by 2030, through offsetting the remaining
emissions. In addition, KONE targets a 40% reduction in
the emissions related to its products’ materials and lifetime
energy use (scope 3 emissions) over the same target
period, relative to orders received. KONE’s targets are the
most ambitious in the industry to date, and we were
among the first 500 companies globally to have our targets
officially validated by the Science Based Targets initiative.
With the climate pledge, we are taking even stronger
action and leading the way in our industry to create more
sustainable urban environments.
We are taking strong actions across the supply chain
and work together with our suppliers to cut emissions,
increase the use of sustainable materials and limit the use
of hazardous substances. Sustainability was also the
theme of this year’s KONE Supplier Day, during which we
launched our Supplier Sustainability Assessment, a
dedicated internal tool for screening our suppliers’
performance in terms of their environmental and social
responsibility. The assessment includes basic criteria that
must be met in order to continue doing business with
KONE, as well as other, more advanced criteria.
KONE’s offering
The majority of the environmental impacts associated with
KONE’s activities are related to our products over their full
life cycle. Our innovations can thus have a significant role
in advancing climate action. Requirements for smart and
energy -efficient solutions, healthy and sustainable
materials and overall, green and sustainable buildings are
increasing. We see these shifts in customer demand as a
clear opportunity and want to be the preferred partner for
sustainable urban environments. To further understand
the emerging needs and technologies in sustainable,
resilient urban environments and people’s behavior in
them, we actively participate in large -scale research
projects and consortiums.
KONE supports sustainable and green building
through our energy -efficient and innovative offering,
functional and sustainable materials, as well as
transparent documentation about our products’
environmental impacts. We can help our customers meet
various green building requirements even better with the
KONE DX Class elevator range which continues to be
launched to new markets. Lifetime energy consumption is
one of the main considerations in green buildings and it is
also the single most significant environmental impact of
KONE’s products overall. This underlines the importance
of eco-efficient innovations. We currently have 19 best -in-
class energy efficiency references for our products
according to the international ISO 25745 standard for the
energy performance of lifts, escalators and moving walks.
Several KONE solutions have received external
recognition for their sustainability. During the reporting
period, KONE renewed the Singapore Green Building
Product (SGBP) certifications for several of its solutions.
KONE currently has seven SGBP-certified solutions and is
the first and only elevator and escalator company to have
all certifications with the highest possible ratings. The
SGBP-certified solutions are recommended for Green
Mark -certified buildings. KONE has also received several
approved Byggvarubedömningen (BVB) assessments for
its products, the latest ones being KONE TranSys ™
elevator and the Tra nsitMaster™ 120 and TransitMaster ™
140 escalators in 2020. BVB is a nonprofit organization
that evaluates solutions for buildings and drives the use of
sustainable building materials.
During 2020, KONE also had important achievements
in transparent communication about the environmental
and health impacts of our products. We published
Environmental Product Declarations (EPD) for six
elevators. We currently have third-party verified EPDs for
altogether eight elevator models and 11 automatic building
door models, thus making KONE the people flow company
with the most EPDs published to date. Furthermore,
during the reporting year, we published two Health
Product Declarations (HPD) for our products. KONE now
has altogether six HPDs for its elevators and escalators.
Own operations
KONE’s target for 2020 was to reduce our operational
carbon footprint relative to sales by 3%. This target
includes our Scope 1 & 2 emissions, extended by selected
Scope 3 categories that are closely monitored by KONE:
logistics, business air travel and waste. The 2020 carbon
footprint results will be published in the second quarter of
2021. In 2019, we exceeded our annual target as our
overall operational carbon footprint (Scope 1, 2 and
selected Scope 3 categories) relative to sales decreased
by 3.1% compared to 2018, with sales growth calculated
at comparable exchange rates. Our scope 1 and 2
greenhouse gas emissions relative to sales decreased by
5.4%. This positive development was enabled by a 0.5%
decrease in our absolute Scope 1 and 2 emissions (with
comparable reporting scope) while our business grew
strongly. KONE’s 2019 absolute operational carbon
footprint amounted to 327,100 tons of carbon dioxide
equivalent (2018: 319,200; figure restated). KONE’s
carbon footprint data has been externally assured.
Additionally, we have set a long-term target of 0% landfill
waste from our manufacturing units by 2030. In 2019, the
share of landfill waste in our manufacturing units was
0.9% (2018: 0.6%).
During the reporting year, we took steps to achieve our
target of having 50% of our electricity consumption from
renewable sources by the end of 2021. Along with our
ambitious climate targets announced in September, we
also raised our target for renewable electricity to 100% by
2030. Our manufacturing unit in Sweden now purchases
BOARD OF DIRECTORS’ REPORT
18 KONE ANNUAL REVIEW 2020
Jan 1
–
Dec 31,
2020
Jan 1
–
Dec 31, 2019
Number of employees at the end of period
61,380
59,825
Average number of employees
60,376
58,369
Number of employees
Dec 31, 2020
Dec 31, 2019
EMEA
23,798
23,306
Americas
7,336
7,632
Asia
-
Pacific
30,246
28,887
Total
61,380
59,825
Geographical distribution of KONE employees
100% renewable electricity, and solar panels were
installed in our new manufacturing unit in Chennai, India.
Additionally, one of our subsidiaries, KONE Austria, is
already carbon neutral for 2020 after offsetting their
emissions by supporting renewable energy production in
Uganda and Guatemala.
KONE uses the ISO 14001 environmental
management system to enhance its environmental
performance. It covers our corporate units, including all
R&D and major manufacturing units, and 26 major
subsidiaries. In addition, our manufacturing unit in
Kunshan, China, received the ISO 50001 energy
management system certification during the reporting
year. Altogether, three KONE manufacturing units are now
ISO 50001 - certified. At the end of 2020, 90% (2019: 91%)
of our key suppliers were ISO 14001 certified, our target
being 100%.
KONE’s manufacturing unit in Finland achieved the
FSC® (Forest Stewardship Council) Chain of Custody
certification, providing credible assurance that elevators
manufactured in this unit come with wooden components
from environmentally and socially responsible sources.
KONE’s subsidiaries in Great Britain and Ireland also
achieved the FSC® Chain of Custody certification,
meaning that customers can now be provided this
assurance for the full delivery chain for elevators installed
in those countries. To our knowledge, KONE is the only
elevator company to have achieved FSC® certifications.
PERSONNEL AND SOCIAL MATTERS
KONE had 61,380 (December 31, 2019: 59,825) employees at the end of December 2020. The average number of employees was 60,376 (1–12/20 19:
58,369). Personnel voluntary turnover rate was 5.5% (7.6%) Employee costs for the reporting period totaled EUR 3,043 (3,048) million. The geographical
distribution of KONE employees was 39% (December 31, 2019: 39%) in EMEA, 12% (13%) in the Americas and 49% (48%) in Asia-Pacific.
The main goals of KONE’s personnel strategy are to
secure the availability, engagement, motivation and
continuous development of the company’s personnel.
All KONE’s activities are guided by ethical principles.
Employee rights and responsibilities include the right to
a safe and healthy working environment, personal well-
being, freedom of association, collective bargaining,
non -discrimination and the right to a working
environment in which harassment of any kind is not
tolerated.
Year 2020 was exceptional due to the COVID-19
outbreak. Especially during the first half of the year,
KONE leaders and HR teams around the world focused
on ensuring that our vital business operations are
functioning with good level of workforce available and
safe working conditions. Field personnel was instructed
of safe ways of working on sites and majority of office
workers across the world started to work remotely. In
some KONE units, the ability to work on construction
and maintenance sites was limited due to national
restrictions. In these cases, KONE approach was to first
and foremost agree on flexible working arrangements
and the use of accrued holidays and negative time
banks to ensure that our employees stay also financially
safe. Only in a few limited cases where it was not
possible to use these measures, and where there were
support mechanisms in place for employees locally,
furloughs or temporary layoffs were used.
The wellbeing and safety of our employees was
KONE’s top priority in 2020. As many employees
worked from home and field employees faced changed
circumstances particularly the mental well-being of our
workforce was in focus. Both global and local well -being
resources were introduced to help managers and
employees deal with remote work, anxiety and stress.
In general, remote work worked well even for more
challenging positions such call center employees and
salespeople. During the year, new safety protocols for
office environments were introduced to ensure safe
return to the workplace.
Diversity and inclusion
We actively encourage diversity at KONE, and our
values guide us in upholding an inclusive culture. To
strengthen our global approach and deepen our insights
on customers and markets, we have set goals for
diversity in our teams. During the reporting year,
KONE’s workforce included 147 (145) nationalities. The
majority of our employees are male representing 89%
BOARD OF DIRECTORS’ REPORT
19 KONE ANNUAL REVIEW 2020
(89%) of our people globally. We continue our efforts
towards having a more balanced gender split. The
share of women at director level positions increased to
19% (18%) leaving us slightly behind our global target
of 20% (by 2020). To strengthen diversity and inclusion
(D&I) at KONE, we assessed D&I maturity in 53 KONE
countries and created a global D&I strategy based on
the findings. The strategy was turned into a global D&I
roadmap with targeted initiatives to further increase
diversity, and to build a more inclusive talent practices
and culture.
Employee engagement & KONE culture
One of KONE’s strategic targets is to be a great place
to work, which is measured by employee engagement
and a related Pulse employee survey . The Pulse survey
offers employees an opportunity to give feedback and
covers topics such as employee engagement and
enablement, leadership, learning and growth, corporate
responsibility, customer centricity, innovation and drive,
and diversity and inclusion.
KONE’s 13th global Pulse employee survey was
carried out in spring 2020 and action plans were made
in teams based on the results. A total of 52,745
employees provided feedback in the employee survey
and we reached a record high global response rate of
92%. Overall, the global survey results took a great leap
up and engagement is now at a very strong level. All
survey dimensions improved and the vast majority of
KONE’s global scores were above external high
performance benchmarks. In 2021, we will conduct a
global light survey as well as organize Pulse Talks
across all teams at KONE to ensure sustainable follow-
up on the Pulse 2020 action plans and continuous
dialogue on engagement.
During 2020, we also started a process for
developing KONE’s culture to ensure that it supports
and aligns with our strategic priorities. First step in this
process was a global culture survey in which more than
8,000 employees participated. The findings of the
survey indicated that KONE’s work environment is
healthy and that employees find the direction of the
company clear. As a second step, employees were
encouraged to share their thoughts about the
development of KONE’s culture, values and ways of
working as part of the global Pulse survey. A total of
25,370 employees provided feedback and these
discoveries contributed to the review and refresh of
KONE’s values. The new values are “We care for each
other”, “We are committed to our customers’ success”,
“We collaborate as one team” and “We perform with
courage”.
KONE hosts a European Employee Forum annually
to bring together employee representatives and top
management to discuss issues ranging from safety to
business development. A smaller working group meets
two to four times a year to ensure continuous
consultation and discussion on important developments
affecting KONE employees. In 2020, the Employee
Forum was postponed due to the COVID-19 pandemic,
but the smaller working group and top management had
two virtual meetings focusing on safety as a topic.
Training and development
We strive to have the best professionals with the right
competencies in each position. We facilitate this effort
as well as increase the motivation, engagement and
continuous development of the personnel through
regular performance discussions, which take place at
least twice a year. In addition, we actively encourage all
employees to prepare individual development plans and
to complete their talent profiles.
KONE supports continuous learning and provides a
rich training offering for its employees. There are over
6,000 in-house developed training programs available
varying from several days trainer-led courses into 2-
minutes online learning modules. These in -house
programs are complemented by external learning
libraries to enhance the training offering. In March 2020,
we launched a new external online learning library with
a lot of bite size courses. By the end of 2020, we
reached 160,000 learning course completions in this
new learning library alone.
In 2020, we had a strong focus on bringing new
online learning opportunities for our employees and
also digitizing current trainer-led programs by using
mobile learning, AR games, VR, social learning and
Microsoft Teams. Hence, by the end of 2020, the total
amount of online learning course completions had
increased by 92% compared to the previous year.
Furthermore, total learning hours increased 26%
compared to 2019. As an example, a new global
COVID-19 safe working practices e-learning was
launched in May with 32 language versions and with a
special focus on our employees serving our customers
in the field. Approximately 27,000 employees had
completed the course by the end of 2020.
Amidst COVID-19, we encouraged everyone to use
time to learn. As we encouraged salespeople to have
virtual customer meetings, they were trained and
supported on utilizing various virtual meeting tools and
techniques. Also our trainers studied and took various
virtual training tools in use and experimented camera
technologies in virtual training sessions. This helped to
re-purpose KONE’s 41 training centers as broadcast
and engagement hubs making them more efficient and
increasing their reach and impact.
We continued our digital HR journey by
implementing Workday Learning to support the learning
activities of all KONE employees during 2020. By doing
this, KONE has now all people data in one system,
which allows for better end-to end employee
experience, and the possibility for more advanced
people analytics to support people development. For
example, the new system offers AI powered
recommendations on learners’ role and interest.
Talent attraction
A key focus area within the KONE people strategy is
attracting the best talent.
Even though recruitment volumes were reduced
during 2020 due to COVID-19, targeting new
competencies and increasing diversity through
recruitment continued to be one of the key focus areas
for KONE. Efforts to increase diversity through
recruitment realized during the year with a large number
of applicants outside of elevator and escalator industry.
During the year 78% of all new hires to KONE positions
were attracted from other industries. We were also able
to recruit an increasing number of people with new
competencies related to, for example, digitalization and
solution selling to KONE. Due to Covid-19 related travel
restrictions, the annual KONE International Trainee
Program (ITP) could not be organized. Instead, we
offered local trainee positions for university students.
KONE also continued to further strengthen its employer
brand through active school collaboration.
Accelerate program
BOARD OF DIRECTORS’ REPORT
20 KONE ANNUAL REVIEW 2020
Year 2020 was the final year of the Accelerate program,
which was introduced in 2017 to create a more efficient
and customer-focused way of working on a country,
area and global level, across the entire KONE
organization. During the Accelerate program, major
changes were implemented in the KONE Way operating
model. We harmonized job roles and defined our global
reference organization model that provide a common
set -up for all units. Three new functions, Customer
Solutions Engineering, Customer Service & Admin and
Logistics, were established and other already existing
functions, e.g. HR, Sourcing, Finance, KONE
Technology & Innovation and Quality, implemented
major organizational and operating model changes.
Alongside with the transformations, we introduced new
learning and development opportunities both for
function specific topics as well as on common topics
such as change management. In 2020, the new global
set -up has enabled us to react fast during the
exceptional market environment caused by COVID-19.
Safety
Over the year, improving safety at work remained a top
priority. KONE continued the implementation of a
companywide safety management system which guides
us in achieving continual improvement.
By the end of 2020, 56,000 KONE employees had
completed general safety training related to our safety
management framework, and KONE’s Health and
Safety Policy. KONE employees receive health and
safety training relevant to their work enabling it to be
performed in a professional and safe manner. The
focus during the year was on strengthening safety
competences using interactive learnings and mobile
tools. Managers perform regular audits to measure
compliance with KONE’s policies, processes and
defined working methods. Corrective actions are taken
if deviations are identified. KONE also conducts
process audits to identify possible obstacles to work
safety. If any are found, the work in question is stopped
until a safe method is approved.
In 2020, the IIFR (Industrial Injury Frequency Rate)
improved to 1.2 (1.7). We continue to target zero
injuries. In order to move towards our ultimate target of
zero injuries, our target is IIFR below 1.0 by the end on
2024. The average lost days per incident was 27.3
(33.7). Furthermore, the number of safety observations,
recorded in our global safety reporting tool, KONE
Safety Solution, increased by 3.6%. All employees are
encouraged to actively report safety near misses and
incidents as it provides valuable information for
improving safety. Focus during the year was on
improving the quality, analysis and investigation of near
misses and incidents.
KONE Safety Week was organized in all KONE
units in June 2020 with a focus on safe behavior. In
order to strengthen KONE’s safety culture, agenda was
complemented with elements of psychological safety.
Various safety related activities were held during the
week for both internal and external stakeholders. For
the first time, majority of the activities we organized
virtually.
The safety of the people using elevators, escalators
and automatic building doors involves everyone from
technology and maintenance service providers to
building owners and equipment users. We work closely
with our customers to help them recognize and deal
with situations that could lead to safety risks. We
communicate actively about safety, organize activities
and provide training along with educational materials to
our customers and the general public to help equipment
users stay safe.
HUMAN RIGHTS, ANTI-CORRUPTION
AND BRIBERY
The KONE Code of Conduct sets out our commitment
to integrity, honesty, and fair play. The topics covered
include: compliance with the laws and rules of society,
the work environment and human rights, measures to
combat fraud, bribery and corruption including guidance
on gifts and corporate hospitality, health and safety,
discrimination, fair competition, conflicts of interest, the
marketing of products and services, and the
environment and sustainability.
Dedicated compliance officers help employees
comply with KONE’s Code of Conduct, and our global
and regional compliance committees advise and take
decisions on compliance matters, including
investigations into allegations of employee misconduct
as well as human rights and corruption violations. All
KONE employees are expected to understand and
abide by the Code and to report any violations using the
channels available for this purpose. Our internal
reporting channels include reporting to management,
HR, Legal or Compliance. We also have a confidential
externally hosted reporting channel, the Compliance
Line, to which all employees and suppliers have phone
and/or web access. Reports can be made in the
employee’s native language and can be anonymous
where permitted under data protection laws. Reports
can be submitted on a range of topics including fraud
and theft, fraudulent reporting, corruption, competition
law, harassment and discrimination, data protection and
confidentiality, environment and safety, trade
compliance, and conflicts of interest. All reports are
handled by a dedicated impartial KONE Compliance
team. In 2020, we received a total of 136 compliance
reports, of which 24% were received through the
Compliance Line. In total 35% of 141 cases closed in
2020 were either substantiated or partially
substantiated, and disciplinary actions in those cases
ranged from coaching discussions to termination of
employment.
Our Code of Conduct E-learning course for all
KONE employees covers topics such as conflicts of
interest, fair competition, anti-bribery, privacy, work
safety, harassment & discrimination and gifts &
hospitality, and has a strong focus on scenarios that
reflect day to day situations employees might face. The
course is available in 37 languages. Nearly 60,000
employees in 64 countries have been assigned the
training since 2018 with a completion rate of 96%.
Regular face-to-face compliance training is also
provided to managers and other target groups. In 2020
approximately 3,000 employees received compliance
training either face-to-face or via Teams, in light of the
COVID-19 pandemic.
KONE’s general Code of Conduct is complemented
by our Supplier and Distributor Codes of Conduct. Our
Supplier Code of Conduct was renewed in July 2020
and is available in 30 languages. It sets out the ethical
business practice requirements that we expect from our
suppliers. It covers areas such as legal compliance,
ethical conduct, our zero tolerance for bribery and
corruption, and the standards we require from our
suppliers in terms of labor and human rights, health and
safety, and environmental issues. KONE may terminate
its contracts with suppliers for failure to adhere to the
Code.
BOARD OF DIRECTORS’ REPORT
21 KONE ANNUAL REVIEW 2020
KONE expects its suppliers to comply with the
requirements of the Supplier Code of Conduct in all
their dealings with KONE, as well as with their own
employees and suppliers, and third parties including
government officials. All our suppliers are expected to
sign KONE’s Supplier Code of Conduct. By the end of
202 0, 84% of KONE’s current key non -product related
and direct materials suppliers had signed the Code. The
scope of this group was further expanded in 2020. We
carry out periodic checks on suppliers’ compliance with
the Supplier Code of Conduct.
KONE’s Distributor Code of Conduct covers the
same topics as the Supplier Code of Conduct and is
available in 5 languages. As business partners, our
distributors are likewise expected to comply with the
requirements of the Code in all their dealings with
KONE, as well as in respect of their own employees,
customers and suppliers, and third parties including
government officials. Our target is to have the Code
signed by all our distributors. By the end of 2020, 100%
(100%) of our distributors in China, and 88% (87%) of
our distributors in the rest of the world, had signed the
Code.
All the above Codes of Conduct are available on
kone.com.
During 2020, we continued focusing on human
rights in the supply chain by developing a supplier
human rights assessment process within KONE.
Although this work was delayed by the COVID
pandemic, an on-site pilot assessment was
nevertheless conducted in Finland which included
interviews with management and randomly selected
workers. Training and risk management improvement
recommendations were provided to the supplier. We
also developed a supplier human rights on -line
questionnaire which will be rolled-out to selected
suppliers during 2021. Human rights training was also
provided to our internal human rights network
throughout the year.
Changes in the Executive Board
In January–December 2020, KONE announced changes
in the Executive Board.
appointed Executive Vice President, KONE Americas as
of April 1, 2020. In this role, Ken Schmid succeeds Larry
Wash who served as Executive Vice President, KONE
Americas and member of the Executive Board since July
2012.
Executive Vice President responsible for Marketing and
Communications as of 31 March 2020. Max Alfthan served
in this role and as a member of KONE's Executive Board
since November 2014. Susanne Skippari, Executive Vice
President, Human Resources, was named interim leader
for Marketing and Communications in addition to her
current role as of April 2020.
Marketing Officer and Executive Vice President, Marketing
and Communications, as of January 18, 2021. Current
interim EVP of Marketing and Communications, Susanne
Skippari concentrates on her duties as Executive Vice
President of Human Resources from January 18, 2021
onwards.
Also after the reporting period, on January 20, 2021,
KONE announced changes in the Executive Board.
Johannes Frände was appointed Executive Vice
President, General Counsel and a member of the
Executive Board at KONE as of February 1, 2021. He
succeeds Klaus Cawén, who has served in different roles
at KONE for 38 years. Thomas Hinnerskov was appointed
Executive Vice President, responsible for South Europe,
Middle -East and Africa region as of April 1, 2021. He
succeeds Pierre Liautaud, who has served 10 years at
KONE as Executive Vice President, South Europe,
Middle -East and Africa region. Prior to this, Thomas
Hinnerskov has served as KONE’s EVP, Central and
North Europe. Axel Berkling was appointed new EVP,
Central and North Europe. Prior to this, Axel Berkling has
served as KONE’s EVP, Asia-Pacific region, excluding
China.
On January 27, 2021, KONE announced that Samer
Halabi was appointed Executive Vice President,
responsible for the Asia-Pacific region and a member of
the Executive Board as of May 1, 2021.
Other events
In 2007, a decision was issued by the European
Commission concerning alleged local anticompetitive
practices before early 2004 in Germany, Luxembourg,
Belgium and the Netherlands by leading elevator and
escalator companies, including KONE’s local subsidiaries.
Also, the Austrian Cartel Court issued in 2007 a decision
concerning anticompetitive practices that had taken place
before mid-2004 in local Austrian markets by leading
elevator and escalator companies, including KONE’s local
subsidiary. As announced by KONE earlier, a number of
civil damage claims by certain companies and public
entities relating to the two 2007 decisions, are pending in
related countries. The claims have been made against
various companies concerned by the decisions, including
certain KONE companies. All claims are independent and
are progressing procedurally at different stages. The total
capital amount claimed jointly and severally from all of the
defendants together was EUR 144 million at the end of
December 2020 (December 31, 2019: EUR 166 million).
KONE’s position is that the claims are without merit. No
provision has been made.
BOARD OF DIRECTORS’ REPORT
22 KONE ANNUAL REVIEW 2020
Most significant risks
KONE is exposed to risks that may arise from its
operations or changes in the operating environment. The
most significant risk factors described below can
potentially have an adverse effect on KONE’s business
operations and financial position and, as a result, on the
value of the company. Other risks, which are currently
either unknown or considered immaterial to KONE may,
however, become material in the future.
STRATEGIC RISKS
Demand for KONE’s products and services and the
competitive environment are impacted by the general
economic cycles and especially the level of activity within
the construction industry. As China accounts for ~30% of
KONE’s sales, a sustained market decline in the Chinese
construction industry, in particular, could have an adverse
effect on KONE’s growth and profitability. In 2020, many
governments across the world took significant measures
to contain the COVID-19 outbreak by restricting the
movement of people and limiting business activities. The
current level of uncertainty continues to be high despite of
the ongoing vaccinations and further deterioration of the
situation or prolonged restrictions to contain the pandemic
could have an adverse impact on the overall economic
environment, level of construction activity and the level of
demand for KONE’s services and solutions in the coming
quarters.
Geopolitical tensions and protectionism continue to
expose KONE to various business risks. In addition to the
potential adverse impacts on the general economic
activity, geopolitical tensions and protectionism could
impact the competitiveness of KONE’s supply chain, and
lead to increased costs from trade and customs tariffs. A
significant portion of KONE’s component suppliers and
global supply capacity is located in China.
In addition to the level of market demand,
competitiveness of KONE’s offering is a key driver of the
company’s growth and profitability. A failure to anticipate
or address changes in customer requirements and in
competitors’ offerings, ecosystems and business models
or in the regulatory environment could result in a
deterioration of the competitiveness of KONE’s offering.
Furthermore, structural changes in the competitive
landscape of the elevator and escalator industry,
increased competition and customer consolidation in
China, for example, could affect market dynamics and
KONE’s market share.
OPERATIONAL RISKS
Engaged employees with relevant competencies and skills
are key to the successful execution of our strategy. With
the business models and ways of working changing in the
elevator and escalator industry, KONE needs new
organizational capabilities and new competencies on the
individual employee level in the field of, for example,
digitalization. At the same time, competition over skilled
field workforce is increasing and securing the needed field
resources and their competence management is critical. A
failure to develop and retain the needed capabilities or
obtain them through recruitment could have an adverse
impact on KONE’s growth and profitability.
The majority of components used in KONE’s supply
chain are sourced from external suppliers. In addition to
this, KONE uses a significant amount of subcontracted
installation resources, has outsourced some business
support processes and works with other partners in e.g.
digital services and logistics. These expose KONE to
component and subcontracted labor availability and cost
risk and continuity risk in partnerships. A failure to secure
the needed components or resources or quality issues
within these could cause business disruptions and cost
increases. In 2020, COVID-19 related government
restrictions caused some disruptions to KONE’s
operations especially in China and in India, and the risk of
such disruptions globally remains still high, however
depending on how the pandemic develops.
As one of the leading companies in the industry, KONE
has a strong brand and reputation. Issues that impact the
company’s reputation or brand could have an effect on
KONE’s business and financial performance. Such
reputational risks could materialize; for example, in the
case of an incident, a major delivery issue or a product or
service quality issue. Matters concerning product integrity,
safety or quality could also have an impact on KONE’s
financial performance and affect customer operations.
HAZARD, SECURITY AND INCIDENTAL
RISKS
KONE’s business activities are dependent on the
uninterrupted operation, quality and reliability of its
manufacturing facilities, sourcing channels, operational
service solutions and logistics processes. KONE’s, its
suppliers’ and customers’ operation also utilize information
technology extensively and KONE’s business is
dependent on the quality, integrity and availability of
information. Thus, KONE is exposed to IT disruptions and
cybersecurity risks, as operational information systems
and products may be vulnerable to interruption, loss or
manipulation of data, or malfunctions which can result in
disruptions in processes and equipment availability. Any
breach of sensitive employee or customer data may also
result in significant penalties as well as reputational
damage. Such cyber incidents could be caused by,
including but not limited to, cybercrime, cyber -attacks,
computer malware, information theft, fraud,
misappropriation, or inadvertent actions from our
employees and vendors. Also physical damage caused by
fire, extreme weather conditions, natural catastrophes or
terrorism, among other things, to these operations, could
cause business interruption for KONE or its suppliers.
FINANCIAL RISKS
The majority of KONE’s sales and result are denominated
in currencies other than the Euro, which exposes KONE to
risks arising from foreign exchange-rate fluctuations.
KONE is also exposed to counterparty risks related to
financial institutions, through the significant amounts of
liquid funds deposited with financial institutions, in the form
of financial investments and in derivatives. Additionally,
KONE is exposed to risks related to the liquidity and
payment schedules of its customers, which may impact
cash flow or lead to credit losses. Significant changes in
local financial or taxation regulation could also have an
impact on KONE’s financial performance, liquidity and
cash flow. For further information on financial risks, please
refer to notes 2.4 and 5.3 in the Financial Statements for
202 0.
BOARD OF DIRECTORS’ REPORT
23 KONE ANNUAL REVIEW 2020
Risks
Mitigation actions
Weakening of the economic
environment, particularly in China
KONE strives to continuously develop its competitiveness in all regions and
businesses. KONE has a wide geographic presence and a balanced business
portfolio with a high share of maintenance business.
Geopolitical tensions impacting the
competitiveness of KONE’s supply
chain, leading to increased costs or
causing potential disruptions
KONE actively monitors the development of the applicable and relevant
regulations, policies and trade rules, and evaluates the competitiveness and
viability of KONE’s supply chain and sourcing channels. KONE is taking
actions to mitigate the impact of tariffs, for example by applying for tariff
exemptions when applicable. KONE also applies increased scrutiny over
business operations that may be affected by international trade restrictions.
Changes in the competitive or
customer landscape, customer
requirements or competitors’
offerings impacting KONE’s
competitiveness
KONE aims to be the industry leader by investing in research and
development and by taking an open innovation approach. KONE also closely
follows emerging industry and market trends and actively monitors
opportunities for industry consolidation.
A failure to secure and develop the
needed organizational capabilities and
competencies
KONE continuously evaluates the skills and competences required for the
execution of the selected strategy and develops and/or acquires these from
internal talent pools or externally. KONE also has extensive training programs
in place to develop and retain critical talents.
Risks related to component and
subcontracted labor availability
KONE’s sourcing processes aim to identify critical suppliers and supply
categories and implement dual sourcing, multi-year agreements, last-buy
options and other measures to ensure the availability of the supply. KONE
has also developed multinational subcontractor pools to ensure subcontractor
capacity on a regional level. Subcontractors competences and capabilities are
monitored and developed continuously, similarly as with own employees.
Product integrity, safety or quality
issues as well as issues with
reputation
To mitigate product risks, KONE has processes in place for product design,
supply, manufacturing, installation and maintenance, involving strict quality
control. In addition, KONE aims for transparent and reliable communication,
to prevent reputational risks and to manage potential incidents. KONE also
has stringent corporate governance principles in place.
Interruptions to KONE’s or its
suppliers’ operations
KONE actively develops business continuity management capabilities to
reduce the impact and likelihood of disruptions within its supply chain.
Furthermore, KONE monitors the operations, business continuity
management capabilities, financial strength and cybersecurity of its key
suppliers. In addition, KONE aims to secure the availability of alternative
sourcing channels for critical components and services. KONE also has a
global property damage and business interruption insurance program in
place.
In the operating environment impacted by COVID-19, KONE’s global supply
chain helps mitigate the risk of interruptions. KONE has 12 manufacturing
facilities in 8 countries, multiple distribution centers and a large supplier
network across the globe, which helps to mitigate the challenges and
restrictions in individual countries. During the COVID-19 crisis, KONE has
also put extra focus on business continuity management.
Quality and reliability of IT systems
and cybersecurity risks
KONE’s security policies define controls to safeguard information and
information systems which are both in development and in operation, in order
to detect cybersecurity incidents and to respond and recover in a timely
manner. KONE works with third-party security service providers and trusted,
well-known technology partners to manage the risks through the control
framework. KONE conducts tests, reviews and exercises to identify areas of
risk and to ensure the appropriate preparedness. The company continues to
invest in its cybersecurity capabilities based on these findings. KONE also
has a global cyber insurance program in place.
Financial risks
Centralized risk management
in accordance with the KONE Treasury Policy.
More information in notes 2.4 and 5.3 of KONE’s Financial Statements 2020.
Risk management
BOARD OF DIRECTORS’ REPORT
24 KONE ANNUAL REVIEW 2020
RISKS AND RISK MANAGEMENT
RELATED TO THE REPORTING OF NON-
FINANCIAL INFORMATION
The assessment and analysis of KONE’s most
significant risks also covers non-financial risks. In line
with the requirements of the Finnish Accounting Act,
KONE has identified the most significant non-financial
risks regardless of their materiality for KONE as a
whole. In addition, KONE is applying TCFD guidelines
on the reporting of climate-related risks.
The typical impact of the non-financial risks
materializing would be reputational damage. In addition
to the risk mitigation actions described below, KONE
aims for transparent and reliable communication in
order to prevent reputational risks and to enable
proactive management and learning from incidents,
should they occur.
Climate and environmental risks
We recognize climate and environmental risks as
having a potential negative impact on our business in
the short to medium term, albeit they are not considered
being very significant in comparison to other business
risks which are reported under “Most significant risks”.
However, we see that climate risks will only keep
increasing in relevance and potential impact. Overall,
we identify, assess and manage climate and
environmental risks as integral part of our company-
wide business risk management process and ISO
14001 environmental management system. Certain
KONE functions and locations conduct detailed climate
and environmental risk assessments, according to
relevant business requirements, e.g. in the Supply
Chain function or at selected operational sites.
Climate and environmental risks are classified as
transition risks and physical risks as well as risks of
negative impacts on the climate. Some of the most
relevant climate and environmental risks for KONE are
physical risks to our supply chain and own operations,
for example, as a result of extreme weather events.
These risks can materialize, for example, in the form of
delivery disruptions or interruptions in our own
manufacturing, installation or maintenance activities.
KONE’s products are also subject to physical risks and
possible damages due to changing environmental
conditions or extreme weather events.
To mitigate the physical risks, we engage in several
risk mitigation activities related to component availability
and interruptions to our own or suppliers’ operations, as
described in the risk management table in this text. We
use, for example, dedicated location -based software
tools to regularly monitor our supply chain locations for
risks related to extreme weather events such as fires,
floods and hurricanes. In terms of our product
development, we apply design specifications and
specific procedures that aim to ensure product
resilience even in harsh and changing environmental
conditions. For example, rigorous environmental testing
is a part of KONE’s product development to ensure that
our products sustain exceptional and changing weather
conditions, such as temperature variations and
moisture.
We have equally identified transition risks in the
form of changing market demands and emerging
regulation for both KONE’s solutions and operations.
Not being able to meet the climate-related demands
and offer the solutions and services our customers
require, could have a detrimental impact on KONE’s
business. In addition to potential product-related
requirements, emerging climate-related regulation may
also impact our operations. For example, the need to
transition towards more sustainable mobility solutions is
evident for KONE’s current fleet of over 19,000 service
and benefit vehicles.
To mitigate the transition risks, KONE constantly
evaluates emerging regulation and market demands in
our high-level business plans. KONE is an active
member in relevant industry forums and research
consortiums and proactively monitors the regulatory
landscape. As part of KONE’s climate pledge, we have
set ambitious greenhouse gas reduction targets for our
offering and operations and aim to have carbon neutral
operations by 2030. The pledge will guide our work for
more climate-friendly products, services and ways of
working, and we actively collaborate with our suppliers
and partners to achieve our targets.
Social and employee related risks
Safety is a top priority at KONE and potential safety
incidents are among the most significant social and
employee related risks. Incidents are mitigated through,
for example, extensive training and communication,
consistent safety management practices, standardized
maintenance and installation methods and regular
process audits. KONE also identifies and assesses
risks related to any type of harassment, equal
employment practices, working conditions and any form
of discriminations. KONE prevents such situations by
having adequate policies and processes in place and
training its managers. KONE also offers its employees
channels for reporting misconduct as there is no
tolerance for such behavior. In 2020, safety and
wellbeing of KONE employees were highlighted as a
risk mitigation focus area due to the changing
conditions caused by COVID-19 pandemic.
Major repairs or retrofits in public infrastructure
locations may also affect the daily life of many people
and therefore, may have a reputational impact.
Both safety and quality have a key role in product
design, supply, manufacturing, installation and
maintenance and they involve strict quality controls.
KONE also follows globally implemented principles in
how to manage potential incidents and implement
improvements.
Human rights related risks
The most significant human rights related risks are in
the supply and delivery chain and are related to terms
and conditions of work. All our suppliers are expected to
sign KONE’s Supplier Code of Conduct which sets out
our ethical business practice requirements, including
the standards we require in terms of labor and human
rights. These standards were further clarified in our
2020 Supplier Code of Conduct. On the basis of the
2019 human rights risk assessment we conducted, we
have prioritized our work on human rights in the supply
chain, set up a human rights network and prepared
supplier on-site and online assessment processes and
documentation for roll-out in 2021.
Anti-corruptio n and bribery related risks
BOARD OF DIRECTORS’ REPORT
25 KONE ANNUAL REVIEW 2020
KONE requires its employees and partners to adhere to
high ethical standards and to comply with its Code of
Conduct, Distributor Code of Conduct and Supplier
Code of Conduct. These codes cover numerous
compliance topics, including competition law, trade
sanctions compliance, and labor and human rights
issues, as well as prohibiting corruption and bribery.
Unethical business practices among KONE’s
employees or various stakeholders could cause
reputational damage for KONE as well as a possible
financial impact. The risks of such behaviors and
practices materializing are included in the scope of
KONE’s regular audit programs. In addition, processes
introduced under our Global Delegation of Authority
policy help to mitigate the risk of unauthorized
payments, donations and sponsorships. We have
introduced more stringent disclosure requirements in
China for conflicts of interest and this work has
continued worldwide in 2020. The most important action
for internal mitigation continues to be the development
of KONE’s corporate culture through training and
awareness building. In addition, in 2020 we began an
anti -bribery and corruption risk assessment, which will
be completed in early 2021.
BOARD OF DIRECTORS’ REPORT
26 KONE ANNUAL REVIEW 2020
Decisions of the Annual General Meeting
KONE Corporation's Annual General Meeting was held in
Helsinki on February 25, 2020. The meeting approved the
financial statements, considered the Remuneration Policy
for governing bodies and discharged the responsible
parties from liability for the financial period January 1-
December 31, 2019.
The General Meeting approved dividends in line with
the Board of Director’s proposal of EUR 1.6975 for each of
the 76,208,712 class A shares and EUR 1.70 for each of
the outstanding 441,851,042 class B shares. The date of
record for dividend distribution was February 27, 2020 and
dividends were paid on March 5, 2020.
The number of Members of the Board of Directors was
confirmed as nine. Re-elected as Members of the Board
were Matti Alahuhta, Anne Brunila, Antti Herlin, Iiris Herlin,
Jussi Herlin, Ravi Kant, Juhani Kaskeala and Sirpa
Pietikäinen. Susan Duinhoven was elected as a new
member to the Board of Directors.
At its meeting held after the General Meeting, the
Board of Directors elected from among its members Antti
Herlin as its Chairman and Jussi Herlin as Vice Chairman.
Ravi Kant was elected as Chairman and Anne Brunila,
Antti Herlin and Jussi Herlin as members of the Audit
Committee. Anne Brunila and Ravi Kant are independent
of both the company and of significa nt shareholders.
Antti Herlin was elected as Chairman and Matti
Alahuhta, Jussi Herlin and Juhani Kaskeala as members
of the Nomination and Compensation Committee. Matti
Alahuhta and Juhani Kaskeala are independent of both
the company and of significant sh areholders.
The General Meeting confirmed an annual
compensation of EUR 60,000 for the Chairman of the
Board, EUR 50,000 for the Vice Chairman and EUR
45,000 for Board Members. In addition, a compensation of
EUR 500 was approved for attendance at Board and
Committee meetings but anyhow a fee of EUR 3,000 is
paid per Committee meeting for a Chairman of the
Committee residing outside of Finland and a fee of EUR
2,000 is paid per Committee meeting for those members
residing outside of Finland. Of the annual remuneration,
40 percent will be paid in class B shares of KONE
Corporation and the rest in cash.
The General Meeting approved the authorization for
the Board of Directors to repurchase KONE's own shares.
Altogether no more than 52,930,000 shares may be
repurchased, of which no more than 7,620,000 may be
class A shares and 45,310,000 class B shares. The
authorization will be valid until the conclusion of the
following annual general meeting, however, at the latest
until 30 June 2021.
Furthermore, the General Meeting authorized the
Board of Directors to decide on the issuance of shares as
well as the issuance of options and other special rights
entitling to shares referred to in chapter 10 section 1 of the
Finnish Companies Act. The number of shares to be
issued based on this authorization shall not exceed
7,620,000 class A shares and 45,310,000 class B shares.
The Board of Directors decides on all the conditions of the
issuance of shares and of special rights entitling to shares.
The authorization concerns both the issuance of new
shares as well as the transfer of treasury shares. The
issuance of shares and of special rights entitling to shares
may be carried out in deviation from the shareholders' pre-
emptive rights (directed issue). The authorization will be
valid until the conclusion of the following annual general
meeting, however, at the latest until 30 June 2021.
The General Meeting decided to amend the Articles of
Association by updating the article concerning the line of
business of the company (2 §) and changing the articles
concerning the auditing (7§ and 10§).
Authorized public accountants Pricewaterhouse-
Coopers Oy and APA Jouko Malinen were nominated as
auditors for the term 2020. Audit firm Ernst & Young Oy
was nominated as the auditor for the term 2021.
Share-based long-term incentives
KONE has three separate share-based incentive plans,
two performance share plans and one restricted share
plan. The first performance share plan is targeted for the
senior management of KONE including the President &
CEO, members of the Executive Board and other top
management, consisting of approximately 60 individuals.
The second performance share plan is targeted for other
key personnel of KONE, totaling approximately 500
individuals. The restricted share plan is targeted for senior
management and other key personnel of KONE, excluding
President & CEO. The potential reward for the
performance share plans is based on KPIs as decided by
the Board on an annual basis in line with the strategic
targets. In 2020, the reward was based on sales growth
and profitability as well as growth of KONE’s digital
services in both plans. The restricted share plan does not
have a performance condition. The potential reward is to
be paid as a combination of KONE class B shares and a
cash payment equivalent to the taxes and similar charges
that are incurred from the receipt of shares.
The performance share plans have a vesting period of
three years, including the performance period. The
restricted share plan has a vesting period from one to
three years. If the participant’s employment or service
contract is terminated during the vesting period, they are
either obliged to return the shares already received or lose
the entitlement to the shares they have not yet received.
As part of the plan for the senior management, a long-term
target for their ownership has been set. For the Executive
Board members, the long-term ownership target is that the
members have an ownership of KONE shares
corresponding to at least five years’ annual base salary.
For other selected top management positions, the
ownership target is at least two years’ base salary.
BOARD OF DIRECTORS’ REPORT
27 KONE ANNUAL REVIEW 2020
Share capital and market capitalization*
Dec 31, 2020
Dec 31, 2019
Number of class B shares
453,187,148
453,187,148
Number of class A shares
76,208,712
76,208,712
Total shares
529,395,860
529,395,860
Share capital, EUR
66,174,483
66,174,483
Market capitalization, MEUR*
34,452
30,180
* Market capitalization is calculated on the basis of both the listed B shares and the unlisted A shares excluding treasury shares. Class A shares are valued at
the closing price of the class B shares at the end of the reporting period.
Shares in KONE’s possession
1–12/2020
Shares in KONE's possession at the beginning of the period
11,553,605
Changes in own shares during the period
-
547,599
Shares in KONE's possession at the end of the period
11,006,006
1
–
12/2020
1
–
12/2019
Shares traded on the Nasdaq Helsinki Ltd., million
222.9
157.0
Average daily trading volume
884,675
628,085
Volume
-
weighted average share price
EUR
62.1
49.8
Highest share notation
EUR
76.2
59.3
Lowest share notation
EUR
42.4
41.0
Share notation at the end of the period
EUR
66.5
58.3
Trading on the KONE share
Share capital and market capitalization
Shares in KONE’s possession
At the end of December 2020, the Group had 11,006,006 class B shares in its possession. The shares in the Group’s
possession represent 2.4% of the total number of class B shares. This corresponds to 0.9% of the total voting rights.
Shares traded on the Nasdaq Helsinki Ltd
In addition to the Nasdaq Helsinki Ltd., KONE’s class B
share is traded also on various alternative trading
platforms. The volume of KONE’s B shares traded on
the Nasdaq Helsinki Stock Exchange represented
approximately 31.3% of the total volume of KONE’s
class B shares traded in October–December 2020
(source: Fidessa Fragmentation Index,
www.fragmentation.fidessa.com).
The number of registered shareholders was 62,100
at the beginning of the review period and 72,661 at its
BOARD OF DIRECTORS’ REPORT
28 KONE ANNUAL REVIEW 2020
end. The number of private households holding shares
totaled 68,746 at the end of the period, which
corresponds to approximately 12.1% of the listed B
shares. At the end of December 2020, a total of 54.6%
of the B shares were owned by nominee-registered and
non -Finnish investors.
Flagging notifications
During January–December 2020, BlackRock, Inc.
announced two notices in accordance with the Finnish
Securities Market Act Chapter 9, Section 5. The notices
were announced on January 17 and January 27. The
notices have been released as stock exchange releases
and are available on KONE Corporation’s internet pages
at www.kone.com. According to the latest notification, the
total number of KONE Corporation shares owned by
BlackRock, Inc. and its funds decreased to below five (5)
per cent of the share capital of KONE Corporation on
January 24, 2020.
BOARD OF DIRECTORS’ REPORT
29 KONE ANNUAL REVIEW 2020
Outlook
NORTH AMERICA
EMEA
ASIA-PACIFIC
New equipment
Services
New equipment
Services
New equipment
Services
Decline in the first
quarter, recovery
after that
Maintenance
Resilient excl. impact
from lock-downs
Modernization
Uncertainty could
delay decisions
Decline in the first
quarter, recovery
after that
Maintenance
Resilient excl. impact
from lock-downs
Modernization
Uncertainty could
delay decisions
China
Stable or growth
Outside China
Decline in the first
quarter, recovery
after that
Maintenance
Resilient excl. impact
from lock-downs
Modernization
Uncertainty could
delay decisions
Market outlook 2021
The new equipment market is expected to be stable or to
grow in China. In the rest of the world, the market is
expected to decline year-on-year in the first quarter due to
a high comparison point and then to start recovering.
The maintenance markets are expected to be resilient,
excluding the direct impacts of the lockdown measures.
In the modernization markets, the fundamental growth
drivers are intact, but uncertainty could delay decision-
making in modernization projects.
Business outlook 2021
In 2021, KONE's sales growth is estimated to be in the
range of 0 % 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 13.4%. Assuming that
foreign exchange rates would remain at the January 2021
level, foreign exchange rates are estimated to impact the
adjusted EBIT negatively by around EUR 20 million.
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 potential
impacts from COVID-19 as well as the rising raw material
and logistics costs. KONE also continues to invest actively
in building the capability to sell and deliver digital services
and solutions .
The Board’s proposal for the distribution of profit
The parent company’s non-restricted equity on December
31, 2020 is EUR 2,046,658,825.95 of which the net
income for the financial year is EUR 389,581,522.35.
The Board of Directors proposes to the Annual General
Meeting that a dividend of EUR 1.7475 be paid on the
outstanding 76,208,712 class A shares and EUR 1.75 on
the outstanding 442,181,142 class B shares. Further, the
Board proposes an extra dividend of EUR 0.4975 to be
paid on the outstanding 76,208,712 class A shares and
EUR 0.50 on the outstanding 442,181,142 class B shares,
resulting in a total amount of proposed dividend of EUR
1,165,996,127.94. The Board of Directors further proposes
that the remaining non-restricted equity, EUR
880,662,698.01 be retained and carried forward.
The Board proposes that the dividends be payable from
March 11, 2021. All the shares existing on the dividend
record date are entitled to dividend for the year 2020
except for the own shares held by the parent company.
Annual General Meeting 2021
KONE Corporation’s Annual General Meeting will be
held on Tuesday 2 March 2021 at 11.00 a.m. In order to
prevent the spread of the COVID-19 pandemic, the
company’s shareholders may participate in the General
Meeting and exercise their shareholder rights only by
voting in advance and by submitting counterproposals
and asking questions in advance.
Helsinki, January 28, 2021
KONE Corporation’s Board of Director s
BOARD OF DIRECTORS’ REPORT | SHARES AND SHAREHOLDERS
30 KONE ANNUAL REVIEW 2020
SHARES AND SHAREHOLDERS
KONE share
KONE has two classes of shares: A and B. Only B-
class shares are listed on the Nasdaq Helsinki Ltd.
Trading of the KONE class B shares started on January
2, 1967.
VOTING RIGHTS
Each KONE class A share is assigned one vote, as is
each block of 10 class B shares, with the provision that
each shareholder is entitled to at least one vote.
DIVIDEND POLICY
KONE has not adopted a specific dividend policy. In the
case of a dividend distribution, the dividend paid on the
class B share is higher than that on the class A share.
The difference between the dividends is at minimum
one (1) percent and at maximum two-and-a-half (2.5)
percent, calculated from the accounting par value of the
share. The accounting par value of the share is EUR
0.125.
Dividend proposal
Dividend
EUR 1.75
Extraordinary dividend
EUR 0.50
per class B share
Market
capitalization
on December 31,
2020
EUR
34,452
Closing price (EUR)
December 31, 2020
66.46
December 31, 2019
58.28
Change
+14.0 %
KONE corporation’s share capital consists of
the following
Number of
shares
Par value,
EUR
Class A
76,208,712
9,526,089
Class B
453,187,148
56,648,394
Total
529,395,860
66,174,483
Share notations (EUR)
High
76.20
Low
42.39
Volume -weighted
average price
62.07
KONE class B
shares
Trading code, Nasdaq Helsinki
Ltd. in Finland
KNEBV
ISIN code
FI0009013403
Accounting par value
EUR 0.125
BOARD OF DIRECTORS’ REPORT | SHARES AND SHAREHOLDERS
31 KONE ANNUAL REVIEW 2020
0,00
0,50
1,00
1,50
2,00
2,50
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020*
0
10
20
30
40
50
60
70
80
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
KONE class B dividend per share, 2005–2020, EUR
Dividend
Extraordinary d
ivid
end
*) Board’s proposal for the 2020 dividend
KONE class B share price development Jan 1, 2011–Dec 31, 2020, EUR
KONE class B share
OMX Helsinki Cap Index
Shareholders
Class A shares, %
Class B shares, %
92.6% Companies
7.4% Non-profit organizations
54.6% Foreign / nominee registered shareholders *)
16.0% Companies
12.1% Individuals
9.8% Financial institutions and insurance companies
4.2% Non-profit organizations
3.3% Public institutions
*) Includes foreign -owned shares registered by Finnish
nominees
BOARD OF DIRECTORS’ REPORT | SHARES AND SHAREHOLDERS
32 KONE ANNUAL REVIEW 2020
Shareholdings KONE Board of Directors and
Executive Board on Dec 31, 2020 and changes
in shareholding during Jan 1−Dec 31, 2020 are
available on page 110.
Shareholdings on Dec 31, 2020 by number of shares
Number of shares
Number of
owners
Percentage of
owners
Number of
shares
Percentage of
shares
1 - 10
13,468
18.5 %
73,719
0.0 %
11 - 100
29,397
40.5 %
1,392,735
0.3 %
101 - 1,000
22,802
31.4 %
8,276,699
1.6 %
1,001 - 10,000
6,170
8.5 %
17,164,161
3.2 %
10,001 - 100,000
725
1.0 %
18,561,762
3.5 %
100,001 -
99
0.1 %
483,884,448
91.4 %
Total
72,661
100.00%
529,353,524
100.00%
Shares which have not been transferred to the paperless
book entry system
42,336
0.0 %
Total
529,395,860
100.00%
Major shareholders on Dec 31, 2020
A-series
B-series
Total
% of shares
% of votes
1
Herlin Antti
70,561,608
47,737,946
118,299,554
22.35%
61.99%
Holding Manutas Oy
1)
54,284,592
38,065,254
92,349,846
17.44%
47.80%
Secutiry Trading Oy
2)
16,277,016
7,983,016
24,260,032
4.58%
14.05%
Herlin Antti
0
1,689,676
1,689,676
0.32%
0.14%
2
Polttina Oy
0
17,271,928
17,271,928
3.26%
1.42%
3
Wipunen varainhallinta Oy
0
16,350,000
16,350,000
3.09%
1.35%
4
KONE Foundation
5,647,104
9,859,632
15,506,736
2.93%
5.46%
5
Heikintorppa Oy
0
10,210,743
10,210,743
1.93%
0.84%
6
Varma Mutual Pension Insurance Company
0
5,851,222
5,851,222
1.11%
0.48%
7
Riikantorppa Oy
0
5,500,000
5,500,000
1.04%
0.45%
8
Blåberg Olli Edvard
0
4,660,000
4,660,000
0.88%
0.38%
9
Ilmarinen Mutual Pension Insurance Company
0
3,828,977
3,828,977
0.72%
0.32%
10
The State Pension Fund
0
2,450,000
2,450,000
0.46%
0.20%
10 largest shareholders total
76,208,712
123,720,448
199,929,160
37.77%
72.89%
Foreign / nominee registered shareholders
3)
0
247,471,223
247,471,223
46.75%
20.36%
Repurchased own shares
0
11,006,006
11,006,006
2.08%
0.91%
Others
0
70,989,471
70,989,471
13.41%
5.84%
Total
76,208,712
453,187,148
529,395,860
100.00%
100.00%
The list of ten major shareholders includes the major shareholders with a Finnish book -entry account.
1)
Trading, company in which he exercises controlling power, his ownership represents 51.0% of the shares and 62.7% of the voting rights.
2)
Antti Herlin’s ownership in Security Trading Oy represents 99.9% of the shares and 99.8% of the voting rights.
3)
Foreign ownership including foreign -owned shares registered by Finnish nominees.
BOARD OF DIRECTORS’ REPORT | SHARES AND SHAREHOLDERS
33 KONE ANNUAL REVIEW 2020
Key figures per share, Jan 1−Dec 31, 2020
KONE has adopted the new IFRS 16 effective January 1, 2019 using the modified retrospective approach and
comparative figures have not been restated. KONE applies IFRS 15 and IFRS 9 standards from January 1, 2018
onwards and 2017 financials are restated retrospectively. Figures for 2016 are not restated and thus not fully
comparable.
2020
2019
2018
2017
2016
Basic earnings per share, EUR
1.81
1.80
1.63
1.86
2.00
Diluted earnings per share, EUR
1.81
1.80
1.63
1.86
1.99
Equity per share, EUR
6.12
6.13
5.94
5.85
5.42
Dividend per class B share, EUR ¹
⁾
2.25
1.70
1.65
1.65
1.55
Dividend per class A share, EUR ¹
⁾
2.2450
1.6975
1.6475
1.6475
1.5475
Dividend per earnings, class B share, %
124.0
94.2
101.0
88.6
77.5
Dividend per earnings, class A share, %
123.7
94.1
100.9
88.5
77.4
Effective dividend yield, class B share, %
3.4
2.9
4.0
3.7
3.6
Price per earnings, class B share
36.63
32.31
25.49
24.05
21.29
Market value of class B share, average, EUR
62.07
49.82
43.68
43.73
41.47
- at end of period, EUR
66.46
58.28
41.64
44.78
42.57
Market capitalization at the end of period, MEUR ²
⁾
34,452
30,180
21,489
23,052
21,851
Number of class A shares at the end of period, (1,000s)
76,209
76,209
76,209
76,209
76,209
Weighted average number of class A shares, (1,000s)
76,209
76,209
76,209
76,209
76,209
Number of class B shares at the end of period, (1,000s) ²
⁾
442,181
441,634
439,852
438,569
437,076
Weighted average number of class B shares, (1,000s) ³
⁾
442,055
440,897
439,875
438,628
437,928
Weighted average number of shares, (1,000s) ³
⁾
518,264
517,105
516,084
514,837
514,137
¹
⁾
²
⁾
³
⁾
BOARD OF DIRECTORS’ REPORT | KEY FIGURES AND FINANCIAL DEVELOPMENT
34 KONE ANNUAL REVIEW 2020
KEY FIGURES AND FINANCIAL DEVELOPMENT
KONE has adopted IFRS 16 standard effective January 1, 2019 using the modified retrospective approach and
comparative figures have not been restated. KONE applies IFRS 15 and IFRS 9 standards from January 1, 2018
onwards and 2017 financials are restated retrospectively. Figures for 2016 are not restated and thus not fully
comparable.
Consolidated Statement of Income, Jan 1–Dec 31
2020
2019
2018
2017
2016
Sales, MEUR
9,939
9,982
9,071
8,797
8,784
- sales outside Finland, MEUR
9,745
9,783
8,879
8,620
8,594
Operating income, MEUR
1,213
1,192
1,042
1,192
1,293
- as percentage of sales, %
12.2
11.9
11.5
13.6
14.7
Adjusted EBIT, MEUR ¹
⁾
1,251
1,237
1,112
1,206
1,293
- as percentage of sales, % ¹
⁾
12.6
12.4
12.3
13.7
14.7
Income before taxes, MEUR
1,224
1,218
1,087
1,250
1,330
- as percentage of sales, %
12.3
12.2
12.0
14.2
15.1
Net income, MEUR
947
939
845
960
1,023
Consolidated statement of financial position, MEUR
Dec 31, 2020
Dec 31, 2019
Dec 31, 2018
Dec 31, 2017
Dec 31, 2016
Non-current assets
2,666
2,811
2,418
2,387
2,489
Current assets
6,126
5,802
5,316
5,075
5,463
Total equity
3,197
3,193
3,081
3,029
2,796
Non-current liabilities
522
760
489
491
534
Provisions
155
127
139
138
183
Current liabilities
4,918
4,533
4,025
3,804
4,438
Total assets
8,792
8,613
7,734
7,462
7,951
Interest-bearing net debt
-1,954
-1,553
-1,704
-1,690
-1,688
Assets employed ²
⁾
1,243
1,640
1,377
1,339
1,108
Net working capital ²
⁾
-1,160
-856
-758
-773
-1,055
Other data, Jan 1–Dec 31
2020
2019
2018
2017
2016
Orders received, MEUR
8,185
8,400
7,797
7,554
7,621
Order book, MEUR
7,729
8,052
7,951
7,358
8,592
Cash flow from operations before financing items and taxes,
MEUR
1,908
1,550
1,150
1,263
1,509
Capital expenditure excl. acquisitions, MEUR
201
200
112
116
127
- as percentage of sales, %
2.0
2.0
1.2
1.3
1.5
Expenditure on research and development, MEUR
180
171
164
158
141
- as percentage of sales, %
1.8
1.7
1.8
1.8
1.6
Average number of employees
60,376
58,369
56,119
53,417
50,905
Number of employees at end of period
61,380
59,825
57,359
55,075
52,104
Employee costs
3,043
3,048
2,818
2,725
2,634
Key ratios, %, Jan 1–Dec 31
2020
2019
2018
2017
2016
Return on equity
29.7
30.1
27.7
32.1
38.1
Return on capital employed
25.0
25.1
25.0
28.8
34.1
Equity ratio
45.5
46.5
49.9
50.0
46.8
Gearing
-61.1
-48.6
-55.3
-55.8
-60.4
¹
⁾
²
⁾
BOARD OF DIRECTORS’ REPORT | KEY FIGURES AND FINANCIAL DEVELOPMENT
35 KONE ANNUAL REVIEW 2020
ALTERNATIVE PERFORMANCE MEASURE
In September 2017, KONE launched a program called Accelerate to speed up the execution of the strategy and to
support profitable growth. KONE reports an alternative performance measure, adjusted EBIT, to enhance the
comparability of the business performance between reporting periods. The adjusted EBIT is calculated by excluding
significant items impacting comparability such as significant restructuring costs arising from redundancy and other costs
directly associated to the Accelerate program.
2020
2019
2018
2017
2016
Operating income (EBIT), MEUR
1,213
1,192
1,042
1,192
1,293
Operating income margin (EBIT margin), %
12.2
11.9
11.5
13.6
14.7
Items impacting comparability, MEUR
38
45
70
13
-
Adjusted EBIT, MEUR
1,251
1,237
1,112
1,206
1,293
Adjusted EBIT margin %
12.6
12.4
12.3
13.7
14.7
BOARD OF DIRECTORS’ REPORT | CALCULATION OF KEY FIGURES
36 KONE ANNUAL REVIEW 2020
CALCULATION OF KEY FIGURES
Basic earnings/share
=
Net income attributable to the shareholders of the parent company
Share issue and conversion -adjusted weighted average
number of shares - repurchased own shares
Equity/share
=
Total shareholders’ equity
Number of shares (issue adjusted) - repurchased own shares
Dividend/share
=
Dividend payable for the accounting period
Share issue and conversion -adjusted weighted average
number of shares - repurchased own shares
Dividend/earnings (%)
=
100 x
Dividend/share
Earnings/share
Effective dividend yield (%)
=
100 x
Dividend/share
Price of class B shares at end of accounting period
Price/earnings
=
Price of class B shares at end of accounting period
Earnings/share
Average price
=
Total EUR value of all class B shares traded
Average number of class B shares traded during the accounting period
Market value of all
outstanding shares
=
The number of shares ¹
⁾
the price of class B shares at end of accounting period
Shares traded
=
Number of class B shares traded during the accounting period
Shares traded (%)
=
100 x
Number of class B shares traded
Average weighted number of class B shares
Average number
of employees
=
The average number of employees at the end of each calendar month
during the accounting period
Return on equity (%)
=
100 x
Net income
Total equity (average during the accounting period)
Return on
capital employed (%)
=
100 x
Net income + financing expenses
Equity + interest-bearing-debt (average during the accounting period)
Equity ratio (%)
=
100 x
Total equity
Total assets - advance payments received and deferred revenue
Gearing (%)
=
100 x
Interest-bearing net debt
Total equity
Assets employed
=
Net working capital + goodwill + intangible assets + tangible assets +
investments in associated companies + shares and other non-current
financial assets
¹
⁾
CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF INCOME
37 KONE ANNUAL REVIEW 2020
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
MEUR
Note
Jan 1–Dec 31, 2020
%
Jan 1–Dec 31, 2019
%
Sales
2.1
Costs, expenses and depreciation
2.2, 2.3
-8,725.7
-8,789.4
Operating income
Financing income
2.5
Financing expenses
2.5
-30.4
-26.5
Income before taxes
Taxes
2.6
-276.9
-278.9
Net income
Net income attributable to:
Shareholders of the parent company
Non-controlling interests
Total
Earnings per share for profit attributable to the
shareholders of the parent company, EUR
2.7
Basic earnings per share, EUR
Diluted earnings per share, EUR
CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF INCOME
38 KONE ANNUAL REVIEW 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
MEUR
Note
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Net income
Other comprehensive income, net of tax:
2.8
Translation differences
-173.2
Hedging of foreign subsidiaries
-8.5
Cash flow hedges
-14.5
Items that may be subsequently
reclassified to statement of income
-94.1
Changes in fair value
-2.7
Remeasurements of employee benefits
-34.3
Items that will not be reclassified to
statement of income
-37.0
Total other comprehensive
income, net of tax
-80.5
-6.0
Total comprehensive income
Total comprehensive income
attributable to:
Shareholders of the parent company
Non-controlling interests
Total
CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF FINANCIAL POSITION
39 KONE ANNUAL REVIEW 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Assets, MEUR
Note
Dec 31, 2020
Dec 31, 2019
Non-current assets
Goodwill
4.2
Other intangible assets
4.3
Tangible assets
4.4
Shares and other non-current financial assets
5.3, 5.4
Non-current loans receivable
I
5.3, 5.5
Employee benefits
I
5.3, 5.7
Deferred tax assets
II
3.6
Total non-current assets
Current assets
Inventories
II
3.1
Accounts receivable
II
3.2, 5.3
Deferred assets
II
3.3, 5.3
Income tax receivables
II
Current deposits and loan receivables
I
5.3, 5.5
Cash and cash equivalents
I
5.3
Total current assets
Total assets
Equity and liabilities, MEUR
Note
Dec 31, 2020
Dec 31, 2019
Equity attributable to the shareholders
of the parent company
Share capital
5.2
Share premium account
Paid-up unrestricted equity reserve
Fair value and hedge reserves
Translation differences
-10.9
Remeasurements of employee benefits
-115.0
-123.8
Retained earnings
Total Shareholders' Equity
Non-controlling interests
Total Equity
Non-current liabilities
Loans
I
5.3
Employee benefits
I
5.3, 5.7
Deferred tax liabilities
II
3.6
Total non-current liabilities
Provisions
II
3.5
Current liabilities
Current portion of long-term loans
I
5.3
Short-term loans and other liabilities
I
5.3
Advance payments received and deferred revenue
II
3.2
Accounts payable
II
5.3
Accruals
II
3.4, 5.3
Income tax payables
II
Total current liabilities
Total equity and liabilities
Items designated " I " comprise interest-bearing net debt.
Items designated " II " comprise net working capital.
CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
40 KONE ANNUAL REVIEW 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Jan 1, 2020
-123.8
-185.1
Net income for the period
Other comprehensive income:
2.8
Translation differences
-173.2
-173.2
Hedging of foreign subsidiaries
Cash flow hedges
Changes in fair value
Remeasurements of employee benefits
Transactions with shareholders and non-
controlling interests:
5.2
Profit distribution
-880.5
-880.5
Increase in equity (option rights)
-
Purchase of own shares
-
Change in non-controlling interests
-5.5
-5.5
Option and share-based compensation
-20.4
Dec 31, 2020
-10.9
-115.0
-164.7
Jan 1, 2019
-89.5
-203.3
Restatement impact
-28.5
-28.5
Jan 1, 2019 restated
-89.5
-203.3
Net income for the period
Other comprehensive income:
2.8
Translation differences
Hedging of foreign subsidiaries
-8.5
-8.5
Cash flow hedges
-14.5
-14.5
Changes in fair value
-2.7
-2.7
Remeasurements of employee benefits
-34.3
-34.3
Transactions with shareholders and non-
controlling interests:
5.2
Profit distribution
-851.7
-851.7
Increase in equity (option rights)
Purchase of own shares
-
Change in non-controlling interests
-3.3
-3.3
Option and share-based compensation
-18.2
Dec 31, 2019
-123.8
-185.1
CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF CASH FLOWS
41 KONE ANNUAL REVIEW 2020
CONSOLIDATED STATEMENT OF CASH FLOWS
MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Cash receipts from customers
Cash paid to suppliers and employees
-8,149.7
-8,417.8
Cash flow from operations before financing items and
taxes
Interest received
Interest paid
-19.0
-16.1
Dividends received and capital repayments
Other financing items
-43.7
-21.7
Income taxes paid
-333.2
-287.2
Cash flow from operating activities
Capital expenditure
-88.0
-98.0
Proceeds from sales of fixed assets
-
Acquisitions, net of cash
-26.9
-27.0
Proceeds from sales of businesses
Cash flow from investing activities
-109.8
-121.8
Cash flow after investing activities
Change in deposits and loan receivables, net
-606.1
-182.7
Change of current creditors
-130.2
-119.8
Payments of long-term liabilities
-3.9
-14.3
Purchase of own shares
-
-
Increase in equity (option rights)
-
Profit distribution
-880.5
-851.7
Changes in non-controlling interests
-3.8
-3.7
Cash flow from financing activities
-1,624.5
-1,134.7
Change in cash and cash equivalents
-184.1
Cash and cash equivalents at beginning of period
Translation differences
-20.4
Cash and cash equivalents at end of period
The impact of changes in exchange rates has been eliminated in the statement of cash flows by translating the opening balance
sheet with the closing rates of the period.
Reconciliation of operating income to cash flow from operations before financing items and taxes
MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Operating income
1,212.9
1,192.5
Change in working capital before financing items and taxes
455.6
115.7
Depreciation and amortization
239.0
241.5
Cash flow from operations before financing items and
taxes
1,907.5
1,549.6
Change in interest -bearing net debt
MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Interest-bearing net debt at beginning of period
-1,552.9
-1,346.4
Interest-bearing net debt at end of period
-1,953.8
-1,552.9
Change in interest-bearing net debt
-401.0
-206.5
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | BASIS OF PREPARATION
42 KONE ANNUAL REVIEW 2020
BASIS OF PREPARATION
domiciled in
.
its subsidiaries together form the KONE Group (“KONE”
or “the Group”). KONE’s vision is to deliver the best
People Flow® experience, by providing Ease,
Effectiveness and Experiences to users and customers
over the full life-cycle of the buildings.
The consolidated financial statements of
International Financial Reporting Standards (IFRS) as
adopted by the European Union, observing the
standards and interpretations effective on December
31, 2020.
KONE has adopted the new standards and
interpretations that took effect during the accounting
period and are relevant to its operations. The IFRS
standards and amendments thereto that took effect in
2020 did not have a material impact on the result or the
financial position of the Group or on the presentation of
the financial statements. IFRS 16 and IFRIC 23 were
adopted effective January 1, 2019 using the modified
retrospective approach with transition impact of EUR
28.5 million recognized in the opening balance of
retained earnings.
The consolidated financial statements have been
prepared for the accounting period of 12 months from
January 1 to December 31, 2020. The financial
statements have been authorized for issue by the Board
of Directors of
According to the Finnish Companies’ Act the Annual
General Meeting has the right to approve, reject or
make changes to the financial statements after the
publication.
The consolidated financial statements are presented
in millions of euros and prepared under the historical
cost convention except as disclosed in the accounting
Basis of
preparation
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
1
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | BASIS OF PREPARATION
IN THIS SECTION
●
Basis of preparation
●
Consolidation principles
●
Segment information
●
Accounting estimates and management
judgements
Accounting principles are presented in connection
with notes in sections 2–6
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | BASIS OF PREPARATION
43 KONE ANNUAL REVIEW 2020
principles. Further, trade date accounting has been
applied to all financial assets and liabilities. Amounts
presented in these financial statements have been
rounded from exact values and therefore the sum of
amounts presented individually can deviate from the
presented sum amount calculated based on the exact
values . Key figures have been calculated using exact
values .
CONSOLIDATION PRINCIPLES
The consolidated accounts include the parent company
and those companies in which the parent company
held, directly or indirectly, more than 50 percent of the
voting power or had control through management
agreements with shareholders holding the majority of
the voting power at the end of the accounting period. In
addition to these holdings, the consolidated accounts
include possible holdings that are of a controlling-right
nature (units/companies established for a specific
reason). Subsidiaries acquired during the period were
included in the consolidated financial statements from
the date of acquiring the control, and divested
subsidiaries up to the date of loss of control. Inter-
corporate shareholdings have been eliminated using
the acquisition method. The acquisition consideration,
including deferred and contingent consideration, as well
as the identifiable assets acquired and liabilities
assumed, are measured at the acquisition date fair
values. The acquisit ion-related costs are accounted as
expenses for the period in which they are incurred.
At the acquisition date, the non-controlling interests
are valued either at the acquisition date fair values or at
non -controlling interests’ proportionate share in the
recognized amounts of the identifiable net assets. Net
income for the period is disclosed in the statement of
income as an allocation to the shareholders of the
parent company and non -controlling interests. The
allocation of the comprehensive income to the
shareholders of the parent company and non-controlling
interests is presented in the statement of
comprehensive income. Non-controlling interests’ share
of total equity is disclosed separately under
consolidated total equity.
All inter-corporate transactions, receivables,
liabilities and unrealized profits, as well as the
distribution of profits within the Group have been
eliminated in the consolidated financial statements.
The results and financial position of foreign
operations that have a functional currency different from
the presentation currency of the Group, have been
translated into the presentation currency as follows:
assets and liabilities at the statement of financial
position date closing rate, and income and expenses at
average exchange rates of the accounting period. The
resulting exchange rate differences have been
recognized in other comprehensive income.
SEGMENT INFORMATION
The profitability of KONE is presented as a single entity.
The KONE business idea is to serve its customers by
providing solutions throughout the entire lifecycle of the
equipment, beginning from the installation of new
equipment to the maintenance and modernization
during their lifecycle and the full replacement of the
equipment. Most of the equipment that are delivered
are converted into long-term KONE maintenance
contracts. KONE’s operating business structure is
globally harmonized based on defined business
processes. Material operative decisions are made by
the Board of Directors of KONE. Such decisions are
prepared and presented by the full-time Chairman of
the Board and the President and Chief Executive
Officer. Due to the business model of KONE, the nature
of its operations and its governance structure, the
Group as a whole is the relevant operating segment to
be reported.
ACCOUNTING ESTIMATES AND
MANAGEMENT JUDGEMENTS
The preparation of the financial statements in
accordance with the IFRS requires management to
make judgements, estimates and assumptions that
affect the measurement of the reported assets and
liabilities and other information, such as contingent
assets and liabilities and the recognition of income and
expenses in the consolidated statement of income.
Although these estimates and assumptions are based
on the management’s best knowledge of current events
and actions, actual results may differ from the
estimates.
For KONE the most significant judgements,
estimates and assumptions made by the management
relate to revenue recognition, especially to defining and
determining principles for revenue recognition in project
business, to project estimates for long-term major
projects, assumptions used in impairment testing,
valuation of accounts receivables and inventories,
determining the lease term applied in the lease
accounting and recognition of provisions and uncertain
tax positions.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
44 KONE ANNUAL REVIEW 2020
Financial targets
KONE has defined long-term financial targets for
its financial performance:
◾
KONE has not defined a time frame for the
achievement of these financial targets.
◾
Given the capital and asset structure of
KONE, the aim is not to maximize the EBIT
margin in the short term, but rather to grow the
absolute EBIT in an optimal way over the long
term and as a result maintain a strong return
on capital employed.
◾
The relative EBIT margin target is relevant in
ensuring that growth and productivity improve
continuously.
GROWTH:
Faster than market growth
PROFITABILITY:
EBIT 16%
CASH FLOW:
Improved working capital rotation
Sales
9,939
MEUR
EBIT
1,213
MEUR
Financial
performance
2
IN THIS SECTION
This section comprises the following notes
describing KONE’s financial performance in 2020:
2.1 Sales
2.2 Costs and expenses
2.3 Depreciation and amortization
2.4 Foreign exchange sensitivity
2.5 Financing income and expenses
2.6 Income taxes
2.7 Earnings per share
2.8 Other comprehensive income
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
CONSOLIDATED FINANCIAL STA TEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
45 KONE ANNUAL REVIEW 2020
2.1 SALES
Due to KONE’s business model, the nature of its operations and its
governance structure, KONE has one operating segment.
Sales by business
MEUR
Jan 1–Dec 31,
2020
%
Jan 1–Dec 31,
2019
%
New equipment
5,340.2
54
5,318.8
53
Services
4,598.4
46
4,663.0
47
Maintenance
3215.6
32
3,192.0
32
Modernization
1,382.8
14
1,471.0
15
Total
9,938.5
9,981.8
Sales by geographical area
MEUR
Jan 1–Dec 31,
2020
%
Jan 1–Dec 31,
2019
%
EMEA ¹
⁾
3,916.2
39
4,045.4
41
Americas
1,939.5
20
2,046.7
21
Asia -Pacific
4,082.8
41
3,889.7
39
Total
9,938.5
9,981.8
¹
⁾
Sales by customer
KONE’s customer base consists of a large number of customers in several
markets areas and no individual customer represents a material share of its
sales.
Top 10 countries by sales, %
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
46 KONE ANNUAL REVIEW 2020
Accounting principles
Revenue from contracts with KONE’s customers is
recognized at an amount that reflects the consideration
to which KONE expects to be entitled in exchange for
promised goods or services to a customer.
KONE recognizes revenue when or as it satisfies
a performance obligation by transferring control on the
promised goods or services (performance obligation) to
a customer.
A performance obligation is a distinct good or
service within a contract that a customer can benefit
from on a stand-alone basis. For KONE’s new
equipment and modernization contracts, a performance
obligation typically means delivery and installation of a
single unit, i.e. an elevator, an escalator or other
People Flow™ solution. For KONE’s maintenance
contracts, maintenance of a single unit is considered as
a distinct performance obligation and for repairs
business, typically a service order is a performance
obligation for KONE.
In new equipment and modernization contracts,
KONE transfers the control of a single unit to the
customer over time and, therefore, satisfies the
performance obligation and recognizes revenue over
time.
The transfer of control occurs when KONE
completes full delivery of the unit to a customer site as
then the customer has the ability to direct the use of,
and obtain substantially all of the remaining benefits
from, a unit constructed by KONE. Upon this milestone
and onwards up to the project handover, revenue is
recognized under the percentage of completion method
using a cost-to-cost input method as based on KONE’s
assessment it best depicts the transfer of control to the
customer. Percentage of completion is defined as the
proportion of an individual performance obligation’s
cost incurred to date from the total estimated costs for
that particular performance obligation
The percentage of completion method requires
accurate estimates of future revenues and costs over
the full term of the contracts. These significant
estimates form the basis for the amount of revenue to
be recognized and include the latest updated estimate
of total revenue and costs, adjusted with risks based on
historical experience on typical estimation revisions for
similar types of contracts. These estimates may
materially change due to the stage of completion of the
contract, changes in the contract scope, cost estimates
and customer’s plans and other factors.
Revenues from the rendering of maintenance
services and repairs are recognized when the services
have been rendered or over the contract term when the
work is being carried out. For maintenance services the
performance obligation is satisfied over time because
the customer simultaneously receives and consumes
the benefits provided as KONE performs the services.
Most of KONE’s revenue is derived from fixed-price
contracts and, therefore, the amount of revenue to be
earned from each contract is determined by reference
to those fixed prices. KONE’s customer contracts do
not contain any significant financing components. In
new equipment and modernization contracts payment
terms are typically based on either specific contractual
milestones or progress of work performed. In
maintenance services contracts customers generally
pay based on fixed payment schedules.
When customer contracts contain multiple
performance obligations the transaction price is
allocated to each performance obligation based on the
standalone selling prices. Where these are not directly
observable, they are estimated based on estimated
costs plus margin approach.
2.2 COSTS AND EXPENSES
Costs and expenses, MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Direct materials, supplies and subcontracting
3,957.6
4,022.3
Wages, salaries, and other employment expenses including
pensions (note 5.7)
3,042.9
3,048.4
Other production costs ¹
⁾
712.9
745.1
Selling, administrative and other expenses ²
⁾
762.2
706.2
Items impacting comparability ³
⁾
37.7
45.0
Depreciation and amortization (note 2.3)
239.0
241.5
Costs, expenses, depreciation and amortization
8,752.2
8,808.4
Other income ⁴
⁾
26.5
19.0
Total costs, expenses, depreciation and amortization
8,725.7
8,789.4
Expense arising from leases of low - value assets and short - term leases amounted to EUR 11.2 (11.0) million in
2020.
¹
⁾
Includes costs of logistics, tools and consumables, operative car
fleet and traveling as well as
other miscellaneous operative
costs.
²
⁾
Includes costs related
to premises, consulting and external services, IT and traveling as well
as other miscellaneous administrative costs.
³
⁾
Restructuring costs related to the Accelerate
-
program.
⁴
⁾
Includes rental income, received grants, interest on late payments, gains on sale of fixed assets and scrap as well as other
miscellaneous income.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
47 KONE ANNUAL REVIEW 2020
Accounting principles
Research and development costs
Research and development costs are expensed as they incur, because the future economic benefits of new products
and development of existing products and services can only be proven after their successful introduction to the
market.
Accounting principles
Depreciation and amortization are recorded on a
straight-line basis over the economic useful lives of the
assets, or over the lease contract periods, if shorter.
Economic useful lives:
Maintenance contracts
10
–
15
years
Other intangible assets
3
–
10
years
Buildings
5
–
40 years
Machinery and equipment
4
–
10
years
Land is not depreciated.
Research and development costs, MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
R&D costs included in total costs
179.6
170.9
As percentage of sales, %
1.8
1.7
Auditors´ fees, MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
To member firms of PricewaterhouseCoopers network
Audit
3.7
3.8
Auditors´ statements
0.0
0.0
Tax services
0.5
0.4
Other services
2.3
2.2
Total
6.5
6.4
PricewaterhouseCoopers Oy has provided non
-
audit services to the entities of KONE Group in total of
213.0
thousand
euros during the financial year
2020
. These services included tax advisory services
27.0
thousand
euros
and other services 187.0 thousand eur os.
2.3 DEPRECIATION AND AMORTIZATION
Depreciation and amortization, MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Other intangible assets
Maintenance contracts
36.8
36.2
Other
11.6
13.7
Buildings
73.2
80.4
Machinery and equipment
117.5
111.2
Total
239.0
241.5
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
48 KONE ANNUAL REVIEW 2020
EUR
CNY
USD
Other
A change of 10% in the annual average foreign exchange rates
Impact on sales
Impact on operating income (EBIT)
Higher impact on operating income
as compared to sales and some
impact on relative operating income
7.6% change in consolidated sales
in euros
2.4 FOREIGN EXCHANGE SENSITIVITY
Sales by currency 1–12/2020
Foreig n exchange risks
KONE operates internationally and is thus exposed to risks
arising from foreign exchange rate fluctuations related to
currency flows of revenues and expenses (transaction risk)
and from the translation of statement of income and
statement of financial position of the foreign subsidiaries
from respective functional currencies into euros
(translation risk).
Transaction risks
A substantial part of KONE’s operations are denominated
in local functional currencies of the subsidiaries and do not
therefore give rise to transaction risk. The sales of new
equipment and modernizations, including installation,
typically take place in the local currency of the customer.
Component and material expenses may occur in other
currencies than the sales currency, which exposes KONE
to transaction risks. KONE policy is to hedge the foreign
exchange exposure of the order book and other highly
probable future sales and purchases with foreign
exchange forward contracts. The business units are
responsible for evaluating and hedging the transaction
risks in their operations according to the foreign exchange
policy. The most significant transaction risk exposures
arising from business operations are in the Chinese yuan,
British pound, Canadian dollar, US dollar and Singapore
dollar. The majority of the currency forward contracts
expire within one year.
Hedge accounting is applied in business units, where
there are significant revenues or expenses in foreign
currency. When hedge accounting is applied the gains and
losses from the hedges are recognized in the statement of
income at the same time as the exchange rate gains and
losses for the hedged items are recognized.
KONE’s internal loans and deposits are primarily
initiated in the local currencies of the subsidiaries in which
case the possible foreign exchange risks are hedged, by
the parent company, using foreign exchange swap
contracts.
Translation risks
Changes in consolidation exchange rates affect KONE’s
statement of income, statement of cash flows and
statement of financial position, which are presented in
euros. As approximately 75% of KONE’s revenues occur in
functional currencies other than euro, the translation risk is
significant for KONE. A change of 10% in the annual
average foreign exchange rates would have caused a
7.6% (7.6%) change in 2020 consolidated sales in euros.
Such a change would have had a higher impact on
KONE’s operating income and therefore also some impact
on KONE’s relative operating income. The translation of
the subsidiaries’ balance sheets into euros caused
translation differences of EUR -173.2 (54.0) million in
2020. The translation risk is not hedged as a rule as
KONE’s business consists of continuous operations in
various currency areas. However, in individual cases,
KONE can also hedge translation risk related to net assets
of subsidiaries. The most significant translation risk
exposures arising from operations of foreign subsidiaries
are in the Chinese yuan, Hong Kong dollar and US dollar.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
49 KONE ANNUAL REVIEW 2020
Accounting principles
The items included in the financial statements are
initially recognized in the functional currencies, which
are defined for each group entity based on their primary
economic environment.
The presentation currency of the financial
statements is the euro, which is also the functional
currency of the parent company.
The initial recognition of transactions denominated
in foreign currencies in the functional currency takes
place at the rate of exchange prevailing at the date of
the individual transaction. Foreign currency
denominated receivables and liabilities are translated
using period end exchange rates.
Foreign exchange gains and losses related to
business transactions are treated as adjustments within
operating income. Foreign exchange gains and losses
associated with financing transactions are included in
financing income and expenses.
The statements of income of foreign subsidiaries,
whose functional currency is not the euro, are translated
into euros based on the average exchange rate of the
accounting period. Items in the statement of financial
position, with the exception of net income for the
accounting period, are translated into euros at the
closing date exchange rate. Exchange rate differences
arising from net investments and associated companies
in non-euro currency subsidiaries, as well as the
exchange rate differences resulting from translating
income and expenses at the average rates and assets
and liabilities at the closing rate, are recorded in
translation differences under equity. Respective
changes during the period are presented in other
comprehensive income. Exchange rate gains and
losses resulting from financial instruments designated
as hedges of net assets in foreign subsidiaries have
been entered as translation differences in other
comprehensive income. The cumulative translation
differences related to foreign operations are reclassified
from equity to statement of income upon the disposal of
the foreign operation.
Foreig n exchange risk sensitivity analysis of financial assets and liabilities
The foreign exchange risk sensitivity analysis for the most
important currency pairs has been calculated for the KONE
companies’ foreign currency denominated financial assets
and liabilities, including foreign exchange forward contracts
outstanding at the statement of financial position date. The
order book or forecasted cash flows are not included. The
exposures in the most important currency pairs are
disclosed in the table below. The foreign exchange risk
sensitivity analysis presents the impact of a change in the
foreign exchange rates of 10 percent on net income and
on equity at the statement of financial position date.
Changes in the equity are mainly caused by foreign
exchange forwards designated in cash flow hedge
accounting. The sensitivity analysis is calculated before
taxes. A 10% change in the foreign exchange rates
(strengthening of the euro, Chinese yuan and US dollar) at
the statement of financial position date would have
resulted in an impact of EUR -8.5 (-14.6) million on the net
income and an impact of EUR 90.1 (48.7) million on equity.
Exposure Dec 31, 2020
-618
-124
-82
80
139
-76
-681
112
-93
-43
-24
-45
-66
-111
Exposure Dec 31, 2019
-154
-135
-91
80
134
-77
-243
149
-87
-39
23
-53
-68
-121
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
50 KONE ANNUAL REVIEW 2020
Accounting principles
The Group tax expense includes taxes of subsidiaries
based on taxable income for the period, together with
tax adjustments for previous periods and changes in
deferred taxes. Deferred taxes are provided for
temporary differences arising from difference between
the tax bases of assets and liabilities and their carrying
amounts in financial reporting and measured with
enacted tax rates. Typical temporary differences arise
from provisions, depreciation and amortization, inter-
company inventory margins, defined benefit plans and
tax losses carried forward. Deferred tax assets on
unused tax losses and other temporary differences are
recognized to the extent it is probable that taxable profit
is available to offset losses in the future.
A deferred tax liability is recognized on the
undistributed profits of subsidiaries where such tax is
applicable and it is expected to realize in the
foreseeable future.
The positions taken in tax returns are evaluated
periodically by the management to identify situations in
which applicable tax regulation is subject to
interpretation. Based on the evaluation, adjustments for
the uncertain tax positions are recognized when it is
considered more likely than not that certain tax
positions will be challenged by the tax authorities. The
amounts recorded are based upon the estimated final
taxes to be paid to the tax authorities.
2.5 FINANCING INCOME AND EXPENSES
Financing income and expenses, MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Dividend income
8.0
5.9
Interest income
Interest and foreign exchange rate derivatives
Change in fair value of interest ¹
⁾
-
0.6
Interest income
19.9
25.2
Interest income on loan receivables and financial assets
13.0
16.2
Other financing income
0.3
1.5
Exchange rate gains ²
⁾
0.6
2.2
Financing income
41.8
51.6
Interest expenses
Interest and foreign exchange rate derivatives
Change in fair value of interest ¹
⁾
-6.3
-0.3
Interest expenses on other financial liabilities ³
⁾
-17.0
-19.2
Other financing expenses ⁴
⁾
-5.4
-6.9
Exchange rate losses ²
⁾
-1.7
-0.1
Financing expenses
-30.4
-26.5
Financing income and expenses
11.4
25.1
¹
⁾
Change in fair value of interest includes EUR
-
6.5
(
0.4
) million relating to interest rate funds measured at fair value through statement of income.
²
⁾
Exchange rate gains and losses include exchange rate differences on loans and other receivables of EUR
141.4
(
-
6.5
) million and fair value
changes of foreign
exchange derivatives of EUR
-
142.5
(
8.6
) million.
³
⁾
Includes interest expenses on the lease liabilities amounting to EUR
-
10.2
(
-
13.3
) million.
⁴
⁾
Includes
commitment
for fees undrawn revolving credit facilities EUR
-
0.9
(
-
0.7
) million and banking charg
es and other expenses EUR
-
4.5 (
-
6.2
)
million.
2.6 INCOME TAXES
Taxes in statement of income, MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Tax expense for current year
304.2
290.4
Change in deferred tax assets and liabilities
-23.4
-16.7
Tax expense for previous years
-3.9
5.2
Total
276.9
278.9
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
51 KONE ANNUAL REVIEW 2020
Accounting principles
The basic earnings per share figure is calculated by
dividing the net income attributable to the shareholders
of the parent company by the weighted average
number of shares outstanding during the year. Diluted
earnings per share is calculated by adjusting the
weighted average number of shares by the effect of
potential diluting shares due to share options and
share-based incentive plans of the Group. KONE has
two classes of shares that are both included in the
calculation of earnings per share.
Reconciliation of income before taxes with total income
taxes in the statement of income, MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Income before taxes
1,224.2
1,217.5
Tax calculated at the domestic corporation
tax rate (20%)
244.9
243.5
Effect of different tax rates in foreign subsidiaries
0.5
2.5
Permanent differences
-4.4
1.1
Taxes from previous years and reassessment
of deferred tax assets
3.5
0.9
Remeasurement of deferred taxes -
changes in corporate tax rates
0.4
1.2
Deferred tax liability on undistributed earnings
27.8
24.9
Other
4.2
4.8
Total
276.9
278.9
Effective tax rate, %
22.6
22.9
Tax rate of parent company, %
20.0
20.0
2.7 EARNINGS PER SHARE
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Net income attributable to the shareholders of the parent
company, MEUR
939.2
931.3
Weighted average number of shares (1,000 shares)
517,679
516,252
Basic earnings per share, EUR
1.81
1.80
Dilution effect of share options and share-based
incentive plans (1,000 shares)
585
853
Weighted average number of shares, dilution adjusted (1,000
shares)
518,264
517,105
Diluted earnings per share, EUR
1.81
1.80
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
52 KONE ANNUAL REVIEW 2020
2.8 OTHER COMPREHENSIVE INCOME
Components of other comprehensive income
MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Translation differences
-173.2
54.0
Hedging of foreign subsidiaries
65.0
-10.7
Changes in fair value
4.8
-2.7
Remeasurements of employee benefits
-2.9
-36.7
Cash flow hedges:
Gains/losses arising during the year
36.4
-0.9
Reclassifications included in profit or loss
-1.4
-17.9
Cash flow hedges, net
35.0
-18.8
Income tax relating to components of
other comprehensive income
-9.2
8.8
Other comprehensive income
-80.5
-6.0
Tax effects relating to components of other comprehensive income
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
MEUR
Before-tax
amount
Tax expense/
benefit
Net-of-tax
amount
Before-tax
amount
Tax expense/
benefit
Net-of-tax
amount
Translation differences
-173.2
-
-173.2
54.0
-
54.0
Hedging of foreign subsidiaries
65.0
-13.0
52.0
-10.7
2.1
-8.5
Cash flow hedges
35.0
-7.9
27.1
-18.8
4.3
-14.5
Items that may be subsequently
reclassified to statement of income
-73.2
-20.9
-94.1
24.5
6.4
31.0
Changes in fair value
4.8
-
4.8
-2.7
-
-2.7
Remeasurements of employee benefits
-2.9
11.7
8.8
-36.7
2.4
-34.3
Items that will not be reclassified to
statement of income
1.9
11.7
13.6
-39.4
2.4
-37.0
Total other comprehensive income
-71.3
-9.2
-80.5
-14.9
8.8
-6.0
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
53 KONE ANNUAL REVIEW 2020
KONE’S NET WORKING CAPITAL
◾
Our business model enables us to operate with
negative net working capital.
◾
KONE operates with advance payments across
businesses and geographies.
Net working
capital
3
Cash flow*
1,908
MEUR
Net working capital
-1,160
MEUR
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
IN THIS SECTION
This section comprises the following notes,
describing components of KONE’s net working
capital for 2020:
3.1 Inventories
3.2 Accounts receivable and contract assets and
liabilities
3.3 Deferred assets
3.4 Accruals
3.5 Provisions
3.6 Deferred tax assets and liabilities
*) Cash flow from operations before
financing items and taxes
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
54 KONE ANNUAL REVIEW 2020
Accounting principles
Inventories are valued at the lower of cost and net
realizable value. Raw materials and supplies are valued
based on weighted average cost method or at standard
cost. Semi-manufactures are valued at production
costs.
Work in progress includes direct labor and material
costs as of the consolidated statement of financial
position date with a proportion of indirect costs related
to manufacturing and installation allocated to the
firm customer order when control has not yet
transferred to the customer. Firm customer orders are
mainly fixed price contracts with customers for the sale
of new equipment or for the modernization of old
equipment.
An allowance is recorded for obsolete items based
on management’s estimate of expected net realizable
value.
MEUR
Dec 31, 2020
Dec 31, 2019
Net working capital
Inventories
597.0
648.6
Advance payments received and deferred revenue
-1,766.8
-1,753.8
Accounts receivable
2,178.6
2,232.3
Deferred assets and income tax receivables
720.9
669.6
Accruals and income tax payables
-1,996.2
-1,848.0
Provisions
-154.7
-127.1
Accounts payable
-890.9
-809.8
Net deferred tax assets/liabilities
152.0
132.1
Total net working capital
-1,160.1
-856.0
3.1 INVENTORIES
Inventories, MEUR
Dec 31, 2020
Dec 31, 2019
Raw materials, supplies and finished goods
278.0
299.3
Work in progress
300.2
322.7
Advance payments made
18.7
26.6
Total
597.0
648.6
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
55 KONE ANNUAL REVIEW 2020
Accounting principles
Accounts receivable are recognized when the right to
consideration becomes unconditional and are
measured at amortized cost. For KONE’s new
equipment and modernization contracts a receivable is
recognized upon invoicing when the goods are
delivered and for KONE maintenance contracts upon
invoicing according to customer contract terms and
conditions.
KONE applies the expected credit loss model to
assess impairment loss for the doubtful accounts
receivable since the accounts receivable do not contain
significant financing component. To measure the
lifetime expected credit losses trade receivables have
been grouped based on shared credit risk
characteristics and aging category and measured
based on historical loss rates adjusted by forward
looking estimates and individual assessment. Changes
in impairment loss for doubtful accounts receivable are
recognized under cost and expenses in the
consolidated statement of income.
Unbilled contract revenue
Unbilled contract revenue relates to consideration for
performance obligations satisfied over time in KONE’s
new equipment and modernization contracts. It is
recognized when the revenue recognized exceeds the
amounts billed to the customer and is considered to be
conditional upon factors other than the passage of time.
Unbilled contract revenue is stated at net realizable
value and is classified as contract asset and presented
under deferred assets in
the consolidated statement of financial position.
An impairment loss for contract assets is estimated
based on lifetime expected credit loss model and
individual analysis.
Deferred and accrued income on maintenance
contracts
When revenue recognized exceeds the amounts billed
to the customer an accrued income on maintenance
contracts is recognized. It is stated at net realizable
value and classified as contract assets and presented
under deferred assets in the consolidated statement of
financial position. When the amounts billed to the
customer exceed the recognized revenue deferred
income on maintenance contracts is recognized. These
balances are classified as contract liabilities and are
presented under accruals in the consolidated statement
of financial position.
Advance payments received and deferred
revenue
Advance payments received and deferred revenue
relates to payments received in advance of
performance or billing in excess of revenue recognized
under KONE’s new equipment and modernization
contracts. Advance payments received and deferred
revenue are recognized as revenue as (or when) KONE
performs under the contracts and are classified as
contract liabilities.
3.2 ACCOUNTS RECEIVABLE AND CONTRACT ASSETS AND LIABILITIES
MEUR
Dec 31, 2020
Dec 31, 2019
Accounts receivable
2,178.6
2,232.3
Accrued income on maintenance contracts (note 3.3)
31.8
25.6
Unbilled contract revenue (note 3.3)
282.7
321.0
Assets related to contracts with customers
2,493.2
2,578.8
Deferred income on maintenance contracts (note 3.4)
406.3
385.0
Advance payments received and deferred revenue
1,766.8
1,753.8
Liabilities related to contracts with customers
2,173.1
2,138.7
Changes in contract assets and liabilities
The order book representing the unsatisfied
performance obligations with respect to new equipment
and modernization contracts stood at EUR 7,728.8
(8,051.5) million. The vast majority of the order book is
recognized as revenue within the next 12 months from
the end of the reporting period. However, lead-times
especially in the long-term major projects are somewhat
longer depending the size and complexity of the
projects.
The changes in unbilled contract revenue and
advance payments received and deferred revenue are
following the changes in business but also impacted by
the normal fluctuation in project progress when applying
percentage of completion method for recognition of
revenue.
Deferred income on maintenance contracts
represents the unsatisfied part of transaction price
invoiced for maintenance contracts. Typically this will be
recognized as revenue within the next 12 months from
the end of the reporting period.
No material amounts of revenue were recognized
during the reporting period due to changes in
transaction prices or changes in estimates for
performance obligations partially or fully satisfied in
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
56 KONE ANNUAL REVIEW 2020
previous years. There were no significant impairment
charges recognized during the reporting period for the
contract assets.
Aging of accounts receivable
Aging structure of the accounts receivable after recognition of
impairment, MEUR
Dec 31, 2020
Dec 31, 2019
Not past due and less than one month due receivables
1,674.5
1,742.3
Past due 1–3 months
277.5
275.9
Past due 3–6 months
134.8
136.6
Past due > 6 months
91.9
77.5
Accounts receivable in the consolidated
statement of financial position
2,178.6
2,232.3
Customer credit risk management
Customer credit risks relate to advance payments
receivable from customers or to accounts receivable
related to equipment deliveries or to services rendered.
This risk is managed by defining the rules for tendering,
payment terms, authorizations and credit control as well
as project management controls. Advance payments,
documentary credits and guarantees are used in
payment terms to minimize customer credit risks. KONE
proactively manages its accounts receivable in order to
minimize the risk of customer defaults. KONE’s
customer base consists of a large number of customers
in several market areas. The management considers
that there are no significant concentrations of credit risk
with any individual customer or geographical region.
The credit quality of advance payments receivable
and accounts receivable is evaluated according to
KONE’s credit policy. According to this policy, the rules
for credit quality evaluation are set separately for the
new equipment business and the service business. The
credit quality is evaluated both on the basis of the aging
of the receivables as well as on the basis of individual
case by case customer analysis in order to identify
customers with a potential higher credit risk due to
individual customer specific reasons. The bad debt
provision for the accounts receivable is recognized on
the basis of this credit quality evaluation using the
expected credit loss model.
During the current financial year, KONE has
modified calculation parameters for the receivables
aging based allowance as well as recorded impairment
charges on certain individual cases to reflect the effect
of increased risk for credit losses pertaining to
COVID19. Overall the disruption to the business arising
from COVID19 has been limited with significant part of
KONE's operations being considered essential and as
such, allowed even during lockdowns. Increased
uncertainty of receivables collection is not expected to
continue long-term.
The amount of bad debt provision recorded to cover
doubtful accounts was EUR 262.5 (252.9) million at the
end of the financial period.
3.3 DEFERRED ASSETS
Deferred assets, MEUR
Dec 31, 2020
Dec 31, 2019
Deferred interests
0.7
3.1
Accrued income on maintenance contracts (note 3.2)
31.8
25.6
Unbilled contract revenue (note 3.2)
282.7
321.0
Derivative assets (note 5.3)
76.8
9.1
Value added tax assets
92.4
101.3
Prepaid expenses and other receivables
154.3
135.9
Total
638.7
596.0
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
57 KONE ANNUAL REVIEW 2020
Accounting principles
Provisions are recognized when KONE has a current
legal or constructive obligation as a result of past event,
and it is probable that an outflow of resources will be
required to settle the obligation and a reliable estimate
of the amount of the obligation can be made.
Recognition and measurement of a provision generally
employs managerial estimates of the probability and
the amount of the liability.
Provisions for warranties cover the estimated
liability to repair or replace products still under warranty
at the statement of financial position date. This
provision is calculated based on historical experience of
levels of repair and replacements.
Provision for claims is recognized when the claim
has been received and it is probable that it will be
settled and the settlement amount can be estimated
reliably.
A provision for business restructuring is recognized
only when a detailed and formal plan has been
established, there is a valid expectation that such a
plan will be carried out and the plan has been
communicated.
Provisions for loss contracts are recognized when it
is probable that the costs will exceed the estimated total
revenue or other income arising from the contract. The
probable loss is recognized as an expense
immediately.
Other provisions include for example provisions for
contractual and other obligations arising from disputes,
labour relations or other regulatory matters.
3.4 ACCRUALS
Accruals, MEUR
Dec 31, 2020
Dec 31, 2019
Accrued interests
0.9
0.9
Deferred income on maintenance contracts (note 3.2)
406.3
385.0
Late cost accruals ¹
⁾
305.7
281.8
Accrued salaries, wages and employment costs
479.5
477.5
Share-based payments
26.6
29.5
Derivative liabilities (note 5.3)
77.0
25.7
Value added tax liabilities
98.3
108.3
Accruals on acquisitions
13.4
13.4
Other accruals
474.9
402.8
Total
1,882.6
1,725.0
¹
⁾
3.5 PROVISIONS
Jan 1–Dec 31, 2020, MEUR
Provision
for warranty
Provision
for claims
Provision for
business
restructuring
Provision
for loss
contracts
Other
provisions
Total
Total provisions at beginning of period
57.8
3.7
15.2
26.4
24.0
127.1
Translation differences
-1.0
0.0
-0.2
-1.9
-0.4
-3.6
Increase
31.4
3.2
20.9
18.5
19.9
94.0
Provisions used
-16.2
-0.1
-16.1
-9.5
-4.6
-46.5
Reversal of provisions
-4.6
-0.5
-1.6
-5.1
-4.6
-16.4
Companies acquired
-
-
-
-
0.2
0.2
Total provisions at end of period
67.4
6.3
18.1
28.3
34.5
154.7
Non-current liabilities
Current liabilities
Total
Distribution of provisions as of
Dec 31, 2020
39.9
114.7
154.7
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
58 KONE ANNUAL REVIEW 2020
Accounting principles
Deferred taxes are provided for temporary differences
arising between the tax bases of assets and liabilities
and their carrying amounts in financial reporting, and
measured with enacted tax rates. Typical temporary
differences arise from revenue recognition, provisions,
depreciation and amortization, inter-company inventory
margins, defined benefit plans, lease contracts and tax
losses carried forward. Deferred tax assets on unused
tax losses and other temporary differences are
recognized to the extent it is probable that taxable profit
is available to take advantage of the asset in the future.
A deferred tax liability is recognized on the
undistributed profits of subsidiaries where such tax is
applicable and it is expected to realize in the
foreseeable future. Deferred tax assets and liabilities
are offset for presentation purposes when there is a
legally enforceable right to offset income tax
receivables against income tax payables and when the
deferred tax assets and liabilities relate to income taxes
levied by the same taxation authority
Jan 1–Dec 31, 2019, MEUR
Provision
for warranty
Provision
for claims
Provision for
business
restructuring
Provision
for loss
contracts
Other
provisions
Total
Total provisions at beginning of period
56.6
2.9
24.1
28.4
27.3
139.4
Translation differences
0.1
-0.1
-0.7
0.8
0.1
0.2
Increase
22.9
3.2
4.3
12.5
4.0
46.9
Provisions used
-16.9
-0.1
-11.6
-9.6
-3.3
-41.5
Reversal of provisions
-4.8
-2.2
-1.0
-5.8
-4.3
-18.2
Companies acquired
-
-
-
-
0.2
0.2
Total provisions at end of period
57.8
3.7
15.2
26.4
24.0
127.1
Non-current liabilities
Current liabilities
Total
Distribution of provisions as of
Dec 31, 2019
32.0
95.1
127.1
3.6 DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets, MEUR
Dec 31, 2020
Dec 31, 2019
Dec 31, 2018
Tax losses carried forward
2.0
2.4
3.0
Provisions and accruals
236.7
193.2
160.8
Pensions
21.7
20.8
18.5
Inventory
24.5
25.7
25.9
Property, plant and equipment
14.7
9.2
11.6
Other temporary differences for assets
42.6
41.0
33.9
Offset against deferred tax liabilities ¹
⁾
-99.8
-
-
Total
242.4
292.3
253.7
Total at beginning of period
292.3
253.7
-
Translation differences
-5.5
5.0
-
Change in statement of income
-48.3
26.9
-
Charged or credited to equity
3.8
6.7
-
Acquisitions, divestments and other
0.1
-
-
Total at end of period
242.4
292.3
-
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
59 KONE ANNUAL REVIEW 2020
Deferred tax liabilities, MEUR
Dec 31, 2020
Dec 31, 2019
Dec 31, 2018
Property, plant and equipment
29.0
22.6
20.4
Goodwill and intangible assets
72.0
73.9
59.5
Other temporary differences for liabilities
89.3
63.8
68.8
Offset against deferred tax assets ¹
⁾
-99.8
-
-
Total
90.4
160.3
148.7
Total at beginning of period
160.3
148.7
-
Translation difference
-2.1
-0.2
-
Change in statement of income
-71.7
10.2
-
Acquisitions, divestments and other
3.9
1.6
-
Total at end of period
90.4
160.3
-
Net deferred tax assets and liabilities
152.0
132.0
-
¹
⁾
assets and deferred tax liabilities would have been EUR 72.8 million lower had they been offset against each other.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE
60 KONE ANNUAL REVIEW 2020
KONE´s capital expenditure 2.0%
of sales in 2020
ACQUISITIONS AND CAPITAL EXPENDITURE
AT KONE
◾
KONE’s business is capital light and labor-intensive
in nature, particularly in services. On the new
equipment side, we cooperate with many
component suppliers. As a result, the level of
tangible and intangible assets is relatively low in
the business.
◾
Capital expenditure on leases consists mainly of
maintenance vehicles and office facilities.
◾
Capital expenditure is mainly related to R&D, IT,
production and business operations.
◾
The majority of KONE’s acquisitions in 2020
consisted of small maintenance companies in
EMEA.
Acquisitions and
capital expenditure
4
Acquisitions and
capex
230 MEUR
Completed
acquisitions
20
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE
IN THIS SECTION
This section comprises the following notes, which
describe acquisitions and capital expenditure at
KONE for 2020:
4.1 Acquisitions
4.2 Goodwill
4.3 Intangible assets
4.4 Tangible assets
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE
61 KONE ANNUAL REVIEW 2020
Accounting principles
Businesses acquired during the period have been
combined in the consolidated financial statements from
the date when Group has obtained control of the
business and divested businesses up to the date when
control has ceased. The acquisition consideration,
including deferred and contingent consideration, as well
as the identifiable assets acquired, and liabilities
assumed, are measured at the acquisition date fair
values. The acquisition related costs are recognized as
expenses for the period in which they are incurred.
At the acquisition date, any non-controlling interest
is measured either at the acquisition date fair value or
at non-controlling interest’s proportionate share in the
recognized amounts of the identifiable net assets.
4.1 ACQUISITIONS
Assets and liabilities of the acquired businesses, MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Maintenance contracts
26.6
22.3
Other intangible assets
1.3
-
Tangible assets
0.5
0.2
Deferred tax assets
0.1
0.0
Inventories
1.0
0.6
Accounts receivables and other assets
3.6
4.8
Cash and cash equivalents and other interest-bearing
receivables
1.5
2.9
Total assets
34.5
30.8
Pension liabilities
1.6
0.6
Interest-bearing loans
0.6
1.7
Provisions
0.2
0.2
Deferred tax liabilities
3.9
1.6
Other liabilities
3.2
3.2
Total liabilities
9.4
7.4
Net assets
25.0
23.4
Acquisition cost paid in cash
21.7
25.4
Contingent and deferred consideration
7.3
10.6
Acquisition cost at date of acquisitions
29.0
36.0
Goodwill
4.0
12.6
Contingent considerations are typically realized in the amount initially recognized.
Changes in the acquisition cost occurred after the acquisition date and recognized in the statement of income totaled
EUR 0.7 (0.6) million.
Acquisitions
KONE completed 20 (22) acquisitions during 2020 for a
total consideration of EUR 29.0 million. The acquired
businesses are specialized in the elevator, escalator and
automatic building door businesses. The acquisitions
completed during the financial period were not material
individually or as a whole to KONE’s 2020 financial
statements. The sales consolidated from the companies
acquired during 2020 had only a minor impact on KONE’s
sales for the financial period. Of total consideration based
on provisional assessments EUR 26.6 million was
allocated to maintenance contracts in other intangible
assets. Acquired maintenance contracts are typically
amortized over ten years. Note 4.3 provides more detail on
other intangible assets.
The fair values of the acquired net assets, based on a
provisional assessment, as well as the acquisition costs,
are summarized in the table above. The considerations
were paid for in cash, except for certain deferred
considerations, which will be paid later. For most of the
completed acquisitions, the acquisition cost includes a
contingent consideration, which is typically determined by
the financial performance of the acquired business after
the date of the acquisition. Changes in the fair value of the
contingent consideration after the acquisition date are
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE
62 KONE ANNUAL REVIEW 2020
Accounting principles
Acquisitions are accounted for using the acquisition
method. Goodwill represents the excess of acquisition
cost over the fair values of identified acquired assets
and liabilities of acquired companies.
Goodwill arises typically in connection with a major
acquisition, and represents the value of the acquired
market share, business knowledge and the synergies
obtained in connection with the acquisition. The
carrying amount of goodwill is tested for impairment.
Impairment testing
The Group assesses the carrying amount of goodwill
annually or more frequently if any indication of
impairment exists. Goodwill is allocated to the cash
generating units (CGUs) of the Group, which are
identified according to the country of operation and
business unit at the level at which goodwill is monitored
for internal management purposes. The recoverable
amount of a CGU is determined by value-in-use
calculations. In assessing the recoverable amount,
estimated future cash flows are discounted to their
present value. Cash flow estimates are based on
operative managerial estimates. The discount rate is
the weighted average cost of capital (WACC) for the
main currency area in the location of the CGU (country
or business area), which reflects the market
assessment of the time value of money and the risks
specific in KONE’s business.
Any impairment loss of goodwill is recognized
immediately as an expense and is not subsequently
reversed.
recognized in the profit or loss. KONE acquired a 100%
interest in all businesses acquired in 2020.
4.2 GOODWILL
Goodwill allocation
Goodwill is allocated to cash-generating units (CGUs). A cash generating unit is typically defined as the country unit in
which the acquired business is operating in accordance with KONE’s business model and organization structure. As at
Dec 31, 2020 the carrying amount of goodwill is allocated to 24 different CGUs. The five largest CGUs carry 74% of the
goodwill. The carrying amount of goodwill is below EUR 10 million for 10 CGUs. The geographical allocation of goodwill
and the weighted average discount rates are presented in the table below:
Goodwill, MEUR
Dec 31, 2020
%
Discount
interest
rates used
(pre-tax), %
Dec 31, 2019
%
Discount
interest
rates used
(pre-tax), %
EMEA
784.9
59
5.15
791.7
58
5.55
Americas
319.6
24
6.46
346.9
25
7.72
Asia -Pacific
222.6
17
9.19
228.0
17
9.31
Total
1,327.0
1,366.5
Goodwill reconciliation
Goodwill, MEUR
Dec 31, 2020
Dec 31, 2019
Opening net book value
1,366.5
1,333.4
Translation differences
-39.7
20.4
Increase
0.2
0.0
Decrease
-3.8
-
Companies acquired (note 4.1)
4.0
12.6
Closing net book value
1,327.0
1,366.5
Impairment testing
The value-in-use calculations based on CGU specific
cash flow projections are based on financial estimates
prepared by the management. The explicit forecast
period covers the following three years for each CGU.
The business growth, price and cost development
assumptions embedded in the CGU specific cash flow
projections are based on management assessments of
the market demand and environment, which are
examined against external information sources. The
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE
63 KONE ANNUAL REVIEW 2020
Accounting principles
Intangible assets identified in connection with
acquisitions are amortized on a straight-line basis over
their expected useful lifetime. KONE often acquires
small elevator and door service companies, where the
excess of consideration transferred over the net assets
of the acquiree as at closing, is allocated to the
acquired maintenance contracts. The acquired
maintenance contracts are typically amortized over ten
years.
Intangible assets also include expenditure on
acquired patents, trademarks and licenses, including
acquired software licenses. These assets are amortized
on a straight-line basis over their expected useful
lifetime, which does not usually exceed five years. The
carrying amount of any intangible asset is impairment
tested (see impairment of assets accounting principles)
when an indication of impairment exists.
productivity and efficiency assumptions are based on
internal targets, which are evaluated against actual
performance. The cash flows for subsequent terminal
year are assumed prudently without growth.
The discount rates are based on the risk-free
interest rates, risk factors (beta coefficient) and market
risk premiums available on financial markets. The
value -in-use calculations are validated against KONE’s
market capitalization.
No goodwill impairment losses were recognized
during the accounting period. The impairment testing
process includes a sensitivity analysis in which the
CGU specific cash flow estimates were reduced by 10–
40 percent and the discount rates were increased by 1–
4 percentage points. Based on the sensitivity analysis,
the probability for impairment losses was very low.
Under the basic scenario, the value -in -use calculations
were on average 9.9 times higher than the CGU’s
assets employed. The respective ratio for the five
largest CGUs was 8.0; for the five smallest 13.9 and
respectively for the other CGUs 13.8.
4.3 INTANGIBLE ASSETS
Jan 1–Dec 31, 2020
Intangible assets, MEUR
contracts
Other
Total
Jan 1, 2020:
Acquisition cost
416.3
273.0
689.2
Accumulated amortization and impairment
-212.7
-228.3
-441.0
Opening net book value
203.5
44.7
248.2
Opening net book value
203.5
44.7
248.2
Translation differences
-3.5
-2.0
-5.5
Increase
0.1
9.3
9.4
Decrease
-
-0.1
-0.1
Reclassifications
-
-8.3
-8.3
Companies acquired (note 4.1)
26.6
1.3
27.9
Amortization
-36.8
-11.6
-48.4
Closing net book value
190.0
33.2
223.2
Dec 31, 2020
Acquisition cost
439.5
261.8
701.3
Accumulated amortization and impairment
-249.5
-228.6
-478.1
Closing net book value
190.0
33.2
223.2
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE
64 KONE ANNUAL REVIEW 2020
Accounting principles
Property, plant and equipment are measured at cost
less accumulated depreciation and any impairment
losses, when applicable. Depreciation is recognized on
a straight-line basis over the economic useful lives of
the assets or over the lease contract period, if shorter.
Economic useful lives are as follows:
Buildings
5
–
40
years
Machinery and equipment
4
–
10
years
Land is not depreciated.
Expenditure on repairs and maintenance of property,
plant and equipment is recognized as expense when
incurred.
Leases
As a lessee, KONE recognizes a right-of-use asset
representing its right to use the underlying asset and a
lease liability representing its obligation to make lease
payments, amounting to the present value of the future
lease payments. The value of right-of-use asset
corresponds the value of future lease payments at the
inception of the lease, discounted with the incremental
borrowing rate.
Right-of-use assets are depreciated over the
contract period or over the useful life of the asset, which
is the shorter. An option to extend or terminate the
lease contract is included to the lease period when
exercising such option is considered highly probable.
The cost arising from short-term leases and leases of
low value assets are recognized as an expense on a
straight-line basis over the contract period.
Impairment of assets
The carrying amounts of non-current tangible assets
and intangible assets are reviewed for impairment at
each reporting date or whenever there is indication of
that the carrying value of the asset may not be
recoverable. Impairment test involves estimating the
recoverable amount of the asset, subject to testing. The
recoverable amount is the higher of the asset’s fair
value less cost of disposal and the value in use. An
impairment loss is recognized in the statement of
income whenever the carrying amount exceeds the
recoverable amount.
A previously recognized impairment loss is reversed
only if there has been a significant change in the
estimates used to determine the recoverable amount,
but not, however, to an amount higher than the carrying
amount that would have been determined without the
impairment loss recognized in prior years, deducted by
accumulated depreciation.
Jan 1–Dec 31, 2019
Intangible assets, MEUR
contracts
Other
Total
Jan 1, 2019:
Acquisition cost
388.3
264.4
652.8
Accumulated amortization and impairment
-176.6
-216.0
-392.6
Opening net book value
211.8
48.4
260.2
Opening net book value
211.8
48.4
260.2
Translation differences
5.1
0.2
5.3
Increase
0.8
9.6
10.4
Decrease
-0.2
-0.2
-0.4
Reclassifications
-
0.2
0.2
Companies acquired (note 4.1)
22.3
0.1
22.4
Amortization
-36.2
-13.7
-49.9
Closing net book value
203.5
44.7
248.2
Dec 31, 2019
Acquisition cost
416.3
273.0
689.2
Accumulated amortization and impairment
-212.7
-228.3
-441.0
Closing net book value
203.5
44.7
248.2
4.4 TANGIBLE ASSETS
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE
65 KONE ANNUAL REVIEW 2020
During the period of Jan 1–Dec 31, 2020, capital expenditure on production facilities, customer service of sales and
maintenance operations as well as on information systems, including new assets recognized for lease agreements,
totaled to EUR 201.0 (200.5) million. Capital expenditure on leases consists mainly of maintenance vehicles and office
facilities.
Lease payments in cash flow in 2020 totaled to EUR -117.9 (-108.4) million.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE
66 KONE ANNUAL REVIEW 2020
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
67 KONE ANNUAL REVIEW 2020
KONE’S CAPITAL STRUCTURE
◾
KONE’s cash position is strong due to the cash-
generative business model including advance
payments -driven operating model.
◾
KONE has not defined a specific target for its
capital structure, but the aim is to ensure strong
credit quality to provide for example access to
external funding sources and to support the growth
ambitions of the business.
Capital
structure
KONE’s interest
bearing net debt
-1,954
MEUR
Equity per
share
6.12
EUR
5
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
IN THIS SECTION
This section comprises the following notes, which
describe capital structure of KONE for 2020:
5.1 Capital management
5.2 Shareholders’ equity
5.3 Financial risks and instruments
5.4 Shares and other non -current financial assets
5.5 Deposits and loans receivable
5.6 Commitments
5.7 Employee benefits
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
68 KONE ANNUAL REVIEW 2020
5.1 CAPITAL MANAGEMENT
KONE aims to manage its capital in a way that supports
the profitable growth of operations by securing an
adequate liquidity and capitalization of the Group at all
times. The target is to maintain a capital structure that
contributes to the creation of shareholder value.
The assets employed in KONE’s business consist
principally of net working capital, fixed assets, and
financial investments which are funded by equity and
net debt, as shown in the table below. Due to the
business model and the business processes of KONE,
the level of total assets employed is relatively low.
KONE aims to maintain a negative net working capital
to ensure a healthy cash flow even when the business
is growing and to maintain a high return on assets
employed.
Cash flow from operations is the principal source of
KONE’s financing. External funding, as well as cash
and financial investments, are managed centrally by the
KONE Treasury according to the KONE Treasury
Policy. Financial investments are made only with
counterparties with high creditworthiness and mainly in
short term instruments to ensure continuous liquidity.
KONE has not defined a specific target for its capital
structure, but the aim is to ensure strong credit quality
to provide for ample access to external funding sources
and to support the growth ambitions of the business.
KONE considers its current capital structure to be a
strength, as it allows for capturing potential value
creating business opportunities, should such
opportunities arise. In the event that significant
attractive investment or acquisition opportunities were
available, KONE could also utilize its borrowing
capacity.
In such cases, the level of debt and financial
gearing could be higher for a period of time. At the end
of 2020, the funding of KONE was guaranteed by
existing committed credit facilities, cash and financial
investments.
KONE has not defined a specific target for dividends
or share buy-backs. The dividend proposal by the
Board of Directors is determined on the basis of the
overall business outlook, business opportunities, as well
as the present capital structure and the anticipated
changes in it.*) At the end of December 2020, KONE
had 11,006,006 class B shares in its possession.
To ensure an efficient internal allocation and
utilization of its capital resources, KONE measures the
financial results of its business activities after a capital
allocation charge. The capital allocation charge is
based on the assets employed in the business activity
and the weighted average cost of capital (WACC).
The WACC is also used as a hurdle rate when
evaluating the shareholder value creation potential of
new acquisitions, major capital expenditure and other
investments. The valuation methods used are payback
time, discounted cash flow and profitability.
Capital management, MEUR
2020
2019
2018
2017
2016
Assets employed:
Goodwill and shares
1,470
1,506
1,477
1,460
1,502
Other non-current assets ¹
⁾
933
990
658
652
661
Net working capital
-1,160
-856
-758
-773
-1,055
Total assets employed
1,243
1,640
1,377
1,339
1,108
Capital:
Equity
3,197
3,193
3,081
3,029
2,796
Interest-bearing net debt
-1,954
-1,553
-1,704
-1,690
-1,688
Total capital
1,243
1,640
1,377
1,339
1,108
Gearing
-61.1%
-48.6%
-55.3%
-55.8%
-60.4%
Equity ratio
45.5%
46.5%
49.9%
50.0%
46.8%
1) Tangible assets, acquired maintenance contracts and other intangible assets.
*) In 2016–2020, the dividend payout ratio has been 77.6–124.0% for class B shares (2020 proposal by the Board of Directors at KONE Corporation ).
KONE has adopted the new IFRS 16 and IFRIC 23 effective January 1, 2019 using the modified retrospective approach
and the comparative amounts have not been restated. Further, KONE has applied IFRS 15 and IFRS 9 standards from
January 1, 2018 onwards and 2017 financials are restated retrospectively. Amounts for 2016 are not restated and thus
not fully comparable.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
69 KONE ANNUAL REVIEW 2020
Accounting principles
The total shareholders’ equity consists of the share
capital, the share premium account, the fair value and
other reserves, translation differences, the paid-up
unrestricted equity reserve, remeasurements of
employee benefits and retained earnings. When
options are exercised and if new shares are issued, the
impacts of changes in the share capital, which exceed
the accounting par value of the shares, are included in
the paid-up unrestricted equity reserve. If treasury
shares are used in subscriptions with option rights, the
subscription price is included in the paid-up unrestricted
equity reserve. The fair value and other reserves
include changes in the fair value of cash flow hedges.
Differences arising from the application of the
acquisition method on the translation of the net
investment in foreign subsidiaries and associated
companies are recognized as translation differences.
Exchange rate differences resulting from financial
instruments intended as hedges of the net assets in
foreign subsidiaries are also recognized as translation
differences. Actuarial gains and losses arising from
revaluation of employee benefits are recognized as
remeasurements of employee benefits. The purchase
price of own shares purchased by KONE Corporation is
deducted from retained earnings. The net income for
the accounting period is recognized directly in retained
earnings.
When KONE purchases its own shares, the
consideration paid and costs directly attributable to the
purchase transaction are recognized as a deduction in
equity. When such shares are sold, the consideration
received, net of directly attributable transaction costs, is
included in equity.
Profit distribution includes dividends and donations
decided by the Shareholders’ Meeting. The dividend
and distribution of profits proposed by the Board of
Directors of KONE Corporation for the financial year
ended, is not deducted from the equity prior to
acceptance by a Shareholders’ Meeting.
5.2 SHAREHOLDERS’ EQUITY
Shares and share capital
At the end of the 2020 financial year, the number of
shares outstanding was 529,395,860. The share capital
was EUR 66 million and the total number of votes was
121,527,427. Each class A share is assigned one vote,
as is each block of 10 class B shares, with the provision
that each shareholder is entitled to at least one vote. At
the end of the financial year, the Board of Directors of
KONE Corporation had a valid authorization granted by
the Annual General Meeting in February 2020 to
increase the share capital and to issue stock options.
The authorization shall remain in effect until the
conclusion of the following annual general meeting,
however at the latest until 30 June 2021.
In accordance with the Articles of Association, class
B shares are preferred for a dividend which is at least
1% and no more than 2.5% higher than the dividend
paid to the holders of class A shares, calculated based
on the amount obtained by dividing the share capital
entered into the Trade Register by the number of
shares entered into the Trade Register.
During 2020 there were no changes in the share
capital of KONE Corporation. In 2019, share capital
increased by 1,303,193 or EUR 0.2 million through
subscription of Class B shares with 2015 options.
Authority to buy own shares
KONE Corporation’s Annual General Meeting held on
February 25, 2020 authorized the Board of Directors to
repurchase the company’s own shares. The shares may
be repurchased among others in order to develop the
capital structure of the Company, finance or carry out
possible acquisitions, implement the Company’s share-
based incentive plans, or to be transferred for other
purposes or to be cancelled. Altogether no more than
52, 930,000 shares may be repurchased, of which no more
than 7,620,000 are to be class A shares and 45,310,000
class B shares, taking into consideration the provisions of
the Companies Act regarding the maximum amount of own
shares that the Company is allowed to possess.
The minimum and maximum consideration for the
shares to be purchased is determined for both class A and
class B shares on the basis of the trading price for class B
shares determined on the Nasdaq Helsinki Ltd. on the time
of purchase.
During the financial year 2020, KONE did not
repurchase own shares.
More information
Please, refer to section 6.2 for more information on share -based incentive plans and options.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
70 KONE ANNUAL REVIEW 2020
Own shares
Number of shares
Cost, MEUR
Jan 1, 2020
11,553,605
185.1
Distributed to the share-based incentive plan, January
-217,499
-8.2
Distributed to the annual compensation of the Board, April
-3,315
-0.1
Distributed to the share-based incentive plan, April
-294,497
-11.0
Distributed to the share-based incentive plan, May
-38,013
-1.4
Returned from the share-based incentive plan, April
3,487
0.1
Returned from the share-based incentive plan, December
2,238
0.1
Dec 31, 2020
11,006,006
164.7
Jan 1, 2019
12,031,814
203.3
Distributed to the share-based incentive plan, January
-217,899
-8.5
Distributed to the annual compensation of the Board, April
-2,866
-0.1
Distributed to the share-based incentive plan, April
-262,676
-9.8
Returned from the share-based incentive plan, August
1,744
0.1
Returned from the share-based incentive plan, December
3,488
0.1
Dec 31, 2019
11,553,605
185.1
Reconciliation of own shares, Dec 31, 2020
KONE Corporation and Group total
pcs
Acquisition cost
Average price
Dec 31, 2019
11,553,605
185,110,965.32
16.02
January 29, 2020
-217,499
-8,159,470.77
37.51
April 28, 2020
-3,315
-122,156.59
36.85
April 28, 2020
-294,497
-10,978,976.56
37.28
April 28, 2020
3,487
-1,400,765.81
37.09
May 19, 2020
-38,013
129,325.23
36.85
December 17, 2020
2,238
83,002.54
37.09
Dec 31, 2020
11,006,006
164,661,923.36
14.96
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
71 KONE ANNUAL REVIEW 2020
Accounting principles
Derivative financial instruments are initially and
subsequently recognized at fair value in the statement
of financial position. The fair values of foreign exchange
forward contracts are calculated by discounting the
future cash flows of the contracts with the relevant
market interest rate yield curves on the valuation date
and by calculating the difference between the
discounted values as at the forward contract date and
balance sheet date in euros.
At the contract date the derivatives are classified
according to the foreign exchange policy as hedging
instruments of a business transaction arising from a
firm or highly probable purchase or sales contract.
These are partly included in cash flow hedge
accounting, hedges against fair value changes of
assets or liabilities or hedges of net investments in
foreign entities.
In cash flow hedge accounting KONE uses foreign
currency forward contracts to hedge its exposure in
foreign currency dominated cash flows which ensures
economic relationship between the hedged item and
the hedging instrument and full effectiveness as the
value of the hedging instrument and the value of the
hedged item move in the opposite direction because of
the common underlying denominator. The full fair value
of derivatives including transaction related forward
points, is designated in the hedging relationship.
The effective portion of changes in the fair values of
the foreign exchange derivatives initiated for hedging
firm or highly probable future purchase or sales
transactions is recognized through the statement of
comprehensive income to the hedge reserve within
equity. The cumulative changes of fair values are
transferred into the statement of income as adjustment
items to sales or purchases simultaneously when the
hedged sale or purchase realizes.
When cash flow hedge accounting is applied, at the
inception of the hedging transaction the economic
relationship between hedging instruments and hedged
items is documented including whether the hedging
instrument is expected to offset changes in cash flows
of hedged items. Also, the risk management objective
and strategy for undertaking various hedge transactions
is documented at the inception of each hedge
relationship. Hedge effectiveness is assessed before
hedge accounting is applied and at least on a quarterly
basis thereafter.
The gain or loss relating to the ineffective portion is
recognized immediately as an adjustment to cost and
expenses. In hedges of foreign currency transaction,
ineffectiveness may arise if the timing of the forecast
transaction changes from what was originally
estimated. If a foreign exchange derivative included in
the cash flow hedge accounting expires or is sold or
when a hedge no longer meets the criteria for hedge
accounting, the cumulative change in the fair value of
the hedging instrument will remain in the hedge reserve
and is recognized in the income statement at the same
time with the hedged sale or purchase. The cumulative
fair values of the hedging instruments are transferred
from the hedge reserve to adjust cost and expenses
immediately if the hedged cash flow is no longer
expected to occur.
The changes in the fair values of derivatives that
are designated as hedging instruments but are not
accounted for according to the principles of cash flow
hedge accounting are recognized based on their nature
either in the operative income or costs, or as financial
income or expenses: if the hedged risk arises from an
operative transaction, the fair values of the hedging
instruments are recognized in costs and expenses, and
if the hedged item is a monetary item, the fair values
are recognized in financing items.
Changes in the fair values of foreign exchange
derivatives are recognized in financing income and
expenses if the hedged item is a loan receivable,
deposit or a financial asset or liability denominated in a
foreign currency.
The effective portion of the change in the fair values
of currency forward contracts hedging translation
differences arising from net investments in foreign
subsidiaries, are recognized through the statement of
comprehensive income to the translation differences
within equity and would be transferred to the income
statement in case the net investment were disposed of
partially or in its entirety. The hedged risk is designated
as movements in the spot rate (excluding changes due
to interest rates i.e. forward points). Changes in fair
value of the hedging instrument due to the forward
points (cost of hedging) are immediately recognized in
the consolidated statement of income.
Fair values of derivative instruments are recognized
under current assets and liabilities in the balance sheet.
Loans
Loans payable are classified in the valuation category
other financial liabilities. They are measured initially at
fair value net of directly attributable transaction costs
incurred and are subsequently carried at amortized cost
using the effective interest rate method. Lease liabilities
are measured to the present value of future lease
payments discounted with the incremental borrowing
rate.
5.3 FINANCIAL RISKS AND INSTRUMENTS
KONE’s business activities are exposed to financial
risks such as foreign exchange risks, interest rate risks,
liquidity risks and credit risks. These financial risks are
managed as part of the total KONE risk portfolio. KONE
Treasury is responsible for the centralized management
of financial risks in accordance with the KONE Treasury
Policy approved by the Board of Directors. KONE
business units manage their financial risks locally in
accordance with the KONE Treasury Policy.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
72 KONE ANNUAL REVIEW 2020
Accounting principles
Financial assets
Financial assets are classified into three categories:
measured at amortized cost, at fair value through other
comprehensive income (FVOCI) and at fair value
through profit or loss.
The classification is made at the time of the original
acquisition based on the objective of the business
model and the characteristics of contractual cash flows
of the investment.
KONE assesses on a forward looking basis the
expected credit losses associated with its assets
carried at amortized cost. The impairment methodology
applied depends on whether there has been a
significant increase in credit risk. All of these financial
assets are considered to have low credit risk, and thus
the impairment provision assessment is based on 12
months expected losses.
Current deposits and loans receivable
Current deposits and loans receivable are initially
recognized at fair value and thereafter at amortized
cost using the effective interest rate method except for
interest rate funds which are classified and measured
as investments at fair value through profit or loss. Only
substantial transaction costs are considered for when
measuring the acquisition cost.
Investments in commercial papers, short-term bank
deposits, interest rate funds and other money market
instruments are included in deposits and loans
receivable.
Cash and cash equivalents
Cash and cash equivalents include cash-in-hand and
bank account balances. Bank overdrafts are included in
other current liabilities.
Financial assets
KONE has substantial amounts of cash and financial
investments. In order to diversify the financial credit
risk, funds are invested into highly liquid interest rate
funds and deposits with several banks. Global
counterparty limits are approved by the Board of
Directors. All open exposures such as cash on bank
accounts, investments, deposits and other financial
assets , for example derivatives contracts, are included
when measuring the financial credit risk exposure.
When selecting counterparty banks and other
investment targets, only counterparties with high
creditworthiness are approved. The size of each limit
reflects the creditworthiness of the counterparty.
Counterparty creditworthiness is evaluated constantly
and the required actions are considered case by case if
significant changes in the creditworthiness of a
counterparty occur. The fair values of interest rate funds
are measured based on market information (fair value
hierarchy level 2).
Refinancing and liquidity risks
KONE’s cash and cash equivalents was EUR 457.9
(662.4 ) million and financial investments EUR 2,170.4
(1,587.7 ) million on December 31, 2020.
Cash and financial investments are managed
centrally by KONE Treasury. Due to local regulations
part of the funds reside in local investments and on
decentralized bank accounts in a number of KONE
countries. A substantial part of the funds is nevertheless
accessible to KONE Treasury. Changes in the local
regulations can also in the future have an impact on the
location of the cash and financial investments.
KONE has a credit facility from European
Investment Bank (EIB) of EUR 160 million. The credit
facility is a 5-year fixed interest rate loan which will be
used for R&D purposes. The loan will mature in 2021.
The fair value of the loan is estimated based on
discounted cash flow method using a current borrowing
rate (level 2 fair value hierarchy) as the discount rate.
KONE has also an uncommitted commercial paper
program of EUR 500 million, an existing committed
European Investment Bank (EIB) credit facility of EUR
200 million and bank credit facilities of EUR 800 million
to ensure sufficient liquidity.
Interest rate risks
KONE’s cash and short -term investments were EUR
2,628.3 (2,250.2) million at the statement of financial
position date. At the same time, KONE’s interest-
bearing debt was EUR 695.8 (721.6) million and
consiste d of EUR 504.3 (544.3) million of financial debt
including lease liabilities, EUR 4.2 (4.4) million of option
liabilities from acquisitions, and EUR 187.2 (172.9)
million of employee benefit liabilities. Additionally,
KONE had an asset on employee benefits of EUR 19.2
(21.7 ) million.
As KONE’s financial investments are mainly
invested in tenors of less than one year, changes in the
interest rates do not have any significant impact on their
market values. Changes in the interest rates may
however impact future interest income.
When calculating the interest rate sensitivity
analysis the interest-bearing net financial debt,
excluding foreign exchange forward contracts, is
assumed to remain on the level of the closing balance
of 2020 during the following financial period. The
sensitivity analysis presents the impact of a 1
percentage point change in the interest rate level on the
net interest income for the financial period by taking into
account the net financial debt tied to interest periods of
less than one year, EUR -2,364.8 (-2,130.3) million. For
2021 a 1 percentage point change in the interest rate
level would mean a change of EUR -23.6 (-21.3) million
in net interest income. The interest rate sensitivity is
calculated before taxes.
A change in interest rates does not have a material
impact on the net interest on employee benefits, on
financial debt or option liabilities from acquisition.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
73 KONE ANNUAL REVIEW 2020
Maturity analysis of financial liabilities and interest payments
Dec 31, 2020
Dec 31, 2019
MEUR
< 1 year
1-5 years
> 5 years
Total
< 1 year
1-5 years
> 5 years
Total
Interest-bearing debt
Long-term loans
-
-
-
-
-
-160.0
-
-160.0
Lease liabilities
-98.9
-199.8
-44.2
-342.9
-103.7
-210.3
-56.7
-370.7
Short-term loans
-160.0
-
-
-160.0
-
-
-
-
Used bank overdraft limits
-1.4
-
-
-1.4
-13.5
-
-
-13.5
Option liabilities from
acquisitions
-4.2
-
-
-4.2
-4.4
-
-
-4.4
Employee benefits
-
-
-187.2
-187.2
-
-
-172.9
-172.9
Non-interest-bearing debt
Accounts payables
-890.9
-
-
-890.9
-809.8
-
-
-809.8
Derivatives
Capital inflow
3,676.9
113.4
-
3,790.3
2,425.5
143.9
-
2,569.4
Capital outflow
-3,667.7
-113.8
-
-3,781.5
-2,437.7
-146.3
-
-2,584.0
Interest payments
-7.6
-8.5
-4.6
-20.7
-0.6
-14.2
-4.4
-19.2
Net outflow
-1,154.0
-208.6
-236.0
-1,598.6
-944.2
-386.9
-234.0
-1,565.1
Values of financial assets and liabilities by categories
Non-current assets
Shares and other non-current financial assets
I
5.4
143.2
143.2
Non-current loans receivable
5.5
1.0
1.0
Employee benefits
5.7
19.2
19.2
Current assets
Accounts receivable
2,178.6
2,178.6
Derivative assets
7.7
69.1
76.8
Current deposits and loans receivable
I
5.5
1,790.1
381.3
2,171.4
Cash and cash equivalents
I
457.9
457.9
Total financial assets
1,797.9
3,018.9
212.2
19.2
5,048.2
Non-current liabilities
Loans ¹
⁾
I
244.0
244.0
Employee benefits
I
5.7
187.2
187.2
Current liabilities
Loans ²
⁾
I
160.0
98.9
258.9
Short-term loans and other liabilities
I
1.4
1.4
Option liabilities from acquisitions
I
4.2
4.2
Accounts payable
890.9
890.9
Derivative liabilities
62.1
15.0
77.0
Unpaid acquisition consideration
13.4
13.4
Total financial liabilities
66.3
1,050.9
15.0
545.0
1,677.1
¹
⁾
²
⁾
The fair values of the financial assets and liabilities are not materially different from their book values.
Interest -bearing net debt comprises items marked with “ I “.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
74 KONE ANNUAL REVIEW 2020
Non-current assets
Shares and other non-current financial assets
I
5.4
139.2
139.2
Non-current loans receivable
5.5
0.8
0.8
Employee benefits
5.7
21.7
21.7
Current assets
Accounts receivable
2,232.3
2,232.3
Derivative assets
2.5
6.6
9.1
Current deposits and loans receivable
I
5.5
973.2
616.3
1,589.5
Cash and cash equivalents
I
662.4
662.4
Total financial assets
975.7
3,511.8
145.8
21.7
4,655.1
Non-current liabilities
Loans ¹
⁾
I
160.0
267.1
427.1
Employee benefits
I
5.7
172.9
172.9
Current liabilities
Loans ²
⁾
I
103.7
103.7
Short-term loans and other liabilities
I
13.5
13.5
Option liabilities from acquisitions
I
4.4
4.4
Accounts payable
809.8
809.8
Derivative liabilities
3.1
22.6
25.7
Unpaid acquisition consideration
13.4
13.4
Total financial liabilities
7.5
969.8
22.6
570.7
1,570.5
¹
⁾
²
⁾
The fair values of the financial assets and liabilities are not materially different from their book values.
Interest -bearing net debt comprises items marked with “ I “.
Derivatives
All derivative contracts have been entered into in
accord ance with the KONE Treasury policy for hedging
purposes.
The majority of the foreign exchange forward
contracts and swaps mature within a year.
The fair values of foreign exchange forward
contracts and swaps are measured based on price
information derived from active markets and commonly
used valuation methods (fair value hierarchy level 2).
Financial contracts are executed only with
counterparties that have high credit ratings. The credit
risk of these counterparties, as well as that of KONE, is
considered when calculating the fair values of
outstanding financial assets and liabilities.
The fair values of the derivatives are represented in
the balance on a gross basis and can be set off on
conditional terms such as breach of contract or
bankruptcy. Derivative financial receivables from
counterparties after set off would be EUR 9.6 (0.4)
million and payables EUR 9.9 (17.0 ) million.
Fair values of derivative financial instruments,
MEUR
Derivative
assets Dec 31,
2020
Derivative
liabilities Dec 31,
2020
Fair value, net
Dec 31, 2020
Fair value, net
Dec 31, 2019
Foreign exchange forward contracts and swaps
In cash flow hedge accounting
19.9
-15.0
4.9
-16.0
In net investment hedging
49.2
-
49.2
0.0
Other hedges
7.7
-62.1
-54.4
-0.6
Total
76.8
-77.0
-0.3
-16.5
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
75 KONE ANNUAL REVIEW 2020
Accounting principles
Shares include long-term strategic investments, which
are investments in equity instruments that do not have
a quoted price in an active market. Other noncurrent
financial assets include investments in smaller holdings
in other companies without public quotation.
Shares and other non-current financial assets are
classified as investments measured at fair value
through other comprehensive income. The fair value is
measured using income or market approach valuation
techniques under fair value hierarchy level 3. Upon
disposal of these investments, any balance within the
fair value and other reserves for these investments is
reclassified to retained earnings and is not reclassified
to the statement of income.
Nominal values of derivative financial
instruments, MEUR
Dec 31, 2020
Dec 31, 2019
Foreign exchange forward contracts and swaps
In cash flow hedge accounting
981.1
1,126.0
In net investment hedging
670.5
152.9
Other hedges
2,138.6
1,290.5
Total
3,790.3
2,569.4
5.4 SHAREHOLDINGS AND OTHER NON-CURRENT FINANCIAL ASSETS
On the date of the statement of financial position,
shares and other non -current financial assets were
EUR 139.0 and 4.2 million, respectively (EUR 134.2
and 4.9 million).
The shares held include a 19.9% holding in Toshiba
Elevator and Building Systems Corporation (TELC).
TELC consists of an investment in equity instruments
that does not have a quoted price in an active market.
Investment also include other non -current financial
assets which are investments in smaller holdings in
other companies without public quotation.
5.5 DEPOSITS AND LOANS RECEIVABLE
Deposits and loans receivable, MEUR
Dec 31, 2020
Dec 31, 2019
Non-current loans receivable
1.0
0.8
Current loans receivable
1.1
1.8
Current short-term deposits
2,170.4
1,587.7
Total
2,172.5
1,590.3
The fair values of deposits and loans receivable are not materially different from their carrying amounts. Current short-
term deposits mature within one year and consist of EUR 1,790.1 million and EUR 380.2 million of interest rate funds and
short -term bank deposits, respectively (EUR 973.2 and 614.5 million).
5.6 COMMITMENTS
Banks and financial institutions have guaranteed obligations arising in the ordinary course of business of KONE
companies up to a maximum of EUR 1,485.1 (1,576.6) million as of December 31, 2020.
5.7 EMPLOYEE BENEFITS
KONE operates various employee benefit plans
throughout the world. These plans include both defined
contribution and defined benefit schemes. The pension
benefits provided by KONE to its employees are
primarily organized through defined contribution plans.
KONE’s most significant funded defined benefit
plans are in the United Kingdom and in the United
States. Defined benefit pension plans are funded by
KONE to satisfy local statutory funding requirements.
The assets are managed by external fund managers.
The funds are allocated between equities and fixed
income instruments in order to provide return at target
level and limited risk profile. The valuations of the
obligations are carried out by independent qualified
actuaries. The discount rates used in actuarial
calculations of the employee benefit liabilities are
adjusted to market rates.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
76 KONE ANNUAL REVIEW 2020
Accounting principles
The Group operates various employee benefit plans in
accordance with local conditions and practices. The
plans are classified as either defined contribution plans
or defined benefit plans. The pension plans are
generally funded by payments from employees and by
the relevant KONE companies. The assets of these
plans are generally held in separate insurance
companies or trustee-administered funds. Pension
costs and liabilities are based on calculations by the
local authorities or independent qualified actuaries.
Contributions to the defined contribution plans are
charged directly to the statement of income in the year
to which these contributions relate. For defined benefit
plans, pension cost is determined based on the advice
of qualified actuaries who carry out a full valuation of
the plan on a regular basis using the projected unit
credit method. Under this method, the costs of
providing pensions are charged to the statement of
income so as to spread the regular costs over the
working lives of employees. KONE presents the service
cost relating to defined benefit obligations in
employment expenses while the net interest is
presented in financing expenses.
The liability arising from the defined benefit post-
employment plans is the present value of the defined
benefit obligation less the fair value of plan assets. The
discount rates used in the actuarial calculations of
employee benefits liabilities are adjusted to market
rates. Obligations to pay long-term disability benefit, the
level of which is dependent on the length of service of
the employee, are measured to reflect the probability
that payments will be required and the length of service
for which it is expected to be made.
In the United Kingdom, the pension scheme is
designed according to the Definitive Trust Deed and
Rules and complies with the guidelines of the UK
Pension Regulator. The pension scheme has been
closed for new members as of March 2002 and is
managed through KONE Pension Trustees Ltd.
In the United States, a part of KONE’s employees
are members in the Employees’ Retirement Plan, which
is a funded defined benefit plan. The plan is managed
by KONE Inc.’s Pension Committee. In addition to this
pension plan, KONE also provides post -employment
medical and life insurance benefits. These
predominantly unfunded other post -employment benefit
plans qualify as defined benefit plans under IFRS.
KONE is also a participant in a multi -employer
employee benefit plan in the United States. In this
defined contribution plan KONE pays a contribution
based on the hours worked by participating employees,
KONE’s obligation is limited to this payment.
KONE’s main unfunded defined benefit plans are in
Germany, Italy (TFR Trattamento di Fine Rapporto,
termination indemnity plan) and in Sweden. The
pension schemes in Germany and the TFR plan in Italy
are closed for new entrants. In Sweden, the pension
cover is organized through defined contribution as well
as unfunded defined benefit plans (ITP system,
Industrins och handelns tilläggspension).
KONE has defined contribution plans for pensions
and other post -employment benefits in most countries.
Under defined contribution plans KONE’s contributions
are recorded as an expense in the accounting period to
which they relate. Recognition of a liability is not
required because KONE’s obligation is limited to the
payment of the contributions into these plans or funds.
The defined contribution pension plan in Finland is
the statutory Finnish employee pension scheme
(Finnish Statutory Employment Pension Scheme
“TyEL“), according to which the benefits are directly
linked to the beneficiary’s earnings. TyEL is arranged
through pension insurance companies.
Defined benefit obligations expose KONE to various
risks: Corporate bond yields are used as a reference in
determining the discount rates used for calculation of
defined benefit plan related obligations. A decrease in
corporate bond yields hence will increase the present
value of the defined benefit obligation. A plan deficit can
occur if the performance of the plan assets is below the
above mentioned yield. These potential deficits may
require further contributions to the plan assets by the
Group.
Some of the Group’s defined benefit obligations are
linked to general inflation and salary level development.
Higher level of inflation and salary level will result in a
higher present value of the benefit obligation.
Some of the defined benefit plans obligate KONE to
provide benefits to plan members for a lifetime.
Therefore, any increase in life expectancy will increase
defined benefit liability of these plans .
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
77 KONE ANNUAL REVIEW 2020
Employee benefit liabilities recognized in the
consolidated statement of financial position,
MEUR
Dec 31, 2020
Dec 31, 2019
Employee benefits
Defined benefit plans
158.1
142.0
Other post-employment benefits
10.1
9.0
Total
168.1
151.0
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Employee benefit liabilities recognized in the
consolidated statement of financial position,
MEUR
Defined benefit
plans
Other post-
employment
benefits
Defined benefit
plans
Other post-
employment
benefits
Present value of unfunded obligations
112.5
0.4
99.3
-
Present value of funded obligations
526.3
9.7
530.4
10.2
Fair value of benefit plans' assets
-480.8
-
-487.7
-1.2
Total
158.1
10.1
142.0
9.0
Dec 31, 2020
Dec 31, 2019
Net liability reconciliation, MEUR
Defined benefit
plans
Other post-
employment
benefits
Defined benefit
plans
Other post-
employment
benefits
Employee benefit liability at beginning of period
163.2
9.0
133.5
13.5
Employee benefit assets at beginning of period
-21.3
-
-29.0
-
Net liability at beginning of period
142.0
9.0
104.5
13.5
Translation differences
-2.6
-1.2
-0.6
0.3
Acquisitions of new companies
1.6
-
-
-
Costs recognized in statement of income
19.0
0.4
19.0
-3.4
Remeasurements
1.8
1.1
37.5
-0.8
Paid contributions and benefits
-18.3
-0.4
-18.6
-0.5
Reclassifications
6.4
1.2
0.1
-
Transfer
8.4
-
-
-
Net liability at end of period
158.1
10.1
142.0
9.0
Employee benefit liability at end of period
177.2
10.1
163.2
9.0
Employee benefit assets at end of period
-19.2
-
-21.3
-
Net liability at end of period
158.1
10.1
142.0
9.0
Amounts recognized in the statement of income,
MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Defined contribution pension plans
238.5
215.2
Defined benefit pension plans
19.0
19.0
Other post-employment benefits
0.4
-3.4
Total
257.8
230.8
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Amounts recognized in the statement of income,
MEUR
Defined benefit
plans
Other post-
employment
benefits
Defined benefit
plans
Other post-
employment
benefits
Current service costs
19.4
0.1
16.4
0.1
Net interest
2.1
0.2
2.4
0.3
Past-service costs
-1.9
-
0.2
-3.9
Settlements
-0.7
-
-
-
Total
19.0
0.4
19.0
-3.4
The actual return on defined benefit plans’ assets was EUR 49.8 (59.8) million.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
78 KONE ANNUAL REVIEW 2020
Defined benefit plans: assumptions
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
used in calculating benefit obligations
Europe
USA
Europe
USA
Discount rate, %
1.27
2.52
1.61
3.19
Future salary increase, %
2.4
4.0
2.5
4.0
Future pension increase, %
1.7
-
1.6
-
Sensitivity of the defined benefit obligation
Impact on defined benefit obligation
to changes in actuarial assumptions
Dec 31, 2020
Dec 31, 2019
Discount rate, +0.25 percentage points
-3.8%
-3.6%
Discount rate, -0.25 percentage points
4.1%
3.9%
Future pension increase, +0.25 percentage points
2.4%
2.2%
Future pension increase, -0.25 percentage points
-2.3%
-2.0%
Sensitivities are calculated by changing one assumption at a time while keeping other variables constant.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | OTHERS
79 KONE ANNUAL REVIEW 2020
IN THIS SECTION
This section comprises the following notes
concerning rewards and related parties:
6.1 Management remuneration
6.2 Share-based payments
6.3 Related party transactions
Others
6
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | OTHERS
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | OTHERS
80 KONE ANNUAL REVIEW 2020
6.1 MANAGEMENT REMUNERATION
The key management of KONE consists of the Board of Directors of KONE Corporation and the Executive Board.
Compensation paid to the key management, MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Salaries and other remunerations
7.8
Share-based payments
14.8
Total
22.6
Compensation recognized as an expense for members of
the Board of Directors and the President & CEO, (EUR,
thousand) ²
⁾
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Herlin Antti, Chairman of the Board ¹
⁾
535.0
529.5
Herlin Jussi, Vice Chairman of the Board
119.0
114.1
Ehrnrooth Henrik, President & CEO ¹
⁾
750.0
750.0
Alahuhta Matti
50.5
45.0
Brunila Anne
49.0
44.5
Duinhoven Susan
48.0
-
Herlin Iiris
48.5
43.5
Kant Ravi
56.5
49.5
Kaskeala Juhani
50.5
45.0
Pietikäinen Sirpa
48.5
43.0
Total
1,755.5
1,664.1
¹
⁾
paid during 202 1. In April 2020 , the share-based payments for the financial year 2019 received by Henrik Ehrnrooth was EUR 3,736,669.
²
⁾
February 25, 2020 .
The compensation for Antti Herlin, fulltime Chairman of
the Board, consists of a basic salary and a yearly bonus
decided by the Board on the basis of the Group’s
financial result. The yearly bonus may not exceed 100
percent of his annual salary. In 2020 , Antti Herlin’s
basic salary was EUR 468,488. In addition, his accrued
bonus for 2020 totalled EUR 290,462. He was also paid
EUR 66,500 as compensation for serving as Chairman
of the Board. Antti Herlin’s holdings of shares are
presented in the table on page 110 . The full-time
Chairman’s retirement age and pension are determined
in accordance with Finland’s Pensions Act. Statutory
pension cost for the year 2020 was EUR 149,870. No
separate agreement regarding early retirement has
been made.
The compensation for the President and CEO
Henrik Ehrnrooth consists of a basic salary and a yearly
bonus decided annually by the Board on the basis of
the Corporation’s key targets. The yearly bonus may
not exceed 100 percent of his annual salary. In 2020,
Henrik Ehrnrooth’s basic salary was EUR 750,000. In
addition, his accrued bonus for 2020 totaled to EUR
493,500. Henrik Ehrnrooth’s holdings of shares are
presented in the table on page 110. Henrik Ehrnrooth is
included in the share-based incentive plan for the
Group’s senior management. In April 2020, on the basis
of the incentive plan for year 2019, Henrik Ehrnrooth
received a reward of EUR 3,736,669, which consisted
of 32,531 KONE class B shares together with a cash
payment to cover taxes and similar charges arising from
the receipt of shares. The corresponding reward
accrued from 2020 and due for payment in April 2021 is
17,625 KONE class B shares together with a cash
payment to cover taxes and similar charges arising from
the receipt of shares. Henrik Ehrnrooth’s retirement age
and pension are determined in accordance with
Finland’s Pensions Act. Statutory pension cost for the
year 2020 was EUR 255,530. No separate agreement
regarding early retirement has been made. Should his
employment contract be terminated before retirement,
he has the right to the equivalent of 18 months’ salary,
which includes the salary for a six month term of notice.
The compensation for the members of the Executive
Board comprises a base salary and a yearly bonus,
based on the Group’s annual result and the
achievement of personal targets. The bonus amount is
determined by the Nomination and Compensation
Committee and may not exceed 50 percent of the
annual salary. The Executive Board members’ holdings
of shares are presented in the table on page 110. The
members of the Executive Board are included in the
share -based incentive plan for senior management. In
April 2020, on the basis of the incentive plan, the
members of the Executive Board received a reward of
172,619 KONE class B shares together with a cash
payment equal to the amount required to cover taxes
and similar charges arising from the receipt of shares.
The corresponding reward accrued from 2020 and due
for payment in April 2021 is 83,897 KONE class B
shares together with a cash payment equal to the
amount of taxes and similar charges. No separate
agreement regarding early retirement has been made
for the members of the Executive Board. The
compensation for the termination of the employment
contract prior to retirement is a maximum of 15 months’
salary, which includes the salary for a six-month term of
notice.
The amount of the pension liability for Board
Member Matti Alahuhta (served as President & CEO
until March 31, 2014) included in the balance sheet is
EUR 5.9 million at the end of the year 2020 and the
monthly pension paid by KONE to him is EUR 22,434
(December 2020).
CONSOLIDATED FINANCIAL STATEM ENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | OTHERS
81 KONE ANNUAL REVIEW 2020
Accounting principles
KONE has a share-based incentive plan to the senior
management of KONE and other key personnel.
Pursuant to the share ownership plan, the reward to the
management will be settled as a combination of KONE
class B shares and cash when the criteria set in the
terms and conditions for the plan are met. The fair
value of the share-based payments settled with KONE
class B shares has been determined at the grant date
and will be recognized as an expense over the vesting
period. The total amount to be expensed over the
vesting period is determined based on the Group’s
estimate of the number of the shares that are expected
to be vested by the end of the vesting period. The
impact of any non-market vesting conditions have been
excluded, but they are included in assumptions about
the number of shares that are expected to be
distributed. At each statement of financial position date,
the Group revises its estimates of the number of shares
that are expected to be distributed. It recognizes the
impact of the revision of original estimates in the
statement of income. The fair value of the cash settled
part of share-based payments reward has been
determined so that it covers taxes and taxable benefit
costs that are incurred. The liability shall be measured,
initially and at each reporting date until settled, based
on the fair value of the shares expected to be
distributed and expensed based on the extent to which
the employees have rendered service to date. KONE
recognizes the impact of the revision of original
estimates, if any, in the statement of income.
6.2 SHARE-BASED PAYMENTS
Share based incentive plan s
KONE has three separate share-based incentive plans,
two performance share plans and one restricted share
plan. The first performance share plan is targeted for
the senior management of KONE including the
President & CEO, members of the Executive Board and
other top management, consisting of approximately 60
individuals. The second performance share plan is
targeted for other key personnel of KONE, totaling
approximately 500 individuals. The restricted share plan
is targeted for senior management and other key
personnel of KONE, excluding President & CEO.
The potential reward for the performance share plans
are based on KPIs as decided by the Board on an
annual basis in line with the strategic targets. In 2020,
the reward was based on sales growth and profitability
as well as growth of KONE’s digital services in both
plans. The restricted share plan does not have a
performance condition. The potential reward is to be
paid as a combination of KONE class B shares and a
cash payment equivalent to the taxes and similar
charges that are incurred from the receipt of shares.
The share-based incentive plans have a vesting
period from one to three years, including the
performance period. If the participant’s employment or
service contract is terminated during the vesting period,
they are either obliged to return the shares already
received or lose the entitlement to the shares they have
not yet received. As part of the plan for the senior
management, a long-term target for their ownership has
been set. For the Executive Board members, the long-
term ownership target is that the members have an
ownership of KONE shares corresponding to at least
five years’ annual base salary. For other selected top
management positions, the ownership target is at least
two years’ base salary.
As part of the previous share-based incentive plan a
total of 294,497 KONE class B shares were granted in
April 2020 and a total of 38,013 KONE class B shares
were granted in May 2020 to the management as a
reward due to the achievement of the targets for the
year 2019 and 217,499 shares in January 2020 to other
key personnel. During year 2020 a total of 5,725 of
those KONE class B shares were returned to KONE
Corporation. In April 2021, a total of 175,461 class B
shares will be granted to the senior management as a
reward due to the achievement of the targets for the
year 2020. To the other key personnel of KONE the
total reward from the year 2020 is based on the value of
186,265 KONE class B shares to be delivered in
January 2023 and reduced by such an amount of
shares to be equivalent to the taxes and similar charges
that are incurred by the receipt of shares.
Options
KONE Corporation had one option program open in 2019. During the year, a total of 1,303,193 KONE class B shares
were subscribed with the open 2015 option program rights. The original share subscription price for the stock option was
EUR 36.20 per share. By Dec 31, 2019 all outstanding options had either been subscribed or had expired.
Share based incentive plan
Share-based payments recognized as an expense in the
statements of income, MEUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
To be paid in shares
23.4
25.6
To be paid in cash
16.3
20.0
6.3 RELATED PARTY TRANSACTIONS
KONE’s related parties comprise its subsidiaries as well
as the Board of Directors, the President & CEO, the
Executive Board including any companies controlled or
significantly influenced by them. The Corporate
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | OTHERS
82 KONE ANNUAL REVIEW 2020
Controlling function evaluates and monitor s
transactions between the Group and its related parties
to ensure that any conflicts of interest are taken into
account appropriately in KONE’s decision making
process.
Except for management remuneration there have
not been any material transactions between KONE and
its members of the Board of Directors, the President &
CEO, the Executive Board including any companies
controlled or significantly influenced by them.
Information concerning management remuneration is
disclosed in note 6.1 and shares held by the members
of the Board of Directors, the President & CEO, the
Executive Board is disclosed in page 110. KONE’s
subsidiaries are disclosed in pages 95–98.
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | PARENT COMPANY STATEMENT OF INCOME
83 KONE ANNUAL REVIEW 2020
PARENT COMPANY STATEMENT OF INCOME
EUR
Note
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Sales
1
666,309,719.40
684,511,130.42
Other operating income
2
12,597,014.82
14,567,247.60
Materials and services
-3,104,920.68
-3,191,452.20
Personnel expenses
3
-161,658,709.12
-139,636,277.67
Depreciation and amortization
4
-15,236,243.68
-15,035,552.47
Other operating expenses
-405,805,333.71
-390,087,370.19
Operating income
93,101,527.03
151,127,725.49
Financing income and expenses
6
297,451,763.44
679,920,814.03
Income before appropriations and taxes
390,553,290.47
831,048,539.52
Appropriations
7
41,048,579.61
59,243,425.09
Income taxes
-40,924,770.98
-43,699,372.89
Deferred taxes
-1,095,576.75
305,873.57
Net income
389,581,522.35
846,898,465.29
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | PARENT COMPANY STATEMENT OF FINANCIAL POSITION
84 KONE ANNUAL REVIEW 2020
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
Assets, EUR
Note
Dec 31, 2020
Dec 31, 2019
Non-current assets
Intangible assets
8
18,278,548.21
20,134,338.21
Property, plant and equipment
9
37,746,453.05
34,825,427.20
Investments
Subsidiary shares
10
2,627,011,289.86
2,631,178,172.87
Other shares
11
2,460,845.44
2,462,629.44
2,629,472,135.30
2,633,640,802.31
Total non-current assets
2,685,497,136.56
2,688,600,567.72
Current assets
Long-term receivables
12
Loans receivable
372,009,023.74
346,879,043.00
372,009,023.74
346,879,043.00
Short-term receivables
13
Accounts receivable
108,111,218.15
147,276,682.67
Loans receivable
722,058,681.04
879,343,158.82
Deferred tax assets
3,456,027.40
5,355,604.15
Other receivables
15,786,952.75
16,127,584.07
Deferred assets
248,784,957.83
238,401,080.76
1,098,197,837.17
1,286,504,110.47
Financial investments
1,509,966,813.95
687,464,343.38
Cash and cash equivalents
158,423,651.17
269,462,126.90
Total current assets
3,138,597,326.03
2,590,309,623.75
Total assets
5,824,094,462.59
5,278,910,191.47
Equity and liabilities, EUR
Note
Dec 31, 2020
Dec 31, 2019
Equity
Share capital
66,174,482.53
66,174,482.53
Share premium account
100,328,064.58
100,328,064.58
Other reserves
Paid-up unrestricted equity reserve
326,971,986.85
298,115,709.83
Retained earnings
1,330,105,316.75
1,363,717,911.48
Net income
389,581,522.35
846,898,465.29
Total equity
14
2,213,161,373.06
2,675,234,633.71
Cumulative accelerated depreciation
8,932,913.97
9,216,627.63
Appropriations
8,932,913.97
9,216,627.63
Provisions
15
4,964,668.60
3,684,116.72
Liabilities
Non-current liabilities
16
Loans
272,550,427.14
253,180,335.72
272,550,427.14
253,180,335.72
Current liabilities
17
Accounts payable
82,095,305.56
91,370,151.60
Loans
3,024,448,429.10
2,107,909,509.79
Deferred tax liabilities
804,000.00
Other liabilities
34,045,510.30
26,491,719.75
Accruals
183,895,834.86
111,019,096.55
3,324,485,079.82
2,337,594,477.69
Total liabilities
3,597,035,506.96
2,590,774,813.41
Total equity and liabilities
5,824,094,462.59
5,278,910,191.47
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | PARENT COMPANY CASH FLOW STATEMENT
85 KONE ANNUAL REVIEW 2020
PARENT COMPANY CASH FLOW STATEMENT
EUR
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Cash receipts from customers
805,514,007.31
617,231,180.44
Cash receipts from other operative income
12,542,014.82
14,567,247.60
Cash paid to suppliers and employees
-586,702,664.86
-511,632,305.52
Financing items
235,019,188.40
693,569,259.45
Taxes paid
-52,206,429.88
-36,046,855.37
Other financing items
67,538,690.58
-11,016,481.92
Cash flow from operating activities
481,704,806.37
766,672,044.68
Capital expenditure
-16,302,543.53
-12,421,278.54
Proceeds from sales of fixed assets
55,000.00
-
Subsidiary investments
-11,157,233.74
Proceeds from sales and decreases of subsidiary
shares
276,870.56
1,793,416.47
Cash flow from investing activities
-15,970,672.97
-21,785,095.81
Increase in equity (option rights)
-
37,466,798.76
Net change in short-term debt
916,538,919.31
499,057,211.85
Net change in long-term debt
19,370,091.42
-476,305,291.09
Profit distribution
-880,511,060.02
-851,669,419.02
Group contributions received
58,400,000.00
45,940,250.00
Other financing items
-690,570,559.84
66,719,699.18
Cash flow from financing activities
-576,772,609.13
-678,790,750.32
Change in cash and cash equivalents
-111,038,475.73
66,096,198.55
Cash and cash equivalents, Jan 1
269,462,126.90
203,365,928.35
Cash and cash equivalents, Dec 31
158,423,651.17
269,462,126.90
Change in cash and cash equivalents
-111,038,475.73
66,096,198.55
Reconciliation of net income to the cash flow from
operating activities
Net income
389,581,522.35
846,898,465.29
Depreciation and amortization
15,236,243.68
15,035,552.47
Other adjustments
-2,663,581.15
-30,240,972.28
Income before change in working capital
402,154,184.88
831,693,045.48
Change in receivables
16,499,225.51
-15,610,941.19
Change in liabilities
63,051,395.98
-49,410,059.61
Cash flow from operating activities
481,704,806.37
766,672,044.68
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | ACCOUNTING PRINCIPLES
86 KONE ANNUAL REVIEW 2020
ACCOUNTING PRINCIPLES OF THE PARENT COMPANY
FINANCIAL STATEMENTS
The parent company financial statements have been
prepared according to the Finnish Accounting
Standards. Financial statements have been prepared
for the period of 12 months between January 1 and
December 31, 2020.
FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are recorded at the
rate of exchange prevailing on the date of the individual
transaction. Foreign currency denominated receivables
and liabilities are translated using the period end
exchange rates.
Foreign exchange gains and losses associated with
loans, deposits and other statement of financial position
items are included under financing income and
expenses.
DERIVATIVE INSTRUMENTS
Derivative financial instruments that are used to hedge
the currency and the interest rate risks are initially and
subsequently recognized at fair value in the statement
of financial position. The fair values of foreign exchange
forward contracts are calculated by discounting the
future cash flows of the contracts with the relevant
market interest rate yield curves on the valuation date
and by calculating the difference between the
discounted values as at the forward contract date and
balance sheet date in euros. The fair values of
derivative financial instruments are presented in note
19.
Changes in the fair values of foreign exchange
derivatives are recognized in financing income and
expenses if the hedged item is a loan receivable,
deposit or a financial asset or liability denominated in a
foreign currency.
REVENUE RECOGNITION
Revenues related to the utilization of intangible property
rights are recognized as sales on an accrual basis,
according to the existing contracts. The sales of
services are recognized as sales when the services
have been rendered or when the work is being carried
out.
RESEARCH AND DEVELOPMENT COST
Research and development costs are expensed as they
incur.
PENSIONS
An external pension insurance company manages the
parent company statutory pension plan. Contributions to
the pension plan are charged directly to the statement
of income in the year to which these contributions
relate.
LEASES
Leasing payments are charged to the statement of
income on a straight-line basis over the leasing term.
Remaining future leasing liabilities from existing
contracts are presented in note 18.
TAXES
Tax expense includes taxes based on taxable income
for the period, together with tax adjustments for
previous periods and changes in deferred taxes.
Deferred taxes are provided for temporary differences
arising between the tax basis of assets and liabilities
and their book values in financial reporting, and
measured with enacted tax rates.
Deferred tax liabilities arising from temporary
differences are fully recognized with prudency, whereas
the deferred tax assets are recognized only to the
extent of the probable future tax benefit.
NON-CURRENT ASSETS
Intangible assets and property, plant and equipment are
stated at the cost less accumulated depreciation and
amortization. Depreciation and amortization are
recorded on a straight -line basis over the economic
useful lives of the assets as follows:
Buildings
5
–
40 years
Machinery and equipment
4
–
10 years
Other long
-
term expenditure
4
–
10 years
Land is not depreciated.
Investments in subsidiaries and other companies are
measured at cost, or fair value in case the fair value is
less than cost.
PROVISIONS
Future costs in which the parent company has
committed to and which probably will not contribute in
future revenues and unavoidable losses the occurrence
of which are probable recognized in provisions.
FINANCIAL RISK MANAGEMENT
Parent company business activities are exposed to
financial risks such as foreign exchange risks, interest
rate risks, liquidity risks and credit risks. These financial
risks are managed in accordance with the KONE
Treasury Policy. Parent company financials risks are
not significantly different from the group’s financials
risks, see notes 2.4 and 5.3 to the Group level financial
statements .
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | ACCOUNTING PRINCIPLES
87 KONE ANNUAL REVIEW 2020
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash -in-hand and
bank account balances. Used bank overdrafts are
included in other current liabilities.
SHARE-BASED PAYMENTS
KONE has two separate share-based incentive plans to
the senior management of KONE and other key
personnel. Pursuant to the share ownership plans, the
reward to the management will be settled as a
combination of KONE class B shares and cash when
the criteria set in the terms and conditions of the plan
are met. The fair value of the share-based payments
settled with KONE class B shares has been determined
at the grant date and will be recognized as an expense
over the vesting period. The total amount to be
expensed over the vesting period is determined based
on the company’s estimate of the number of the shares
that are expected to be vested by the end of the vesting
period. The impact of any non-market vesting
conditions has been excluded, but they are included in
assumptions about the number of shares that are
expected to be distributed. At each statement of
financial position date, the company revises its
estimates of the number of shares that are expected to
be distributed. It recognizes the impact of the revision of
original estimates in the statement of income. The fair
value of the share-based payments settled with cash
has been determined so that it covers taxes and taxable
benefit costs that are incurred. The liability shall be
measured, initially and at each reporting date until
settled, based on the fair value of the shares expected
to be distributed and expensed based on the extent to
which the employees have rendered service to date.
KONE recognizes the impact of the revision of original
estimates, if any, in the statement of income at the date
when estimates are revised.
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
88 KONE ANNUAL REVIEW 2020
NOTES TO THE PARENT COMPANY FINANCIAL
STATEMENTS
Notes to the statement of income
1.
SALES
Sales to subsidiaries was 666,309.7 (684,511.1) thousand euros, which relates to revenues for the utilization of
intellectual property rights.
2.
OTHER OPERATING INCOME
EUR 1,000
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Subsidies received
1,429.7
1,102.7
Recharged energy
1,873.1
2,083.7
Service charges
785.4
703.7
Others
8,508.7
10,677.2
Total
12,597.0
14,567.2
3.
PERSONNEL EXPENSES
EUR 1,000
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Wages and salaries
145,115.3
121,803.4
Pension costs
13,864.3
16,002.1
Other employment expenses
2,679.1
1,830.8
Total
161,658.7
139,636.3
In 2020, the salaries and fees paid to the President & CEO and to the Board of Directors were together 6,621.7 (5,000.2)
thousand euros. Average number of staff employed by the parent company was 1,207 during the financial year (1,053).
4.
DEPRECIATION AND AMORTIZATION
EUR 1,000
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Intangible rights
261.6
272.2
Other long-term expenditure
7,835.3
8,381.9
Buildings
1,247.6
1,273.3
Machinery and equipment
5,891.8
5,108.1
Total
15,236.2
15,035.6
5.
AUDITORS’ FEES
EUR 1,000
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Audit
613.0
710.0
Auditors´ statements
21.9
0.8
Tax advisory services
26.7
80.0
Other services
164.8
1,008.0
Total
826.3
1,798.8
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
89 KONE ANNUAL REVIEW 2020
6. FINANCING INCOME AND EXPENSES
EUR 1,000
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Dividend income from subsidiaries
249,410.1
698,468.0
Other dividends received
3.3
3.0
Interest income from subsidiaries
7,119.8
8,213.1
Interest income from others
13,805.0
26,368.6
Interest expenses to subsidiaries
-35,226.7
-37,601.0
Interest expenses to others
-690.3
-2,423.0
Other financing income and expenses
63,030.5
-13,107.8
Total
297,451.8
679,920.8
7.
APPROPRIATIONS
EUR 1,000
Jan 1–Dec 31, 2020
Jan 1–Dec 31, 2019
Cumulative accelerated depreciation charge
283.7
843.4
Group contributions received
40,764.9
58,400.0
Total
41,048.6
59,243.4
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
90 KONE ANNUAL REVIEW 2020
Notes to the statement of financial position
8.
INTANGIBLE ASSETS
Jan 1–Dec 31, 2020, EUR 1, 000
Intangible rights
Other long-term
expenditure
Advance
payments
Total
Jan 1, 2020
Acquisition cost
4,712.8
124,549.3
1,866.4
131,128.6
Accumulated amortization and impairment
-3,866.9
-107,127.3
-
-110,994.2
Opening net book value
845.9
17,422.0
1,866.4
20,134.3
Opening net book value
845.9
17,422.0
1,866.4
20,134.3
Increase
173.9
6,067.1
6,241.1
Reclassifications
1,866.4
-1,866.4
Amortization
-261.6
-7,835.3
-8,096.9
Closing net book value
758.3
17,520.3
-
18,278.5
Dec 31, 2020
Acquisition cost
4,886.8
132,482.8
-
137,369.6
Accumulated amortization and impairment
-4,128.5
-114,962.6
-119,091.1
Closing net book value
758.3
17,520.3
-
18,278.5
Jan 1–Dec 31, 2019, EUR 1, 000
Intangible rights
Other long-term
expenditure
Advance
payments
Total
Jan 1, 2019
Acquisition cost
4,503.1
119,294.3
1,866.4
125,663.8
Accumulated amortization and impairment
-3,594.7
-100,014.2
-
-103,608.9
Opening net book value
908.4
19,280.0
1,866.4
22,054.8
Opening net book value
908.4
19,280.0
1,866.4
22,054.8
Increase
209.7
6,526.4
-
6,736.1
Decrease
-
-2.5
-
-2.5
Amortization
-272.2
-8,381.9
-
-8,654.1
Closing net book value
845.9
17,422.0
1,866.4
20,134.3
Dec 31, 2019
Acquisition cost
4,712.8
124,549.3
1,866.4
131,128.6
Accumulated amortization and impairment
-3,866.9
-107,127.3
-
-110,994.2
Closing net book value
845.9
17,422.0
1,866.4
20,134.3
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
91 KONE ANNUAL REVIEW 2020
9. PROPERTY, PLANT AND EQUIPMENT
Jan 1–Dec 31, 2020, EUR 1, 000
Land
Buildings
Machinery &
equipment
Fixed assets
under
construction
Total
Jan 1, 2020
Acquisition cost
182.3
30,472.6
40,835.7
216.0
71,706.6
Accumulated depreciation
-
-9,781.5
-27,099.7
-
-36,881.2
Opening net book value
182.3
20,691.1
13,736.0
216.0
34,825.4
Opening net book value
182.3
20,691.1
13,736.0
216.0
34,825.4
Increase
943.9
9,064.0
52.6
10,060.4
Decrease
-170.7
-170.7
Reclassifications
52.2
-52.2
Depreciation
-1,247.6
-5,721.0
-6,968.6
Closing net book value
182.3
20,439.6
16,908.2
216.3
37,746.5
Dec 31, 2020
Acquisition cost
182.3
31,468.7
49,729.0
216.3
81,596.3
Accumulated depreciation
-
-11,029.1
-32,820.8
-
-43,849.8
Closing net book value
182.3
20,439.6
16,908.2
216.3
37,746.5
Jan 1–Dec 31, 2019, EUR 1, 000
Land
Buildings
Machinery &
equipment
Fixed assets
under
construction
Total
Jan 1, 2019
Acquisition cost
182.3
30,314.7
38,054.1
4.5
68,555.7
Accumulated depreciation
-
-8,515.6
-24,432.3
-32,947.9
Opening net book value
182.3
21,799.2
13,621.8
4.5
35,607.8
Opening net book value
182.3
21,799.2
13,621.8
4.5
35,607.8
Increase
-
165.6
5,303.6
216.0
5,685.1
Decrease
-
-4.8
-81.3
-
-86.1
Reclassifications
-
4.5
-
-4.5
-
Depreciation
-
-1,273.3
-5,108.1
-
-6,381.4
Closing net book value
182.3
20,691.1
13,736.0
216.0
34,825.4
Dec 31, 2019
Acquisition cost
182.3
30,472.6
40,835.7
216.0
71,706.6
Accumulated depreciation
-
-9,781.5
-27,099.7
-
-36,881.2
Closing net book value
182.3
20,691.1
13,736.0
216.0
34,825.4
10. SUBSIDIARY SHARES
EUR 1,000
Dec 31, 2020
Dec 31, 2019
Acquisition cost, Jan 1
2,631,178.2
2,622,075.4
Increase
-
11,703.1
Decrease
-4,166.9
-2,600.3
Net book value, Dec 31
2,627,011.3
2,631,178.2
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
92 KONE ANNUAL REVIEW 2020
11. OTHER SHARES
EUR 1,000
Dec 31, 2020
Dec 31, 2019
Acquisition cost, Jan 1
2,462.6
2,463.3
Increase
-
167.2
Decrease
-1.8
-0.7
Reclassifications
-
-167.2
Net book value, Dec 31
2,460.8
2,462.6
12. LONG-TERM RECEIVABLES
EUR 1,000
Dec 31, 2020
Dec 31, 2019
Loans receivable from subsidiaries
371,684.9
346,879.0
Loans receivable from externals
324.1
-
Long-term receivables
372,009.0
346,879.0
13. SHORT -TERM RECEIVABLES
Receivables from subsidiaries, EUR 1,000
Dec 31, 2020
Dec 31, 2019
Accounts receivables
107,410.7
146,659.7
Loans receivable
722,058.7
879,343.2
Deferred assets
144,761.3
199,820.4
Total
974,230.6
1,225,823.2
Receivables from externals, EUR 1,000
Dec 31, 2020
Dec 31, 2019
Accounts receivables
700.5
617.0
Others
15,787.0
16,127.6
Deferred assets
104,023.7
38,580.7
Total
120,511.2
55,325.3
Deferred tax assets*
3,456.0
5,355.6
Total short-term receivables
1,098,197.8
1,286,504.1
Deferred assets, EUR 1,000
Dec 31, 2020
Dec 31, 2019
Derivative assets
79,362.2
22,897.2
Deferred income taxes
17,059.7
11,811.9
Unbilled revenue
90,231.8
124,436.7
Group contributions
40,764.9
58,400.0
Others
21,366.3
20,855.3
Total
248,785.0
238,401.1
*As from 1.1.2020 deferred tax assets and liabilities are offset for presentation purposes. In 2019, the balance sheet value of deferred tax assets would
have been 804.0 thousand euros lower if the offset would have been done.
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
93 KONE ANNUAL REVIEW 2020
14. EQUITY AND CHANGES IN EQUITY
EUR 1,000
premium
for
Book value Jan 1, 2020
66,174.5
100,328.1
298,115.7
-185,111.0
2,395,727.4
2,675,234.6
Profit distribution
-880,511.1
-880,511.1
Option and share-based
compensation
28,856.3
20,449.0
-20,449.0
28,856.3
Net income for the period
389,581.5
389,581.5
Net book value Dec 31, 2020
66,174.5
100,328.1
326,972.0
-164,662.0
1,494,767.3
389,581.5
2,213,161.4
Non-restricted equity includes the paid-up unrestricted equity reserve, retained earnings deducted by own shares and the
profit for the financial year. The non -restricted equity was EUR 2,046,658,825.95 (2,508,732,086.60) at the end of the
period.
EUR 1,000
premium
for
Book value Jan 1, 2019
66,011.6
100,328.1
237,735.4
-203,325.9
2,418,713.2
2,619,462.4
Profit distribution
-851,669.4
-851,669.4
Option and share-based
compensation
162.9
60,380.3
18,214.9
-18,214.9
60,543.2
Net income for the period
846,898.5
846,898.5
Net book value Dec 31, 2019
66,174.5
100,328.1
298,115.7
-185,111.0
1,548,828.9
846,898.5
2,675,234.6
15. PROVISIONS
EUR 1,000
Dec 31, 2020
Dec 31, 2019
Warranty provisions
4,964.7
3,684.1
Total
4,964.7
3,684.1
16. NON-CURRENT LIABILITIES
Liabilities to subsidiaries, EUR 1,000
Dec 31, 2020
Dec 31, 2019
Liabilities falling due in 1–5 years
272,550.4
93,180.3
Total
272,550.4
93,180.3
Liabilities to externals, EUR 1,000
Dec 31, 2020
Dec 31, 2019
Liabilities falling due in 1–5 years
-
160,000.0
Total
-
160,000.0
Total non-current liabilities
272,550.4
253,180.3
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
94 KONE ANNUAL REVIEW 2020
17. CURRENT LIABILITIES
Liabilities to subsidiaries, EUR 1,000
Dec 31, 2020
Dec 31, 2019
Accounts payable
15,888.1
31,869.4
Loans
2,864,448.4
2,107,909.5
Accruals
42,226.1
27,487.8
Total
2,922,562.6
2,167,266.7
Liabilities to externals, EUR 1,000
Dec 31, 2020
Dec 31, 2019
Accounts payable
66,207.2
59,500.8
Loans
160,000.0
-
Other liabilities
34,045.5
26,491.7
Accruals
141,669.7
83,531.3
Total
401,922.5
169,523.8
Deferred tax liabilities*
-
804.0
Total current liabilities
3,324,485.1
2,337,594.5
Accruals, EUR 1,000
Dec 31, 2020
Dec 31, 2019
Accrued wages, salaries and employment costs
33,347.7
27,744.4
Derivative liabilities
84,290.9
23,317.7
Others
66,257.2
59,957.0
Total
183,895.8
111,019.1
* As from 1.1.2020 deferred tax assets and liabilities are offset for presentation purposes. In 2019, the balance sheet value of deferred tax liabilities would
have been 804.0 thousand euros lower if the offset would have been done.
18.
COMMITMENTS
EUR 1,000
Dec 31, 2020
Dec 31, 2019
Guarantees
For subsidiaries
2,731,483.7
2,710,431.1
For others
80.9
82.4
Leasing commitments
Due next year
7,359.9
6,364.7
Due over a year
7,182.9
8,829.0
Other commitments
3,774.7
2,334.7
Total
2,749,882.1
2,728,041.9
19.
DERIVATIVES
Fair values of derivative instruments, EUR 1,000
Dec 31, 2020
Dec 31, 2019
Foreign exchange forward contracts with external parties
-9,072.1
-12,222.4
Foreign exchange forward contracts with subsidiaries
4,143.5
11,801.9
Total
-4,928.7
-420.5
Nominal values of derivative instruments, EUR 1,000
Dec 31, 2020
Dec 31, 2019
Foreign exchange forward contracts with external parties
3,450,680.9
2,169,789.0
Foreign exchange forward contracts with subsidiaries
667,343.7
746,230.9
Total
4,118,024.7
2,916,019.9
Derivatives are hedging transactions in line with KONE hedging policy and recognized at fair value. Derivatives are
classified as financial assets at fair value through profit or loss. The majority of the foreign exchange forward contracts
mature within a year. The fair values of the foreign exchange forward contracts are measured based on the price
information derived from the active markets and commonly used valuation methods.
More information about financial risks management is described in the notes 2.4 and 5.3 to the consolidated financial
statements.
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | SUBSIDIARIES
95 KONE ANNUAL REVIEW 2020
SUBSIDIARIES
SUBSIDIARIES, DEC 31, 2020
Shareholding %
Country/Region
Company
Group
Parent company
Andorra
KONE Ascensors i Escales, S.A.
100
Australia
KONE Elevators Pty Limited
100
KONE Elevators Employee Benefits Pty Limited
100
KONE Holdings (Australia) Limited
100
Austria
KONE AG
100
100
Bahrain
KONE Bahrain S.P.C.
0
KONE Elevators S.P.C.
0
Belgium
KONE Belgium S.A.
100
99.99
Bosnia and Herzegovina
KONE d.o.o. Sarajevo
100
Bulgaria
KONE EOOD
100
100
Canada
KONE Inc.
100
China mainland
Giant Kone Elevator Co., Ltd.
100
40
KONE Elevators Co., Ltd.
100
KONE Elevator (Shanghai) Co., Ltd.
100
Kunshan KONE Industrial Machinery Co., Ltd.
100
100
Croatia
KONE d.o.o.
100
100
Cyprus
Gelco Lifts Ltd
100
KONE Elevators Cyprus Limited
100
100
Czech Republic
KONE, a.s.
100
100
KONE Industrial – koncern s.r.o.
100
100
Denmark
KONE A/S
100
100
Egypt
KONE LLC
100
Estonia
AS KONE
100
100
Finland
Finescal Oy
100
100
KONE Digital Services Oy
100
100
KONE Export Oy
100
KONE Hissit Oy
100
100
KONE Industrial Oy
100
100
France
Ascenseurs Portes Automatiques Arnaud S.A.S.
100
Ascenseurs Soulier S.N.C.
100
ATS -ATPE S.A.S.
100
Delta Ascenseurs S.A.S.
100
KONE Développement S.N.C.
100
KONE Holding France S.A.S.
100
100
KONE S.A.
99.99
Liftman S.A.S.
100
Prokodis S.A.S.
100
R.M.D. Automatismes S.A.S.
100
R.M.D. S.A.S.
100
Société en Participation KONE ATS
100
2STP S.A.S.
100
Technique & Mecanique des Elevateurs S.A.S.
100
Germany
Alois Kasper GmbH
100
Aufzugstechnik Rhein Ruhr GmbH
100
KONE Automatiktüren GmbH
100
KONE Escalator Supply Service Center Europe GmbH
100
KONE Garant Aufzug GmbH
100
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | SUBSIDIARIES
96 KONE ANNUAL REVIEW 2020
Germany
KONE GmbH
100
KONE Montage GmbH
100
KONE Servicezentrale GmbH
100
SK-Fördertechnik GmbH
100
WBM Ostfalen-Aufzüge GmbH
100
Greece
KONE S.A.
100
Hong Kong SAR
Ben Fung Machineries & Engineering Limited
100
0.1
KONE Elevator (HK) Limited
100
Shan On Engineering Company Limited
100
Hungary
KONE Felvonó Kft.
100
100
Iceland
KONE ehf
100
100
India
KONE Elevator India Private Limited
100
99.99
Indonesia
PT KONE INDO ELEVATOR
100
1.04
Ireland
Ennis Lifts Limited
100
KONE (Ireland) Limited
100
Israel
KONE LTD
100
100
Italy
Cerqueti Servizi S.r.l.
100
Cofam S.r.l.
60
Elevant Servizi S.r.l.
70
Elevatori Bari S.r.l.
89
Elevators S.r.l.
60
EP Servizi S.r.l.
70
Euro Elevator S.r.l.
100
Ferrara Ascensori S.r.l.
60
Gianfranceschi Ascensori S.r.l.
100
GSB Ascensori S.r.l.
65
KONE Industrial S.p.A.
100
100
KONE S.p.A.
100
26.86
L.A.M. Lombarda Ascensori Montacarichi S.r.l.
70
Mingot S.r.l.
100
Nettuno S.r.l.
75
Neulift S.p.A.
100
Neulift Service Molise S.r.l.
51
Neulift Service Triveneto S.r.l.
100
Pinna Ascensori S.r.l.
100
Rimma S.r.l.
60
Slimpa S.p.A.
100
Tecnocram S.r.l.
84
Tecnolift La Spezia S.r.l.
100
Tosca Ascensori S.r.l.
66.67
Unilift S.r.l.
78.54
Kenya
KONE Kenya Limited
100
Latvia
SIA KONE Lifti Latvija
100
0.5
Lithuania
UAB KONE
100
100
Luxembourg
KONE Luxembourg Sàrl
100
Macedonia
KONE Makedonija Dooel Skopje
100
Malaysia
KONE Elevator (M) Sdn. Bhd.
47.85
47.85
Mexico
KONE Industrial, S.A. de C.V.
100
KONE Industrial Servicios, S.A. de C.V.
100
KONE Mexico, S.A. de C.V.
100
0.1
Monaco
S.A.M. KONE
99.87
Montenegro
KONE d.o.o. Podgorica
100
Morocco
KONE Elevators and Escalators Sàrl AU
100
100
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | SUBSIDIARIES
97 KONE ANNUAL REVIEW 2020
Netherlands
Hissi B.V.
100
KONE B.V.
100
KONE Deursystemen B.V.
100
KONE Finance Holding B.V.
100
KONE Holland B.V.
100
53.22
KONE Nederland Holding B.V.
100
Norway
KONE Aksjeselskap
100
100
KONE Rulletrapper AS
100
100
Oman
KONE Assarain LLC
70
Philippines
Elevators Philippines Construction, Inc.
40
KPI Elevators, Inc.
99.99
Poland
KONE Sp.z o.o.
100
100
Portugal
KONE Portugal - Elevadores, Lda.
100
1
JCC Companhia de Elevadores LDA
100
Qatar
KONE Elevators W.L.L.
49
49
Romania
KONE Ascensorul S.A.
100
99.99
Russia
JSC KONE Lifts
100
100
Saudi Arabia
KONE Areeco Limited
50
10
Serbia
KONE d.o.o. Beograd-Novi Beograd
100
Singapore
KONE Pte Ltd
100
Slovak Republic
KONE s.r.o.
100
99.91
KONE SSC s.r.o.
100
100
Slovenia
KONE d.o.o.
100
100
South Africa
KONE Elevators South Africa (Pty) Ltd
100
United Elevators (Pty) Ltd
100
Addo Private Equity Fund 2 (Pty) Ltd
100
Spain
Ascensores Carrillo Alcalá S.L.
100
Ascensores Muralla, S.L.
100
Ascensores R Casado, S.A.
100
Citylift S.A.
100
Instalación y Mantenimiento Ascensores MP Baleares, S.L
100
KONE Elevadores, S.A.
100
99.99
MARVI ASCENSORES, S.L.
100
Sweden
KONE AB
100
KONE Door AB
100
KONE Metro AB
100
Motala Hissar AB
100
Switzerland
KONE (Schweiz) AG
100
100
Taiwan, China
KONE Elevators Taiwan Co., Ltd
100
Kang-En Taiwan Elevator Technology Service Co., Ltd
100
Thailand
KONE Public Company Limited
84.08
Thai Elevators and Escalators Company Limited
74
Thai Elevators Holding Company Limited
49
Tunisia
KONE Elevators & Escalators Assembly
100
Turkey
KONE Asansör Sanayi ve Ticaret A.S.
100
Uganda
KONE Uganda Limited
100
Ukraine
KONE Lifts LLC
100
United Arab Emirates
KONE (Middle East) LLC
49
49
United Kingdom
21st Century Lifts Limited
100
Acre Lifts Limited
100
CrownAcre Lifts Limited
100
Express Elevators Limited
100
KONE (NI) Limited
100
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | SUBSIDIARIES
98 KONE ANNUAL REVIEW 2020
United Kingdom
KONE Pension Trustees Ltd.
100
KONE Plc
100
100
Lift Maintenance Limited
100
(Jersey)
Rob Willder Lifts Limited
100
USA
ENOK Electrical Company, LLC
100
KONE Holdings, Inc.
100
KONE Inc.
100
Marine Elevators LLC
100
Vietnam
KONE Vietnam Limited Liability Company
100
DIVIDEND PROPOSAL, SIGNATURES FOR THE BOARD OF DIRECTORS’ REPORT AND FINANCIAL STATEMENTS AND AUDITOR’S NOTE
99 KONE ANNUAL REVIEW 2020
DIVIDEND PROPOSAL, SIGNATURES FOR THE BOARD
OF DIRECTORS´ REPORT AND FINANCIAL
STATEMENTS AND AUDITOR´S NOTE
DIVIDEND PROPOSAL
The parent company’s non-restricted equity on December 31, 2020 is EUR 2,046,658,825.95 of which the net income for
the financial year is EUR 389,581,522.35.
The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 1.7475 be paid on the
outstanding 76,208,712 class A shares and EUR 1.75 on the outstanding 442,181,142 class B shares. Further, the
Board proposes an extra dividend of EUR 0.4975 to be paid on the outstanding 76,208,712 class A shares and EUR
0.50 on the outstanding 442,181,142 class B shares, resulting in a total amount of proposed dividend of EUR
1,165,996,127.94. The Board of Directors further proposes that the remaining non -restricted equity, EUR 880,662,698.01
be retained and carried forward.
The Board proposes that the dividends be payable from March 11, 2021
SIGNATURES FOR THE FINANCIAL STATEMENTS AND BOARD OF DIRECTORS’
REPORT
Helsinki, January 28, 2021
Antti Herlin
Matti Alahuhta
Anne Brunila
Susan Duinhoven
Ravi Kant
Sirpa Pietikäinen
Jussi Herlin
Iiris Herlin
Juhani Kaskeala
Henrik Ehrnrooth,
President & CEO
THE AUDITOR’S NOTE
Our auditor´s report has been issued today.
Helsinki, January 28, 2021
PricewaterhouseCoopers Oy
Authorized Public Accountants
Lauri Kallaskari
Authorized Public Accountant
Jouko Malinen
Authorized Public Accountant
AUDITOR’S REPORT
100 KONE ANNUAL REVIEW 2020
AUDITOR´S REPORT
To the Annual General Meeting of KONE Oyj
Report on the Audit of the Financial Statements
OPINION
In our opinion
●
the consolidated financial statements give a true and
fair view of the group’s financial position and
financial performance and cash flows in accordance
with International Financial Reporting Standards
(IFRS) as adopted by the EU
●
the financial statements g
ive a true and fair view of
the parent company’s financial performance and
financial position in accordance with the laws and
regulations governing the preparation of the financial
statements in Finland and comply with statutory
requirements.
Our opinion is consistent with the additional report to the
Audit Committee
.
What we have audited
We have audited the financial statements of KONE Oyj
(business identity code 1927400-1) for the year ended 31
December 2020. The financial statements comprise:
●
the
consolidated balance sheet, income statement,
statement of comprehensive income, statement of
changes in equity, statement of cash flows and
notes, including a summary of significant accounting
policies
●
the parent company’s balance sheet, income
statement, statement of cash flows and notes.
BASIS FOR OPINION
We conducted our audit in accordance with good
auditing practice in Finland. Our responsibilities under
good auditing practice are further described in the
Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the parent company and of the
group companies in accordance with the ethical
requirements that are applicable in Finland and are
relevant to our audit, and we have fulfilled our other
ethical responsibilities in accordance with these
requirements.
To the best of our knowledge and belief, the non-audit
services that we have provided to the parent company
and to the group companies are in accordance with the
applicable law and regulations in Finland and we have
not provided non -audit services that are prohibited
under Article 5(1) of Regulation (EU) No 537/2014. The
non -audit services that we have provided are disclosed
in note 2.2 to the Financial Statements.
AUDITOR’S REPORT
101 KONE ANNUAL REVIEW 2020
OUR AUDIT APPROACH
Overview
Materiality
●
Overall group materiality: €
60
million, which represents approximately 5 % of the
group’s operating income.
Audit Scope
●
The group audit scope encompassed all significant group companies, as well as a
number of smaller group companies in Europe, Asia, the Middle East and North
America, covering the vast majority of the Group revenue, assets and liabilities.
Key Audit Matters
●
Revenue recognition of new equipment and modernisation sales.
As part of designing our audit, we determined
materiality and assessed the risks of material
misstatement in the financial statements. In particular,
we considered where management made subjective
judgements; for example, in respect of significant
accounting estimates that involved making assumptions
and considering future events that are inherently
uncertain.
Materiality
The scope of our audit was influenced by our
application of materiality. An audit is designed to obtain
reasonable assurance whether the financial statements
are free from material misstatement. Misstatements
may arise due to fraud or error. They are considered
material if individually or in aggregate, they could
reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
Overall group
materiality
€ 60 million (previous year € 59
million)
How we
determined it
Approximately 5% of operating
inc ome
Rationale for
the
materiality
benchmark
applied
We chose operating income as the
benchmark because, in our view, it
is the benchmark against which the
performance of the Group is most
commonly measured by users of
these financial statements. We
applied 5%, which is within the
range of acceptable quantitative
materiality thresholds in auditing
standards.
Based on our professional judgement, we determined
certain quantitative thresholds for materiality, including
the overall group materiality for the consolidated
financial statements as set out in the table below.
These, together with qualitative considerations, helped
us to determine the scope of our audit and the nature,
timing and extent of our audit procedures and to
evaluate the effect of misstatements on the financial
statements as a whole.
How we tailored our group audit scope
We tailored the scope of our audit, taking into account
the structure of the KONE Group, the accounting
processes and controls, and the industry in which the
group operates.
We determined the type of work that needed to be
performed at group companies by us, as the group
engagement team, or by auditors from other PwC
network firms operating under our instruction. Audits
were performed in group companies which are
considered significant either because of their individual
financial significance or due to their specific nature,
covering the vast majority of revenue, assets and
liabilities of the Group. Selected specified procedures
as well as analytical procedures were performed to
cover the remaining companies.
AUDITOR’S REPORT
102 KONE ANNUAL REVIEW 2020
KEY AUDIT MATTERS
Key audit matters are those matters that, in our
professional judgment, were of most significance in our
audit of the financial statements of the current period.
These matters were addressed in the context of our
audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a
separate opinion on these matters.
As in all of our audits, we also addressed the risk of
management override of internal controls, including
among other matters consideration of whether there
was evidence of bias that represented a risk of material
misstatement due to fraud.
Key audit matter in the audit of the group
How our audit addressed the key audit matter
Revenue recognition of new equipment and modernisation sales
Refer to notes 1 and 2.1 in the consolidated financial statements
The sales of the group comprise new equipment,
modernisation and maintenance sales. Given the
different nature of the revenue streams, we consider their
related risks to be different. While the accounting for
maintenance revenue is less complex, we consider the
accounting for new equipment and modernisation
business revenue to constitute focus areas of the audit.
Revenue for new equipment and modernisation contracts
is primarily recognised by applying the over-time model,
whereby the revenue recognised is determined based on
the stage of completion of the ongoing projects. The
stage of completion is determined by comparing actual
costs incurred to date with the total estimated costs of the
project. Revenue recognition for a project starts upon
delivery of equipment to the customer site. We assessed
the risk to mainly relate to the stage of completion of
projects, which were open at the end of 2020.
Our audit procedures focused on the revenue recognition
of new equipment and modernisation projects because of
the degree of management judgement included in the
project estimates, impacting the amount of revenue
recognised and project profitability.
This matter is a significant risk of material misstatement
referred to in Article 10(2c) of Regulation (EU) No
537/2014.
Our audit of revenue from new equipment and
modernisation projects included both testing of controls
and substantive audit procedures.
Our substantive testing focused on the accounting
estimates used by management as follows:
●
we agreed total project revenues per management’s
calculations to sales agreements including possible
amendments for selected projects
●
we tested cos
t estimates for selected projects by
obtaining an understanding of management’s
process for making the estimates, and evaluating
them based on supporting documentation in the
project accounting
●
we evaluated the reliability of estimates used by
management by comparing forecasts made at the
end of 2019 to actual outcomes in 2020
●
we tested the stage of completion of projects open at
the end of 2020 by comparing actual costs incurred
by that date to the estimated total costs of the
projects.
We also tested a sample of revenue transactions
recorded during the financial year 2020.
We have no key audit matters to report with respect to our audit of the parent company financial statements.
There are no significant risks of material misstatement referred to in Article 10(2c) of Regulation (EU) No 537/2014
with respect to the parent company financial statements.
RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THE MANAGING DIRECTOR
FOR THE FINANCIAL STATEMENTS
The Board of Directors and the Managing Director are
responsible for the preparation of consolidated financial
statements that give a true and fair view in accordance
with International Financial Reporting Standards (IFRS)
as adopted by the EU, and of financial statements that
give a true and fair view in accordance with the laws
and regulations governing the preparation of financial
statements in Finland and comply with statutory
requirements. The Board of Directors and the Managing
Director are also responsible for such internal control as
they determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of
Directors and the Managing Director are responsible for
assessing the parent company’s and the group’s ability
to continue as a going concern, disclosing, as
applicable, matters relating to going concern and using
AUDITOR’S REPORT
103 KONE ANNUAL REVIEW 2020
the going concern basis of accounting. The financial
statements are prepared using the going concern basis
of accounting unless there is an intention to liquidate
the parent company or the group or to cease
operations, or there is no realistic alternative but to do
so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole are
free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit
conducted in accordance with good auditing practice
will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the
aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the
basis of these financial statements.
As part of an audit in accordance with good auditing
practice, we exercise professional judgment and
maintain professional skepticism throughout the audit.
We also:
●
Identify and assess the risks of materi
al
misstatement of the financial statements, whether
due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of
internal control.
●
Obtain an understanding of internal con
trol relevant
to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the
effectiveness of the parent company’s or the
group’s internal control.
●
Evaluate the appropriat
eness of accounting
policies used and the reasonableness of
accounting estimates and related disclosures made
by management.
●
Conclude on the appropriateness of the Board of
Directors’ and the Managing Director’s use of the
going concern basis of accounting and based on
the audit evidence obtained, whether a material
uncertainty exists related to events or conditions
that may cast significant doubt on the parent
company’s or the group’s ability to continue as a
going concern. If we conclude that a material
uncertainty exists, we are required to draw
attention in our auditor’s report to the related
disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report.
However, future events or conditions may cause
the parent company or the group to cease to
continue as a going concern.
●
Evaluate the overall presentation, structure and
content of the financial statements, including the
disclosures, and whether the financial statements
represent the underlying transactions and events
so that the financial statements give a true and fair
view.
●
Obtain sufficient appropriate audit evidence
regarding the financial information of the entities or
business activities within the group to express an
opinion on the consolidated financial statements.
We are responsible for the direction, supervision
and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with governance
regarding, among other matters, the planned scope and
timing of the audit and significant audit findings,
including any significant deficiencies in internal control
that we identify during our audit.
We also provide those charged with governance with a
statement that we have complied with relevant ethical
requirements regarding independence, and to
communicate with them all relationships and other
matters that may reasonably be thought to bear on our
independence, and where applicable, related
safeguards.
From the matters communicated with those charged
with governance, we determine those matters that were
of most significance in the audit of the financial
statements of the current period and are therefore the
key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should
not be communicated in our report because the adverse
consequences of doing so would reasonably be
expected to outweigh the public interest benefits of
such communication.
AUDITOR’S REPORT
104 KONE ANNUAL REVIEW 2020
Other Reporting Requirements
APPOINTMENT
The auditors who have signed the audit report have
been acting as the auditors appointed by the annual
general meeting of KONE Oyj as follows:
PricewaterhouseCoopers Oy has, without interruption,
been acting as the auditor for 64 years since first being
appointed on 2 March 1957, when one Authorised
Public Accountant (KHT) working for our firm was
appointed as the auditor. The other auditor of KONE
Oyj has been an auditor working for our firm since
1.1.1988. Authorised Public Accountant (KHT) Jouko
Malinen has, without interruption, been acting as the
auditor since 26 February 2019 for two years. Our firm
and Authorised Public Accountants (KHT) working for
our firm have been acting as the auditors of KONE Oyj
for the entirety of the duration that it has been a public
interest entity.
OTHER INFORMATION
The Board of Directors and the Managing Director are
responsible for the other information. The other
information comprises the report of the Board of
Directors and the information included in the Annual
Review, but does not include the financial statements
and our auditor’s report thereon.
Our opinion on the financial statements does not cover
the other information.
In connection with our audit of the financial statements,
our responsibility is to read the other information and, in
doing so, consider whether the other information is
materially inconsistent with the financial statements or
our knowledge obtained in the audit, or otherwise
appears to be materially misstated. With respect to the
report of the Board of Directors, our responsibility also
includes considering whether the report of the Board of
Directors has been prepared in accordance with the
applicable laws and regulations.
In our opinion
●
the information in the report of the Board of
Directors is consistent with the information in the
financial statements
●
the report of the Board of Directors has been
prepared in accordance with the applicable laws
and regulations.
If, based on the work we have performed, we conclude
that there is a material misstatement of the other
information, we are required to report that fact. We have
nothing to report in this regard.
Helsinki 28 January 2021
PricewaterhouseCoopers Oy
Authorised Public Accountants
Lauri Kallaskari
Authorised Public Accountant (KHT)
Jouko Malinen
Authorised Public Accountant (KHT)
CORPORATE GOVERNANCE STATEMENT
105 KONE ANNUAL REVIEW 2020
CORPORATE GOVERNANCE STATEMEN T
KONE’S GENERAL GOVERNANCE
PRINCIPLES
The duties and responsibilities of KONE Corporation’s
various governing bodies are determined by Finnish law
and KONE’s corporate governance principles. KONE
complies with the Finnish Corporate Governance Code
2020 published by the Securities Market Association,
with the exception of recommendations 16
(Independence of the company of the members of the
audit committee), 17 (Independence of the company of
the members of the remuneration committee) and 18
(Independence of the company of the members of the
nomination committee). The entire Code is available on
the Internet at www.cgfinland.fi. These exceptions are
due to the company’s ownership structure. The
company’s largest shareholder, Antti Herlin, controls 62
percent of the company’s voting rights and 22 percent
of its shares. The significant entrepreneurial risk
associated with ownership is considered to justify the
main shareholder serving as either Chairman or
Member of the Board of Directors and of its Committees
and, in this capacity, overseeing the shareholders’
interests.
KONE’s administrative bodies and officers with the
greatest decision-making power are the General
Meeting of Shareholders, the Board of Directors of
KONE Corporation, the full time Chairman of the Board
and the President and CEO. At the Annual General
Meeting of Shareholders, the shareholders approve the
consolidated financial statements, decide on the
distribution of profits, select the members of the Board
of Directors and the auditors and determine their
compensation.
KONE Corporation’s Annual General Meeting is
convened by the Board of Directors. According to the
Articles of Association, the Annual General Meeting of
Shareholders shall be held within three months of the
closing of the financial year on a date decided by the
Board of Directors.
BOARD OF DIRECTORS
Duties and responsibilities
The Board of Directors’ duties and responsibilities are
defined primarily by the Articles of Association and the
Finnish Limited Liability Companies’ Act. The Board’s
duties include:
◾
compiling of the Board of Directors’ report,
interim reports and financial statements
◾
ensuring the proper organization and
surveillance of the accounting and asset
management
◾
preparation of proposals for the General
Meeting and the convocation of the General
Meetings
◾
approval and confirmation of strategic
guidelines and the principles of risk
management
◾
ratification of annual budget and plans
◾
appointment of a full-time Chairman of the
Board and a President and CEO, and
decisions on the terms and conditions of their
employment
◾
decisions on the company’s corporate
structure
◾
decisions on major acquisitions and
investments
◾
decisions on other matters falling under the
Board’s responsibility by law
The Board has created rules of procedure stipulating
the duties of the Board, its Chairman and its
Committees. The Board of Directors holds six regular
meetings a year and additional meetings as required.
The Board of Directors reviews its own performance
and procedures once a year.
Members of the Board
The Annual General Meeting elects five to ten members
and no more than three deputy members to the Board
of Directors for one year at a time in accordance with
KONE Corporation’s Articles of Association. The Board
of Directors elects a Chairman and Vice Chairman
among its members. The proposals for Board members
are prepared at the Nomination and Compensation
Committee and under the steering of the Chairman of
the Board. During the preparation and in the proposal to
the General Meeting of Shareholders attention is paid
to the board candidates’ broad and mutually
complementary background, experience, expertise,
age, gender and views of both KONE’s business and
other businesses so that the diversity of the board
supports KONE’s business and its future in the best
available way. The independence of the members of
the Board is assessed in line with the independence
criteria of the Finnish Corporate Governance Code
.
Committees
The Board of Directors has appointed two committees
consisting of its members: the Audit Committee and the
Nomination and Compensation Committee. The Board
has confirmed rules of procedure for both Committees.
The Secretary to the Board acts as the Secretary of
both Committees.
The Audit Committee monitors the Group’s financial
situation and supervises reporting related to the
financial statements and interim reports. The Audit
Committee monitors and assesses the adequacy and
appropriateness of KONE’s internal control and risk
management, as well as the adherence to rules and
regulations. It also monitors and evaluates how
agreements and other transactions between the
company and its related parties meet the requirements
relating to ordinary business operations and general
market terms and monitors and oversees the financial
statement and financial reporting process. In addition,
the Audit Committee processes the description of the
main features of the internal control and risk
management systems pertaining to the financial
reporting process included in the company’s corporate
governance statement. In addition, it deals with the
Corporation’s internal audit plans and reports. The
Director of Internal Audit reports the internal audit
results to the Committee.
CORPORATE GOVERNANCE STATEMENT
106 KONE ANNUAL REVIEW 2020
The Audit Committee evaluates the auditing of the
Group’s companies and the appropriateness of the
related arrangements and auditing services and
considers the auditors’ reports. Furthermore, the
Committee formulates a proposal to the Annual General
Meeting regarding the auditors to be selected for the
Corporation.
The Nomination and Compensation Committee
prepares proposals to be made to the Annual General
Meeting regarding the nomination of Board members
and their compensation and makes decisions regarding
senior management appointments and compensation.
The Committee also decides on the compensation
systems to be used and prepares the remuneration
policy and remuneration report for the company´s
governing bodies.
MANAGEMENT
Full-time Chairman of the Board and the President
and CEO
KONE Corporation’s Board of Directors appoints the
full -time Chairman of the Board and the President and
CEO. The Board determines the terms and conditions
of employment of the full-time Chairman of the Board
and the President and CEO, and these are defined in
their respective written contracts. The Chairman of the
Board prepares matters to be considered by the Board
together with the President and CEO and the corporate
staff. The Chairman of the Board and the President and
CEO are responsible for the execution of the targets,
plans, strategies and goals set by the Board of
Directors within the KONE Group. The President and
CEO is responsible for operational leadership within the
scope of the strategic plans, budgets, operational plans,
guidelines and orders approved by KONE Corporation’s
Board of Directors. The President and CEO presents
operational issues to the Board, and is responsible for
implementing the decisions of the Board.
Executive Board
The Executive Board supports the President and CEO
in executing the corporate strategy. The Executive
Board follows business developments, initiates actions
and defines operating principles and methods in
accordance with guidelines handed down by the Board
of Directors and the President and CEO. The Executive
Board holds regular monthly meetings and additional
meetings as required.
RISK MANAGEMENT, INTERNAL
CONTROL AND INTERNAL AND
EXTERNAL AUDIT AT KONE
KONE Corporation’s Board of Directors has ratified the
principles of risk management, internal control and
internal auditing to be followed within the Group.
Risk management
KONE’s Risk Management function coordinates and
develops a systematic assessment of risks and
opportunities within core business planning and
decision -making processes together with the Strategy
Development function.
KONE Risk Management function oversees and
facilitates the assessment of risks and opportunities
related to KONE’s business environment, operations,
assets and financial performance in order to limit
unnecessary or excessive risks. KONE’s business units
are responsible for identifying, assessing and managing
risks that can threaten the achievement of their
business objectives as part of the strategic planning
and budgeting processes. Key risks are reported to the
Risk Management function, which consolidates the risk
information to the Executive Board. The Board of
Directors reviews the KONE risk portfolio regularly
based on the Executive Board’s assessment. The
ownership of identified risk exposures is assigned to
specific business units, and the Risk Management
function facilitates and follows-up the execution of the
identified actions.
Internal control
The goal of KONE’s internal control system is to ensure
that the Group’s operations are efficient and profitable,
risks are managed, eliminated or mitigated to an
acceptable level and that the financial and operational
reporting is reliable and in compliance with the
applicable regulations, policies and practices.
The Board’s Audit Committee monitors the
efficiency and functioning of the internal control
process. The management is responsible for
establishing and maintaining adequate internal controls
and for monitoring the effectiveness as part of operative
management. This is supported by dedicated Internal
Controls function, which is responsible for facilitating
and coordinating the internal control design,
implementation and monitoring across the organization.
The KONE internal control framework is built and
based on corporate values, Code of Conduct, a culture
of honesty and high ethical standards. Such framework
is promoted by dedicated leadership, training programs,
positive and disciplined corporate culture and working
environment as well as by attracting and promoting
dedicated and competent employees.
KONE internal controls are designed to manage,
eliminate and mitigate the relevant operational,
financial, and compliance risks, and they are linked to
KONE’s processes and employee job roles. Controls
are supported by global and local policies and
principles, and control design is continuously
maintained by incorporating the changes and
development from the business operations and
information systems .
KONE business units are responsible for
implementing the control framework and for monitoring
adherence of globally and locally agreed policies and
principles. Global Finance and Control has the
oversight responsibility of the overall framework.
Internal control procedures over financial reporting
Correct financial reporting in KONE’s internal control
framework means that its financial statements give a
true and fair view of the financial performance of the
operations and the financial position of the group and
that such statements do not include intentional or
unintentional misstatements or omissions both in
respect of the figures and level of disclosure.
Corporate -wide financial management and control
of operations is coordinated by the Global Finance and
Control function and implemented by a network of
subsidiary and business entity Controllers within KONE.
KONE’s monthly business planning and financial
reporting process represents a key control procedure
within KONE in ensuring the effectiveness and
efficiency of operations. This process includes in -depth
analyses of deviations between actual performance,
CORPORATE GOVERNANCE STATEMENT
107 KONE ANNUAL REVIEW 2020
More information
Most significant risks and uncertainties related to
KONE’s business are described in the Board of
Directors’ Report. Financial risk management is
described in note 2.4 and 5.3.
budgets, prior year performance and latest forecasts for
the business on multiple levels of the organization. The
process covers financial information as well as key
performance indicators that measure the operational
performance on a business unit and corporate level.
The process is designed to ensure that any deviations
from plans, in terms of financial or operating
performance and financial management policies are
identified, communicated and reacted upon efficiently,
in a harmonized and timely manner. KONE’s financial
statements are based on this management reporting
process.
Financial control tasks are built into the business
processes of KONE as well as into the ongoing
business supervision and monitoring of the
management. KONE has established Financial Control
Models for new equipment and service businesses as
well as for treasury and tax matters. The models have
been defined to ensure that the financial control covers
the relevant tasks in an efficient and timely manner.
The interpretation, application and monitoring of the
compliance of accounting standards is centralized in
the Global Finance and Control function, which
maintains, under the supervision of the Audit
Committee, the KONE Accounting Standards.
Reporting and forecasting contents are defined in the
KONE Accounting and Reporting Instructions. These
standards and instructions are maintained and updated
centrally by the Global Finance and Control function
and applied uniformly throughout KONE.
KONE has a global enterprise resource planning
(ERP) system which is built to reflect the KONE
Accounting Standards and KONE Accounting and
Reporting Instructions. KONE applies a controlled
change management process ensuring that no changes
to the financial reporting logic of the ERP system can
be made without approval from the Global Finance and
Control function. Automatic interfaces between different
systems are principally applied in the period -end
financial reporting process of KONE. Transactional
processing is increasingly automated and centralized in
dedicated shared service centers.
Effective internal control over record to report
processes, from business processes and systems to
the financial statements, is important in ensuring the
correctness of financial reporting. This is driven by the
identification of key data elements of the business and
the quality of the data to ensure correct financial
reporting and forecasting ability.
Internal audit
The Corporation has an Internal Audit Department,
which is separate from the management. The Head of
Internal Audit reports to the Chairman of the Board. The
Internal Audit Department is responsible for auditing
both the internal control system and the management of
business risks. It reports its findings to the Audit
Committee.
Related party transactions
KONE evaluates and monitors related party
transactions between the company and its related
parties. KONE maintains a list of related parties.
KONE’s related parties comprise its subsidiaries as well
as the Board of Directors, the President and CEO, the
Executive Board including any companies controlled or
significantly influenced by them. KONE’s Board of
Directors has approved guidelines how to recognize,
handle, approve, monitor and report related party
transactions. According to the guidelines, the Corporate
Controlling function follows and monitors related party
transactions as part KONE’s normal reporting and
control procedures and reports related party
transactions to the Audit Committee annually.
KONE’s Board of Directors decides on any related
party transactions which are not considered normal
business activities or differ from market terms. KONE
reports relevant and material related party transactions
annually in the notes of consolidated financial
statements.
External audit
The objective of a statutory audit is to express an
opinion whether the consolidated financial statements
give a true and fair view of the financial position,
financial performance and cash flows of the group, as
well as whether the parent company’s financial
statements give a true and fair view of the parent
company’s financial performance and financial position.
Statutory audit encompasses also the audit of the
accounting and governance in the company. The
auditor considers whether the information in the Board
of Directors’ report is consistent with the information in
the financial statements and the report of the Board of
Directors has been prepared in accordance with the
applicable legal requirements.
According to the Articles of Association, the
company must have a minimum of one and a maximum
of three Auditors. The Auditors must be public
accountants or public accounting firms authorized by
Finland’s Central Chamber of Commerce. The Auditor
is elected at the Annual General Meeting for a term
which expires at the end of the following Annual
General Meeting.
CORPORATE GOVERNANCE STATEMENT
108 KONE ANNUAL REVIEW 2020
INSIDERS
KONE Corporation adheres to the insider guidelines of
the Nasdaq Helsinki Ltd, which have been
supplemented with internal insider guidelines approved
by the Board of Directors. In compliance with the
Market Abuse Regulation, the person discharging
managerial responsibilities in KONE Corporation
(managers) include the members and deputy members
of the Board of Directors, the President and CEO and
members of the Executive Board. Managers are
permitted to trade in KONE shares and other financial
instruments of KONE during a six -week period after the
release of interim reports and financial statements
releases. KONE does not maintain a list of permanent
insiders. KONE has resolved to maintain the insider list
with respect to each quarter and year-end financial
reporting. The company also maintains other project-
specific insider lists when necessary. Project-specific
insiders are prohibited from trading with financial
instruments of KONE until the termination of the project.
The person in charge of KONE’s insider issues is
the Secretary to the Board of Directors.
CORPORATE GOVERNANCE IN 2020
Annual General Meeting
The Annual General Meeting was held in Helsinki,
Finland on February 25 February, 2020.
Board of Directors and committees
The Annual General Meeting elected nine members to
KONE’s Board of Directors. The full-time Chairman of
the Board of Directors of KONE Corporation is Antti
Herlin. Jussi Herlin is the Vice Chairman of the Board.
The other members of the Board are Matti Alahuhta,
Anne Brunila, Susan Duinhoven, Iiris Herlin, Ravi Kant,
Juhani Kaskeala and Sirpa Pietikäinen. Out of the nine
Board Members, five are male and four females.
Of the Board members, Matti Alahuhta, Anne
Brunila, Susan Duinhoven, Iiris Herlin, Ravi Kant,
Juhani Kaskeala and Sirpa Pietikäinen are independent
of the Corporation. With the exception of Antti Herlin,
Iiris Herlin and Jussi Herlin, the other Board members
are independent of the Corporation’s significant
shareholders.
In 2020, the Board of Directors convened 8 times,
with an average attendance rate of 99%. Jukka Ala-
Mello serves as Secretary to the Board and to its
Committees.
Audit committee
The Board of Directors’ Audit Committee comprises
Ravi Kant (Chairman, independent member), Anne
Brunila (independent member), Antti Herlin and Jussi
Herlin.
The Audit Committee held 3 meetings in 2020, with
an average attendance rate of 83%
Kristian Snäll serves as the Head of Internal Audit.
Nomination and compensation co mmittee
The Nomination and Compensation Committee
comprises Antti Herlin (Chairman), Matti Alahuhta
(independent member), Jussi Herlin and Juhani
Kaskeala (independent member).
The Nomination and Compensation Committee held
4 meetings in 2020, with an average attendance rate of
100 %.
Number of Board and Committee meetings in 2020 and participant attendance:
Board
Audit Committee
Nomination and
Compensation
Committee
Antti Herlin
8/8
2/3
4/4
Jussi Herlin
8/8
3/3
4/4
Matti Alahuhta
8/8
4/4
Anne Brunila
7/8
2/3
Susan Duinhoven
7/7
Iiris Herlin
8/8
Ravi Kant
8/8
3/3
Juhani Kaskeala
8/8
4/4
Sirpa Pietikäinen
8/8
CORPORATE GOVERNANCE STATEMENT
109 KONE ANNUAL REVIEW 2020
More information
This statement is available on the company’s web
pages at www.kone.com and it has been given
separately of the Board of Directors’ report
.
Compensation and other benefits of the Board of
Directors
The Annual General Meeting of KONE Corporation in
February 2020 confirmed the fees of the members of
the Board as follows (annual fees in EUR):
Chairman of the Board
60
000
Vice chairman
50
000
Member
45
000
Of the annual remuneration, 40 percent was paid in
class B shares of KONE Corporation and the rest in
cash. In addition, a compensation of EUR 500 was
approved for attendance at Board and Committee
meetings but anyhow a fee of EUR 3,000 is paid per
Committee meeting for a Chairman of the Committee
residing outside of Finland and a fee of EUR 2,000 is
paid per Committee meeting for those members
residing outside of Finland. Board members’ travel
expenses and daily allowances are compensated in
accordance with the company’s travel expense policy.
Compensation and other benefits of the Chairman
The compensation for Antti Herlin, full-time Chairman of
the Board, consists of a base salary and a yearly bonus
decided by the Board on the basis of the Group’s
financial result. The yearly bonus may not exceed 100
percent of the recipient’s annual salary. In 2020, Antti
Herlin’s basic salary was EUR 468,488. In addition, his
accrued bonus for 2020 totaled EUR 290,462. He was
also paid EUR 66,500 as compensation for serving as
Chairman of the Board. Antti Herlin’s holdings of shares
are presented in the table on page 110.
The full-time Chairman’s retirement age and
pension are determined in accordance with Finland’s
Pensions Act. No separate agreement regarding early
reti rement has been made.
President and CEO
Henrik Ehrnrooth serves as KONE Corporation’s
President and CEO.
Compensation and other benefits of the President
and CEO
The President and CEO’s compensation consists of a
basic salary and a yearly bonus determined annually by
the Board on the basis of the Corporation’s key targets.
The yearly bonus may not exceed 100 percent of the
recipient’s annual salary .
Henrik Ehrnrooth’s annual base salary is EUR
750,000 . In addition, his accrued bonus for 2020 totaled
EUR 493,500. Henrik Ehrnrooth’s holdings of shares
are presented in the table below.
Henrik Ehrnrooth is included in the share -based
incentive plan for the Group’s senior management. In
April 2020, on the basis of the incentive plan for year
201 9, Henrik Ehrnrooth received a bonus of EUR
3,736,669 which consisted of 32,531 KONE class B
shares together with a cash bonus to cover taxes and
similar charges arising from the receipt of shares. The
corresponding bonus accrued from 2020 and due for
payment in April 2021 is 17,625 KONE class B shares
together with a cash bonus to cover taxes and similar
charges arising from the receipt of shares.
Henrik Ehrnrooth’s retirement age and pension are
determined in accordance with Finland’s Pensions Act.
No separate agreement regarding early retirement has
been made. Should his employment contract be
terminated before retirement, he has the right to the
equivalent of 18 months’ salary, which includes the
salary for a six-month term of notice.
Executive Board
In 2020, KONE’s Executive Board consisted of
President and CEO and 12-13 Members. Henrik
Ehrnrooth serves as President and CEO. The other
members of Executive Board in 2020 were Max Alfthan
(until 31 March, 2020), Axel Berkling, Klaus Cawén,
Hugues Delval, Ilkka Hara, Thomas Hinnerskov,
William Johnson, Mikko Korte, Maciej Kranz, Pierre
Liautaud, Tomio Pihkala, Ken Schmid (from March 1,
2020), Susanne Skippari and Larry Wash (until 28
February, 2020).
Compensation and other benefits of the Executive
Board
The compensation for the members of the Executive
Board comprises a base salary and a yearly bonus,
based on the Group’s annual result and the
achievement of personal targets, which can relate to,
for example, strategy execution, safety or quality. The
bonus amount is determined by the Nomination and
Compensation Committee and may not exceed 50
percent of the annual salary. The Executive Board
members’ holdings of shares are presented in the
below table.
The members of the Executive Board are included
in the share-based incentive plan for senior
management. In April 2020, on the basis of the
incentive plan, the members of the Executive Board
received a bonus 172,619 KONE class B shares
together with a cash bonus equal to the amount
required to cover taxes and similar charges arising from
the receipt of shares. The corresponding bonus
accrued from 2020 and due for payment in April 2021 is
83,897 KONE class B shares together with a cash
bonus equal to the amount of taxes and similar
charges. No separate agreement regarding early
retirement has been made for the members of the
Executive Board. The compensation for the termination
of the employment contract prior to retirement is a
maximum of 15 months’ salary, which includes the
salary for a six-month term of notice.
CORPORATE GOVERNANCE STATEMENT
110 KONE ANNUAL REVIEW 2020
More information
As of July 3, 2016, the trades of KONE Board
and Management are published as stock
exchange releases.
More information
Board of Directors page 111
Executive Board pages 112-113
Auditing
KONE Corporation’s Auditors are Jouko Malinen,
Authorized Public Accountant, and
PricewaterhouseCoopers Oy, Authorized Public
Accountants. The fees paid to companies in the
PricewaterhouseCoopers chain for 2020 were EUR 3.7
million for auditing and EUR 2.8 million for other
consulting services.
Insiders
The holdings of the Board of Directors and
Management of KONE on December 31, 20 20 and the
changes occurring in them during the financial year are
presented in the table below.
Related party transactions
Except for management remuneration, there have not
been any material transactions between KONE and its
members of the Board of Directors, the President &
CEO, the Executive Board including any companies
controlled or significantly influenced by them.
Shareholdings and options of KONE Board and Management on Dec 31, 2020 and changes in shareholding
during the period Jan 1–Dec 31, 2020
Class A share
Change
Class B shares
Change
Alahuhta Matti
754,294
+351
Berkling Axel
61,924
+13,013
Brunila Anne
3,334
+351
Cawén Klaus
368,312
+13,013
Delval Hugues
47,199
-1,987
Duinhoven Susan
351
+351
Ehrnrooth Henrik
371,272
+32,531
Hara Ilkka
48,515
+13,013
Herlin Antti
70,561,608
-
47,737,946
+801,468
Herlin Iiris
135,341
+351
Herlin Jussi
109,667
+390
Hinnerskov Thomas
55,179
+13,013
Johnson William
134,122
+8,013
Kant Ravi
2,494
+351
Kaskeala Juhani
3,318
+351
Korte Mikko
67,058
+11,713
Kranz Maciej
38,013
+38,013
Liautaud Pierre
53,296
-15,987
Pietikäinen Sirpa
8,494
+351
Pihkala Tomio
106,608
+13,013
Schmid Ken
17,818
+4,476
Skippari Susanne
39,682
+13,013
Max Alft han was a member of the Executive Board until March 31, 2020 and owned 58,875 KONE class B shares on that date. Larry Wash was a member
of the Executive Board until February 28, 2020 and owned 69,033 KONE class B shares on that date. The shares owned by companies in which the Board
Member or Management exercises controlling power and minor children are also included in these shareholdings.
CORPORATE GOVERNANCE STATEMENT
111 KONE ANNUAL REVIEW 2020
BOARD OF DIRECTORS
Antti Herlin
Chairman of the Board
b. 1956, D.Sc. (Econ.) h.c., D.Arts h.c., D.Sc. (Tech)
h.c.
Member of the Board since 1991.
Has served as Chairman of the Board since 2003.
Previously served as CEO of KONE 1996 –2006 and as
Deputy Chairman 1996–2003.
Current key positions of trust are Chairman of the
Board of Security Trading Oy, Chairman of the Board of
Holding Manutas Oy, Chairman of the Board of the
Tiina and Antti Herlin Foundation and Vice Chairman of
the Board of Sanoma Corporation.
Jussi Herlin
Vice Chairman of the Board
b. 1984, M.Sc. (Econ)
Member of the Board since 2012.
Previously served as Senior Business Analyst and
Strategy Development Manager at KONE 2016-2020,
as Consultant at Accenture between 2012-2014 and as
Deputy Member of the Board of KONE Corporation
during the years 2007 -2012. Current key positions of
trust are Member of the Board of Security Trading Oy,
Member of the Board of Holding Manutas Oy, Member
of the Board of the Tiina and Antti Herlin Foundation,
Member of the Board of Kaskas Media Oy and Member
of the Board of Technology Industries of Finland.
Matti Alahuhta
b. 1952, D. Sc. (Tech.), D.Sc. (Tech.) h.c.
Member of the Board since 2003.
Previously served as President of KONE since 2005,
and President & CEO since 2006 to 2014, as Executive
Vice President of Nokia Corporation 2004, as President
of Nokia Mobile Phones 1998–2003 and as President of
Nokia Telecommunications 1993–1998.
Current key positions of trust are Chairman of the
Board of DevCo Partners Corporation, Vice Chairman
of the Board of Metso Outotec Corporation, Member of
the Board of AB Volvo and Member of the Board of
ABB Ltd.
Anne Brunila
b. 1957, D.Sc. (Econ.), D.Sc. (Econ.) h.c.
Member of the Board since 2009.
Previously served as Professor of Practice, Hanken
School of Economics 2014-2018, as Executive Vice
President, Corporate Relations and Strategy and
Member of the Management Team of Fortum 2009-
2012, as President and CEO of the Finnish Forest
Industries Federation 2006-2009, in the Finnish Ministry
of Finance as Director General 2003 -2006 and in
several advisory and executive positions in the Bank of
Finland 1992-2000 and in the European Commission
2000 -2002. Current key position of trust is Chair of the
Board of the Finnish Film Foundation.
Susan Duinhoven
b. 1965, Ph.D. (Physical Chemistry), B. Sc. (Physical
Chemistry)
Member of the Board since 2020.
Serves as President and CEO of Sanoma Corporation
since 2015. Previously served as CEO of Koninklijke
Wegener N.V. 2013-2015, as CEO of Western
Europe/CEO Netherlands at Thomas Cook Group Plc
2010 -2013, as Managing Director of Benelux & New
Acquisitions Europe at Reader's Digest 2008-2010, and
as CEO at De Gule Sider A/S 2005 -2007 and started
her career at Unilever in 1988.
Iiris Herlin
b. 1989, M.Soc.Sc.
Member of the Board since 2015. Deputy Member of
the Board during the years 2013–2014.
Current key positions of trust are Member of the Board
of Security Trading Oy and Member of the Board of the
Tiina and Antti Herlin Foundation.
Ravi Kant
b. 1944, B.Tech. (Hons.), M.Sc., D.Sc. (Hon)
Member of the Board since 2014.
Previously served in different positions in Tata Motors
since 1999, and as Managing Director and CEO from
2005 to 2009 and after that as the Vice Chairman of the
Board of Directors until 2014. Prior to that, he was
Director, Consumer Electronics, Philips India; Director
(Marketing), LML Ltd. and Vice President (Marketing),
Titan Watches Ltd. Current key positions of trust are
Member of the Board of Hawkins Cookers Ltd, Member
of the Advisory Board of Accenture India and Chairman
of the Advisory Board of both MedTherapy India and
Akhandjyoti Eye Hospital.
Juhani Kaskeala
b. 1946, Admiral.
Member of the Board since 2009.
Managing Director of Admiral Consulting Oy since
2011. Previously served in the Finnish Defence Forces
in several positions 1965 -2009, last as Commander of
the Finnish Defence Forces 2001-2009. Current key
positions of trust are Senior Advisor of Blic Oy and
Member of the European Leadership Network.
Sirpa Pietikäinen
b. 1959, M.Sc. (Econ.)
Member of the Board since 2006.
Served as Member of the European Parliament since
2008 and as a negotiation theory lecturer and
consultant since 1999. Previously served as a Member
of Finland’s Parliament 1983–2003 and as Finland’s
Minister of the Environment 1991–1995.
Current key positions of trust are Chair of GLOBE EU,
Chair of the Board of the Martha Organisation, Vice
Chair of the Board of Lammi Savings Bank, Chair of the
Board of Federation Mieli Mental Health Finland and
Member of the Board of Alzheimer Europe.
CORPORATE GOVERNANCE STATEMENT
112 KONE ANNUAL REVIEW 2020
EXECUTIVE BOARD
Henrik Ehrnrooth
President and CEO
b. 1969, M.Sc. (Econ).
President & CEO of KONE since 2014. Member of the
Executive Board. Previously served as Chief Financial
Officer of KONE 2009–2014. Earlier worked for
Goldman Sachs from 1998–2009, most recently as a
Managing Director in the Investment Banking Division
and at UBS in various positions from 1994–1998.
Current key position of trust: Member of the Board of
UPM-Kymmene Corporation, Member of the
Foundation Board of the International Institute of
Management Development (IMD, Switzerland), Member
of the European Round Table for Industry (ERT).
Axel Berkling
Asia-Pacific
b. 1967, M.Sc. (Econ)
Member of the Executive Board since 2016. Employed
by KONE since 1998. Previously served at KONE as
Managing Director of KONE Germany from 2012–2016.
Axel has held various regional commercial roles since
2007, including managing KONE’s service business in
Germany. Prior to joining KONE, he served as
Managing Director of Nass Magnet GmbH 1996–1998
and held different roles at Arthur Andersen from 1992–
1995.
Klaus Cawén
M&A and Strategic Alliances, Legal
Affairs
b. 1957, LL.M.
Member of the Executive Board since 1991.
Employed by KONE since 1983. Previously served as
General Counsel of KONE 1991–2001.
Current key positions of trust: Member of the Board of
Oy Karl Fazer Ab, Member of the Board of East Office
of Finnish Industries Ltd, Member of the Board of Metso
Outotec Corporation, Member of the Board of Toshiba
Elevator and Building Systems Corporation (Japan),
and Member of the Supervisory Board of Ilmarinen
Mutual Pension Insurance Company.
Hugues Delval
Service Business
b. 1971, M.Sc. (Commercial Engineering)
Member of the Executive Board since 2017.
Employed by KONE since 1994. Previously served as
Senior Vice President, Head of Global Maintenance,
Service Business (2015–2017), Managing Director for
KONE France (2011 –2015), and Managing Director for
KONE Belgium and Luxembourg (2009–2011). Since
joining KONE, he has held various regional leadership
positions and roles in several geographies.
Ilkka Hara
CFO
b. 1975, M. Sc. (Finance and Accounting)
Member of the Executive Board and employed by
KONE since 2016. Previously served as GM and CFO
of Microsoft Phones 2014–2016, in various leadership
roles at Nokia 2004–2014. Prior to Nokia worked at
ABN AMRO 2003–2004 and Morgan Stanley 2001–
2003. Current key positions of trust: Member of the
Board of Directors at Hartili Oy
Thomas Hinnerskov
Central and North Europe
b. 1971, M.Sc. (Finance and Accounting)
Member of the Executive Board and employed by
KONE since 2016. Previously served as Regional CEO
for ISS Western Europe (2016) and for ISS APAC
(2012 –2016), as well as serving in various other
leadership roles at ISS during 2003 –2012. Prior to ISS,
he worked at TEMA Kapital 2002–2003, McKinsey &
Company 2001–2002 and Gudme Raaschou
Investment Bank from 1995–2000. Current key position
of trust: Member of the Board of Caverion Corporation.
William B. Johnson
Greater China
b. 1958, MBA
Member of the Executive Board since 2012. Employed
by KONE since 2004. Previously served as Managing
Director of KONE China since 2004, Service Vice
President of Asia-Pacific, Carrier International
Corporation (United Technologies) 2002–2004, as
Managing Director Australia, Carrier Air Conditioning
Ltd. (United Technologies) 2001–2002, and in various
leadership roles with Otis Elevator Company and
Trammell Crow Company
Mikko Korte
Operations Development
b. 1968. M.Sc. (Eng)
Member of the Executive Board since 2016. Employed
by KONE since 1995. Previously served as Head of
New Equipment Business for KONE Americas 2013–
2015, Managing Director for KONE Finland and Baltics
2011 –2013, Service Director for KONE Central and
North Europe 2007–2011, Service Business Director for
KONE Scandinavia 2004–2007 and Service Operations
Manager for KONE Finland 1999–2004.
CORPORATE GOVERNANCE STATEMENT
113 KONE ANNUAL REVIEW 2020
More information
Corporate governance page 105
More information
Shareholdings of KONE Corporation’s public
insiders are available on page 110
Maciej Kranz
Chief Technology Officer
b. 1964. MBA. Business Administration
Member of the Executive Board and employed by
KONE since 2019. Previously served at Cisco Systems
as Vice President and General Manager of Corporate
Strategic Innovation Group (2013–2019), General
Manager of the Connected Industries Group (2012–
2013), Vice President of Borderless Networks (2009–
2011), Vice President of Wireless Networking (2006–
2009) and Vice President of Ethernet Switching (1999–
2006) . Current key positions of trust: Member of the
Board of IoTecha Corporation.
Pierre Liautaud
South Europe, Middle East and Africa
b. 1958, M.Sc (Ecole Polytechnique, Ecole Nationale
Supérieure des Télécommunications)
Member of the Executive Board and employed by
KONE since 2011. Previously served in KONE as EVP,
West & South Europe, Africa, Customer Experience
2011 –2016, in Microsoft EMEA as Vice President,
Enterprise & Partner Group 2003–2006, then Area Vice
President Western Europe 2006–2009. Was CEO at
@viso (Vivendi -Softbank, 1999–2001) and Activia
Networks (2001–2003). Also served in IBM Corporation
1982 –1999, most recently as Vice -President Marketing,
Internet Division (1998) and General Manager, Global
Electronic s Industry (1999).
Tomio Pihkala
New Equipment Business
b. 1975, M.Sc. (Mechanical Engineering)
Member of the Executive Board since 2013. Employed
by KONE since 2001. Previously served in KONE as
Executive Vice President, Chief Technology Officer
2015 -2019, Operations Development 2013-2015, Vice
President, Technology Finland 2011 –2013, as Director,
Service Equipment Business, in KONE China 2009–
2010, as Director, Product Strategy and Marketing, in
KONE China 2007–2008. Current key positions of trust:
Member of the Board of Toshiba Elevator and Building
Systems Corporation, and Member of the Board of
Vexve Oy.
Ken Schmid
Americas
b. 1963, B.A. (History), MBA (Business Administration)
Member of the Executive Board since March 2020.
Employed by KONE since 1986 (Montgomery Elevator
Company until 1994). Previously served in KONE as
Senior Vice President, Finance for KONE Americas and
member of KONE’s Global Finance Leadership Team
2005 -2020; Senior Vice President of Global Information
Services 2003-2005; Senior Vice President, CIO for
KONE Americas 1998-2003; Vice President of Quality
1995 -1998. Earlier in his career Ken held various new
equipment sales roles in multiple branch offices within
KONE. Current key positions of trust: Member of the
Board of National Elevator Industry, Inc. (NEII),
Member of the Board of Advisory Board to Invest in
Finland, USA.
Susanne Skippari
Human Resources
b. 1974, M.Sc. (Econ.)
Member of the Executive Board since 2017.
Employed by KONE since 2007. Previously served as
Head of Human Resources in New Equipment
Business (2015–2017), and Head of Talent
Management (2007–2008 and 2011 –2015). Susanne
has also worked as Area Human Resources Director for
Europe, Middle-East and Africa between 2009–2011.
Prior to joining KONE, she served eight years at Nokia
and worked in many Human Resources roles in Finland
and in Argentina.
In 2020, Max Alfthan served as a Executive Vice
President, Marketing and Communications until March
31, 2020. Susanne Skippari was interim Executive Vice
President, Marketing and Communications from April
2020 until January 2021. Tricia Weener was appointed
as the new Executive Vice President, Marketing and
Communications as of 18 January 2021.
Larry Wash served as a Executive Vice President,
Americas until February 28, 2020. After that, Ken
Schmid has served as the Executive Vice President,
Americas.
After the reporting period, on January 20, 2021, KONE
announced changes in the Executive Board. Johannes
Frände was appointed Executive Vice President,
General Counsel and a member of the Executive Board
at KONE as of February 1, 2021. He succeeds Klaus
Cawén. Thomas Hinnerskov was appointed Executive
Vice President, responsible for South Europe, Middle-
East and Africa region as of April 1, 2021. He succeeds
Pierre Liautaud. Prior to this, Thomas Hinnerskov has
served as KONE’s EVP, Central and North Europe.
Axel Berkling was appointed new EVP, Central and
North Europe. Prior to this, Axel Berkling has served as
KONE’s EVP, Asia-Pacific region, excluding China. On
January 27, 2021, KONE announced that Samer Halabi
was appointed Executive Vice President, responsible
for the Asia-Pacific region and a member of the
Executive Board as of May 1, 2021.
CORPORATE GOVERNANCE STATEMENT
114 KONE ANNUAL REVIEW 2020
More information
The Board of Directors’ proposal for the
distribution of profit, page 99.
Shares and shareholders, page 30.
INFORMATION FOR SHAREHOLDERS
Annual General Meeting
KONE Corporation’s Annual General Meeting will be
held on Tuesday 2 March 2021 at 11.00 a.m. In order to
prevent the spread of the COVID-19 pandemic, the
company’s shareholders may participate in the General
Meeting and exercise their shareholder rights only by
voting in advance and by submitting counterproposals
and asking questions in advance.
Further instructions and schedules for shareholders
can be found on KONE’s website at kone.com and in
the Notice to the General meeting.
At general meetings, each KONE class A share is
assigned one vote, as is each block of 10 class B
shares, with the provision that each shareholder is
entitled to at least one vote.
Payment of dividends
The Board of Directors proposes to the Annual General
Meeting that for the financial year 2020 dividend of EUR
1.7475 be paid for each class A share and a dividend of
EUR 1.75 be paid for each class B share. Further, the
Board proposes an extraordinary dividend of EUR
0.4975 to be paid on the outstanding class A shares
and EUR 0.50 on the outstanding class B shares,
resulting total dividend of 2.2450 per class A share and
2.25 per class B share. All shares existing on the
dividend record date, March 4, 2020 are entitled to the
dividend. The dividend is proposed to be paid on March
11 , 2020.
Listing of KONE securities
KONE Corporation has two classes of shares: the listed
class B shares and the non -listed class A shares. The
KONE class B shares are listed on the Nasdaq Helsinki
Ltd. and are registered at Euroclear Finland Ltd.
CORPORATE GOVERNANCE STATEMENT
115 KONE ANNUAL REVIEW 2020
INVESTOR RELATIONS
Investor relations policy
KONE strives to offer liquid shares that present an
attractive investment alternative to domestic and foreign
investors. The primary task of KONE’s Investor
Relations is to ensure that the market has correct and
sufficient information at its disposal in order to
determine the value of the KONE share at all times.
This task is being performed in KONE’s written
communications, such as the financial statements and
interim reports, the corporate responsibility report, stock
exchange and press releases, the internet pages as
well as in all other communication with investors and
analysts.
In all of its communications, KONE complies with
the requirements for listed companies as defined by the
Securities Markets Act, the rules of the Nasdaq Helsinki
Ltd. and any other applicable regulation concerning
prompt and simultaneous disclosure of information.
Silent period
KONE observes a period of silence prior to releasing
financial results. This means that there will be no
discussions regarding financial issues with the capital
markets or the financial media during the three-week
period preceding the publication of interim results and
the four-week period preceding the publication of the
annual financial statements. This applies to meetings,
telephone conversations or other means of
communication.
Contact information
Sanna Kaje
Vice President, Investor relations
Tel. +358 (0)204 75 4705
KONE’s financial reporting schedule 2021
Financial Statement Bulletin and Financial Statements for 2020
Thursday, January 28, 2020
Printed Financial Statements for 2020
Week 8-9 February, 2021
Interim report for January 1–March 31, 2021
Wednesday, April 28, 2021
Half-year Financial Report for January 1–June 30, 2021
Tuesday, July 20, 202 1
Interim report for January 1–September 30, 2021
Thursday, October 28, 2021
In the second quarter of 2021, KONE will publish a separate Sustainability Report for the year 2020.
116 KONE ANNUAL REVIEW 2020
This bulletin contains forward -looking statements that are based on the current expectations, known factors, decisions and plans of the management
of KONE. Although the management believes that the expectations reflected in such forward -looking statements are reasonable, 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 as well as fluctuations in exchange rates.
117 KONE ANNUAL REVIEW 2020
Front and back cover reference images
Beijing Daxing Airport is Beijing’s second -largest
airport, capable of accommodating 45 million
passengers by 2021. The capacity will grow to
100 million annually with planned expansions.
Designed to look like a mythical phoenix bird in
flight, the building was inspired by traditional
Chinese architecture and blends classical and
modern elements.
First opened in 2019 with planned expansions
already in the pipeline, the 700,000 square
meter airport was designed with efficiency and
convenience to passengers as a priority.
Departure and arrival gates are located on the
same floor, and the radial design aims to allow
passengers to enter the building and easily
reach their flight gates. Once the expansion is
completed, a total of 174 KONE TravelMaster™
escalators and a KONE E-Link™ monitoring
system will help provide reliable, smooth people
flow to transport millions of passengers.
KONE
CORPORATION
Corporate Offices
Tel. +358 (0)204 751
www.kone.com
For further information
please contact
:
Sanna Kaje
Vice President,
Investor Relations
Tel . +358 (0)204 75 4705