KONE 2021
ANNUAL REVIEW
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1 KONE ANNUAL REVIEW 2021
KONE IN BRIEF
At KONE, our mission is to improve the flow of urban life. As a global
leader in the elevator and escalator industry, KONE provides elevators,
escalators and automatic building doors, as well as solutions for
maintenance and modernization to add value to buildings throughout their
life cycle. Through more effective People Flow®, we make people's
journeys safe, convenient and reliable, in taller, smarter buildings.
Sales MEUR
10,514
in 2021
>60,000
employees
We move over
1 billion
people every day
~550,000
customers
<1,500,000
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 2021
8400
8185
8853
2000
4000
6000
8000
10000
2019
2020
2021
9982
9939
10514
2 000
4 000
6 000
8 000
10 000
12 000
2019
2020
2021
1237
1251
1310
0,0
4,0
8,0
12,0
16,0
20,0
0
250
500
750
1 000
1 250
1 500
2019
2020
2021
1550
1908
1829
250
500
750
1 000
1 250
1 500
1 750
2 000
2019
2020
2021
1,80
1,81
1,96
0,00
0,30
0,60
0,90
1,20
1,50
1,80
2,10
2019
2020
2021
1,70
2,25
2,10
0,00
0,30
0,60
0,90
1,20
1,50
1,80
2,10
2,40
2019
2020
2021*
KEY FIGURES
Sales by business
Sales by region
1–12/2021
1–12/2020
Change
Change at
comparable
exchange rates
Orders received
MEUR
8,852.8
8,185.1
8.2%
7.4%
Order book
MEUR
8,564.0
7,728.8
10.8%
3.8%
Sales
MEUR
10,514.1
9,938.5
5.8%
5.3%
Operating income
MEUR
1,295.3
1,212.9
6.8%
Operating income margin
%
12.3
12.2
Adjusted EBIT*
MEUR
1,309.8
1,250.5
4.7%
Adjusted EBIT margin*
%
12.5
12.6
Income before tax
MEUR
1,320.8
1,224.2
7.9%
Net income
MEUR
1,022.7
947.3
7.9%
Basic earnings per share
EUR
1.96
1.81
7.9%
Cash flow from operations (before financing items and taxes)
MEUR
1,828.7
1,907.5
Interest-bearing net debt
MEUR
-2,164.1
-1,953.8
Equity ratio
%
41.2
45.5
Return on equity
%
32.0
29.7
Net working capital (including financing items and taxes)
MEUR
-1,468.2
-1,160.1
Gearing
%
-67.6
-61.1
* KONE presents adjusted EBIT as an alternative performance measure to enhance comparability of the business performance between reporting periods. Restructuring
costs related to significant restructuring programs are excluded from the calculation of the adjusted EBIT. In January–December 2021, the adjusted EBIT excluded costs of
EUR 14.5 million related to restructuring measures in KONE’s global business lines and functions. During 2017 –2020, all restructuring costs excluded from the adjusted
EBIT related to the Accelerate program.
*) Board’s proposal
Dividend
Extraordinary dividend
Adjusted EBIT
Adjusted EBIT margin
12.6%
12.4 %
12.5%
Orders received*, MEUR
Sales, MEUR
Adjusted EBIT, MEUR and
adjusted EBIT margin, %
Cash flow*, MEUR
Earnings per share, EUR
Dividend per class B share,
EUR
*) Orders received do not include
maintenance contracts
*) Cash flow from operations before
financing items and taxes
STRATEGY
3 KONE ANNUAL REVIEW 2021
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 ‘Sustainable success with
customers’ focuses on increasing the value we create for our
customers with new intelligent solutions and on embedding
sustainability even deeper across all of our operations.
The global elevator and escalator industry is shaped by
three major megatrends: urbanization, sustainability and
technology. Against this backdrop, ‘Sustainable success with
customers’ addresses the needs of a digitally enabled world,
in which 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 deliver an
improved user experience.
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 optimized for cost efficiency and
sustainability.
◾
New solutions for customer value
:
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
We measure progress against five strategic targets:
◾
Great place to work
◾
Most loyal customers
◾
Faster than market growth
◾
Best financial development
◾
Leader in sustainability
Our 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
4 KONE ANNUAL REVIEW 2021
BOARD OF DIRECTORS’ REPORT | KONE’S BUSINESS MODEL
5 KONE ANNUAL REVIEW 2021
BOARD OF DIRECTORS’
REPORT
KONE’s business model
KONE provides value for customers during the whole life
cycle 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.
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 the majority of units delivered will end up in
KONE’s maintenance base. In addition , KONE also maintains
other OEM’s equipment. The main growth drivers for
modernization are the aging installed base and increased
requirements for efficient people flow, safety and
sustainability. Having a strong maintenance base is crucial for
the growth of the 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. 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 the following strategic inputs that are
crucial in creating value for customers, shareholders and the
society: competent and engaged people and strong
leadership; innovative, sustainable offering and global
processes and systems; best partners; efficient manufacturing
and delivery chain; solid financial position; environmentally
sustainable operations as well as strong brand and solid
reputation. In addition to these, KONE sees that the life cycle
business model and the existing maintenance base of close to
1.5 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.
◾
>5,000 granted or pending patents
globally
◾
R&D spend 1.8% of sales, 7 global
R&D units
◾
~1,500 technology professionals in
R&D, ca. half in software
development
◾
Global KONE way processes and
systems
◾
Safe and efficient maintenance and
installation methods
INNOVATIONS, PROCESSES
AND SYSTEMS
◾
One of the leading brands in the
elevator and escalator industry
BRAND AND REPUTATION
◾
>60,000 employees representing 145
different nationalities, ca. half of
employees in the field
◾
Global diversity and inclusion
strategy
◾
Personnel voluntary turnover rate
7.8%
◾
Wide development opportunities on
all organizational levels around the
world
◾
Management systems and
certificates (e.g. ISO 14001, ISO
9001, OHSAS 18001)
◾
Governance structures, ethical
business practices and compliance,
96% of employees completed at least
one compliance training during 2021
◾
Co-creation with customers
◾
Partnering to co-develop new
technologies and solutions
◾
Collaboration with >300 universities
and educational institutes
◾
Distributors and agents important
part of go-to-market
NATURAL RESOURCES*
◾
Equity EUR 3.2 billion
◾
Interest-bearing net debt EUR -2.2
billion
◾
Net working capital EUR -1.5 billion
◾
Capital expenditure 2.1% of sales
FINANCIAL
MANUFACTURING AND
DELIVERY CHAIN
◾
10 manufacturing units in 7
countries
◾
~2,000 component suppliers and
thousands of installation suppliers
◾
Optimized logistics network
◾
Supplier Sustainability Assessment
PARTNERING
INPUTS
PEOPLE AND LEADERSHIP
EMISSIONS AND WASTE*
T
HE MOST SUSTAINABLE
OFFERING
◾
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
◾
~196,000 new elevators and escalators ordered
in 2021
◾
Maintenance and modernization services, <1.5
million units in maintenance base
MOVING OVER 1 BILLION
PEOPLE EVERY DAY
SUSTAINABLE SUCCESS WITH
CUSTOMERS
OUTPUTS
BUSINESS MODEL
◾
Materials used 1,643,400 tonnes
◾
Heating and vehicle fleet fuels
408,200 MWh
◾
Electricity and district heat 81,600
MWh
◾
Water consumption 301,900 m3
◾
12% reduction in absolute GHG emissions from our own operations
(Scope 1 and 2) compared to 2018
◾
0.7% increase in product-related GHG emissions (Scope 3) relative to
ordered products compared to 2018
◾
41% of green electricity
◾
94.0% of waste recycled or incinerated
◾
Corporate units as well as all manufacturing and R&D units are ISO
9001 and ISO 14001 certified
◾
88% of key suppliers with ISO 14001 certification at the end of 2021
◾
Carbon footprint from own operations 135,100
tCO2e
◾
Waste 39,600 tonnes
◾
Wastewater effluents 8 tonnes
◾
Carbon footprint from our products and
value chain 14.1 MtCO2
◾
Recognized for our contribution to better societies and urban
environment by several external parties, e.g. CDP, EcoVadis, Forbes
as well as The Financial Times’ Diversity Leaders and Climate Leaders
report
◾
Wages, salaries, other employment expenses and pensions EUR 3.2
billion
◾
Industrial Injury Frequency Rate (IIFR) 1.6
◾
81% of external hires into leadership positions from local communities
◾
21% of director level positions held by women
◾
Increased amount of skilled workforce
◾
Direct purchases EUR 4.3 billion
◾
Income taxes EUR 298.1 million with effective tax rate 22.6%
*2020 figures. 2021 figures will be published in
the 2021 Sustainability Report in Q2 2022.
ENVIRONMENT*
SOCIETY
◾
Operating income EUR 1,295 million
◾
Dividend proposal EUR 2.10 per class B share (incl. extraordinary
dividend), total amount of proposed dividends MEUR 1,087
◾
Return on equity 32.0%
IMPACT
SHAREHOLDERS
BOARD OF DIRECTORS’ REPORT
6 KONE ANNUAL REVIEW 2021
KONE’s operating environment
Activity in the global elevator and escalator markets was
somewhat affected by the COVID-19 pandemic in the early
part of the year, but recovered thereafter. However, global
supply chain constraints affected the pace of the recovery in
the second half. Throughout the year, activity was the
strongest in the residential segment across all regions. The
sentiment in the infrastructure segment was somewhat
boosted by stimulus, whereas activity in the commercial
segment remained limited.
increased clearly
from 2020, when markets in most regions were heavily
impacted by the pandemic.
In Asia-Pacific
, new equipment
volumes grew clearly.
In China
, volumes grew clearly with
strong growth in the first half and softer development in the
second half due to tightened liquidity situation in the property
sector.
In the rest of Asia-Pacific
significantly. In the EMEA region, the new equipment market
grew slightly. The new equipment markets grew slightly in
Central and North Europe and in the Middle East, whereas in
South Europe the market was stable.
In North America
, the
new equipment market grew clearly.
maintenance
activity picked up as of
the second quarter and was largely at pre-COVID levels at the
end of the year. Similarly, demand rebounded
in
modernization
affected by intense competition. That said, market prices
started to improve in several areas in the second half of the
year as a response to the increased component and logistics
costs.
BOARD OF DIRECTORS’ REPORT
7 KONE ANNUAL REVIEW 2021
Orders received
MEUR
2021
2020
Change
Change at
comparable
exchange rates
Orders received
8,852.8
8,185.1
8.2%
7.4%
Order book
8,564.0
7,728.8
10.8%
3.8%
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 and order book
Orders received grew by 8.2% as compared to January–
December 2020 and totaled EUR 8,852.8 million. At
comparable exchange rates, KONE’s orders received grew by
7.4%.
At comparable rates, orders received for the new
equipment grew clearly with clear growth in the volume
business and significant growth in major projects. In
modernization, orders received were stable with significant
growth in the volume business and significant decline in major
projects.
The margin of orders received declined year-on-year due
to increased component and logistics costs. Some sequential
improvement was seen towards the end of the year.
KONE’s new equipment orders received in elevator and
escalator units amounted to approximately 196,000 units
(2020: approximately 180,000).
Orders received in the EMEA region
comparable exchange rates as compared to January–
December 2020. New equipment orders grew slightly and
modernization orders grew slightly.
In the Americas region
, orders received grew clearly at
comparable rates as compared to January–December 2020.
New equipment orders grew significantly and modernization
orders declined significantly. The comparison period included
an exceptionally sizeable modernization order from the
Washington Metropolitan Area Transit Authority.
Orders received in the Asia-Pacific region
at comparable rates as compared to January–December
2020. In China, new equipment orders grew clearly in units
and grew clearly in monetary value during the year. During the
second half , orders were impacted by the tightened liquidity
situation in the property markets. Like-for-like prices were
stable while mix was slightly negative. In the rest of Asia-
Pacific, new equipment orders received grew significantly.
Modernization orders received grew significantly in China and
declined slightly in the rest of Asia-Pacific.
The order book
December 2020 and stood at a strong level of EUR 8,564.0
million at the end of the reporting period. At comparable rates,
the order book grew slightly.
The order book margin continued to be at a healthy level.
Customer cancellations remained at a very low level.
Terminology: Slight <5%, clear 5–10%, significant >10%
BOARD OF DIRECTORS’ REPORT
8 KONE ANNUAL REVIEW 2021
MEUR 2021 2020 Change
Change at
comparable
exchange rates
New equipment sales
5,637.7 5,340.2 5.6% 4.4%
Service sales
4,876.4 4,598.4 6.0% 6.3%
Maintenance
3,450.6
3,215.6
7.3%
7.5%
Modernization
1,425.9
1,382.8
3.1%
3.4%
Total sales
10,514.1 9,938.5 5.8% 5.3%
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*
MEUR 2021 2020 Change
Change at
comparable
exchange rates
EMEA
4,036.9 3,916.2 3.1% 3.3%
Americas
1,902.9 1,939.5 1.9% 0.6%
Asia-Pacific
4,574.3 4,082.8 12.0% 9.2%
Total sales
10,514.1 9,938.5 5.8% 5.3%
Sales by region
Sales
KONE’s sales grew by 5.8% as compared to January–
December 2020, and totaled EUR 10,514.1 million. At
comparable exchange rates, KONE’s sales grew by 5.3%.
The sales consolidated from the companies acquired in 2021
had only a minor impact on KONE’s sales for the financial
period.
New equipment sales grew by 4.4% at comparable
exchange rates thanks to strong growth in China during the
first half. Service sales grew by 6.3% at comparable exchange
rates supported by a normalization in both maintenance and
modernization activities. At comparable exchange rates,
maintenance sales grew by 7.5% and modernization sales
grew by 3.4%.
KONE’s elevator and escalator maintenance base
continued to grow and was close to 1.5 million units at the end
of 2021 (over 1.4 million units at the end of 2020).
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 2021,
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 (~35%), The United States (15%), Germany (6%) and
France (5%).
Sales in the EMEA region
4,036.9 million. At comparable exchange rates, sales grew by
3.3%. New equipment sales grew slightly, maintenance sales
grew clearly and modernization sales grew slightly in the
region.
In the Americas
, sales declined by 1.9% and totaled EUR
1,902.9 million. At comparable exchange rates, sales grew by
0.6%. New equipment sales declined clearly, maintenance
sales grew clearly and modernization sales grew slightly in the
region.
In Asia-Pacific
, sales grew by 12.0% and totaled EUR
4,574.3 million. At comparable exchange rates, sales grew by
9.2%. New equipment sales grew clearly, maintenance sales
grew significantly and modernization sales grew significantly
in the region.
Terminology: Slight <5%, clear 5–10%, significant >10%
BOARD OF DIRECTORS’ REPORT
9 KONE ANNUAL REVIEW 2021
Financial result
Cash flow and financial position
Financial result
KONE’s operating income (EBIT) was EUR 1,295.3 million or
12.3% of sales. The adjusted EBIT, which excludes costs of
EUR 14.5 million related to restructuring measures in KONE’s
global business lines and functions, was EUR 1,309.8 million
or 12.5% of sales. In the comparison period items affecting
comparability consisted of restructuring costs related to the
Accelerate program.
The adjusted EBIT margin developed in line with
expectations despite the sharp increase in component and
logistics costs. Pricing, productivity and product cost actions
have been implemented to counteract the headwinds in the
cost environment.
With comparable exchange rates, the translation impact
on operating income for the comparison period was EUR 12.4
million.
KONE’s income before taxes was EUR 1,320.8 million.
Taxes totaled EUR 298.1 (276.9) million. This represents an
effective tax rate of 22.6% for the full financial year. Net
income for the period was EUR 1,022.7 million.
Basic earnings per share was EUR 1.96.
Cash flow and financial position
KONE’s financial position was very strong at the end of
December 2021.
Cash flow from operations (before financing items and
taxes) during January–December 2021 was exceptionally
strong at EUR 1,828.7 million.
Net working capital (including financing items and taxes)
was EUR -1,468.2 million at the end of December 2021.
Accounts payable increased in the quarter due to higher raw
material prices and the timing of payments. Foreign exchange
rates had a EUR 117 million positive impact on the net
working capital.
Interest-bearing net debt was EUR -2,164.1 million at the
end of December 2021. KONE’s cash and cash equivalents
together with current deposits and loan receivables were EUR
2,885.1 (Dec 31, 2020: 2,629.4) million at the end of the
reporting period. During the period, KONE signed a
sustainability-linked revolving credit facility of EUR 850 million
which replaces a previously existing EUR 800 million facility.
The sustainability targets included in the facility relate to
KONE’s decarbonization and gender diversity commitments.
Interest-bearing liabilities were EUR 746.5 (Dec 31, 2020:
695.8) million, including a pension liability of EUR 194.3 (Dec
31, 2020: 187.2) million and leasing liability of EUR 343.6
(Dec 31, 2020: 342.9) million. Additionally, KONE had an
asset on employee benefits, EUR 22.9 (Dec 31, 2020: 19.2)
million. Gearing was -67.6% and the equity ratio was 41.2% at
the end of December 2021.
Equity per share was EUR 6.13.
BOARD OF DIRECTORS’ REPORT
10 KONE ANNUAL REVIEW 2021
MEUR
Jan 1
–
Dec 31, 2021
Jan 1
–
Dec 31, 2020
On fixed assets 96.5 87.5
On leasing agreements
120.6
113.4
On acquisitions 50.1 29.0
Total
267.3 230.0
Capital expenditure & acquisitions
R&D expenditure
Capital expenditure and acquisition
KONE’s capital expenditure and acquisitions totaled EUR
267.3 million in January–December 2021 . Capital expenditure
excluding acquisitions was mainly related to equipment and
facilities in R&D, IT and production. Capital expenditure on
leases consists mainly of maintenance vehicles and office
facilities.
Acquisitions totaled EUR 50.1 million in January–
December 2021. KONE completed acquisitions of small
maintenance businesses in the EMEA region as well as in
North America.
Research and development
The objective of KONE’s research and development is to drive
differentiation by putting the needs of customers and users at
the center of all development. Our R&D activities focus on
developing smart and sustainable solutions that adapt to
future needs. By integrating elevators and escalators with
digital systems, we enable an even smoother people flow and
an improved user experience. Built -in connectivity in our
newest elevator models makes them a digital platform for
various services and new business models. We support our
customers in achieving their eco-efficiency goals throughout
the building’s life cycle, for instance by continuously
developing the energy-efficiency of our solutions.
Research and development expenditure totaled EUR
188.8 million, representing 1.8% of sales in January–
December 2021. R&D expenditure includes the development
of new product and service concepts as well as the further
development of existing solutions and services.
During January–December 2021, we continued the global
rollout and extension of the KONE DX Class offering. This
new elevator series featuring built-in connectivity and an
enhanced user experience was introduced at the end of 2019
and will replace the previous KONE elevator range across all
areas. During the first quarter, we launched DX Class
elevators in China, Asia Pacific and in India. We also
introduced several enhancements to the DX Class offering
during the year. These included expansions to the DX
modernization solutions as well as new API (application
programming interface) connectivity devices for elevators in
the high-rise segment.
During the second quarter, we launched the KONE Lane
turnstile. This next generation access gate solution offers
improved space-efficiency, reducing the need for floorspace
by up to 90% compared with conventional similar products.
The solution is ideal for offices and multiuse developments
and can be adjusted to suit various design styles. KONE Lane
won two Red Dot Design Awards along with three other
KONE solutions in May. Other awards were given to KONE
Office Flow, KONE Digital Experience Car and the KONE
TravelMaster Premium Kit escalator design solution, which
were recognized for their design quality, innovation and smart
connectivity.
During the fourth quarter, we introduced KONE Care™ DX
maintenance service, the first carbon-neutral maintenance
service in the elevator industry. By using AI-powered
predictive maintenance, automatic updates, remote servicing
and in person or digital support, KONE Care™ DX maximizes
uptime and prolongs the equipment life. The service comes
with KONE 24/7 Connected Services, KONE’s flagship
solution for predictive maintenance. All KONE Care™ DX
maintenance activities will be carbon neutral through a
combination of emission reduction actions that we are
implementing
to reach the targets of our climate pledge, and
carbon offsetting programs.
During the fourth quarter, we also announced a
collaboration with Amazon Web Services (AWS), the world's
most comprehensive and broadly adopted cloud offering.
AWS will provide KONE with global cloud capabilities such as
Internet of Things (IoT) and analytics. The companies will also
innovate together to develop new technologies that further
strengthen the scalability and performance of KONE's
connected services and solutions.
BOARD OF DIRECTORS’ REPORT
11 KONE ANNUAL REVIEW 2021
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 conducts its business in a responsible and
sustainable way, and we expect the
same commitment from all our
partners. We are committed to
complying with the laws and
regulations of the countries in which
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 Environmental
Excellence Program, as well as in 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 reducing emissions in its own operations, offering
and the value chain by 2030, showing climate leadership and
commitment to limiting global warming to 1.5 degrees celsius
in accordance with the Paris Climate Agreement. KONE
applies the Task Force on Climate-related Financial
Disclosure (TCFD) reporting principles in order to report about
climate -related financial risks and opportunities. The table on
this text maps the pages of the report where disclosures
according to TCFD requirements can be found.
KONE’s strategy and business model are described on
pages 3–5
of KONE’s Annual Review 2021. Risks and risk
management related to the matters below are described in the
section 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, which is prepared
according to GRI Standards. KONE published its
Sustainability Report for 2020 in April 2021. KONE’s
Sustainability Report for 2021 will be published during the
second quarter of 2022.
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 President and
CEO and the Executive Board. KONE’s Executive Board
discusses sustainability topics, including e.g. environmental,
social and compliance topics, in each meeting given the
strong emphasis on sustainability in KONE’s strategy
“Sustainable Success with Customers”. Furthermore, KONE
has established forums where sustainability and climate-
related topics are regularly discussed: The Quality and
Environmental Board and the Offering and Technology Board,
both chaired by KONE President and CEO and with Executive
Board level members. KONE also has a separate
Sustainability Board, a steering committee dedicated to
sustainability topics, with climate and environment among the
prioritized areas. Several members of KONE’s Executive
Board are members of the Sustainability Board, which is
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, including
environmental, social and anti-corruption matters. In 2021, the
Board decided on a new share-based long-term incentive
plan, which introduced sustainability as a new key
performance indicator. The Board and its Nomination and
Compensation Committee worked on setting this new
sustainability target as well as on monitoring KONE’s
progression against it.
External recognitions
KONE has received external recognition for its efforts to
conduct business in a sustainable way. For example, KONE
was again included in the FTSE4Good index as well as in
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 ninth
consecutive year that KONE has achieved a leadership score
of A or A- in the Climate Change rating, which demonstrates
our long-term commitment to environmental work and
sustainability. KONE was also awarded the best A grade in
CDP’s 2020 Supplier Engagement Rating, demonstrating
leadership and best practice in engaging our suppliers on
climate change issues. In addition, KONE was awarded the
highest -scoring Platinum medal in the annual EcoVadis
sustainability performance assessment covering environment,
labor and human rights, ethics and sustainable procurement.
This places KONE in the top 1% of all 75,000 companies
assessed in 2021. KONE also earned a place in the first ever
Financial Times Europe’s Climate Leaders ranking. The
ranking identifies companies that achieved the greatest
reduction in their greenhouse gas (GHG) emissions relative to
their revenue between 2014 and 2019.
KONE’s Sustainability
Report 2021
◾
Q2 2022
◾
find more detailed
information about
sustainability
BOARD OF DIRECTORS’ REPORT
12 KONE ANNUAL REVIEW 2021
Key performance indicator
Target
2021 results
2020 results
Environmental
matters
Greenhouse gas emissions from own operations
(Scope 1 and 2)
1)
Long-term target (2030):
50% reduction in absolute emissions , carbon
neutral operations
2021 target: 7% reduction in Scope 1 and 2
absolute carbon footprint from 2019 baseline
Will be published in the Sustainability Report
during Q2 2022
12% reduction in absolute emissions
Product-related greenhouse gas emissions
(Scope 3)
1)
Long-term target (2030):
40% reduction in product-related Scope 3
emissions relative to ordered product s
Will be published in the Sustainability Report
during Q2 2022
0.7% increase relative to products ordered
Share of renewable electricity used
in our facilities, %
Long-term target (2030): 100%
2025 target: 80%
2021 target: 50%
Will be published in the Sustainability Report
during Q2 2022
41%
Share of key suppliers ISO 14001 certified, %
100%
88%
90%
Share of landfill waste at our manufacturing units,
%
0% by 2030
Will be published in the Sustainability Report
during Q2 2022
0.6%
Number of products covered by Environmental
Product Declarations
17 by 2022
13
8
Personnel and
social matters
Industrial Injury Frequency Rate (IIFR)
2)
Zero injuries
IIFR 1.6
IIFR 1.2
Employee engagement
Maintain employee engagement on a strong level
Slight decline. Remained above the external
high-performance benchmark.
Great leap up. Engagement was at a very strong
level.
Personnel voluntary turnover rate, %
3)
Maintain voluntary turnover below market level
7.8%
5.5%
Share of women in director level positions, %
35% of director level positions occupied by
women by 2030
21%
19%
Average learning hours per employee
>40 hours in a year
43
38
Human rights,
anti-corruption &
bribery
% of total employees who have completed at
least one ethics & compliance training during the
year
90%
96%
Change of KPI. In 2020, 96% of employees had
completed Code of Conduct training (cumulative
% since the launch of the training in 2018).
% of KONE's overall external spend that is
covered by KONE Supplier Code of Conduct or
equivalent accepted by KONE
80%
80%
Change of KPI. In 2020, 84% of key suppliers
had signed the Supplier Code of Conduct
% of distributors who have signed the Distributor
Code of Conduct
100%
100% of our distributors in China and 99% in the
rest of the world
100% of our distributors in China and 88% in the
rest of the world
1)
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).
2)
3)
Sum of voluntarily left employees (with permanent contract) over 12 months divided by average closing headcount over 12 month s
Non-financial key performance indicators
BOARD OF DIRECTORS’ REPORT
13 KONE ANNUAL REVIEW 2021
KONE’s climate related disclosures according to TCFD
Content in KONE’s report
Governance
Board’s oversight of climaterelated risks and
opportunities
Non-financial information/ Management and Board of
Directors’ oversight of sustainability, p. 1
Management’s role in assessing and managing
climaterelated risks and opportunities
Non-financial information / Management and Board of
Directors’ oversight of sustainability, p. 1
Strategy
Climate-related risks and opportunities over the
short, medium and long term
Non-financial information / Environmental matters, p. 13
Impact of climaterelated risks and opportunities
on the organization’s businesses, strategy and
financial planning
Strategy, p. 3
Risks and risk management related to the reporting of non-
financial information, p. 23
Resilience of strategy, taking into consideration
different climate-related scenarios
KONE is planning to conduct scenario work during 2022.
Risk
management
Processes for identifying and assessing climate
related risks
Risks and risk management related to the reporting of non-
financial information, p. 23
Processes for managing climate
related risks
Risks and risk management related to the reporting of non
-
financial information, p. 23
How processes for identifying, assessingand
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. 23
Metrics and
targets
Metrics used to assess climate-related risks and
opportunities
Non-financial information / Key performance indicators, p. 12
Non-financial information / Environmental matters, p. 13
Scope 1, Scope 2 and Scope 3 emissions and
the related risks
Non-financial information / Key performance indicators, p. 12
Non-financial information / Environmental matters, p. 13
Targets used to manage climate-related risks and
opportunities and performance against targets
Non-financial information / Key performance indicators, p. 12
Non-financial information / Environmental matters, p. 13
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 have defined our environmental ambition, objectives
and commitment to environmental sustainability in all activities
in our Environmental policy statement, which is publicly
available at kone.com. In 2021, we renewed both this
statement and our Environmental Excellence program, which
guides us towards our environmental targets, to improve
alignment with our heightened climate and environmental
ambition. In line with the statement, 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 the KONE Global Vehicle Fleet, Facility and Travel
Policies also set out environmental requirements relevant to
the operations of KONE or its partners.
KONE has a climate pledge with science-based targets for
significant greenhouse gas emissions reductions and an aim
to have carbon neutral operations by 2030. We are committed
to a 50% cut in the emissions from our 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 these ambitious emissions
reduction targets, we aim to achieve carbon neutral
operations by 2030 by offsetting the remaining emissions. In
addition, we target a 40% reduction in the emissions related to
our products’ materials and lifetime energy use (scope 3
emissions) over the same target period, relative to orders
received. KONE was the first to validate its science-based
targets against the latest climate science in the elevator and
escalator industry and KONE’s targets are the most ambitious
in the industry to date. 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
BOARD OF DIRECTORS’ REPORT
14 KONE ANNUAL REVIEW 2021
substances. We screen our suppliers’ performance in terms of
their environmental and social responsibility with our Supplier
Sustainability Assessment. The assessment includes the
basic criteria that must be met in order to continue doing
business with KONE, as well as other, more advanced
criteria.
Most of KONE’s environmental figures for 2021 will be
published in the 2021 Sustainability Report during the second
quarter of 2022.
KONE’s offering
The majority of the environmental impacts associated with
KONE’s activities are related to our products over their full life
cycle. In 2020, our product-related Scope 3 emissions
increased by 0.7% relative to ordered products. This was
mainly due to an increased number of products sold
especially in the Asia-Pacific region, where the lifetime energy
use emissions of our products tend to be higher due to fossil
fuel-based energy generation. KONE will publish the carbon
emissions from 2021 in the Sustainability Report during the
second quarter of 2022.
Requirements for smart and sustainable materials,
solutions and buildings are increasing. We see these shifts in
demand as a growth opportunity and want to be the preferred
partner for our customers. 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.
Our innovations can have a significant role in advancing
climate action. We support smart and sustainable building
through our energy-efficient and innovative offering, functional
and sustainable materials, as well as transparent
documentation about our products’ environmental impacts.
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 solutions.
During the year, we obtained seven best in-class energy
performance references for our DX elevator models according
to the international ISO 25745 standard for the energy
performance of lifts, escalators and moving walks. We
currently have 31 best-in-class energy efficiency references
for our products according to the standard.
Several KONE solutions have received external
recognition for their environmental performance. During 2021,
we received Singapore Green Building Product (SGBP)
certifications for the KONE 3000S MonoSpace®, KONE 3000
Minispace™ and KONE 3000 TranSys™ elevators. KONE
currently has seven SGBP-certified solutions and is the first
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. During 2021, approved
assessments were received for the KONE TranSys™ DX and
MonoSpace® 700 DX elevators as well as for the
TransitMaster™ 140T escalator. BVB is a nonprofit
organization that evaluates solutions for buildings and drives
the use of sustainable building materials.
During 2021, important achievements were also made in
the transparent communication about the environmental and
health impacts of our products with Environmental Product
Declarations (EPD) published for seven of our solutions.
These EPDs included the first escalator EPD in the industry,
which was received by the KONE TransitMaster™ 140.
In 2021, KONE launched the industry’s first carbon neutral
maintenance service offering. KONE Care DX™ maintenance
activities will be carbon neutral through CO2e reduction
actions that we are implementing to reach the targets of our
climate pledge as well as by compensating the remaining
CO2e emissions with our third-party certified carbon
compensation program. We support carbon offsetting projects
in different parts of the world. These projects reduce or avoid
CO2e emissions, and are related to, for example, renewable
energy such as solar and hydro power, as well as to
reforestation or avoiding deforestation.
Own operations
During the first quarter of 2021, we finalized the calculations
of our 2020 carbon footprint. KONE’s target was to reduce its
operational carbon footprint relative to sales by 3% annually.
In 2020, we exceeded our annual target as our overall
operational carbon footprint (Scope 1, 2 and selected Scope 3
categories) relative to sales decreased by 8.9 % compared to
2019, with sales growth calculated at comparable exchange
rates. Our scope 1 and 2 greenhouse gas emissions relative
to sales decreased by 11.8%. 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 2020, the share of landfill waste in our
manufacturing units was 0.6% (2019: 0.9%).
We revised our target setting in 2021, both in terms of
ambition and scope, to align with our climate pledge. Our
long -term target for Scope 1 and 2 emissions is an absolute
reduction of 50% by 2030 from the base-year 2018. The
respective annual target for 2021 is an absolute reduction of
7%, compared to the base-year 2019 due to the exceptional
circumstances in 2020. 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. During 2020, the greenhouse gas emissions from our
own operations (Scope 1 and 2) reduced by 12.0% in
absolute terms compared to 2019. In 2021, we have made
good progress in terms of reducing emissions from our own
operations. Many KONE subsidiaries are taking steps to
renew their vehicle fleets. For example, in our maintenance
operations KONE started piloting e-cargo bikes and e-
scooters in Austria and replacing old motorcycles with new
electric ones in Hong Kong. In terms of our facilities, we
expect to reach our short -term target of 50% (2030 target:
100%) of electricity consumption from renewable sources by
the end of 2021 thanks to good progress made during the
year. Our manufacturing units in the United States, Mexico
and China now purchase 100% renewable electricity, and the
solar panels we installed in our new manufacturing unit in
Chennai, India during 2020 were in operation from the
beginning of 2021. The finalized 2021 carbon footprint results
will be published in our Sustainability Report in the second
quarter of 2022.
KONE uses the ISO 14001 environmental management
system to enhance its environmental performance. It covers
our corporate units, including all R&D, manufacturing units,
and 26 major country organizations. Three KONE
manufacturing units have ISO 50001 energy management
system certification. At the end of 2021, 88% (2020: 90%) of
our key suppliers were ISO 14001 certified, our target being
100%.
An increasing trend in customer demand is the focus on
wooden buildings. To accommodate this, KONE’s
manufacturing unit in Finland continues to hold 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 continue to hold the FSC® Chain of
Custody certification, meaning that customers can now be
provided this assurance for the full delivery chain for elevators
BOARD OF DIRECTORS’ REPORT
15 KONE ANNUAL REVIEW 2021
installed in these countries. To our knowledge, KONE is the
only elevator company to have received FSC® certifications.
BOARD OF DIRECTORS’ REPORT
16 KONE ANNUAL REVIEW 2021
Number of employees
Dec 31, 2021
Dec 31, 2020
EMEA
23,669
23,798
Americas
7,258
7,336
Asia
-
Pacific
31,792
30,246
Total
62,720
61,380
Personnel voluntary turnover rate was 7.8% (5.5%) Employee costs for the reporting period totaled EUR 3222 (3043) million. The geographical distribution of
KONE employees was 38% (December 31,2020: 39%) in EMEA, 12% (12%) in the Americas and 51% (49%) in Asia-Pacific.
Geographical distribution of KONE employees
PERSONNEL AND SOCIAL MATTERS
Our main goal is to have the most capable and engaged team
of professionals, who succeed in a changing world. We strive
towards this goal through great employee experience, diverse
and inclusive culture, continuous learning, flexibility and
wellbeing. These are the core elements in our Empowered
People Way to Win, one of the four KONE-wide
transformation and development initiatives, which enable us to
succeed in our strategy. All KONE’s activities are guided by
ethical principles. Employee rights and responsibilities include
the right to a safe and healthy working environment, fair and
equitable labor conditions, personal wellbeing, freedom of
association, collective bargaining, non-discrimination and the
right to a working environment in which harassment and
bullying are not tolerated.
COVID-19 impact on the way we work
While the COVID-19 pandemic continued to have an impact
globally in 2021, progress in vaccine rollouts resulted in
restrictions being eased in many regions during the second
half of the year. As regulations and practices varied from
country to country, we encouraged our country organizations
to actively follow the local rules and guidance to ensure that
we are compliant and able to take into account our customers’
requirements. Our main focus throughout the pandemic has
been to continue serving our customers in the safest manner
possible. We have supported our employees by offering
flexibility where needed and by ensuring easy access to
information on how to enhance wellbeing. The pandemic has
accelerated a change in how we work. During 2021, we
introduced the KONE flexible working statement confirming
that KONE will support flexible working arrangements that are
aligned with our business priorities.
Diversity and inclusion
We actively encourage diversity at KONE, and our values
guide us in upholding an inclusive culture. In the beginning of
2021, KONE launched a new strategic phase with strong
focus on sustainability and Diversity and Inclusion (D&I) as
key elements of it. As one of the D&I specific goals, we
committed to making a step-change in the share of women at
director level and increase it to 35% by 2030. In 2021, the
share of women in director level positions increased to 21%
(19%). Most of our employees are male representing 88%
(89%) of our people globally. We continue our efforts towards
achieving a more balanced gender split. During the reporting
year, KONE’s workforce included 145 (147) nationalities. To
strengthen our global approach and deepen our customer and
market insights, we have goals to increase cultural diversity in
our global teams.
In 2021, we engaged our senior leaders to a D&I learning
journey to lead the way for an inclusive culture. We also
continued to strengthen D&I maturity in our countries through
various actions from transparent communication to data
driven decision making and more inclusive talent practices
and culture.
Our elevated focus on driving D&I is visible also in KONE’s
new share-based long-term incentive plan, launched in the
beginning of 2021, where sustainability was introduced as a
new metric in addition to the financial metrics. The
sustainability metric is a combination of different elements
with diversity and inclusion being one of them.
Employee engagement & KONE culture
Making KONE a great place to work is KONE’s number one
strategic target and it 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, as well as diversity and
inclusion.
In 2021, we conducted a light version of the Pulse survey
with 84% of all KONE employees taking part despite the
challenging circumstances brought on by COVID-19. The
global results show that KONE continues to be a great place
to work with a healthy company culture and KONE employees
are very engaged. Despite a slight decline from the very high
2020 scores in both engagement and enablement, the vast
majority of the survey results were clearly above the external
high -performance benchmarks. We also organized Pulse
Talks across all teams at KONE with 85% of employees
participating. The objective of the Talks was to ensure
continuous dialogue on team wellbeing and make KONE an
even better workplace.
During 2021, we continued developing KONE’s culture to
ensure that it supports our strategic targets. Throughout the
year, employees continued sharing their thoughts about the
development of KONE’s culture, values and ways of working
through facilitated online discussions. In addition, a new e-
learning course focused on KONE’s culture and values was
BOARD OF DIRECTORS’ REPORT
17 KONE ANNUAL REVIEW 2021
introduced during the second half of the year with
approximately 12,000 employees completing the course.
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 discussion on
important developments affecting our employees. In 2021, the
Employee Forum was conducted virtually due to the COVID-
19 pandemic. In addition to regular business updates and
discussion about the Sustainable Success with customers
strategy, the specific focus areas in the forum were Lean
KONE, smart and sustainable field operations as well as
safety, sustainability and quality.
Training and development
We strive to have the best professionals with the right
competencies in each position. We facilitate this effort , and
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.
We promote the 70-20-10 approach for learning. This
means that we believe that 70% of our learning happens
through experiences, 20% through social learning and 10%
through formal development and
training. We provide a rich
training offering for our employees, which includes more than
8,500 courses in 36 languages. The courses vary from 2-
minute digital nanomodules to trainer -led courses lasting
several days. Amidst the COVID-19 pandemic, we have
actively encouraged employees to make use of learning
opportunities as well as continued to develop new online
learning offerings and virtualize our current instructor-led
programs. Total learning hours increased by 12% compared
to 2020. On average, KONE employees used 43 hours on
formal development and training.
In 2021, we established an upskilling program to support
KONE Sustainable Success with Customer strategy
realization from a competence development perspective. The
program is focused on driving competence development
efforts for organization-wide competences related to, for
example, Lean thinking as well as digital and customer
understanding, and it covers 80% of KONE employees.
We have continued to invest in building capabilities to sell
and deliver digital solutions and services. In connection to the
continuing roll-out of KONE DX Class elevators, salespeople,
engineers and field teams have been actively trained on these
topics as well as on KONE 24/7 Connected Services and
KONE’s ecosystem partnering.
Talent attraction
A key focus area within the KONE people strategy is attracting
the best talent by providing a great employee experience.
Although recruitment volumes continued to fluctuate
during 2021 due to COVID-19, we saw an overall increase in
recruitment volumes. Targeting new competencies and
increasing diversity through recruitment continued to be one
of KONE’s key focus areas. Efforts to increase diversity
through recruitment realized during the year with a large
number of applicants and hires outside of elevator and
escalator industry. We were also able to recruit an increasing
number of people with new competencies related to, for
example, digitalization and solution selling to KONE.
Systematic activities around talent attraction and building
talent pipelines have helped us to reach shorter times to hire
and improved quality of hires.
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.
Safety
Improving safety at work remained a top priority in 2021.
KONE has a company-wide safety management system in
place to guide us in achieving continual improvement. To
support in controlling the main risks in the workplace and keep
our workers safe, we introduced nine KONE core safety
principles during the reporting year. The principles are
common to all KONE employees, subcontractors and
everyone we work with.
KONE employees receive health and safety training
relevant to their work, enabling it to be performed in a
professional and safe manner. All KONE employees are
required to complete a general safety training related to our
safety management framework and KONE’s Health and
Safety Policy. At the end of the reporting year, over 80% of
KONE employees had completed the general safety training.
During the year, we focused on strengthening safety
leadership competences by using a new interactive e-
learning, which was completed by over 6,400 of our safety-,
quality-, and people managers by the end of the year.
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 safely. If any are found, the work in question is stopped
until a safe method is approved.
In 2021, the IIFR (Industrial Injury Frequency Rate) was
1.6 with the average lost days per incident of 27.8 (27.3). The
previous year was exceptional due to the pandemic, with IIFR
as low as 1.2. We continue to target zero injuries and expect
our years of favorable safety progress to continue, with strong
emphasis on safety culture and human factors. In order to
move towards our ultimate target, we aim at getting IIFR
below 1.0 by the end of 2024. The number of safety
observations recorded in KONE Safety Solution, our global
safety reporting tool that was fully deployed in 2021,
increased by 22%. All employees are encouraged to actively
report safety near misses and incidents as it provides valuable
information for improving safety. Our objective during the year
was to enhance the quality, investigation and analysis of our
near miss and incident reports, as well as to improve
transparency.
The global KONE Safety Week was organized in all KONE
units in May 2021 with a continued theme of safe behavior,
complemented with elements of psychological safety. Various
safety related activities were held during the week for both
internal and external stakeholders. Due to the pandemic, most
of the activities were organized virtually. A new global year-
end safety campaign was also organized to strengthen safety
commitments.
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.
BOARD OF DIRECTORS’ REPORT
18 KONE ANNUAL REVIEW 2021
HUMAN RIGHTS, ANTI-CORRUPTION AND
BRIBERY
KONE’s Code of Conduct was renewed in 2021 as part of
KONE’s sustainability actions, to better reflect our new values
and strategy. The Code of Conduct forms an integral part of
KONE’s company culture and is the foundation of our ethical
business practices. The Code sets out the responsible and
ethical conduct expected of KONE employees and companies
and is available in 33 languages. With an even stronger
emphasis on diversity and inclusion, expanded guidance on
fraud, corruption and fair competition and new sections on
human rights, trade compliance and cybersecurity, the Code
of Conduct is well aligned with international practice as well as
stakeholder expectations. Integrity, responsibility and
accountability are highlighted as essential themes.
The topics covered in the new Code are: conflicts of
interest, corruption, competition compliance, trade
compliance, workplace well-being, health and safety,
environmental compliance, human rights, privacy, fraud and
theft, cybersecurity, intellectual property and confidentiality,
external communications and insider trading. Also
emphasized is KONE’s non-retaliation policy which states that
we do not tolerate any form of retaliation against anyone
having made good faith compliance reports. The human rights
section highlights our commitment to respect and endorse
internationally recognized labor and human rights standards
and specifies that we take steps to remediate adverse impacts
on human rights that we become aware of.
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, suppliers and distributors 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 2021, we received a total of 152 reported compliance
allegations, of which 41% were received through the
Compliance Line. Of these reports, 35% were fraud/corruption
related, 35% were HR related, 10% related to conflicts of
interest, and the remaining 20% fell under various other
categories. In total 40% of the 141 cases closed in 2021 were
either substantiated or partially substantiated, and disciplinary
actions in those cases ranged from coaching discussions to
termination of employment, with 23 employees who were
dismissed or resigned as a result of compliance
investigations.
In 2021, the Code of Conduct e-learning course was
refreshed to reflect the changes in the new Code of Conduct
and assigned to all KONE employees. The training covers
topics such as conflicts of interest, fair competition, anti-
bribery, privacy and confidentiality, work safety, harassment &
discrimination, gifts & hospitality and trade compliance and
has a strong focus on scenarios that reflect day to day
situations employees might face. The course is available in 37
languages. Regular face-to-face compliance training is also
provided to managers and other target groups. Of KONE
employees, 96% have completed at least one compliance
traini ng in 2021, including the Code of Conduct e-learning.
KONE’s general Code of Conduct is complemented by our
Supplier and Distributor Codes of Conduct. Our Supplier Code
of Conduct is available in 30 languages and 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.
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 2021, 80% of KONE’s total spend was
with suppliers and installation subcontractors who have
sig ned KONE’s Supplier Code of Conduct or equivalent.
KONE’s Distributor Code of Conduct was updated in 2021
and covers similar topics as the Supplier Code of Conduct. It
is available in 6 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 2021, 100% (100%) of our distributors in China, and
99% (88%) 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 the year, we continued focusing on human rights in
the supply chain by further developing a supplier human rights
assessment process within KONE. The COVID-19 pandemic
continued to impact the roll-out of planned on-site pilot
assessments. However, an extensive online questionnaire
was rolled-out to over 200 suppliers’ production sites to
assess their potential and actual human rights risks. Human
rights training was also provided to our internal human rights
assessors. The Global Compliance Committee is responsible
for the oversight of the Human Rights program at KONE.
Disclosure according to the EU
Taxonomy Regulation
KONE discloses information according to Regulation (EU)
2020/852 of the European Parliament and of the Council of 18
June 2020 on the establishment of a framework to facilitate
sustainable investment and amending Regulation (EU)
2019/2088 (the “Taxonomy Regulation”). The Taxonomy
Regulation forms the basis for the EU Taxonomy, a
classification system that establishes a list of environmentally
sustainable economic activities for six environmental
objectives. The implementation of the Taxonomy Regulation
will progress in phases. The first delegated act setting out
technical screening criteria for the first two environmental
objectives, climate change mitigation and adaptation (the
"Climate Delegated Act"), was adopted in 2021. Another
delegated act for the remaining four environmental objectives
(the "Environmental Delegated Act") will be published in 2022.
In the report regarding fiscal year 2021, undertakings are
required to disclose the proportion of Taxonomy -eligible
economic activities in their turnover, capital expenditure and
operational expenditure. Taxonomy -eligible activities currently
include those in the scope of the Climate Delegated Act.
Undertakings are not required to assess Taxonomy alignment
BOARD OF DIRECTORS’ REPORT
19 KONE ANNUAL REVIEW 2021
in the first year. Taxonomy alignment requires Taxonomy-
eligible activities to meet the detailed technical screening
criteria and comply with the Do No Significant Harm (DNSH)
criteria and the minimum social safeguards defined in the
Taxonomy Regulation.
We have evaluated KONE’s Taxonomy -eligibility
according to the descriptions of economic activities listed in
Annex I (climate change mitigation) and Annex II (climate
change adaptation) of the Climate Delegated Act and the
related NACE codes provided in these descriptions. Where
the description has been ambiguous, we have reviewed the
technical screening criteria laid out in the Annexes to help
interpret the nature of the activity. We have not evaluated
Taxonomy -alignment for 2021.
TAXONOMY -ELIGIBLE TURNOVER
At this stage, only economic activities with the most significant
need and potential to make substantial contribution to climate
change mitigation and adaptation have been included within
the scope of the Climate Delegated Act. Our interpretation is
that the majority of KONE’s business, i.e. the manufacturing,
maintenance and modernization of elevators and escalators,
is currently not within the scope of the Taxonomy because it is
not among the most high -emitting industries. Nonetheless, we
support more sustainable urban environments and buildings
with our energy-efficient and innovative offering and the use of
healthy, functional, and sustainable materials. Furthermore,
we have set ambitious science-based targets for significant
reductions in our greenhouse gas (GHG) emissions by the
year 2030. Read more about KONE’s environmental
sustainability in the ‘Non-financial information‘ section of this
report .
In addition to elevators and escalators, KONE’s offering
includes automatic building doors. We have identified certain
aspects of our automatic building door business as being
Taxonomy -eligible according to the economic activities 3.5
‘Manufacture of energy efficiency equipment for buildings’ and
7.3 ‘Installation, maintenance and repair of energy efficiency
equipment’ in Annex I. The description of the economic
activity 3.5 includes NACE code C25.12 ‘Manufacture of
doors and windows of metal‘, which comprises the
manufacture of metal doors, windows and their frames,
shutters and gates as well as metal room partitions for floor
attachment. Based on this NACE code description, we have
concluded that KONE’s revenue related to manufacturing of
sliding doors, swing doors, revolving doors, turnstiles,
overhead doors, roller shutters, high speed doors, garage
doors and gates is Taxonomy -eligible. We have also
concluded that the installation, maintenance, and repair of
these door/gate solutions is Taxonomy -eligible based on the
description of activity 7.3, which includes individual renovation
measures consisting in installation, maintenance or repair of
energy efficiency equipment.
Furthermore, we have determined that elevators sold with
a regenerative drive can be considered energy efficiency
equipment and thus a Taxonomy -eligible economic activity
based on the description of economic activity 3.5
‘Manufacture of energy efficiency equipment for buildings’ in
Annex I. When descending with a heavily loaded car or
ascending with a lightly loaded car, elevators can recover
energy by converting the stored mechanical energy into
electrical energy in the motor, which acts as a generator.
Elevators equipped with a regenerative drive can push the
generated energy back into the electrical grid of the building,
where it can be used by other building appliances, such as
HVAC. While the regenerated energy varies according to the
building type, the saving can potentially amount to 20–40% in
mid -rise buildings. As part of our science-based targets,
validated against the latest climate science by The Science
Based Targets initiative, we have set a scope 3 emission
reduction target focused on reducing lifetime energy
consumption of our products. Regenerative drive is currently
the best available technology to reduce our product-related
emissions from the use of the equipment. Therefore,
increasing the share of sales of elevators with regenerative
drive is one of the assumptions in reaching our product-
related science-based target. This supports the argument for
considering regenerative drives as energy efficiency
equipment that help mitigate climate change.
In total, we have identified 5.0% of taxonomy-eligible
turnover in 2021 from the economic activities mentioned
above.
TAXONOMY -ELIGIBLE CAPEX AND OPEX
In line with KONE’s science-based targets, we are investing in
enabling significant reductions in greenhouse gas emissions
in both our own operations and in the value chain. Some of
the actions taken, e.g. the installation of solar panels in our
facilities and enhancement of charging infrastructure for EVs
could fit into the scope of the Taxonomy. These investments
do not, however, represent a meaningful share of the total
capex and/or are not considered to be part of KONE’s own
capital expenditure. Thus, we have not identified material
Taxonomy -eligible CapEx in 2021.
In terms of OpEx, we have identified Taxonomy -eligible
operating expenses related to the purchase of output from
other companies’ Taxonomy -eligible economic activities, i.e.
purchased renewable energy for facilities according to
Chapter 4 (‘Energy‘) in Annex I and leasing costs of vehicles
according to activity 6.5 (‘Transport by motorbikes, passenger
cars and commercial vehicles‘) in Annex I. Based on the
description of activity 6.5 , we have concluded that the leasing
costs related to our entire vehicle fleet are Taxonomy-eligible.
In total, we have identified 20.7% of Taxonomy -eligible OpEx
in 2021, of which the majority relates to KONE’s vehicle fleet.
KONE has defined the total OpEx (denominator), MEUR
536.7, based on the methodology specified in the Taxonomy
Regulation. It includes research and development costs of
KONE, in addition to costs related to maintenance and repair
of facilities and buildings, energy purchases and costs for
KONE’s vehicle lease fleet.
Turnover, CapEx and OpEx from products or services
associated with Taxonomy -eligible economic activities
Taxonomy -eligible /non-
eligible economic
activities
Turnover
Taxonomy -eligible activities, %
5.0 %
Taxonomy -non eligible activities, %
95.0 %
Total turnover*, MEUR
10,514.1
CapEx
Taxonomy -eligible activities, %
0.0 %
Taxonomy -non-eligible activities, %
100.0 %
Total CapEx*, MEUR
267.3
OpEx
OpEx of Taxonomy -eligible activities, %
20.7 %
Taxonomy -non-eligible activities, %
79.3 %
Total opEx, MEUR
536.7
*Total turnover and total capex as per KONE group reported figures.
KONE’s principles for defining turnover and capital expenditure can
be found in sections 2.1., 4.3 and 4.4. in the Financial Statements.
BOARD OF DIRECTORS’ REPORT
20 KONE ANNUAL REVIEW 2021
Changes in the Executive Board
In January–December 2021, KONE announced the following
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 the 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 served as KONE’s Executive
Vice President, Central and North Europe. Axel Berkling was
appointed Executive Vice President, Central and North
Europe. Prior to this, Axel Berkling served as KONE’s
Executive Vice President, Asia-Pacific region, excluding
China. 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.
After the reporting period, on January 18, 2022, KONE
announced that Thomas Hinnerskov, Executive Vice
President responsible for South Europe, Middle East and
Africa, has decided to leave KONE for a position outside the
company latest at the end of May 2022. Thomas has served
as a member of KONE's Executive Board since 2016.
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 anti-competitive
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 154 million at the
end of December 2021 (December 31, 2020: EUR 144
million). KONE’s position is that the claims are without merit.
No provision has been made.
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 approximately
35%
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. Liquidity
constraints in the Chinese property markets raised market
concerns as of the third quarter of 2021, and the financing
environment for Chinese property developers remains tight.
KONE’s customer portfolio is well diversified, limiting
individual customer risks. However, a worsening liquidity
situation among Chinese property developers could impact
construction activity in China and, consequently, the demand
for KONE’s solutions.
Following the COVID-19 outbreak in 2020, many
governments across the world have taken significant
measures to contain the pandemic by restricting the
movement of people and limiting some business activities. In
2021, construction markets started to recover in many
countries despite the continuing pandemic thanks to
successful vaccination campaigns, easing restrictions, and
government stimulus. However, a deterioration of the situation
could have an adverse impact on the overall economic
environment, construction activity, availability of workforce
and the demand for KONE’s services and solutions.
Geopolitical tensions and protectionism continue to
expose KONE to various business risks. In addition to the
potential adverse impacts on 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. KONE aims to reduce the above
risks to its supply chain with regionally diversified second
source suppliers and safety stocks.
In addition to the level of market demand, the
competitiveness of KONE’s offering is a key driver for 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, such as increased competition and
customer consolidation in China, could affect market
dynamics and KONE’s market share.
OPERATIONAL RISKS
Empowered employees with relevant competencies and skills
are key to the successful execution of our strategy. With
business models and ways of working changing in the
elevator and escalator industry, KONE needs new
organizational capabilities, as well as new competencies and
talent on the individual employee level in the field of, for
example, digitalization. At the same time, the competition over
talent, such as skilled field workforce, is increasing. Securing
the needed resources and their competence management is
critical. A failure to develop and retain the required 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. KONE also subcontracts
a significant amount of installation activity, outsources certain
business support processes and works with partners in e.g.
digital services and logistics. This exposes KONE to
component and subcontracted labor availability and cost risk
as well as to continuity risk in partnerships. A failure to secure
the needed materials, components or resources, or quality
issues within these, could cause business disruptions and
cost increases. Labor availability constraints may also impact
BOARD OF DIRECTORS’ REPORT
21 KONE ANNUAL REVIEW 2021
progress at construction sites. The recovery in the global
economy witnessed during 2021 has put pressure on supply
chains, resulting in, for example, increased prices and
constraints in component availability and global logistics
capacity. The shortage of semiconductors, in particular, is
closely monitored and managed with detailed planning of
delivery execution and active involvement of supply chain
partners among other actions. Continued challenges in the
global supply chains could have an adverse impact on
KONE’s financial performance.
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 in the case of e.g. safety,
cybersecurity or non-compliance incidents, major delivery
issues or product or service quality issues.
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. The operations of
KONE, its suppliers and customers 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 disruption 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 incidents could be caused by,
including but not limited to, cyber-crime, cyber-attacks,
ransomware, information theft, fraud, or inadvertent actions
from our employees and vendors. Physical damage caused
by fire, extreme weather conditions, natural catastrophes or
terrorism, among other things, could also 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 liquidity and payment discipline 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, 3.2 and 5.3 in the Financial Statements for 2021.
BOARD OF DIRECTORS’ REPORT
22 KONE ANNUAL REVIEW 2021
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 ofKONE’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, prepares for alternative
scenarios 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 or other geopolitical actions.
Changes in the competitive or
customer landscape, customer
requirements or competitors’
offerings impacting KONE’s
competitiveness
KONE aims to be the industry leader with its competitive offering 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,
lastbuy 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 strict quality control processes for product design, supply, manufacturing, installation and
maintenance. 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 componentsand services.
KONE also has a global property damage and business interruption insurance program in place.
KONE’s global supply chain helps mitigate the risk of interruptions. KONE has 10 manufacturing facilities in 7 countries, multiple
distribution centers and a large supplier network across the globe, which helps to mitigate the impacts from potential disruptions in
individual locations or countries.
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 thirdparty 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 continuesto invest in its
cybersecurity capabilities based on these findings. KONE also has a global cyber insurance program in place
Financial risks KONE applies centralized risk management in accordance with the KONE Treasury Policy. More information on financial risk management
can be found in notes 2.4, 3.2 and 5.3
of KONE’s Financial Statements 2021.
Risk management
BOARD OF DIRECTORS’ REPORT
23 KONE ANNUAL REVIEW 2021
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
appl ies TCFD guidelines on the reporting of climate-related
risks.
The typical effect of the non-financial risks materializing
would be reputational damage to KONE or a negative impact
on the surrounding society, environment or individuals. 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. While the effect is not determined to be
significant, we expect climate risks to 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, e.g. the Supply Chain function
or selected operational sites, conduct detailed climate and
environmental risk assessments according to relevant
business requirements.
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 or 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.
The most relevant transition risk to KONE arises from
potential shifts in the supply and demand for low carbon
materials, electricity and fuel, which may increase operating
costs in the short to medium term. Also, technological
improvements or innovations that support the transition to a
lower-carbon, energy-efficient economy may impact KONE’s
competitiveness and our customers’ demand for both KONE’s
solutions and services.
Not being able to 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 approximately 18,000
service and benefit vehicles.
To mitigate the market transition risks, KONE evaluates
plausible scenarios for
market supply and demand, as well as
the impact of emerging regulation in our high-level business
plans. KONE is an active member in relevant industry forums
and research consortiums and proactively monitors the
regulatory landscape. To mitigate the technology transition
risk, KONE bases its innovation work on the needs of our
customers and equipment users. All in all, KONE sees the
transition towards sustainable solutions as a source of
innovation and competitive edge rather than a threat. 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. We also identify and assess risks
related to any type of bullying, harassment, equal employment
practices, working conditions and any form of discriminations.
We address such risks by having adequate policies and
processes in place and by training our managers and
employees. We offer our employees channels for reporting
misconduct as there is zero tolerance for this type of behavior.
In 2021, the safety and wellbeing of KONE employees
continued to be a top priority due to the 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. We follow 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 and installation
subcontractors 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. During 2021, we continued to
prioritize our work on human rights in the supply chain and
rolled-out online supplier human rights assessments to over
200 suppliers’ production sites.
Anti-corruption and bribery related risks
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.
In 2021, we completed an anti-bribery and corruption risk
assessment, which identified our highest risks as relating to
third party intermediaries, sourcing and sales activities.
Follow -up actions to mitigate risks were started in 2021 and
will continue in 2022.
BOARD OF DIRECTORS’ REPORT
24 KONE ANNUAL REVIEW 2021
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 2021, KONE
implemented a supplier screening solution, which monitors
entities against sanctions, watch lists and adverse media
attention, including corruption and human rights issues.
Processes under our Global Delegation of Authority policy
help to mitigate the risk of unauthorized payments, donations
and sponsorships. The most important action for internal
mitigation continues to be the development of KONE’s
corporate culture through training and awareness building.
Ethics & Compliance KPIs and actions have been integrated
into our new Sustainability strategy. All employees are
required to complete at least one annual training on ethics &
compliance, and supplier and distributor Code of Conduct
sign -up rates are tracked annually.
Decisions of the Annual General
Meeting
KONE Corporation's Annual General Meeting was held in
Helsinki on March 2, 2021. The meeting was held based on
the so-called temporary act so that shareholders participated
in the meeting and exercised their shareholder rights only by
voting in advance and by submitting counterproposals and
asking questions in advance.
The meeting approved the financial statements,
considered the Remuneration Report for governing bodies
and discharged the responsible parties from liability for the
financial period January 1–December 31, 2020.
The number of Members of the Board of Directors was
confirmed as eight. Re-elected as Members of the Board were
Matti Alahuhta, Susan Duinhoven, Antti Herlin, Iiris Herlin,
Jussi Herlin, Ravi Kant and Juhani Kaskeala. Jennifer Xin-Zhe
Li was elected as a new member to the Board of Directors.
At its meeting held after the General Meeting on March 2,
2021, 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 Matti Alahuhta
and Jussi Herlin as members of the Audit Committee. Ravi
Kant and Matti Alahuhta are independent of both the company
and of significant 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 shareholders.
The General Meeting confirmed an annual compensation
of EUR 220,000 for the Chairman of the Board, EUR 125,000
for the Vice Chairman and EUR 110,000 for Board Members.
Of the annual remuneration, 40 percent will be paid in class B
shares of KONE Corporation and the rest in cash. In addition,
it was resolved that compensation is not paid to a board
member who is employed by the company.
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. This represents
10% of the total shares and 10% of the total votes for each
share class. The authorization will be valid until the conclusion
of the following annual general meeting, however, at the latest
until 30 June 2022.
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. This represents 10% of the total
shares and 10% of the total votes for each share class. 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 2022.
The audit firm Ernst & Young Oy was nominated as the
auditor for the term 2021.
Share-based long-term incentives
KONE has two separate share-based incentive plans, one
performance share plan and one restricted share plan.
On January 28, 2021, KONE’s Board of Directors decided
on a new performance share plan, which replaced the existing
performance share plans. The new performance plan
continues to emphasize profitable growth and as a new
measure sustainability. It consists of annually commencing
individual share plans, each with a three-year rolling
performance period, after which the potential share awards
vest. If the participant's employment or service relationship
with KONE Group terminates before the end of the
performance period, the participant, as a rule, forfeits the
share award without compensation. 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 target group and
targets within the plan as well as possible rewards are
decided upon annually by the Board. As part of the
performance share 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.
The 2021 performance share plan is targeted to
approximately 55 members of the top management, including
the President and CEO, members of the Executive Board and
other top management, and approximately 500 other selected
key personnel of KONE Group. The performance criteria
applied to the 2021 performance share plan are based on
annual growth in sales, adjusted EBIT margin and
improvements in sustainability. The sustainability performance
condition is a combination of reductions in carbon footprint,
diversity and inclusion as well as safety related targets.
The restricted share plan serves as a complementary
long -term share plan to be used as a commitment instrument
for retention and recruitment purposes for top management
(excluding the President and CEO) and other selected key
persons. The restricted share plan does not have a
performance condition. The plan has a commitment period up
to 3 years, after which the potentially granted share awards
will be paid to the participant, provided that their employment
or service relationship with KONE Group is in force at the time
of payment.
BOARD OF DIRECTORS’ REPORT
25 KONE ANNUAL REVIEW 2021
Treasury shares
12/2021
Treasury shares at the beginning of the period 11,006,006
Changes in treasury shares during the period 427,519
Treasury shares at the end of the period
11,433,525
Share capital and market capitalization
At the end of December 2021, the Group had 11,433,525
class B shares in its possession. The shares in the Group’s
possession represent 2.5% of the total number of class B
shares. This corresponds to 0.9% of the total voting rights.
During the period, KONE completed the repurchase of the
company's own class B shares, which started on November
11, 2021 and ended on November 17, 2021. A total of
750,000 own shares were repurchased for an average price of
EUR 60.9629 per share. The shares were repurchased in
public trading on Nasdaq Helsinki Ltd. at the market price
prevailing at the time of purchase. The shares were
repurchased on the basis of the authorization given by the
Annual General Meeting on 2 March 2021 and will be used as
a part of share-based incentive plans of KONE.
Shares and share capital
BOARD OF DIRECTORS’ REPORT
26 KONE ANNUAL REVIEW 2021
Shares traded on Nasdaq Helsinki
In addition to the Nasdaq Helsinki Ltd., KONE’s class B share
is traded also on various alternative trading platforms.
The number of registered shareholders was 72,661 at the
beginning of the review period and 88,182 at its end. The
number of private households holding shares totaled 83,793
at the end of the period, which corresponds to approximately
12.3% of the listed B shares. At the end of December 2021, a
total of 53.3% of the B shares were owned by nominee-
registered and non-Finnish investors.
Flagging notifications
During January–December 2021, BlackRock, Inc. announced
several notices in accordance with the Finnish Securities
Market Act Chapter 9, Section 5. The notices were announced
on June 3, June 17, June 21, June 29, June 30, July 2, July 8
and July 9. The notices have been published 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 excluding financial
instruments according to SMA 9:6a increased to above five
(5) per cent of the total number of shares of KONE
Corporation on July 8, 2021. The total number of shares
including financial instruments according to SMA 9:6a owned
by BlackRock, Inc. and its funds remained above five (5) per
cent of the total number of shares of KONE Corporation.
BOARD OF DIRECTORS’ REPORT
27 KONE ANNUAL REVIEW 2021
Market outlook 2022
The Chinese new equipment market is expected to remain
solid although below that of 2021 due to the tightened liquidity
situation in the property markets. In the rest of the world, the
new equipment markets are expected to continue recovering.
In North America and in the EMEA region, the new equipment
markets are expected to grow slightly. The new equipment
market in Asia-Pacific, excluding China, is expected to grow
significantly.
Modernization markets are expected to grow across
regions supported by pent-up demand and stimulus
measures.
Continuing global supply chain constraints and potential
labor shortages may limit growth in construction activity, which
could impact demand in the new equipment and
modernization markets.
Maintenance activity is expected to return to pre-pandemic
growth trajectory with slight growth in the more mature
markets and clear growth in Asia-Pacific.
Business outlook 2022
KONE estimates that in 2022, its sales growth will be in the
range of 2% to 7% at comparable exchange rates as
compared to 2021. The adjusted EBIT is expected to be in the
range EUR 1,180-1,330 million, assuming that foreign
exchange rates would remain at the January 2022 level.
Foreign exchange rates are estimated to impact EBIT
positively by around EUR 50 million .
KONE has a solid order book and a positive outlook for
services. Furthermore, the effect of product cost, productivity
and pricing actions are expected to support the results
towards the latter part of the year.
The key headwinds for the 2022 results are increased
material, component and logistics costs, as well as the
competitive dynamics and liquidity constraints in China.
The Board’s proposal for the distribution
of profit
The parent company’s non-restricted equity on December 31,
2021 is EUR 1,357,142,216.84 of which the net income for
the financial year is EUR 501,757,193.86.
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 1.7500 on
the outstanding 441,753,623 class B shares. Further, the
Board proposes an extra dividend of EUR 0.3475 to be paid
on the outstanding 76,208,712 class A shares and EUR
0.3500 on the outstanding 441,753,623 class B shares,
resulting in a total amount of proposed dividend of EUR
1,087,339,859.94. The Board of Directors further proposes
that the remaining non-restricted equity, EUR 269,802,356.90
be retained and carried forward.
The Board proposes that the dividends be payable from
March 10, 2022. All the shares existing on the dividend record
date are entitled to dividend for the year 2021 except for the
own shares held by the parent company.
Annual General Meeting 2022
KONE Corporation’s Annual General Meeting will be held on
Tuesday 1 March 2022 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, February 2, 2022
KONE Corporation’s Board of Directors
Outlook
NORTH AMERICA
EMEA
ASIA-PACIFIC
New equipment
Services
New equipment
Services
New equipment
Services
Slight growth
Maintenance
Slight growth
Modernization
Clear growth
Slight growth
Maintenance
Slight growth
Modernization
Clear growth
China
Activity below that of 2021
Outside China
Significant growth
Maintenance
Clear growth
Modernization
Significant growth
BOARD OF DIRECTORS’ REPORT | SHARES AND SHAREHOLDERS
28 KONE ANNUAL REVIEW 2021
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
2021*
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.
Share notations (EUR)
High
73.86
Low
55.48
Volume -weighted
average price
65.44
Closing price (EUR)
December 31, 2021
63.04
December 31, 2020
66.46
Change
-5.1 %
SHARES AND SHAREHOLDERS
KONE class B dividend per share, 2005–2021, EUR
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
KONE class B
shares
Trading code, Nasdaq Helsinki
Ltd.
KNEBV
ISIN code
FI0009013403
Accounting par value
EUR 0.125
Market capitalization
on December 31, 2021
EUR
32,652
Dividend proposal
dividend
EUR 1.75
extraordinary dividend
EUR 0.35
per class B share
BOARD OF DIRECTORS’ REPORT | SHARES AND SHAREHOLDERS
29 KONE ANNUAL REVIEW 2021
10
20
30
40
50
60
70
80
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
KONE class B share price development
Jan 1, 2012–Dec 31, 2021, EUR
Shareholders
Class A shares, %
l
92.6% Companies
l
7.4% Non-profit organizations
Class B shares, %
l
53.3% Foreign / nominee registered shareholders *)
l
16.1% Companies
l
12.3% Individuals
l
10.5% Financial institutions and insurance companies
l
4.2% Non-profit organizations
l
3.6% Public institutions
SHAREHOLDINGS ON DEC 31, 2021 BY NUMBER OF SHARES
Number of shares
Number of
owners
Percentage of
owners
Number of
shares
Percentage of
shares
1 - 10
19,293
21.9 %
104,653
0.0 %
11 - 100
37,305
42.3 %
1,686,556
0.3 %
101 - 1,000
24,452
27.7 %
8,653,373
1.6 %
1,001 - 10,000
6,313
7.2 %
17,157,392
3.2 %
10,001 - 100,000
722
0.8 %
18,350,014
3.5 %
100,001 -
97
0.1 %
483,401,608
91.3 %
Total
88,182
100.0 %
529,353,596
100.0 %
Shares which have not been transferred to the paperless
book entry system
42,264
0.0 %
Total
529,395,860
100.0 %
BOARD OF DIRECTORS’ REPORT | SHARES AND SHAREHOLDERS
30 KONE ANNUAL REVIEW 2021
More information on the shareholdings of
KONE’s Board of Directors and Executive
Board on Dec 31, 2021 and changes in
shareholding during Jan 1 – Dec 31,
2021 are
available on page
111.
MAJOR SHAREHOLDERS ON DEC 31, 2021
A-series
B-series
Total
% of shares
% of votes
1
Herlin Antti
70,561,608
49,949,192
120,510,800
22.8 %
62.2 %
Holding Manutas Oy
1)
54,284,592
40,275,254
94,559,846
17.9 %
48.0 %
Security Trading Oy
2)
16,277,016
7,983,016
24,260,032
4.6 %
14.1 %
Herlin Antti
0
1,690,922
1,690,922
0.3 %
0.1 %
2
Polttina Oy
0
17,271,928
17,271,928
3.3 %
1.4 %
3
Wipunen Varainhallinta Oy
0
16,350,000
16,350,000
3.1 %
1.3 %
4
KONE Foundation
5,647,104
9,859,632
15,506,736
2.9 %
5.5 %
5
Heikintorppa Oy
0
10,210,743
10,210,743
1.9 %
0.8 %
6
Varma Mutual Pension Insurance Company
0
6,441,222
6,441,222
1.2 %
0.5 %
7
Riikantorppa Oy
0
5,500,000
5,500,000
1.0 %
0.5 %
8
Blåberg Olli Edvard
0
5,000,000
5,000,000
0.9 %
0.4 %
9
Ilmarinen Mutual Pension Insurance Company
0
4,838,977
4,838,977
0.9 %
0.4 %
10
Elo Mutual Pension Insurance Company
0
2,646,321
2,646,321
0.5 %
0.2 %
10 largest shareholders total
76,208,712
128,068,015
204,276,727
38.6 %
73.2 %
Foreign / nominee registered shareholders
3)
0
241,708,237
241,708,237
45.7 %
19.9 %
Repurchased own shares
0
11,433,525
11,433,525
2.2 %
0.9 %
Others
0
71,977,371
71,977,371
13.6 %
5.9 %
Total
76,208,712
453,187,148
529,395,860
100.0 %
100.0 %
The list of ten major shareholders includes the major shareholders with a Finnish book-entry account.
1)
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.
Foreign ownership including foreign -owned shares registered by Finnish nominees.
BOARD OF DIRECTORS’ REPORT | SHARES AND SHAREHOLDERS
31 KONE ANNUAL REVIEW 2021
KONE has adopted IFRS 16 standard effective January 1,
2019 using the modified retrospective approach and
comparative figures have not been restated. IFRS 15 and
IFRS 9 standards have been applied from January 1, 2018
onwards and 2017 financials are restated retrospectively.
2021
2020
2019
2018
2017
Basic earnings per share, EUR
1.96
1.81
1.80
1.63
1.86
Diluted earnings per share, EUR
1.96
1.81
1.80
1.63
1.86
Equity per share, EUR
6.13
6.12
6.13
5.94
5.85
Dividend per class B share, EUR ¹
⁾
2.10
2.25
1.70
1.65
1.65
Dividend per class A share, EUR ¹
⁾
2.0950
2.2450
1.6975
1.6475
1.6475
Dividend per earnings, class B share, %
107.3
124.0
94.2
101.0
88.6
Dividend per earnings, class A share, %
107.0
123.7
94.1
100.9
88.5
Effective dividend yield, class B share, %
3.33
3.4
2.9
4.0
3.7
Price per earnings, class B share
32.20
36.63
32.31
25.49
24.05
Market value of class B share, average, EUR
65.44
62.07
49.82
43.68
43.73
Market value of class B share at end of period, EUR
63.04
66.46
58.28
41.64
44.78
Market capitalization at the end of period, MEUR ²
⁾
32,652
34,452
30,180
21,489
23,052
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
⁾
441,754
442,181
441,634
439,852
438,569
Weighted average number of class B shares, (1,000s) ³
⁾
441,847
442,055
440,897
439,875
438,628
Weighted average number of shares, (1,000s) ³
⁾
518,055
518,264
517,105
516,084
514,837
¹
⁾
²
⁾
³
⁾
Key figures per share, Jan 1–Dec 31, 2021
BOARD OF DIRECTORS’ REPORT | KEY FIGURES AND FINANCIAL DEVELOPMENT
32 KONE ANNUAL REVIEW 2021
KONE has adopted IFRS 16 standard effective January 1,
2019 using the modified retrospective approach and
comparative figures have not been restated. IFRS 15 and
IFRS 9 standards have been applied from January 1, 2018
onwards and 2017 financials are restated retrospectively.
Consolidated statement of income, Jan 1–Dec 31
2021
2020
2019
2018
2017
Sales, MEUR
10,514
9,939
9,982
9,071
8,797
- sales outside Finland, MEUR
10,342
9,745
9,783
8,879
8,620
Operating income, MEUR
1,295
1,213
1,192
1,042
1,192
- as percentage of sales, %
12.3
12.2
11.9
11.5
13.6
Adjusted EBIT, MEUR ¹
⁾
1,310
1,251
1,237
1,112
1,206
- as percentage of sales, % ¹
⁾
12.5
12.6
12.4
12.3
13.7
Income before taxes, MEUR
1,321
1,224
1,218
1,087
1,250
- as percentage of sales, %
12.6
12.3
12.2
12.0
14.2
Net income, MEUR
1,023
947
939
845
960
Consolidated statement of financial position, MEUR
Dec 31, 2021
Dec 31, 2020
Dec 31, 2019
Dec 31, 2018
Dec 31, 2017
Non-current assets
2,798
2,666
2,811
2,418
2,387
Current assets
6,922
6,126
5,802
5,316
5,075
Total equity
3,199
3,197
3,193
3,081
3,029
Non-current liabilities
717
522
760
489
491
Provisions
152
155
127
139
138
Current liabilities
5,652
4,918
4,533
4,025
3,804
Total assets
9,720
8,792
8,613
7,734
7,462
Interest-bearing net debt
-2,164
-1,954
-1,553
-1,704
-1,690
Assets employed ²
⁾
1,035
1,243
1,640
1,377
1,339
Net working capital ²
⁾
-1,468
-1,160
-856
-758
-773
¹
⁾
²
⁾
KEY FIGURES AND FINANCIAL DEVELOPMENT
BOARD OF DIRECTORS’ REPORT | KEY FIGURES AND FINANCIAL DEVELOPMENT
33 KONE ANNUAL REVIEW 2021
Alternative performance measure
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 from EBIT significant items impacting
comparability such as significant restructuring costs. In 2021
items affecting comparability related to restructuring measures
of KONE’s global business lines and functions. In 2020 and
earlier periods items affecting comparability arise from the
Accelerate program, launched in September 2017, to speed
up the execution of the strategy and to support profitable
growth.
Other data, Jan 1–Dec 31
2021
2020
2019
2018
2017
Orders received, MEUR
8,853
8,185
8,400
7,797
7,554
Order book, MEUR
8,564
7,729
8,052
7,951
7,358
Cash flow from operations before financing items and taxes,
MEUR
1,829
1,908
1,550
1,150
1,263
Capital expenditure excl. acquisitions, MEUR
217
201
200
112
116
- as percentage of sales, %
2.1
2.0
2.0
1.2
1.3
Expenditure on research and development, MEUR
189
180
171
164
158
- as percentage of sales, %
1.8
1.8
1.7
1.8
1.8
Average number of employees
61,698
60,376
58,369
56,119
53,417
Number of employees at end of period
62,720
61,380
59,825
57,359
55,075
Employee costs
3,222
3,043
3,048
2,818
2,725
Key ratios, %, Jan 1–Dec 31
2021
2020
2019
2018
2017
Return on equity
32.0
29.7
30.1
27.7
32.1
Return on capital employed
26.8
25.0
25.1
25.0
28.8
Equity ratio
41.2
45.5
46.5
49.9
50.0
Gearing
-67.6
-61.1
-48.6
-55.3
-55.8
2021
2020
2019
2018
2017
Operating income (EBIT), MEUR
1,295
1,213
1,192
1,042
1,192
Operating income margin (EBIT margin), %
12.3
12.2
11.9
11.5
13.6
Items impacting comparability, MEUR
15
38
45
70
13
Adjusted EBIT, MEUR
1,310
1,251
1,237
1,112
1,206
Adjusted EBIT margin %
12.5
12.6
12.4
12.3
13.7
BOARD OF DIRECTORS’ REPORT | CALCULATION OF KEY FIGURES
34 KONE ANNUAL REVIEW 2021
CALCULATION OF KEY FIGURES
Shares traded
=
Number of class B shares traded during the
reporting 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 reporting period
Return on equity (%)
=
100 x
Net income
Total equity (average during the reporting period)
Return on capital
employed (%)
=
100 x
Net income + financing expenses
Equity + interest-bearing-debt (average during the
reporting 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
Basic earnings/share
=
Net income attributable to the shareholders of the
parent company
Share issue and conversion -adjusted weighted
average number of shares - own shares
Equity/share
=
Total shareholders’ equity
Number of shares (issue adjusted) - own shares
Dividend/share
=
Dividend payable for the reporting period
Share issue and conversion -adjusted weighted
average number of shares - 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 reporting period
Price/earnings
=
Price of class B shares at end of reporting period
Earnings/share
Average price
=
Total EUR value of all class B shares traded
Average number of class B shares traded during the
reporting period
Market value of all
outstanding shares
=
The number of shares ¹
⁾
period x the price of class B shares at end of reporting
period
¹
⁾
CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF INCOME
35 KONE ANNUAL REVIEW 2021
CONSOLIDATED STATEMENT OF INCOME
MEUR
Note
Jan 1–Dec 31,
2021
%
Jan 1–Dec 31,
2020
%
Sales
2.1
Costs, expenses and depreciation
2.2, 2.3
-9,218.8
-8,725.7
Operating income
12.3
12.2
Financing income
2.5
Financing expenses
2.5
-27.4
-30.4
Income before taxes
12.6
12.3
Taxes
2.6
-298.1
-276.9
Net income
9.7
9.5
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 STATEMENT OF
COMPREHENSIVE INCOME
MEUR
Note
Jan 1–Dec 31,
2021
Jan 1–Dec 31,
2020
Net income
Other comprehensive income, net of tax:
2.8
Translation differences
-173.2
Hedging of foreign subsidiaries
-28.6
Cash flow hedges
-2.1
Items that may be subsequently
reclassified to statement of income
-94.1
Changes in fair value
Remeasurements of employee benefits
-6.7
Items that will not be reclassified to
statement of income
-6.1
Total other comprehensive
income, net of tax
-80.5
Total comprehensive income
Total comprehensive income
attributable to:
Shareholders of the parent company
Non-controlling interests
Total
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF FINANCIAL POSITION
36 KONE ANNUAL REVIEW 2021
Assets, MEUR
Note
Dec 31, 2021
Dec 31, 2020
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 benefit assets
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, 2021
Dec 31, 2020
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
-121.6
-115.0
Retained earnings
Total shareholders' equity
Non-controlling interests
Total equity
Non-current liabilities
Loans
I
5.3
Employee benefit liabilities
I
5.3, 5.7
Deferred tax liabilities
II
3.6
Total non-current liabilities
Provisions
II
3.5
Current liabilities
Current portion of non-current loans
I
5.3
Current 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 STATEMENT OF FINANCIAL POSITIO N
CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
37 KONE ANNUAL REVIEW 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
MEUR
Note
Share
capital
Share
premium
account
Paid-up
unrestricted
equity reserve
Fair value and
other reserves
Translation
differences
Remeasurements of
employee benefits
Own
shares
Retained
earnings
Net income
for the
period
Non-
controlling
interests
Total
equity
Jan 1, 2021
-10.9
-115.0
-164.7
Net income for the period
Other comprehensive income:
2.8
Translation differences
Hedging of foreign subsidiaries
-28.6
-28.6
Cash flow hedges
-2.1
-2.1
Changes in fair value
Remeasurements of employee benefits
-6.7
-6.7
Transactions with shareholders and non-
controlling interests:
5.2
Profit distribution
-1,166.3
-1,166.3
Purchase of own shares
-45.8
-45.8
Change in non-controlling interests
-6.1
-5.8
Share-based compensation
-11.9
Dec 31, 2021
-121.6
-198.6
CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
38 KONE ANNUAL REVIEW 2021
MEUR
Note
Share
capital
Share
premium
account
Paid-up
unrestricted
equity reserve
Fair value and
other reserves
Translation
differences
Remeasurements of
employee benefits
Own
shares
Retained
earnings
Net income
for the
period
Non-
controlling
interests
Total
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
Purchase of own shares
-
Change in non-controlling interests
-5.5
-5.5
Share-based compensation
-20.4
Dec 31, 2020
-10.9
-115.0
-164.7
CONSOLIDATED FINANCIAL STATEMENTS | CONSOLIDATED STATEMENT OF CASH FLOWS
39 KONE ANNUAL REVIEW 2021
MEUR
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Cash receipts from customers
Cash paid to suppliers and employees
-8,611.7
-8,149.7
Cash flow from operations before financing items and
taxes
Interest received
Interest paid
-11.6
-19.0
Dividends received and capital repayments
Other financing items
-43.7
Income taxes paid
-328.3
-333.2
Cash flow from operating activities
Capital expenditure
-96.5
-88.0
Proceeds from sales of fixed assets
Acquisitions, net of cash
-34.5
-26.9
Proceeds from sales of subsidiary shares
Cash flow from investing activities
-106.0
-109.8
Cash flow after investing activities
Change in deposits and loan receivables, net
-151.7
-606.1
Change of current creditors
-278.1
-130.2
Change in long-term liabilities
-3.9
Purchase of own shares
-45.8
Profit distribution
-1,166.3
-880.5
Changes in non-controlling interests
-1.2
-3.8
Cash flow from financing activities
-1,462.0
-1,624.5
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, 2021
Jan 1–Dec 31, 2020
Operating income
Change in working capital before financing items and taxes
Depreciation and amortization
Cash flow from operations before financing items and
taxes
Change in interest -bearing net debt
MEUR
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Interest-bearing net debt at beginning of period
-1,953.8
-1,552.9
Interest-bearing net debt at end of period
-2,164.1
-1,953.8
Change in interest-bearing net debt
-210.2
-401.0
CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | BASIS OF PREPARATION
40 KONE ANNUAL REVIEW 2021
Basis of preparation
domiciled in
.
subsidiaries together form the KONE Group (“KONE” or “the
Group”). KONE is global leader in the elevator and escalator
industry with a vision to make the world’s cities better and
more sustainable places to live.
. Through more effective People
Flow®, KONE’s ambition is to make people's journeys safe,
convenient and reliable, in taller, smarter buildings.
, serving
approximately 550,000 customers. Headquartered in Helsinki,
Finland, we have seven global R&D units and 10
manufacturing units in seven countries, as well as a worldwide
network of agents and authorized distributors.
The consolidated financial statements of
International Financial Reporting Standards (IFRS) as
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | BASIS OF PREPARATION
Basis of preparation
Accounting principles are presented in connection with
notes in sections 2–6
IN THIS SECTION
◾
Basis of preparation
◾
Consolidation principles
◾
Segment information
◾
Accounting estimates and management judgements
1
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | BASIS OF PREPARATION
41 KONE ANNUAL REVIEW 2021
adopted by the European Union, observing the standards and
interpretations effective on December 31, 2021.
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 2021 did not have a material impact
on the result or the financial position of the Group or on the
presentation of the financial statements.
The consolidated financial statements have been prepared
for the reporting period of 12 months from January 1 to
December 31, 2021. The financial statements have been
authorized for issue by the Board of Directors of
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 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
reporting 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 acquisition-related costs are recognized as
expenses in 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 total consolidated 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 reporting
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.
KONE’s business concept is to serve its customers by
providing solutions throughout the entire life cycle of the
equipment, beginning from the installation of new equipment
to the maintenance and modernization during their life cycle
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 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 considered 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
42 KONE ANNUAL REVIEW 2021
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
10,514
MEUR
EBIT
1,295
MEUR
Financial performance
IN THIS SECTION
This section comprises the following notes describing
KONE’s financial performance:
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
2
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
43 KONE ANNUAL REVIEW 2021
Accounting principles
Revenue recognition
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 delivering 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 is
initiated 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 costto
cost input method as basedon 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.
Formaintenance 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 fixedprice
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 transactionprice 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.
2.1 SALES
Due to KONE’s business model, the nature of its operations
and its governance structure, KONE has one operating
segment.
Sales by customer
KONE’s customer base consists of a large number of
customers in several markets areas with no significant
customer concentration. In 2021 the single biggest customer,
residing in China, generated 1.3% of total revenue.
Sales by business
MEUR
Jan 1–Dec 31,
2021
%
Jan 1–Dec 31,
2020
%
New equipment
5,637.7
54
5,340.2
54
Services
4,876.4
46
4,598.4
46
Maintenance
3,450.6
33
3,215.6
32
Modernization
1,425.9
14
1,382.8
14
Total
10,514.1
9,938.5
Sales by geographical area
MEUR
Jan 1–Dec 31,
2021
%
Jan 1–Dec 31,
2020
%
EMEA ¹
⁾
4,036.9
38
3,916.2
39
Americas
1,902.9
18
1,939.5
20
Asia -Pacific
4,574.3
44
4,082.8
41
Total
10,514.1
9,938.5
¹
⁾
Top 10 countries by sales, %
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
44 KONE ANNUAL REVIEW 2021
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.
2.2 COSTS AND EXPENSES
The majority of expenses of operations arise from direct
materials and supplies, as well as cost of subcontracting.
Other production costs comprise of logistics, tools and
consumables, operative car fleet and traveling as well as
other miscellaneous items of direct costs. Selling,
administrative and other expenses include costs related to
premises, consulting and external services, IT and traveling
as well as other miscellaneous administrative costs.
Items affecting comparability consist of significant
restructuring costs. In 2021 items affecting comparability
related to restructuring measures of KONE’s global business
lines and functions, and in 2020 and earlier years to the
Accelerate program.
Other income comprises of rental income, received grants,
interest on late payments, gains on sale of fixed assets and
scrap as well as other miscellaneous income.
Costs and expenses, MEUR
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Direct materials, supplies and subcontracting
4,297.3
3,957.6
Wages, salaries, and other employment expenses including pensions (note 5.7)
3,222.5
3,042.9
Other production costs
789.6
712.9
Selling, administrative and other expenses
703.3
762.2
Items impacting comparability
14.5
37.7
Depreciation and amortization (note 2.3)
244.0
239.0
Costs, expenses, depreciation and amortization
9,271.3
8,752.2
Other income ¹
⁾
52.5
26.5
Total costs, expenses, depreciation and amortization
9,218.8
8,725.7
¹
⁾
Expense arising from leases of low-value assets and short -term leases amounted to EUR 11.7 (11.2) million in 2021.
Research and development costs, MEUR
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
R&D costs included in total costs
188.8
179.6
As percentage of sales, %
1.8
1.8
Auditors´ fees, MEUR ¹
⁾
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Audit
3.2
3.7
Auditors´ statements
-
0.0
Tax services
0.3
0.5
Other services
0.1
2.3
Total
3.7
6.5
¹
⁾
Ernst & Young Oy has provided non -audit services to the entities of KONE Group in total of 86.0 thousand euros during the
financial year 2021 . These services included tax advisory services 13.0 thousand euros and other services 73.0 thousand
euros.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
45 KONE ANNUAL REVIEW 2021
Accounting principles
Depreciation and amortization
Depreciation and amortization are recorded on a
straight-line basis over the economic useful lives of
the assets, or over the lease contract periods, when
applicable, if shorter.
Economic useful lives:
Maintenance contracts
Other intangible assets
Buildings
Machinery and equipment
Land is not depreciated.
10-15 years
3-10 years
5-40 years
4-15 years
2.3 DEPRECIATION AND AMORTIZATION
Depreciation and amortization, MEUR
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Intangible assets
Maintenance contracts
36.4
36.8
Other
11.3
11.6
Buildings
74.6
73.2
Machinery and equipment
121.8
117.5
Total
244.0
239.0
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
46 KONE ANNUAL REVIEW 2021
EUR
CNY
USD
Other
Accounting principles
Foreign currency transactions and translations
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.
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
7.7% change in
consolidated sales in
euros
2.4 FOREIGN EXCHANGE SENSITIVITY
Foreign 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 substantially hedge the foreign exchange
exposure of firm commitments 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, Canadian dollar, British pound,
Singapore dollar and Saudi-Arabian rial. 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.
The financial assets and liabilities of KONE subsidiaries
are in the local currencies of the subsidiaries whenever
possible. In case a subsidiary company has a financial asset
or liability in other than its local currency, these assets and
liabilities are hedged with foreign exchange forward contracts
whenever possible and required by the KONE Treasury
Policy.
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 77% 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 7.7% (7.6%) change in
2021 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 205.6 (-
173.2) million in 2021. 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
Sales by currency 1–12/2021
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
47 KONE ANNUAL REVIEW 2021
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.
Foreign 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 -11.2 (-8.5) million on the
net income and an impact of EUR 69.0 (90.1) million on
equity.
Exposure
against EUR
Exposure
against USD
Exposure
against CNY
MEUR
HKD
USD
GBP
SEK
CNY
JPY
Others
Total
CNY
CAD
Others
Total
Others
Total
Exposure Dec 31, 2021
-447
-107
-67
-56
77
140
-9
-469
107
-82
-15
10
-119
-119
Exposure Dec 31, 2020
-618
-124
-82
-44
80
139
-32
-681
112
-93
-43
-24
-111
-111
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
48 KONE ANNUAL REVIEW 2021
2.5 FINANCING INCOME AND EXPENSES
Financing income and expenses, MEUR
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Dividend income ¹
⁾
5.7
8.0
Interest income
Interest income on foreign exchange rate derivatives
25.7
19.9
Interest income on loan receivables and financial assets
18.1
13.0
Other financing income
0.2
0.3
Exchange rate gains ²
⁾
3.2
0.6
Financing income
52.9
41.8
Interest expenses
Interest and foreign exchange rate derivatives
Change in fair value of interest ³
⁾
-5.2
-6.3
Interest expenses on other financial liabilities ⁴
⁾
-15.8
-17.0
Other financing expenses ⁵
⁾
-5.8
-5.4
Exchange rate losses ²
⁾
-0.7
-1.7
Financing expenses
-27.4
-30.4
Total
25.5
11.4
1)
2)
foreign exchange derivatives of EUR 131.3 (-142.5 ) million.
3)
4)
5)
commitment
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
49 KONE ANNUAL REVIEW 2021
Accounting principles
Income
tax
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 plansand 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 onthe 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.
Accounting principles
Earnings per share
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-based incentive plans of the Group. KONE
has two classes of shares that are both included in the
calculation of earnings per share.
2.6 INCOME TAXES
2.7 EARNINGS PER SHARE
Taxes in the statement of income, MEUR
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Tax expense for current year
310.0
304.2
Change in deferred tax assets and liabilities
-17.6
-23.4
Tax expense for previous years
5.7
-3.9
Total
298.1
276.9
Reconciliation of income before taxes with total income taxes in the statement of
income, MEUR
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Income before taxes
1,320.8
1,224.2
Tax calculated at the domestic corporation tax rate (20%)
264.1
244.9
Effect of different tax rates in foreign subsidiaries
4.1
0.5
Permanent differences
-1.2
-4.4
Taxes from previous years and reassessment of deferred tax assets
0.8
3.5
Remeasurement of deferred taxes - changes in corporate tax rates
0.2
0.4
Deferred tax liability on undistributed earnings
27.6
27.8
Other
2.5
4.2
Total
298.1
276.9
Effective tax rate, %
22.6
22.6
Tax rate of parent company, %
20.0
20.0
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Net income attributable to the shareholders of the parent company, MEUR
1,014.2
939.2
Weighted average number of shares (1,000 shares)
518,055
517,679
Basic earnings per share, EUR
1.96
1.81
Dilution effect of share-based incentive plans (1,000 shares)
578
585
Weighted average number of shares, dilution adjusted (1,000 shares)
518,634
518,264
Diluted earnings per share, EUR
1.96
1.81
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
50 KONE ANNUAL REVIEW 2021
2.8 OTHER COMPREHENSIVE INCOME
Components of other comprehensive income
MEUR
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Translation differences
205.6
-173.2
Hedging of foreign subsidiaries
-35.7
65.0
Changes in fair value
0.6
4.8
Remeasurements of employee benefits
-3.3
-2.9
Cash flow hedges:
Gains/losses arising during the year
-8.2
36.4
Reclassifications included in profit or loss
8.6
-1.4
Cash flow hedges, net
0.4
35.0
Income tax relating to components of other comprehensive income
1.2
-9.2
Other comprehensive income
168.9
-80.5
Tax effects relating to components of other comprehensive income
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
MEUR
Before-tax
amount
Tax
expense/
benefit
Net-of-tax
amount
Before-tax
amount
Tax
expense/
benefit
Net-of-tax
amount
Translation differences
205.6
-
205.6
-173.2
-
-173.2
Hedging of foreign subsidiaries
-35.7
7.1
-28.6
65.0
-13.0
52.0
Cash flow hedges
0.4
-2.5
-2.1
35.0
-7.9
27.1
Items that may be subsequently reclassified
to statement of income
170.3
4.6
175.0
-73.2
-20.9
-94.1
Changes in fair value
0.6
-
0.6
4.8
-
4.8
Remeasurements of employee benefits
-3.3
-3.4
-6.7
-2.9
11.7
8.8
Items that will not be reclassified to
statement of income
-2.7
-3.4
-6.1
1.9
11.7
13.6
Total other comprehensive income
167.7
1.2
168.9
-71.3
-9.2
-80.5
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
51 KONE ANNUAL REVIEW 2021
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, MEUR
Dec 31, 2021
Dec 31, 2020
Inventories
717.8
597.0
Advance payments received and
deferred revenue
-1,957.0
-1,766.8
Accounts receivable
2,421.4
2,178.6
Deferred assets and income tax
receivables
898.1
720.9
Accruals and income tax payables
-2,268.2
-1,996.2
Provisions
-152.3
-154.7
Accounts payable
-1,310.2
-890.9
Net deferred tax assets/liabilities
182.2
152.0
Total
-1,468.2
-1,160.1
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
*) Cash flow from operations before financing items and taxes
Net working
capital
-1,468
MEUR
Cash flow*
1,829
MEUR
Net working capital
3
IN THIS SECTION
This section comprises the following notes, describing
components of KONE’s net working capital:
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
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
52 KONE ANNUAL REVIEW 2021
Accounting principles
Inventories
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.
3.1 INVENTORIES
Inventories, MEUR
Dec 31, 2021
Dec 31, 2020
Raw materials, supplies and finished goods
326.6
278.0
Work in progress
351.9
300.2
Advance payments made
39.2
18.7
Total
717.8
597.0
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
53 KONE ANNUAL REVIEW 2021
Accounts receivable
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 containasignificant 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. A final impairment loss is recognized
when receivership or bankruptcy is confirmedor when it is
otherwise obvious that the customer will be unable to meet its
payment obligations. Changes in impairment loss for doubtful
accounts receivable and final impairment losses 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.
Accounting principles
3.2 ACCOUNTS RECEIVABLE AND
CONTRACT ASSETS AND LIABILITIES
Changes in contract assets and liabilitie s
The order book representing the unsatisfied performance
obligations with respect to new equipment and modernization
contracts stood at EUR 8,564.0 (7,728.8) million as at Dec 31,
2021. The vast majority of the order book is expected to be
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, advance
payments received and deferred revenue follow the
developments in business but are 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 previous years. There were no significant
impairment charges recognized during the reporting period for
the contract assets.
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 and geographic split of
receivables and contract assets well mirrors distribution of
sales. KONE management follows particularly closely the
credit risks related to Chinese developers. Customer portfolio
being well diversified is limiting risks arising from any
individual customer.
MEUR
Dec 31, 2021
Dec 31, 2020
Accounts receivable
2,421.4
2,178.6
Accrued income on maintenance contracts (note 3.3)
35.1
31.8
Unbilled contract revenue (note 3.3)
344.6
282.7
Assets related to contracts with customers
2,801.1
2,493.2
Deferred income on maintenance contracts (note 3.4)
462.7
406.3
Advance payments received and deferred revenue
1,957.0
1,766.8
Liabilities related to contracts with customers
2,419.8
2,173.1
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
54 KONE ANNUAL REVIEW 2021
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.
In 2020, KONE modified the 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 COVID-
19. Overall, the disruption to the business arising from
COVID-19 has been limited with a significant part of KONE’s
operations being considered essential and as such, allowed
even during lockdowns. According to management
assessment, at the end of the reporting period the pandemic
no longer poses additional risk to collection of receivables.
The amount of bad debt provision recorded to cover
doubtful accounts was EUR 284.4 (262.5) million at the end of
the financial period.
Aging of accounts receivable
Aging structure of the accounts receivable after recognition of impairment, MEUR
Dec 31, 2021
Dec 31, 2020
Not past due and less than one month due receivables
1,923.4
1,674.5
Past due 1–3 months
278.5
277.5
Past due 3–6 months
133.1
134.8
Past due > 6 months
86.4
91.9
Accounts receivable in the consolidated statement of financial position
2,421.4
2,178.6
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
55 KONE ANNUAL REVIEW 2021
3.4 ACCRUALS
Accruals, MEUR
Dec 31, 2021
Dec 31, 2020
Accrued interests
2.2
0.9
Deferred income on maintenance contracts (note 3.2)
462.7
406.3
Late cost accruals ¹
⁾
342.7
305.7
Accrued salaries, wages and employment costs
551.0
479.5
Share-based payments
22.5
26.6
Derivative liabilities (note 5.3)
42.3
77.0
Value added tax liabilities
122.6
98.3
Accruals on acquisitions
21.2
13.4
Other accruals
570.0
474.9
Total
2,137.4
1,882.6
¹
⁾
Includes accrual for invoicing still pending to be received on completed new equipment and modernization contracts.
3.3 DEFERRED ASSETS
Deferred assets, MEUR
Dec 31, 2021
Dec 31, 2020
Deferred interests
2.7
0.7
Accrued income on maintenance contracts (note 3.2)
35.1
31.8
Unbilled contract revenue (note 3.2)
344.6
282.7
Derivative assets (note 5.3)
88.4
76.8
Value added tax assets
129.6
92.4
Prepaid expenses and other receivables
180.5
154.3
Total
780.8
638.7
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | NET WORKING CAPITAL
56 KONE ANNUAL REVIEW 2021
Accounting principles
Provisions
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 repairsand 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
onerous
(
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,
labor relations or other regulatory matters.
3.5 PROVISIONS
Jan 1–Dec 31, 2021, MEUR
Provision
for warranty
Provision
for claims
Provision for
business
restructuring
Provision
for loss
contracts
Other
provisions
Total
Total provisions at beginning of period
67.4
6.3
18.1
28.3
34.5
154.7
Translation differences
2.8
0.0
0.3
1.3
0.3
4.7
Increase
15.0
5.7
14.3
17.4
20.6
73.0
Provisions used
-21.7
-1.1
-10.5
-10.7
-3.5
-47.7
Reversal of provisions
-4.6
-3.5
-6.2
-5.2
-14.3
-33.8
Companies acquired
0.1
-
-
0.4
0.9
1.4
Total provisions at end of period
58.8
7.4
16.0
31.4
38.6
152.3
Non-current liabilities
Current liabilities
Total
Distribution of provisions as of Dec 31, 2021
101.4
50.9
152.3
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
57 KONE ANNUAL REVIEW 2021
Accounting principles
Deferred taxes
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.
3.6 DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets, MEUR
Dec 31, 2021
Dec 31, 2020
Dec 31, 2019
Tax losses carried forward
1.7
2.0
2.4
Provisions and accruals
267.8
236.7
193.2
Pensions
28.6
21.7
20.8
Inventory
23.5
24.5
25.7
Property, plant and equipment
16.0
14.7
9.2
Other temporary differences for assets
42.8
42.6
41.0
Offset against deferred tax liabilities
-111.3
-99.8
-
Total
269.1
242.4
292.3
Total at beginning of period
242.4
292.3
Translation differences
21.1
-5.5
Change in statement of income
11.5
-48.3
Charged or credited to equity
-5.9
3.8
Acquisitions, divestments and other
0.1
0.1
Total at end of period
269.1
242.4
Deferred tax liabilities, MEUR
Dec 31, 2021
Dec 31, 2020
Dec 31, 2019
Property, plant and equipment
29.3
29.0
22.6
Goodwill and intangible assets
72.2
72.0
73.9
Other temporary differences for liabilities
96.7
89.3
63.8
Offset against deferred tax assets
-111.3
-99.8
-
Total
86.9
90.4
160.3
Total at beginning of period
90.4
160.3
Translation difference
0.6
-2.1
Change in statement of income
-6.1
-71.7
Acquisitions, divestments and other
2.0
3.9
Total at end of period
86.9
90.4
Net deferred tax assets and liabilities
182.2
152.0
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE
58 KONE ANNUAL REVIEW 2021
KONE´s capital expendit
ure 2.1%
of
sales in 2021
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,
manufacturing and service operations.
◾
KONE’s acquisitions in 2021 consisted of small
maintenance companies in EMEA region as well as in
North America.
Acquisitions and capital
expenditure
4
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE
Acquisitions
and capex
267
MEUR
Completed
acquisitions
15
IN THIS SECTION
This section comprises the following notes, which
describe acquisitions and capital expenditure at KONE:
4.1 Acquisitions and disposals
4.2 Goodwill
4.3 Intangible assets
4.4 Tangible assets
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE
59 KONE ANNUAL REVIEW 2021
Accounting principles
Acquisitions
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 noncontrolling interest is
measuredeither at the acquisition date fair value or at non-
controlling interests proportionate share in the recognized
amounts of the identifiable net assets.
4.1 ACQUISITIONS AND DISPOSALS
Acquisitions
KONE completed 15 (20) acquisitions during 2021 for a total
consideration of EUR 50.1 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 2021 financial statements. The sales
consolidated from the companies acquired during 2021 had
only a minor impact on KONE’s sales for the financial period.
Of the total consideration, based on provisional assessments,
EUR 22.7 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 adjacent table. The considerations were
paid for in cash, except for certain deferred considerations,
expected to 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 recognized in the
profit or loss. However, contingent considerations are typically
realized in the amount initially recognized. KONE acquired a
100% interest in all businesses acquired in 2021, except for
one minor acquisition.
Disposals
During the reporting period KONE sold its full ownership in
Motala Hissar AB against cash consideration. The sale of the
subsidiary did not have material impact on the assets or
liabilities of the Group. A gain of EUR 13.9 million was
recognized arising from the sale.
Assets and liabilities of the acquired businesses, MEUR
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Maintenance contracts
22.7
26.6
Other intangible assets
0.2
1.3
Tangible assets
0.2
0.5
Deferred tax assets
0.1
0.1
Inventories
0.8
1.0
Accounts receivables and other assets
4.9
3.6
Cash and cash equivalents and other interest-bearing receivables
8.2
1.5
Total assets
37.2
34.5
Pension liabilities
0.1
1.6
Interest-bearing loans
0.2
0.6
Provisions
1.4
0.2
Deferred tax liabilities
2.0
3.9
Other liabilities
3.6
3.2
Total liabilities
7.3
9.4
Net assets
30.0
25.0
Acquisition cost paid in cash
36.4
21.7
Contingent and deferred consideration
13.7
7.3
Acquisition cost at date of acquisitions
50.1
29.0
Goodwill
20.1
4.0
Changes in the acquisition cost occurring after the acquisition date and recognized in the statement of income totaled EUR 0.2
(0.7) million.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE
60 KONE ANNUAL REVIEW 2021
Accounting principles
Goodwill
Acquisitions are accounted for using the acquisition method.
Goodwill is calculated as the excess of acquisition cost over
the fair values of identified assets and liabilities acquired.
Goodwill typically 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 not amortized, but 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 cashgenerating units
(CGUs) of the Group, which areidentified according to the
country of operation and business area at the level at which
goodwill is monitored for internal management purposes. The
recoverable amount of a CGU is determined by value-inuse
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.
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 operates in accordance with KONE’s
business model and organization structure. As at Dec 31,
2021 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
adjacent table.
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, sales price and cost development
assumptions embedded in the CGU specific cash flow
projections are based on management assessment of the
market demand and environment, which are examined
against external information sources. The 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 material impairment
losses was very low. Under the basic scenario, the value-in-
use calculations were on average 10.0 times higher than the
CGUs’ assets employed. The respective ratio for the five
largest CGUs was 8.5; for the five smallest 12.7 and
respectively for the other CGUs 13.5.
Goodwill, MEUR
Dec 31, 2021
%
Discount interest
rates used (pre-tax),
%
Dec 31, 2020
%
Discount interest
rates used (pre-tax),
%
EMEA
814.9
58
5.52
784.9
59
5.15
Americas
349.0
25
7.22
319.6
24
6.46
Asia -Pacific
241.4
17
8.91
222.6
17
9.19
Total
1,405.2
1,327.0
Goodwill reconciliation
Goodwill, MEUR
Dec 31, 2021
Dec 31, 2020
Opening net book value
1,327.0
1,366.5
Translation differences
58.6
-39.7
Increase
-
0.2
Decrease
-0.9
-3.8
Companies acquired (note 4.1)
20.5
4.0
Closing net book value
1,405.2
1,327.0
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE
61 KONE ANNUAL REVIEW 2021
Accounting principles
Intangible assets
Intangible assets identified in connection with acquisitions
are amortized on a straight-line basis over their expected
useful lifetime. KONE often acquires small elevator,
escalator 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.
Impairment of assets
The carrying amounts of non-current intangible assets and
tangible 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.
Impairmenttest 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 amounthigher than the carrying amount
that would have been determined without the impairment
loss recognized in prior years, deducted by accumulated
depreciation.
4.3 INTANGIBLE ASSETS
Jan 1–Dec 31, 2021
Intangible assets, MEUR
Other
Total
Opening gross acquisition cost
439.5
261.8
701.3
Opening accumulated amortization and impairment
-249.5
-228.6
-478.1
Opening net book value
190.0
33.2
223.2
Opening net book value
190.0
33.2
223.2
Translation differences
6.5
1.7
8.3
Increase
2.8
8.7
11.5
Decrease
-
-1.4
-1.4
Reclassifications
-
0.0
0.0
Companies acquired (note 4.1)
22.7
0.2
22.9
Amortization
-36.4
-11.3
-47.7
Closing net book value
185.8
31.1
216.9
Closing gross acquisition cost
471.6
260.1
731.7
Closing accumulated amortization and impairment
-285.9
-229.0
-514.9
Closing net book value
185.8
31.1
216.9
Jan 1–Dec 31, 2020
Intangible assets, MEUR
Other
Total
Opening gross acquisition cost
416.3
273.0
689.2
Opening 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
Closing gross acquisition cost
439.5
261.8
701.3
Closing 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
62 KONE ANNUAL REVIEW 2021
Accounting principles
Property, plant and equipment
Property, plant and equipment are measured at cost less
accumulated depreciation and any impairment losses, when
applicable. Depreciation is recognized on a straightline
basis over the economic useful lives of the assets or over
the lease contract period, if shorter. Economic useful lives
are as follows:
Buildings
Machinery and equipment
Land is not depreciated.
540 years
415 years
Expenditure on repairs and maintenance of property, plant
and equipment is recognized as expense when incurred.
The carrying amount of any tangible asset is impairment
tested (see impairment of assets accounting principles)
when an indication of impairmentexists.
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 rightofuse 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 assetsare recognized
as an expense on a straightline basis over the contract
period.
4.4 TANGIBLE ASSETS
Opening gross acquisition cost
6.7
317.3
321.6
602.2
208.6
10.6
3.2
1,470.3
Opening accumulated depreciation
-
-137.7
-105.5
-427.6
-89.4
-
-
-760.2
Opening net book value
6.7
179.6
216.1
174.7
119.2
10.6
3.2
710.0
Opening net book value
6.7
179.6
216.1
174.7
119.2
10.6
3.2
710.0
Translation differences
0.0
10.3
9.5
8.6
4.7
0.6
0.3
34.0
Increase
-
6.0
57.0
69.0
63.3
10.0
2.5
207.8
Decrease
0.0
-3.5
-10.5
-1.4
-3.1
-0.7
-
-19.2
Reclassifications
-
2.7
0.0
8.8
-
-9.0
-2.5
-
Companies acquired (note 4.1)
-
-
-
0.2
-
-
-
0.2
Depreciation
0.0
-14.0
-60.6
-59.9
-61.8
-
-
-196.4
Closing net book value
6.7
181.0
211.4
200.0
122.6
11.5
3.5
736.7
Closing gross acquisition cost
6.7
333.3
365.5
664.4
232.2
11.5
3.5
1,617.1
Closing accumulated depreciation
-
-152.2
-154.1
-464.5
-109.6
-
-
-880.4
Closing net book value
6.7
181.1
211.4
200.0
122.6
11.5
3.5
736.7
Decrease for the period includes write downs of EUR 2.5 million in the buildings and machinery and equipment categories arising from fire in KONE’s facilities in
Hyvinkää, Finland.
During the period of Jan 1–Dec 31, 2021, capital expenditure on production facilities, installation equipment, R&D tools, as well
as on information systems, including new assets recognized for lease agreements, totaled to EUR 217.1 (201.0) million. Capital
expenditure on leases consists mainly of maintenance vehicles and office facilities.
Lease payments in cash flow totaled to EUR -121.0 (-117.9) million.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | ACQUISTIONS AND CAPITAL EXPENDITURE
63 KONE ANNUAL REVIEW 2021
Opening gross acquisition cost
6.8
302.1
301.4
610.4
200.2
5.3
4.4
1,430.6
Opening accumulated depreciation
-
-120.9
-69.1
-432.2
-66.1
-
-
-688.4
Opening net book value
6.8
181.2
232.3
178.1
134.1
5.3
4.4
742.2
Opening net book value
6.8
181.2
232.3
178.1
134.1
5.3
4.4
742.2
Translation differences
-0.1
-6.4
-8.8
-7.4
-4.9
-0.4
-0.1
-28.2
Increase
0.1
7.7
58.2
57.7
55.1
10.1
2.7
191.6
Decrease
-0.1
-0.3
-6.0
-1.8
-3.3
-0.9
-1.2
-13.6
Reclassifications
-
10.7
0.0
3.7
0.2
-3.6
-2.6
8.3
Companies acquired (note 4.1)
-
0.2
-
0.2
-
-
-
0.5
Depreciation
0.0
-13.6
-59.6
-55.8
-61.7
-
-
-190.7
Closing net book value
6.7
179.6
216.1
174.7
119.3
10.6
3.2
710.0
Closing gross acquisition cost
6.7
317.3
321.6
602.2
208.6
10.6
3.2
1,470.3
Closing accumulated depreciation
-
-137.7
-105.5
-427.6
-89.4
-
-
-760.2
Closing net book value
6.7
179.6
216.1
174.7
119.2
10.6
3.2
710.0
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
64 KONE ANNUAL REVIEW 2021
KONE’S CAPITAL STRUCTURE
◾
KONE’s cash position is strong due to the cash-
generative operating model including collection of
significant advance payments in the new equipment
business.
◾
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
support the growth ambitions of the business.
KONE’s interest
bearing net debt
-2,164
MEUR
Capital structure
5
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
Equity per
share
6.13
EUR
IN THIS SECTION
This section comprises the following notes, which
describe the capital structure of KONE:
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
65 KONE ANNUAL REVIEW 2021
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 adjacent table. 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 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 2021, 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. In 2017 –2021, the
dividend payout ratio has been 88.6–124.0% for class B
shares (2021 proposal by the Board of Directors at KONE
Corporation). At the end of December 2021, KONE had
11,433,525 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.
Non-current assets by country
MEUR
Dec 31, 2021
Dec 31, 2020
China
482.5
412.6
USA
441.8
412.5
Spain
240.9
227.3
Germany
219.6
227.1
France
206.1
208.2
Other
1,207.2
1,178.5
Total
2,798.0
2,666.1
Capital management, MEUR
2021
2020
2019
2018
2017
Assets employed:
Goodwill and shares
1,550
1,470
1,506
1,477
1,460
Other non-current assets ¹
⁾
954
933
990
658
652
Net working capital
-1,468
-1,160
-856
-758
-773
Total assets employed
1,035
1,243
1,640
1,377
1,339
Capital:
Equity
3,199
3,197
3,193
3,081
3,029
Interest-bearing net debt
-2,164
-1,954
-1,553
-1,704
-1,690
Total capital
1,035
1,243
1,640
1,377
1,339
Gearing
-67.6%
-61.1%
-48.6%
-55.3%
-55.8%
Equity ratio
41.2%
45.5%
46.5%
49.9%
50.0%
1) Tangible assets, acquired maintenance contracts and other intangible assets.
KONE has adopted the IFRS 16 and IFRIC 23 effective January 1, 2019 using the modified retrospective approach and the compara tive amounts have not been
restated. IFRS 15 and IFRS 9 standards have been applied from January 1, 2018 onwards and 2017 financial s are restated retrospectively.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
66 KONE ANNUAL REVIEW 2021
Accounting principles
Equity and profit distribution
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. 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 recognizedas
translation differences. Actuarial gains and losses arising
from revaluation of employee benefits are recognized as
remeasurementsof 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 transactionare 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.
More information
Please, refer to section 6.2 for more information on
sharebased incentive plans.
5.2 SHAREHOLDERS’ EQUITY
Shares and share capital
At the end of the 2021 financial year, the number of shares
outstanding was 529,395,860. The share capital was EUR
66.2 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. The accounting par value of both
classes of shares is EUR 0.125.
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 March 2021 to increase the share
capital and to issue stock options. The authorization remains
in effect until the conclusion of the following annual general
meeting, however at the latest until 30 June 2022.
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.
In 2021 or 2020 there were no changes in the share
capital of KONE Corporation.
Authority to buy own shares
KONE Corporation’s Annual General Meeting held on March
2, 2021 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.
A total of 750,000 B class shares were purchased by
KONE on the Helsinki Stock Exchange (Nasdaq Helsinki Ltd)
in 2021. The total amount paid to acquire shares amounted to
EUR 45.8 million with the average price totaling EUR 60.96
per share. All shares held by KONE at the end of the reporting
period consisted of B class shares.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
67 KONE ANNUAL REVIEW 2021
Own shares
Number of shares
Cost, MEUR
Jan 1, 2021
11,006,006
164.7
Distributed to the share-based incentive plan, January
-155,115
-5.7
Distributed to the annual compensation of the Board, April
-4,984
-0.2
Distributed to the share-based incentive plan, April
-171,231
-6.3
Returned from the share-based incentive plan, April
8,849
0.3
Purchase, November
150,000
8.9
Purchase, November
160,000
9.7
Purchase, November
150,000
9.1
Purchase, November
150,000
9.3
Purchase, November
140,000
8.8
Dec 31, 2021
11,433,525
198.6
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
Reconciliation of own shares, Dec 31, 2021
KONE Corporation and Group total
quantity
Acquisition cost
Average price
Dec 31, 2020
11,006,006
164,661,923.36
14.96
January 29, 2021
-155,115
-5,713,819.90
36.84
April 29, 2021
-4,984
-184,398.53
37.00
April 29, 2021
-171,231
-6,313,755.17
36.87
April 29, 2021
8,849
333,819.76
37.72
November 11, 2021
150,000
8,943,630.35
59.62
November 12, 2021
160,000
9,677,710.82
60.49
November 15, 2021
150,000
9,086,058.68
60.57
November 16, 2021
150,000
9,274,335.67
61.83
November 17, 2021
140,000
8,809,001.71
62.92
Dec 31, 2021
11,433,525
198,574,506.75
17.37
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
68 KONE ANNUAL REVIEW 2021
Accountingprinciples
Derivative financial instruments and hedge accounting
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 valuesas at the forward contract date and balance
sheet datein 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 orpurchase 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 ofeach hedge relationship.
Hedge effectiveness is assessed before hedge accounting is
appliedand 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 hedgesof foreign currency transaction,
ineffectiveness may arise if the timing of the forecast
transaction changes from what was originallyestimated. 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 valuesof derivative instruments are recognized
under current assets and liabilities in the balance sheet.
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
Polic y.
Financial credit risk
KONE has substantial amounts of cash and financial
investments. In order to diversify the financial credit risk and
manage liquidity 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 490.4 (457.9)
million and financial investments EUR 2,393.7 (2,170.4)
million on December 31, 2021.
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 the European Investment
Bank (EIB) of EUR 200 million. The credit facility is a 5-year
fixed interest rate loan which will be used for R&D purposes.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
69 KONE ANNUAL REVIEW 2021
Accounting principles
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.
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, shortterm 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-inhand and bank
account balances. Bank overdrafts are included in other
current liabilities.
The loan will mature in 2026. 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 and a sustainability-linked
revolving credit facility of EUR 850 million to ensure sufficient
liquidity. The sustainability targets included in the facility relate
to KONE’s decarbonization and gender diversity
commitments.
Interest rate risks
KONE’s cash and short -term investments were EUR 2,884.1
(2,628.3) million at the statement of financial position date. At
the same time, KONE’s interest-bearing debt was EUR 746.5
(695.8) million and consisted of EUR 547.1 (504.3) million of
financial debt including lease liabilities, EUR 5.1 (4.2) million
of option liabilities from acquisitions, and EUR 194.3 (187.2)
million of employee benefit liabilities. Additionally, KONE had
an asset on employee benefits of EUR 22.9 (19.2) 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 2021 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 -2,768.5 (-2,364.8) million. For 2021 a 1 percentage
point change in the interest rate level would mean a change of
EUR -27.7 (-23.6) 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.
Derivatives
All derivative contracts have been entered into in accordance
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 49.9 (9.6) million and payables EUR 3.9 (9.9) million.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
70 KONE ANNUAL REVIEW 2021
Maturity analysis of financial liabilities and interest payments
Dec 31, 2021
Dec 31, 2020
MEUR
< 1 year
1-5 years
> 5 years
Total
< 1 year
1-5 years
> 5 years
Total
Interest-bearing debt
Long-term loans
-
-200.0
-
-200.0
-
-
-
-
Lease liabilities
-108.3
-199.6
-35.8
-343.6
-98.9
-199.8
-44.2
-342.9
Short-term loans
-
-
-
-
-160.0
-
-
-160.0
Used bank overdraft limits
-3.4
-
-
-3.4
-1.4
-
-
-1.4
Option liabilities from acquisitions
-3.8
-1.3
-
-5.1
-4.2
-
-
-4.2
Employee benefits
-
-
-194.3
-194.3
-
-
-187.2
-187.2
Non-interest-bearing debt
Accounts payable
-1,310.2
-
-
-1,310.2
-890.9
-
-
-890.9
Derivatives
Capital inflow
3,515.1
90.3
-
3,605.3
3,676.9
113.4
-
3,790.3
Capital outflow
-3,455.7
-88.6
-
-3,544.2
-3,667.7
-113.8
-
-3,781.5
Interest payments
-6.6
-8.9
-2.4
-17.9
-7.6
-8.5
-4.6
-20.7
Net outflow
-1,372.9
-408.0
-232.5
-2,013.5
-1,154.0
-208.6
-236.0
-1,598.6
Fair values of derivative financial instruments, MEUR
Derivative assets
Dec 31, 2021
Derivative
liabilities,
Dec 31, 2021
Fair value, net
Dec 31, 2021
Fair value, net
Dec 31, 2020
Foreign exchange forward contracts and swaps
In cash flow hedge accounting
20.4
-15.2
5.2
4.9
In net investment hedge accounting
-
-23.3
-23.3
49.2
Other hedges
68.0
-3.8
64.1
-54.4
Total
88.4
-42.3
46.0
-0.3
Nominal values of derivative financial instruments, MEUR
Dec 31, 2021
Dec 31, 2020
Foreign exchange forward contracts and swaps
In cash flow hedge accounting
945.6
981.1
In net investment hedge accounting
429.5
670.5
Other hedges
2,230.2
2,138.6
Total
3,605.3
3,790.3
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
71 KONE ANNUAL REVIEW 2021
Values of financial assets and liabilities by categories
Dec 31, 2021
Notes
Measured at
fair value
through
profit or loss
Measured at
amortized
cost
Measured at
fair value
through other
comprehensive
income
Other
Total book
value
Non-current assets
Shares and other non-current financial assets
5.4
144.6
144.6
Non-current loans receivable
I
5.5
2.6
2.6
Employee benefits
I
5.7
22.9
22.9
Current assets
Accounts receivable
2,421.4
2,421.4
Derivative assets
88.4
88.4
Current deposits and loans receivable
I
5.5
1,906.6
488.1
2,394.7
Cash and cash equivalents
I
490.4
490.4
Total financial assets
1,995.0
3,402.5
144.6
22.9
5,565.0
Non-current liabilities
Loans ¹
⁾
I
200.0
235.4
435.4
Employee benefits
I
5.7
194.3
194.3
Current liabilities
Loans ²
⁾
I
108.3
108.3
Short-term loans and other liabilities
I
3.4
3.4
Option liabilities from acquisitions
I
5.1
5.1
Accounts payable
1,310.2
1,310.2
Derivative liabilities
3.8
38.5
42.3
Unpaid acquisition consideration
21.2
21.2
Total financial liabilities
9.0
1,513.6
38.5
559.2
2,120.3
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
72 KONE ANNUAL REVIEW 2021
Dec 31, 2020
Notes
Measured at
fair value
through
profit or loss
Measured at
amortized
cost
Measured at
fair value
through other
comprehensive
income
Other
Total book
value
Non-current assets
Shares and other non-current financial assets
I
5.4
143.2
143.2
Non-current loans receivable
I
5.5
1.0
1.0
Employee benefits
I
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
73 KONE ANNUAL REVIEW 2021
Accountingprinciples
Shares and other noncurrent financial assets
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
ithout 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.
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 139.6 (139.0)
million and EUR 4.9 (4.2) 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. The fair value of
TELC shares is estimated using a dividend discount model
with the key inputs to the model including forecasted dividend
and the discount rate. While the fair value of the investment is
sensitive to changes in these two assumptions, there is no
reasonably possible change that would result in significant
impact on total assets or equity of KONE.
Investment also includes other non-current financial assets
which are investments in smaller holdings in other companies
without public quotation.
5.5 DEPOSITS AND LOANS RECEIVABLE
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
1,906.6 (1,790.1) million and EUR 487.1 (380.2) million of
interest rate funds and short-term bank deposits.
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 1,735.7 (1,485.1) million as of
December 31, 2021.
Deposits and loans receivable, MEUR
Dec 31, 2021
Dec 31, 2020
Non-current loans receivable
2.6
1.0
Current loans receivable
1.0
1.1
Current short-term deposits
2,393.7
2,170.4
Total
2,397.3
2,172.5
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
74 KONE ANNUAL REVIEW 2021
Accounting principles
Employee benefits
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 longterm 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.
KONE operates various employee benefit plans throughout its
locations. 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.
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 their lifetime. Therefore,
any increase in life expectancy will increase defined benefit
liability of these plans.
5.7. EMPLOYEE BENEFITS
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
75 KONE ANNUAL REVIEW 2021
Defined benefit plan liability
Other post-employment
benefit liability
Fair value of plan assets
Net defined benefit balance
MEUR
Dec 31, 2021
Dec 31, 2020
Dec 31, 2021
Dec 31, 2020
Dec 31, 2021
Dec 31, 2020
Dec 31, 2021
Dec 31, 2020
Balance at beginning of period
638.9
638.0
10.1
9.9
480.8
489.2
168.1
158.7
Current service costs
17.5
17.4
0.1
0.1
-
-
17.7
17.5
Interest expense
11.2
13.3
0.1
0.3
-
-
11.3
13.6
Interest income
-
-
-
-
8.8
11.2
-8.8
-11.2
Other
-0.6
-2.9
-
-
-2.0
-2.3
1.3
-0.5
Components of defined benefit costs recognized
in the consolidated statements of income
28.1
27.8
0.2
0.4
6.9
8.9
21.5
19.3
Return on plan assets, excluding interest income
-
-
-
-
36.1
38.7
-36.1
-38.7
Remeasurements
42.7
40.4
-3.4
1.1
-
-
39.3
41.5
Remeasurements recognized in the consolidated
statements of comprehensive income
42.7
40.4
-3.4
1.1
36.1
38.7
3.3
2.9
Employer contributions
-
-
-
-
13.0
12.6
-13.0
-12.6
Plan participants’ contributions
0.4
0.4
0.2
0.3
0.6
0.7
-
-
Benefits paid
-29.3
-26.9
-0.7
-0.8
-23.1
-21.7
-6.9
-5.9
Settlement payments
-0.3
-16.8
-
-
-
-16.6
-0.3
-0.3
Business combinations, disposals and other
-0.1
8.0
-
-
-
-1.2
-0.1
9.1
Foreign currency translation effects
34.1
-32.0
0.7
-0.9
36.0
-29.8
-1.2
-3.2
Other reconciling items
4.9
-67.4
0.1
-1.4
26.5
-56.0
-21.5
-12.8
Balance at end of period
714.5
638.9
7.1
10.1
550.2
480.8
171.4
168.1
Present value of unfunded obligations
114.8
112.5
7.1
0.4
-
-
121.9
112.9
Present value of funded obligations
599.7
526.3
-
9.7
-
-
599.7
536.0
Fair value of benefit plans' assets
-
-
-
-
550.2
480.8
-550.2
-480.8
Total
714.5
638.9
7.1
10.1
550.2
480.8
171.4
168.1
The expected contributions to defined benefit type arrangements in 2022 are EUR 15.6 million.
The actual return on defined benefit plans’ assets was EUR 44.9 (49.8) million.
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
76 KONE ANNUAL REVIEW 2021
Fair values of major classes of plan assets,
MEUR
Dec 31, 2021
Dec 31, 2020
Fair value of plan assets with a quoted market price
521.5
453.6
Other
28.7
27.2
Total
550.2
480.8
Amounts recognized in the statement of income,
MEUR
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Defined contribution pension plans ¹
⁾
281.5
238.5
Defined benefit pension plans
21.2
19.0
Other post-employment benefits
0.2
0.4
Total
302.9
.
257.8
¹
⁾
costs. Considering the same in comparison period defined contribution pension plan costs would have increased by EU R 21.9 million.
Defined benefit plans: assumptions used in
calculating benefit obligations
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Europe
USA
Europe
USA
Discount rate, %
1.55
2.87
1.27
2.52
Future salary increase, %
2.3
4.0
2.4
4.0
Future pension increase, %
1.5
-
1.7
-
Sensitivity of the defined benefit obligation to
changes in actuarial assumptions
Impact on defined benefit obligation
Dec 31, 2021
Dec 31, 2020
Discount rate, +0.25 percentage points
-3.6%
-3.8%
Discount rate, -0.25 percentage points
3.8%
4.1%
Future pension increase, +0.25 percentage points
2.1%
2.4%
Future pension increase, -0.25 percentage points
-1.8%
.
-2.3%
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
77 KONE ANNUAL REVIEW 2021
Others
IN THIS SECTION
This section comprises the following notes concerning
rewards and related parties to KONE:
6.1 Management remuneration
6.2 Share-based payments
6.3 Related party transactions
6
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | OTHERS
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | OTHERS
78 KONE ANNUAL REVIEW 2021
6.1 MANAGEMENT REMUNERATION
Antti Herlin has had a separate employment contract for his
role as Full-time Chairman of the Board at KONE until March
2, 2021. The employment-based compensation for Antti Herlin
consisted of a base salary and an annual bonus decided by
the Board on the basis of the Group’s financial result.
The annual bonus may not exceed 100 percent of his annual
salary. In 2021, Antti Herlin’s base salary was EUR 74,600. In
addition, he received a bonus of EUR 290,462, which was
earned in 2020. He was also paid EUR 223,500 as
compensation for serving as Chairman of the Board. Antti
Herlin’s holdings of shares are presented in the table on page
11 1. Statutory pension cost for the year 2021 was EUR
64,433.
A separate employment contract was entered into with
Vice Chairman of the Board Jussi Herlin for his role as the
Executive Vice Chairman of the Board as of March 2, 2021.
The employment-based compensation for Jussi Herlin
consists of a base salary and an annual bonus decided by the
Board on the basis of the Group’s financial result. The annual
bonus may not exceed 100 percent of the recipient’s annual
base salary. In 2021, Jussi Herlin’s base salary was EUR
104,365. In addition, his accrued bonus for 2021 totaled EUR
26,166. This bonus will be paid in 2022. He was also paid
EUR 3,500 in meeting fees for Board and Committee work
during the time preceding March 2, 2021. Jussi Herlin’s
holdings of shares are presented in the table on page 111.
The Executive Vice Chairman’s retirement age and pension
are determined in accordance with Finland’s Pensions Act.
Statutory pension cost for the year 2021 was EUR 16,855. No
separate agreement regarding early retirement has been
made.
The compensation for the President and CEO Henrik
Ehrnrooth consists of a base salary and an annual bonus
determined by the Board on the basis of the Corporation’s key
targets. The annual bonus may not exceed 150 percent of his
annual salary. In 2021, Henrik Ehrnrooth’s base salary was
EUR 750,000. In addition, his accrued bonus for 2021 totaled
to EUR 835,350. The performance criteria applied to this
annual short-term incentive is based on financial, strategic
and individual performance. The bonus will be paid in 2022.
Henrik Ehrnrooth is included in the share -based incentive plan
for the Group’s senior management. In April 2021, on the
basis of the incentive plan for the year 2020, Henrik Ehrnrooth
received a reward of EUR 2,512,242, which consisted of
17,625 KONE class B shares together with a cash payment to
cover taxes and similar charges arising from the receipt of
shares. The maximum number of KONE class B shares
available for earning for the President and CEO for the year
2020 was 30,000 KONE shares. The reward was based on
sales growth and profitability as well as growth of KONE’s
digital services. In January 2021, KONE’s Board of Directors
decided on a new performance share plan. The performance
criteria applied to the 2021 performance year are based on a
combination of annual sales growth and adjusted EBIT
margin, as well as improvements in sustainability. The
sustainability performance condition is a combination of
reductions in carbon footprint, as well as diversity and
inclusion and safety related targets. The maximum number of
shares available for earning for the President and CEO for the
2021 share-based incentive plan is 53,541 KONE class B
shares (gross before deduction for applicable taxes). The final
outcome and any potential share awards under the incentive
plan for the year 2021 will be confirmed in January 2024,
depending on the performance during the years 2021, 2022
and 2023. Henrik Ehrnrooth’s holdings of shares are
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, 2021
Jan 1–Dec 31, 2020
Salaries and other remunerations
9.1
10.1
Share-based payments
12.9
20.1
Total
22.0
30.2
Compensation recognized as an expense for members of the Board of Directors
and the President & CEO, (EUR, thousand) ²
⁾
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Herlin Antti, Chairman of the Board
298.1
535.0
Herlin Jussi, Vice Chairman of the Board ¹
⁾
⁾
107.9
112.4
Ehrnrooth Henrik, President & CEO ¹
⁾
750.0
750.0
Alahuhta Matti
113.0
50.5
Duinhoven Susan
111.0
48.0
Herlin Iiris
111.0
48.5
Kant Ravi
114.0
56.5
Kaskeala Juhani
113.0
50.5
Xin-Zhe Li Jennifer
110.0
-
Brunila Anne*
1.5
49.0
Pietikäinen Sirpa*
1.0
48.5
Total
1,830.5
1,748.9
* Board member until March 2,2021
¹
⁾
during 2022. In April 2021, the share -based payments for the financial year 2020 received by Henrik Ehrnrooth was EUR 2,512,242.
²⁾
February 25, 2021.
³⁾
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | OTHERS
79 KONE ANNUAL REVIEW 2021
presented in the table on page 11 1. Henrik Ehrnrooth’s
retirement age and pension are determined in accordance
with Finland’s Pensions Act. Statutory pension cost for the
year 2021 was EUR 200,825. 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 an annual bonus, based
on the Group’s annual result and the achievement of
individual 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 75 percent of the annual salary. The members of
the Executive Board are included in the share-based incentive
plan for senior management. In April 2021, on the basis of the
incentive plan, the members of the Executive Board received
a reward of 83,897 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
maximum number of shares available for earning for the
Executive Board for the 2021 share -based incentive plan is
233,794 KONE class B shares (gross before deduction for
applicable taxes). The final outcome and any potential share
awards under the incentive plan for the year 2021 will be
confirmed in January 2024, depending on the performance
during the years 2021, 2022 and 2023. The Executive Board
members’ holdings of shares are presented in the table on
page 11 1. 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 carrying value of the pension liability for Board
Member Matti Alahuhta (served as President & CEO until
March 31, 2014) included in the balance sheet is EUR 5.8
million at the end of 2021 and the monthly pension paid by
KONE to him is EUR 22,554 (December 2021).
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | OTHERS
80 KONE ANNUAL REVIEW 2021
Accounting principles
Share-based payments
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 aboutthe 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
sharebased 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 plans
KONE has two separate share-based incentive plans, one
performance share plan and one restricted share plan.
On January 28, 2021, KONE’s Board of Directors decided
on a new performance share plan, which replaced the existing
performance share plans. The new performance plan
continues to emphasize profitable growth and as a new
measure sustainability. It consists of annually commencing
individual share plans, each with a three-year rolling
performance period, after which the potential share awards
vest. If the participant's employment or service relationship
with KONE Group terminates before the end of the
performance period, the participant, as a rule, forfeits the
share award without compensation. 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 target group and
targets within the plan as well as possible rewards are
decided upon annually by the Board. As part of the
performance share 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.
The 2021 performance share plan is targeted to
approximately 55 members of the top management, including
the President and CEO, members of the Executive Board and
other top management, and approximately 500 other selected
key personnel of KONE Group. The performance criteria
applied to the 2021 performance share plan are based on
annual growth in sales, adjusted EBIT margin and
improvements in sustainability. The sustainability performance
condition is a combination of reductions in carbon footprint,
diversity and inclusion as well as safety related targets.
The restricted share plan serves as a complementary long-
term share plan to be used as a commitment instrument for
retention and recruitment purposes for top management
(excluding the President and CEO) and other selected key
persons. The restricted share plan does not have a
performance condition. The plan has a commitment period up
to three years, after which the potentially granted share
awards will be paid to the participant, provided that their
employment or service relationship with KONE Group is in
force at the time of payment.
As part of the previous share-based incentive plan a total
of 171,231 KONE class B shares were delivered in April 2021
to the management as a reward due to the achievement of the
targets for the year 2020 and 155,115 shares in January 2021
to other key personnel. During the year 2021 a total of 8,849
of those KONE class B shares were returned to KONE
Corporation. The maximum number of shares to be delivered
in the first quarter of 2024 as part of the 2021 share-based
incentive plan is 751,334 KONE class B shares based on the
performance period 2021–2023, reduced by an amount of
shares equivalent to the taxes and similar charges that are
incurred by the receipt of shares.
As part of the restricted share plan, the maximum number
of shares granted in 2021 and to be delivered in 2023 is 6,700
KONE class B shares (gross before deduction for applicable
taxes) and 8,950 KONE class B shares (gross before
deduction for applicable taxes) to be delivered in 2024.
6.3 RELATED PARTY TRANSACTIONS
KONE’s related parties comprise its subsidiaries as well as
the Board of Directors, the President & CEO, and the
Executive Board including any companies controlled or
significantly influenced by them. The Corporate 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
Share based incentive plan
Share-based payments recognized as an expense in the statements of income,
MEUR
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
To be paid in shares
28.0
23.4
To be paid in cash
11.4
16.3
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | OTHERS
81 KONE ANNUAL REVIEW 2021
members of the Board of Directors, the President & CEO, the
Executive Board is disclosed on page 111. KONE’s
subsidiaries are disclosed on pages 97–99.
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | PARENT COMPANY STATEMENT OF INCOME
82 KONE ANNUAL REVIEW 2021
PARENT COMPANY STATEMENT OF INCOME
EUR
Note
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Sales
1
705,519,412.07
666,309,719.40
Other operating income
2
16,925,994.41
12,597,014.82
Materials and services
-1,971,238.59
-3,104,920.68
Personnel expenses
3
-142,660,363.96
-161,658,709.12
Depreciation and amortization
4
-15,227,231.21
-15,236,243.68
Other operating expenses
-395,350,143.35
-405,805,333.71
Operating income
167,236,429.37
93,101,527.03
Financing income and expenses
6
341,369,407.91
297,451,763.44
Income before appropriations and taxes
508,605,837.28
390,553,290.47
Appropriations
7
30,930,877.77
41,048,579.61
Income taxes
-34,339,891.92
-40,924,770.98
Deferred taxes
-3,439,629.27
-1,095,576.75
Net income
501,757,193.86
389,581,522.35
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | PARENT COMPANY STATEME NT OF FINANCIAL POSITION
83 KONE ANNUAL REVIEW 2021
Assets, EUR
Note
Dec 31, 2021
Dec 31, 2020
Non-current assets
Intangible assets
8
16,116,546.21
18,278,548.21
Property, plant and equipment
9
40,178,708.16
37,746,453.05
Investments
Subsidiary shares
10
2,050,333,523.58
2,627,011,289.86
Other shares
11
2,460,845.44
2,460,845.44
2,052,794,369.02
2,629,472,135.30
Total non-current assets
2,109,089,623.39
2,685,497,136.56
Current assets
Long-term receivables
12
Loans receivable
192,328,791.72
372,009,023.74
192,328,791.72
372,009,023.74
Short-term receivables
13
Accounts receivable
111,349,087.72
108,111,218.15
Loans receivable
941,765,351.84
722,058,681.04
Deferred tax assets
16,398.13
3,456,027.40
Other receivables
11,821,982.98
15,786,952.75
Deferred assets
326,391,045.80
248,784,957.83
1,391,343,866.47
1,098,197,837.17
Financial investments
1,575,082,252.03
1,509,966,813.95
Cash and cash equivalents
182,453,102.95
158,423,651.17
Total current assets
3,341,208,013.17
3,138,597,326.03
Total assets
5,450,297,636.56
5,824,094,462.59
Equity and liabilities, EUR
Note
Dec 31, 2021
Dec 31, 2020
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
244,987,601.61
326,971,986.85
Retained earnings
610,397,421.37
1,330,105,316.75
Net income
501,757,193.86
389,581,522.35
Total equity
14
1,523,644,763.95
2,213,161,373.06
Cumulative accelerated depreciation
9,502,036.20
8,932,913.97
Appropriations
9,502,036.20
8,932,913.97
Provisions
15
4,168,821.97
4,964,668.60
Liabilities
Non-current liabilities
16
Loans
507,058,858.40
272,550,427.14
507,058,858.40
272,550,427.14
Current liabilities
17
Accounts payable
85,284,752.45
82,095,305.56
Loans
3,130,795,115.29
3,024,448,429.10
Other liabilities
7,890,923.91
34,045,510.30
Accruals
181,952,364.39
183,895,834.86
3,405,923,156.04
3,324,485,079.82
Total liabilities
3,912,982,014.44
3,597,035,506.96
Total equity and liabilities
5,450,297,636.56
5,824,094,462.59
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | PARENT COMPANY CASH FLOW STATEMENT
84 KONE ANNUAL REVIEW 2021
EUR
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Cash receipts from customers
714,972,591.58
805,514,007.31
Cash receipts from other operative income
16,822,694.41
12,542,014.82
Cash paid to suppliers and employees
-566,050,655.47
-586,702,664.86
Financing items
378,316,531.10
235,019,188.40
Taxes paid
-60,127,725.90
-52,206,429.88
Other financing items
-84,078,698.21
67,538,690.58
Cash flow from operating activities
399,854,737.51
481,704,806.37
Capital expenditure
-17,037,594.16
-16,302,543.53
Proceeds from sales of fixed assets
103,300.00
55,000.00
Subsidiary investments
-4,876.04
-
Proceeds from sales and decreases of subsidiary shares
576,682,642.32
276,870.56
Cash flow from investing activities
559,743,472.12
-15,970,672.97
Purchase of own shares
-45,790,737.23
-
Net change in short-term debt
106,346,686.19
916,538,919.31
Net change in long-term debt
234,508,431.26
19,370,091.42
Profit distribution
-1,166,345,136.69
-880,511,060.02
Group contributions received
40,764,865.95
58,400,000.00
Other financing items
-105,052,867.33
-690,570,559.84
Cash flow from financing activities
-935,568,757.85
-576,772,609.13
Change in cash and cash equivalents
24,029,451.78
-111,038,475.73
Cash and cash equivalents, Jan 1
158,423,651.17
269,462,126.90
Cash and cash equivalents, Dec 31
182,453,102.95
158,423,651.17
Change in cash and cash equivalents
24,029,451.78
-111,038,475.73
Reconciliation of net income to the cash flow from
operating activities, EUR
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Net income
501,757,193.86
389,581,522.35
Depreciation and amortization
15,227,231.21
15,236,243.68
Other adjustments
-30,229,771.93
-2,663,581.15
Income before change in working capital
486,754,653.14
402,154,184.88
Change in receivables
-87,621,274.82
16,499,225.51
Change in liabilities
721,359.19
63,051,395.98
Cash flow from operating activities
399,854,737.51
481,704,806.37
PARENT COMPANY CASH FLOW STATEMENT
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
85 KONE ANNUAL REVIEW 2021
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, 2021.
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.
LOAN RECEIVABLES AND FINANCIAL
INVESTMENTS
Loan receivables are initially recognized at nominal values
and subsequently measured at amortized cost. Management
estimates that the fair values of the loan receivables do not
materially differ from the carrying values at the statement of
financial position dates.
Financial investments in commercial papers, short-term
bank deposits, interest rate funds and other money market
instruments 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.
DERIVATIVE INSTRUMENTS
Derivative financial instruments are used to hedge currency
and the interest rate risks. Derivatives are measured at fair
value in accordance with Accounting Act 5:2a §. The fair
values of foreign exchange forward contracts are estimated 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
Leas ing 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.
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
Accounting principles
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
86 KONE ANNUAL REVIEW 2021
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.
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 separate share -based incentive plans covering the
senior management of KONE, other key personnel and
additional targeted to senior management and other key
personnel, excluding President and CEO of KONE. Pursuant
to the share ownership plans, the reward to the management
is either settled with KONE class B shares, or 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 shares to be transferred as part of the plans are obtained
in public trading. The acquisition of shares is recognized as an
increase of own shares, reducing equity, and transfer of
shares as decrease in own shares and retained earnings
within equity.
In 2021, KONE changed its’ accounting policy for
recognition of expense for the share settled part of share-
based payments rewards. Plans for which settlement of
reward is expected to take place in future years, recognition of
expense, if any, have been discontinued. For plans for which
reward has been settled already in prior years in the fair value
of KONE class B shares, as determined at the grant date, the
total expense has been distributed across the vesting period.
The fair value of the share-based payments settled with
cash has been determined so that it covers taxes and social
security costs that are incurred. The cost arising from cash
settled part of share-based payment rewards is recognized as
an expense over the earnings period. The liability recognized
is measured based on the fair value of the shares 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.
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
87 KONE ANNUAL REVIEW 2021
Notes to the statement of income
1. SALES
2. OTHER OPERATING INCOME
EUR 1,000
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Subsidies received
7,455.3
1,429.7
Recharged energy
1,645.4
1,873.1
Service charges
825.9
785.4
Others
6,999.5
8,508.7
Total
16,926.0
12,597.0
3. PERSONNEL EXPENSES
EUR 1,000
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Wages and salaries
119,058.4
145,115.3
Pension costs
20,395.3
13,864.3
Other employment expenses
3,206.6
2,679.1
Total
142,660.4
161,658.7
Sales primarily comprises of sales to subsidiaries, amounting to 705,519.4 (666,309.7) thousand euros, which relates to revenues for
the utilization of intellectual property rights.
In 2021, the salaries and fees paid to the President & CEO and to the Board of Directors were together 5,126.6 (6,621.7) thousand
euros. Average number of staff employed by the parent company was 1,307 during the financial year (1,207)
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
88 KONE ANNUAL REVIEW 2021
4. DEPRECIATION AND AMORTIZATI ON
EUR 1,000
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Intangible rights
270.2
261.6
Other long-term expenditure
7,235.2
7,835.3
Buildings
1,342.8
1,247.6
Machinery and equipment
6,379.0
5,891.8
Total
15,227.2
15,236.2
5. AUDITORS’ FEES
EUR 1,000
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Audit
639.0
613.0
Auditors´ statements
-
21.9
Tax advisory services
13.0
26.7
Other services
65.0
164.8
Total
717.0
826.3
6. FINANCING INCOME AND EXPENSES
EUR 1,000
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Dividend income from subsidiaries
387,900.8
249,410.1
Other dividends received
4.2
3.3
Interest income from subsidiaries
6,741.7
7,119.8
Interest income from others
21,089.0
13,805.0
Interest expenses to subsidiaries
-34,557.6
-35,226.7
Interest expenses to others
-1,205.8
-690.3
Other financing income and expenses
-38,602.9
63,030.5
Total
341,369.4
297,451.8
7. APPROPRIATIONS
EUR 1,000
Jan 1–Dec 31, 2021
Jan 1–Dec 31, 2020
Cumulative accelerated depreciation charge
-569.1
283.7
Group contributions received
31,500.0
40,764.9
Total
30,930.9
41,048.6
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
89 KONE ANNUAL REVIEW 2021
8. INTANGIBLE ASSETS
Jan 1–Dec 31, 2020, EUR 1, 000
Intangible rights
Other long-term
expenditure
Advance payments
Total
Opening gross acquisition cost
4,712.8
124,549.3
1,866.4
131,128.6
Opening 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
Closing gross acquisition cost
4,886.8
132,482.8
-
137,369.6
Closing 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, 2021, EUR 1, 000
Intangible rights
Other long-term
expenditure
Advance payments
Total
Opening gross acquisition cost
4,886.8
132,482.8
-
137,369.6
Opening accumulated amortization and impairment
-4,128.5
-114,962.6
-
-119,091.1
Opening net book value
758.3
17,520.3
-
18,278.5
Opening net book value
758.3
17,520.3
-
18,278.5
Increase
330.1
6,152.4
-
6,482.5
Decrease
-
-1,139.1
-
-1,139.1
Reclassifications
-
-
-
-
Amortization
-270.2
-7,235.2
-
-7,505.4
Closing net book value
818.2
15,298.4
-
16,116.5
Closing gross acquisition cost
5,216.9
126,282.0
-
131,498.9
Closing accumulated amortization and impairment
-4,398.7
-110,983.7
-
-115,382.4
Closing net book value
818.2
15,298.4
-
16,116.5
Notes to the statement of financial position
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
90 KONE ANNUAL REVIEW 2021
9. PROPERTY, PLANT AND EQUIPMENT
Jan 1–Dec 31, 2021, EUR 1, 000
Land
Buildings
Machinery &
equipment
Fixed assets
under
construction
Total
Opening gross acquisition cost
182.3
31,468.7
49,729.0
216.3
81,596.3
Opening accumulated amortization and impairment
-
-11,029.1
-32,820.8
-
-43,849.8
Opening net book value
182.3
20,439.6
16,908.2
216.3
37,746.5
Opening net book value
182.3
20,439.6
16,908.2
216.3
37,746.5
Increase
-
52.4
10,487.8
21.6
10,561.7
Decrease
-
-34.8
-372.8
-
-407.6
Reclassifications
-
-
-
-
-
Depreciation
-
-1,342.8
-6,379.0
-
-7,721.8
Closing net book value
182.3
19,114.3
20,644.1
237.9
40,178.7
Opening gross acquisition cost
182.3
31,472.5
57,689.5
237.9
89,582.2
Opening accumulated amortization and impairment
-
-12,358.1
-37,045.4
-
-49,403.5
Closing net book value
182.3
19,114.3
20,644.1
237.9
40,178.7
Jan 1–Dec 31, 2020, EUR 1, 000
Land
Buildings
Machinery &
equipment
Fixed assets
under
construction
Total
Opening gross acquisition cost
182.3
30,472.6
40,835.7
216.0
71,706.6
Opening accumulated amortization and impairment
-
-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
Opening gross acquisition cost
182.3
31,468.7
49,729.0
216.3
81,596.3
Opening accumulated amortization and impairment
-
-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
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
91 KONE ANNUAL REVIEW 2021
10. SUBSIDIARY SHARES
11. OTHER SHARES
12. LONG-TERM RECEIVABLES
EUR 1,000
Dec 31, 2021
Dec 31, 2020
Acquisition cost, Jan 1
2,627,011.3
2,631,178.2
Increase
4.9
-
Decrease
-576,682.6
-4,166.9
Net book value, Dec 31
2,050,333.5
2,627,011.3
EUR 1,000
Dec 31, 2021
Dec 31, 2020
Acquisition cost, Jan 1
2,460.8
2,462.6
Decrease
-
-1.8
Net book value, Dec 31
2,460.8
2,460.8
EUR 1,000
Dec 31, 2021
Dec 31, 2020
Loans receivable from subsidiaries
190,328.8
371,684.9
Loans receivable from externals
2,000.0
324.1
Long-term receivables
192,328.8
372,009.0
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
92 KONE ANNUAL REVIEW 2021
13. SHORT -TERM RECEIVABLES
Receivables from subsidiaries, EUR 1,000
Dec 31, 2021
Dec 31, 2020
Accounts receivables
110,692.2
107,410.7
Loans receivable
941,765.4
722,058.7
Deferred assets
161,440.2
144,761.3
Total
1,213,897.8
974,230.6
Receivables from externals, EUR 1,000
Dec 31, 2021
Dec 31, 2020
Accounts receivables
656.8
700.5
Others
11,822.0
15,787.0
Deferred assets
164,950.8
104,023.7
Total
177,429.6
120,511.2
Deferred tax assets
16.4
3,456.0
Total short-term receivables
1,391,343.9
1,098,197.8
Deferred assets, EUR 1,000
Dec 31, 2021
Dec 31, 2020
Derivative assets
91,682.4
79,362.2
Deferred income taxes
44,628.8
17,059.7
Unbilled revenue
118,059.8
90,231.8
Group contributions
31,500.0
40,764.9
Others
40,520.1
21,366.3
Total
326,391.0
248,785.0
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
93 KONE ANNUAL REVIEW 2021
14. EQUITY AND CHANGES IN EQUITY
EUR 1,000
premium
reserve
for
Book value Jan 1, 2021
66,174.5
100,328.1
326,972.0
-164,662.0
1,884,348.8
2,213,161.4
Profit distribution
-1,166,345.1
-1,166,345.1
Purchase of own shares
-45,790.7
-45,790.7
Share-based compensation
-81,984.4
11,878.2
90,968.3
20,862.1
Net income for the period
501,757.2
501,757.2
Net book value Dec 31, 2021
66,174.5
100,328.1
244,987.6
-198,574.5
808,971.9
501,757.2
1,523,644.8
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 1,357,142,216.84 (2,046,658,825.95) at the end of the period. As at 31 December,
2021 cost recognized in prior years for the share settled part of share-based payment rewards in the cumulative amount of EUR 82,315
thousand has been reclassified from paid-up unrestricted equity reserve to retained earnings. Further, EUR 20,531 thousand of accrued
expenses have been reclassified to retained earning pertaining to share based payments arrangements where payment of the reward
has not yet taken place.
EUR 1,000
premium
reserve
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
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
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
94 KONE ANNUAL REVIEW 2021
15. PROVISIONS
16. NON-CURRENT LIABILITIES
EUR 1,000
Dec 31, 2021
Dec 31, 2020
Warranty provisions
4,168.8
4,964.7
Total
4,168.8
4,964.7
Liabilities to subsidiaries, EUR 1,000
Dec 31, 2021
Dec 31, 2020
Liabilities falling due in 1–5 years
307,058.9
272,550.4
Total
307,058.9
272,550.4
Liabilities to externals, EUR 1,000
Dec 31, 2021
Dec 31, 2020
Liabilities falling due in 1–5 years
200,000.0
-
Total
200,000.0
-
Total non-current liabilities
507,058.9
272,550.4
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
95 KONE ANNUAL REVIEW 2021
17. CURRENT LIABILITIES
Liabilities to subsidiaries, EUR 1,000
Dec 31, 2021
Dec 31, 2020
Accounts payable
26,935.9
15,888.1
Loans
3,130,795.1
2,864,448.4
Accruals
75,744.4
42,226.1
Total
3,233,475.4
2,922,562.6
Liabilities to externals, EUR 1,000
Dec 31, 2021
Dec 31, 2020
Accounts payable
58,348.8
66,207.2
Loans
-
160,000.0
Other liabilities
7,890.9
34,045.5
Accruals
106,208.0
141,669.7
Total
172,447.7
401,922.5
Total current liabilities
3,405,923.2
3,324,485.1
Accruals, EUR 1,000
Dec 31, 2021
Dec 31, 2020
Accrued wages, salaries and employment costs
36,339.9
33,347.7
Derivative liabilities
51,135.2
84,290.9
Others
94,477.3
66,257.2
Total
181,952.4
183,895.8
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
96 KONE ANNUAL REVIEW 2021
18. COMMITMENTS
EUR 1,000
Dec 31, 2021
Dec 31, 2020
Guarantees
For subsidiaries
2,778,456.8
2,731,483.7
For others
79.2
80.9
Leasing commitments
Due next year
6,232.2
7,359.9
Due over a year
14,384.3
7,182.9
Other commitments
1,654.2
3,774.7
Total
2,800,806.7
2,749,882.1
19. DERIVATIVES
Fair values of derivative instruments, EUR 1,000
Dec 31, 2021
Dec 31, 2020
Foreign exchange forward contracts with external parties
42,112.4
-9,072.1
Foreign exchange forward contracts with subsidiaries
-1,565.2
4,143.5
Total
40,547.1
-4,928.7
Nominal values of derivative instruments, EUR 1,000
Dec 31, 2021
Dec 31, 2020
Foreign exchange forward contracts with external parties
3,278,646.5
3,450,680.9
Foreign exchange forward contracts with subsidiaries
623,535.1
667,343.7
Total
3,902,181.6
4,118,024.7
Derivative contracts are entered for hedging purposes in line with KONE Treasury policy and are 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
97 KONE ANNUAL REVIEW 2021
SUBSIDIARIES
SUBSIDIARIES, DEC 31, 2021
1)
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 W.L.L.
0
KONE Elevators W.L.L.
49
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
Shareholding %
Country/Region
Company
Group
Parent
company
Finland
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 ATS 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
Multitech's S.A.S.
100
Prokodis S.A.S.
100
R.M.D. S.A.S.
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
KONE GmbH
100
KONE Montage GmbH
100
KONE Servicezentrale GmbH
100
SK-Fördertechnik GmbH
100
Greece
KONE S.A.
100
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | SUBSIDIARIES
98 KONE ANNUAL REVIEW 2021
Shareholding %
Country/Region
Company
Group
Parent
company
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
PT. Mitra Indo Utama
0
Ireland
Ennis Lifts Limited
100
KONE (Ireland) Limited
100
Israel
KONE LTD
100
100
Italy
Ascensori & Ascensori S.r.l.
64
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
Ferrara Ascensori S.r.l.
60
Gianfranceschi Ascensori S.r.l.
100
GSB Ascensori S.r.l.
65
ITA S.r.l.
100
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
Rimma S.r.l.
60
Slimpa S.p.A.
100
Shareholding %
Country/Region
Company
Group
Parent
company
Italy
Tecnocram S.r.l.
84
Tosca Ascensori S.r.l.
66.67
Unilift S.r.l.
78.54
Kazakhstan
KONE Kazakhstan LLP
100
Kenya
KONE Kenya Limited
49
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 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
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
100
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
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
CONSOLIDATED FINANCIAL STATEMENTS | PARENT COMPANY FINANCIAL STATEMENTS | SUBSIDIARIES
99 KONE ANNUAL REVIEW 2021
Shareholding %
Country/Region
Company
Group
Parent
company
Serbia
KONE d.o.o. Beograd-Novi Beograd
100
Singapore
KONE Pte Ltd
100
Slovak Republic
KONE s.r.o.
100
100
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 Muguerza, S.A.U.
100
Ascensores R Casado, S.A.
100
Spain
Baleares Elevación, S.L.
100
KONE Elevadores, S.A.
100
99.99
Sweden
KONE 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
Shareholding %
Country/Region
Company
Group
Parent
company
Thailand
Thai Elevators and Escalators Company Limited
74
Thai Elevators Holding Company Limited
49
Tunisia
KONE Elevators & Escalators Assembly
100
KONE Elevators & Escalators Sarl
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
KONE (NI) Limited
100
KONE Pension Trustees Ltd.
100
KONE Plc
100
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
1)
consolidated financial statements.
DIVIDEND PROPOSAL, SIGNATURES FOR THE BOARD OF DIRECTORS’ REPORT AND FINANCIAL STATEMENTS AND AUDITOR’S NOTE
100 KONE ANNUAL REVIEW 2021
DIVIDEND PROPOSAL
The parent company’s non-restricted equity on December
31, 2021 is EUR 1,357,142,216.84 of which the net income
for the financial year is EUR 501,757,193.86.
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 1.7500 on
the outstanding 441,753,623 class B shares. Further, the
Board proposes an extra dividend of EUR 0.3475 to be
paid on the outstanding 76,208,712 class A shares and
EUR 0.3500 on the outstanding 441,753,623 class B
shares, resulting in a total amount of proposed dividend of
EUR 1,087,339,859.94. The Board of Directors further
proposes that the remaining non-restricted equity, EUR
269,802,356.90 be retained and carried forward.
The Board proposes that the dividends be payable from
March 10, 2022.
DIVIDEND PROPOSAL, SIGNATURES FOR THE BOARD OF DIRECTORS´ REPORT AND
FINANCIAL STATEMENTS AND AUDITOR´S NOTE
SIGNATURES FOR THE FINANCIAL STATEMENTS AND BOARD OF DIRECTORS’ REPORT
Helsinki, February 2, 2022
Antti Herlin Iiris Herlin
Jussi Herlin Ravi Kant
Matti Alahuhta Juhani Kaskeala
Susan Duinhoven Henrik Ehrnrooth,
THE AUDITOR’S NOTE
Our auditor´s report has been issued today.
Helsinki, February 2, 2022
Ernst & Young Oy
Authorized Public Accountants
Heikki Ilkka
Authori zed Public Accountant
AUDITOR’S REPORT
101 KONE ANNUAL REVIEW 2021
AUDITOR´S REPORT
To the Annual General Meeting of KONE Oyj
Report on the Audit of the Financial Statements
OPINION
We have audited the financial statements of KONE Oyj (business identity code 1927400-1) for
the year ended 31 December, 2021. The financial statements comprise the consolidated
statement of financial position, statement of income, statement of comprehensive income,
statement of changes in equity, statement of cash flows and notes, including summaries of
significant accounting policies, as well as the parent company’s statement of financial
position, statement of income, cash flow statement and notes.
In our opinion
●
position as well as its financial performance and its cash flows in accordance with
International Financial Reporting Standards (IFRS) as adopted by the EU.
●
performance and financial position in accordance with the laws and regulations governing
the preparation of financial statements in Finland and comply with statutory requirements.
Our opinion is consistent with the additional report submitted to the Audit Committee
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 Financial Statements
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.
In our best knowledge and understanding, the non-audit services that we have provided to the
parent company and group companies are in compliance with laws and regulations applicable
in Finland regarding these services, and we have not provided any prohibited non-audit
services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we
have provided have been disclosed in note 2.2 to the consolidated financial statements and
note 5 to the parent company financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
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.
We have fulfilled the responsibilities described in the
Auditor’s responsibilities for the audit of
the financial statements
Accordingly, our audit included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the financial statements. The results of
our audit procedures, including the procedures performed to address the matters below,
provi de the basis for our audit opinion on the accompanying financial statements.
AUDITOR’S REPORT
102 KONE ANNUAL REVIEW 2021
We have also addressed the risk of management override of internal controls. This includes
consideration of whether there was evidence of management bias that represented a risk of
material misstatement due to fraud.
Key Audit Matter
How our audit addressed the Key Audit Matter
Revenue recognition of new equipment and modernization sales and related accruals
The accounting principles and disclosures about revenue recognition of new equipment and
modernization sales and related accruals are included in notes 1 and 2.1.
In accordance with its accounting principles KONE applies the percentage of completion (PoC)
method for recognizing revenue over time from new equipment and modernization contracts.
The percentage of completion is based on the cost-to-cost method. In year 2021, approximately
68 % percent of the KONE´s sales of 10,5 billion euro were recognized under the PoC method.
The recognition of revenue by applying PoC method and the estimation of the outcome of
projects require significant management judgement in estimating the cost-to-complete. We
assessed the risk to mainly relate to the stage of completion of projects, which were incomplete
at 31 December 2021.
The Group makes several types of accruals related to risks associated with revenue recognition
by applying PoC method. These accruals require high level of management judgment.
Based on above, revenue recognition based on PoC method, including related accruals, was a
key audit matter. Revenue recognition based on PoC method was also a significant risk of
material misstatement referred to in EU Regulation No 537/2014, point (c) of Article 10(2).
Our audit procedures to address the risk of material misstatement in respect of the revenue
recognition from new equipment and modernization projects and related provisions, included,
among others:
●
recognition of project related accruals;
●
●
written communication;
●
inputs of estimates in the calculations, as well as comparing the estimates to actuals;
●
●
o
related accruals and receipts of project payments, and
o
financial organization; and
●
matters that could affect the project estimates and provisions;
●
Valuation of accounts receivable
The accounting principles and disclosures relating to accounts receivable are included in notes
1 and 3.2.
Valuation of accounts receivable was a key audit matter due to the significance of the account
balance and because valuation requires management to make significant judgments especially
due to prolonged COVID-19 pandemic related considerations. Valuation of accounts receivable
requires management to evaluate the probability of the recoverability of receivables and to
record an impairment loss for doubtful accounts over the portion for which payment is unlikely.
As of balance sheet date 31 December 2021, the carrying value of accounts receivable
amounted to 2 421,4 million euros.
The carrying value of account receivable shown in the balance sheet as of 31 December 2021
is a result of gross receivables deducted by reserve of expected credit losses which is based on
management’s judgment and amounting to 284,4 million euros as of 31 December 2021.
We performed, among others, the following audit procedures:
●
performed quarterly analyses of overdue and undue gross receivable balance
development and corresponding movement in expected credit loss reserve during the year.
●
receivable balances to subsequent cash receipts.
●
aged and overdue receivables considering historical payment patterns as well as recent
communications with the counterparties and dunning procedures.
●
receivables.
AUDITOR’S REPORT
103 KONE ANNUAL REVIEW 2021
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 going
concern, disclosing, as applicable, matters relating to going concern and using 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 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 on 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 aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of the 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:
●
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.
●
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.
●
accounting estimates and related disclosures made by management.
●
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.
●
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.
●
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 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 2021
Other Reporting Requirements
INFORMATION ON OUR AUDIT ENGAGEMENT
We were appointed as auditors by the Annual General Meeting with effect from 2 March 2021.
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 Report, but does not include the financial statements and our auditor’s
report thereon. We have obtained the report of the Board of Directors prior to the date of this
auditor’s report, and the Annual Report is expected to be made available to us after that date.
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 identified above 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 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 and 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 on the other information that we obtained prior to the
date of this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Helsinki, 2 February, 2022
Ernst & Young Oy
Authorized Public Accountant Firm
Heikki Ilkka
Authorized Public Accountant
AUDITOR’S ESEF ASSURANCE REPORT
105 KONE ANNUAL REVIEW 2021
INDEPENDENT AUDITOR’S REPORT ON KONE OYJ’S ESEF CONSOLIDATED FINANCIAL
STATEMENTS
To the Board of Directors of KONE Oyj
We have performed a reasonable assurance engagement on the iXBRL tagging of the
consolidated financial statements included in the digital files 2138001CNF45JP5XZK38-2021-
12-31-FI.zip of KONE Oyj for the financial year 1.1. – 31.12.2021 to ensure that the financial
statements are tagged with iXBRL mark ups in accordance with the requirements of Article 4
of EU Commission Delegated Regulation (EU) 2018/815 (ESEF RTS).
RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND MANAGING DIRECTOR
The Board of Directors and Managing Director are responsible for the preparation of the
Report of Board of Directors and financial statements (ESEF financial statements) that comply
with the ESEF RTS. This responsibility includes:
●
●
statements by using the iXBRL mark ups in accordance with Article 4 of ESEF RTS
●
statements
The Board of Directors and Managing Director are also responsible for such internal control
as they determine is necessary to enable the preparation of ESEF financial statements in
accordance the requirements of ESEF RTS.
AUDITOR’S INDEPENDENCE AND QUALITY CONTROL
We are independent of the company in accordance with the ethical requirements that are
applicable in Finland and are relevant to the engagement we have performed, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
The auditor applies International Standard on Quality Control (ISQC) 1 and therefore
maintains a comprehensive quality control system including documented policies and
procedures regarding compliance with ethical requirements, professional standards and
applicable legal and regulatory requirements.
AUDITOR’S RESPONSIBILITIES
In accordance with the Engagement Letter we will express an opinion on whether the
electronic tagging of the consolidated financial statements complies in all material respects
with the Article 4 of ESEF RTS. We have conducted a reasonable assurance engagement in
accordance with International Standard on Assurance Engagements ISAE 3000.
The engagement includes procedures to obtain evidence on:
●
statements complies in all material respects with Article 4 of the ESEF RTS
●
statements
The nature, timing and extent of the procedures selected depend on the auditor’s judgement
including the assessment of risk of material departures from requirements sets out in the
ESEF RTS, whether due to fraud or error.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our statement.
AUDITOR’S ESEF ASSURANCE REPORT
106 KONE ANNUAL REVIEW 2021
OPINION
In our opinion the tagging of the consolidated financial statement included in the ESEF
financial statements of KONE Oyj for the year ended 31.12.2021 complies in all material
respects with the requirements of ESEF RTS.
Our audit opinion on the consolidated financial statements of KONE Oyj for the year ended
31.12.2021 is included in our Independent Auditor’s Report 2.2.2022. In this report, we do not
express an audit opinion or any other assurance on the consolidated financial statements.
Helsinki, 2 February, 2022
Ernst & Young Oy
Authorized Public Accountant Firm
Heikki Ilkka
Authorized Public Accountant
CORPORATE GOVERNANCE STATEMENT
107 KONE ANNUAL REVIEW 2021
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 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 23 percent of its shares. The
significant entrepreneurial risk associated with ownership is
considered to justify the main shareholder serving as the
Chairman of the Board of Directors and of its Nomination and
Compensation Committee 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 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
◾
possible appointment of a full-time Chairman of the
Board, executive Vice 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 by 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. It also deals with the
Corporation’s internal audit plans and reports. The Head of
Assurance reports the internal audit results to the Committee.
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
CORPORATE GOVERNANCE STATEMEN T
CORPORATE GOVERNANCE STATEMENT
108 KONE ANNUAL REVIEW 2021
More information
The most significant risks and uncertainties related to
KONE’sbusiness are described in the Board of
Directors’ Report. Financial risk management is
described in note 2.4 and 5.3.
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
Chairman of the Board, executive Vice Chairman of the
Board and the President and CEO
KONE Corporation’s Board of Directors appoints Chairman of
the Board, the possible executive Vice Chairman of the Board
and the President and CEO. The Board determines the terms
and conditions of employment of the executive Vice Chairman
of the Board and the President and CEO, and these are
defined in their respective written contracts. The Chairman of
the Board and the Vice Chairman of the Board prepare
matters to be considered by the Board together with the
President and CEO and the corporate staff. The Chairman of
the Board, the Vice 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’s 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 a 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, a 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 changes and
developments from the business operations and information
systems.
KONE’s 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, 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,
CORPORATE GOVERNANCE STATEMENT
109 KONE ANNUAL REVIEW 2021
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 management’s
ongoing business supervision and monitoring. KONE has
established Financial Control Models for the 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 the 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 function, which is
separate from the management. The KONE Assurance
function is responsible for auditing both the internal control
system and the management of business risks. It reports its
findings to the Audit Committee. The Head of Assurance
reports to the Vice Chairman of the Board.
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 for 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 of 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 on
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 also encompasses 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.
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 the 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. Projec t-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 2021
Annual General Meeting
The Annual General Meeting was held in Helsinki, Finland on
March 2, 2021. The meeting was held based on the so-called
temporary act so that shareholders participated in the meeting
and exercised their shareholder rights only by voting in
advance and by submitting counterproposals and asking
questions in advance.
Board of Directors and committees
The Annual General Meeting elected eight members to
KONE’s Board of Directors. The Chairman of the Board of
Directors of KONE Corporation is Antti Herlin. Jussi Herlin is
the executive Vice Chairman of the Board. The other
members of the Board are Matti Alahuhta, Susan Duinhoven,
Iiris Herlin, Ravi Kant, Juhani Kaskeala and Jennifer Xin-Zhe
Li. Out of the eight Board Members, five are male and three
females .
Of the Board members, Matti Alahuhta, Susan Duinhoven,
Iiris Herlin, Ravi Kant, Juhani Kaskeala and Jennifer Xin-Zhe
Li are independent of the Corporation. With the exception of
Antti Herlin, Iiris Herlin and Jussi Herlin, the other Board
CORPORATE GOVERNANCE STATEMENT
110 KONE ANNUAL REVIEW 2021
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
members are independent of the Corporation’s significant
shareholders.
The Board of Directors convened seven times in 2021,
with an average attendance rate of 100%. 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), Matti Alahuhta
(independent member), and Jussi Herlin.
The Audit Committee held three meetings in 2021, with an
average attendance rate of 100%
Kristian Snäll serves as the Head of Assurance.
Nomination and compensation committee
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 four
meetings in 2021, with an average attendance rate of 100%.
Compensation and other benefits of the Board of
Directors
The Annual General Meeting of KONE Corporation in March
2021 confirmed the fees of the members of the Board as
follows (annual fees in EUR):
Chairman of the Board 220, 000
Vice Chairman 125,0 00
Member 110 ,000
Of the remuneration, 40 percent was paid in class B shares of
KONE Corporation and the rest in cash. Annual board fee is
not paid to a board member who is employed by the company
with a separate employment contract. 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 and
the Vice Chairman
Antti Herlin has had a separate employment contract for his
role as Full-time Chairman of the Board at KONE until March
2, 2021. The employment-based compensation for Antti Herlin
consisted of a base salary and an annual bonus decided by
the Board on the basis of the Group’s financial result. The
annual bonus may not exceed 100 percent of the recipient’s
annual salary. In 2021, Antti Herlin’s base salary was EUR
74,600. In addition, he received a bonus of EUR 290,462
which was earned in 2020. He was also paid EUR 223,500 as
compensation for serving as Chairman of the Board. Antti
Herlin’s holdings of shares are presented in the table on page
11 1.
A separate employment contract was entered into with
Vice Chairman of the Board Jussi Herlin for his role as the
Executive Vice Chairman of the Board as of March 2, 2021.
The employment-based compensation for Jussi Herlin
consists of a base salary and an annual bonus decided by the
Board on the basis of the Group’s financial result. The annual
bonus may not exceed 100 percent of the recipient’s annual
base salary. In 2021, Jussi Herlin’s base salary was EUR
104,365. In addition, his accrued bonus for 2021 totaled EUR
26,166. This bonus will be paid in 2022. He was also paid
EUR 3,500 in meeting fees for Board and Committee work
during the time preceding March 2, 2021. Jussi Herlin’s
holdings of shares are presented in the table on page 111.
The Executive Vice Chairman’s retirement age and pension
are determined in accordance with Finland’s Pensions Act. No
separate agreement regarding early retirement 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 base
salary and an annual bonus determined by the Board on the
basis of the Corporation’s key targets. The annual bonus may
not exceed 150 percent of the recipient’s annual salary.
Henrik Ehrnrooth’s annual base salary is EUR 750,000. In
addition, his accrued bonus for 2021 totaled EUR 835,350.
The performance criteria applied to this annual short-term
incentive is based on financial, strategic and individual
performance. The bonus will be paid in 2022.
Henrik Ehrnrooth is included in the share -based incentive
plan for the Group’s senior management. In April 2021, on the
Number of Board and Committee meetings in 2021 and participant attendance:
Board
Audit Committee
Nomination and
Compensation
Committee
Antti Herlin
7/7
1/1
4/4
Jussi Herlin
7/7
3/3
4/4
Matti Alahuhta
7/7
2/2
4/4
Susan Duinhoven
7/7
Iiris Herlin
7/7
Ravi Kant
7/7
3/3
Juhani Kaskeala
7/7
4/4
Jennifer Xin-Zhe Li
6/6
Anne Brunila
1/1
1/1
Sirpa Pietikäinen
1/1
Anne Brunila and Sirpa Pietikäinen served as Board members until March 2,2021. Jennifer Xin-Zhe Li was elected to the Board on March 2,2021.
CORPORATE GOVERNANCE STATEMENT
111 KONE ANNUAL REVIEW 2021
basis of the incentive plan for the year 2020, Henrik Ehrnrooth
received a reward of EUR 2,512,242 which consisted of
17,625 KONE class B shares together with a cash bonus to
cover taxes and similar charges arising from the receipt of
shares. The maximum number of KONE class B shares
available for earning for the President and CEO for the year
2020 was 30,000 KONE shares. The reward was based on
sales growth and profitability as well as growth of KONE’s
digital services.
In January 2021, KONE’s Board of Directors decided on a
new performance share plan. The performance criteria
applied to the 2021 performance year are based on a
combination of annual sales growth and adjusted EBIT
margin, as well as improvements in sustainability. The
sustainability performance condition is a combination of
reductions in carbon footprint, as well as diversity and
inclusion and safety related targets. The maximum number of
shares available for earning for the President and CEO for the
2021 share-based incentive plan is 53,541 KONE class B
shares (gross before deduction for applicable taxes). The final
outcome and any potential share awards under the incentive
plan for the year 2021 will be confirmed in January 2024,
depending on the performance during the years 2021, 2022
and 2023.
Henrik Ehrnrooth’s holdings of shares are presented in the
adjacent table.
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 2021, KONE’s Executive Board consisted of the President
and CEO and 12-13 Members. Henrik Ehrnrooth serves as
President and CEO. The other members of the Executive
Board in 2021 were Axel Berkling, Klaus Cawén (until January
31, 2021), Hugues Delval, Johannes Frände (as of February
1, 2021), Samer Halabi (as of May 1, 2021), Ilkka Hara,
Thomas Hinnerskov, William Johnson, Mikko Korte, Maciej
Kranz, Pierre Liautaud (until March 31, 2021), Tomio Pihkala,
Ken Schmid, Susanne Skippari and Tricia Weener (as of
January 18, 2021).
Compensation and other benefits of the Executive
Board
The compensation for the members of the Executive Board
comprises a base salary and an annual bonus, based on the
Group’s annual result and the achievement of individual
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 75 percent of the annual salary.
The members of the Executive Board are included in the
share -based incentive plan for senior management. In April
2021, on the basis of the incentive plan, the members of the
Executive Board received a reward of 83,897 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 maximum number of shares available
for earning for the Executive Board for the 2021 share-based
incentive plan is 233,794 KONE class B shares (gross before
Shareholdings and options of KONE Board and Management on Dec 31, 2021 and changes in shareholding during the
period Jan 1–Dec 31, 2021
Class A share
Change
Class B shares
Change
Alahuhta Matti
754,917
+623
Berkling Axel
68,974
+7,050
Delval Hugues
54,602
+7,403
Duinhoven Susan
974
+623
Ehrnrooth Henrik
385,014
+13,742
Frände Johannes
952
+259
Halabi Samer
32,111
+2,820
Hara Ilkka
55,683
+7,168
Herlin Antti
70,561,608
-
49,949,192
+2,211,246
Herlin Iiris
135,964
+623
Herlin Jussi
109,667
0
Hinnerskov Thomas
62,229
+7,050
Johnson William
77,787
-56,335
Kant Ravi
3,117
+623
Kaskeala Juhani
3,941
+623
Korte Mikko
67,256
+198
Kranz Maciej
45,063
+7,050
Xin-Zhe Li Jennifer
623
+623
Pihkala Tomio
113,658
+7,050
Schmid Ken
24,516
+6,698
Skippari Susanne
32,898
-6,784
Weener Tricia
0
0
Anne Brunila and Sirpa Pietikäinen were members of the Board of Directors until March 2, 2021 and owned 3,334 and 8,494 KONE class B shares on that date.
Klaus Cawén was a member of the Executive Board until January 31, 2021 and owned 368,312 KONE class B shares on that date. Pierre Liautaud was a member
of the Executive Board until March 31, 2021 and owned 53,296 KONE class B shares on that date.
The shares owned by companies in which the Board Member or Management exercises controlling power and by minor children are also included in these
shareholdings.
CORPORATE GOVERNANCE STATEMENT
112 KONE ANNUAL REVIEW 2021
More information
Board of Directors page 113
Executive Board pages 114-115
More information
As of July 3, 2016, the trades of KONE Board and
Management are published as stock exchange releases.
deduction for applicable taxes). The final outcome and any
potential share awards under the incentive plan for the year
2021 will be confirmed in January 2024, depending on the
performance during the years 2021, 2022 and 2023. 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 Executive Board members’ holdings of shares are
presented in the table above.
Auditing
As of March 2, 2021, KONE Corporation’s Auditor is audit firm
Ernst & Young Oy. The fees to Ernst & Young Oy for 2021
were EUR 3.2 million for auditing and EUR 86 thousand for
other consulting services.
Insiders
The shareholding of the members of the Board of Directors,
the Management of KONE and the corporations under their
control amounted to 122,540,746 shares on December 31,
2021, which represents 23.1 % of total shares and 62.3 % of
voting rights. Antti Herlin’s ownership is 120,510,800 shares
and 75,556,527 votes. The individual holdings of the members
of the Board of Directors and Management of KONE, and the
changes occurred in them during the financial year, are
presented on page 111.
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 or the members
of the Executive Board including any companies controlled or
significantly influenced by them.
CORPORATE GOVERNANCE STATEMENT
113 KONE ANNUAL REVIEW 2021
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 Executive Chairman of the Board of KONE 2006–
2021, 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, and Chairman of the Board of the Tiina and Antti
Herlin Foundation.
Jussi Herlin
Vice Chairman of the Board
b. 1984, M.Sc. (Econ)
Member of the Board since 2012.
Serves as Executive Vice Chair of the Board of KONE since
2021 and Vice Chair of the Board since 2014. Previously
served as Senior Business Analyst and Strategy Development
Manager at KONE 2016 –2020, as Consultant at Accenture
2012 –2014, and as Deputy Member of the Board of KONE
Corporation 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,
Member of the Board of the Confederation of Finnish
Industries, Member of the Board of Technology Industries of
Finland, and Member of the Board of the Finnish Foundation
for Share Promotion.
Matti Alahuhta
b. 1952, D. Sc. (Tech.), D.Sc. (Tech.) h.c.
Member of the Board since 2003.
Previously served as President and CEO of KONE 2006–
2014, as President of KONE 2005–2006, 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 and Member of the Board of AB
Volvo.
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. 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 at Tata Motors 1999–
2014 (as Managing Director and CEO 2005 –2009 and after
that as the Vice Chairman of the Board of Directors until
2014). Prior to that, he served as Director, Consumer
Electronics at Philips India, as Director (Marketing) at LML
Ltd., and as Vice President (Marketing) at Titan Watches Ltd.
Current key positions of trust are Member of the Board of
Hawkins Cookers Ltd 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.
Serves as Managing Director of Admiral Consulting Oy since
2011. Previously served in the Finnish Defence Forces in
several positions 1965–2009, latest 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.
Jennifer Xin-Zhe Li
b. 1967, MBA
Member of the Board since 2021.
Previously served as CEO of Baidu Capital, China 2017–
2018, CFO of Baidu, China 2008–2017, and in different
positions at General Motors (GM) 1994–2008 (as Controller,
North American Operations, GMAC U.S. 2005–2008, as CFO,
GM China 2004–2005, as Controller and Treasurer, GM
China 2001–2004, as Corporate Finance Member, GM
Singap ore 1999–2001, and as Senior Financial analyst, both
at GM U.S. and at GM Canada 1994–1999).
Current key positions of trust are Member of the Board of ABB
Ltd, Member of the Board of Flex Ltd (Singapore / U.S), and
Member of the Board of Full Truck Alliance Co. Ltd (Cayman
Islands / P.R. China).
Anne Brunila and Sirpa Pietikäinen served as Board members
until March 2,2021. Jennifer Xin-Zhe Li was elected to the
Board on March 2,2021.
BOARD OF DIRECTORS
CORPORATE GOVERNANCE STATEMENT
114 KONE ANNUAL REVIEW 2021
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
Central and North Europe
b. 1967, M.Sc. (Econ)
Member of the Executive Board since 2016. Employed by
KONE since 1998.
Previously served at KONE as Executive Vice President
responsible for Asia-Pacific 2016–2021 and Managing
Director for KONE Germany 2012–2016. Prior to that 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.
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.
Johannes Frände
General Counsel
b. 1979, LL.M., M.Sc. (Computer Science)
Member of the Executive Board since February 2021.
Employed by KONE since 2012.
Previously served as Head of Legal for KONE's Service
Business and KONE's Technology and Innovation unit 2017–
2021 and as Senior Legal Counsel 2012–2016. Prior to joining
KONE, Johannes worked as an attorney at Roschier
Attorneys Ltd. 2005–2007 and 2009 –2012 and at Debevoise
& Plimpton LLP 2008–2009.
Samer Halabi
Asia-Pacific
b. 1970, M.Sc. (Mechanical Engineering)
Member of the Executive Board since May 2021. Employed
by KONE since 2001.
Previously served at KONE as Regional Managing Director for
KONE Middle East and Africa 2010 –2021. Prior to that Samer
has held various leadership positions in the region, including
Managing Director for KONE Qatar 2007–2010 and Managing
Director for KONE Distributor Business 2004–2007.
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
South Europe, Middle-East and Africa
b. 1971, M.Sc. (Finance and Accounting)
Member of the Executive Board and employed by KONE
since 2016.
Previously served at KONE as Executive Vice President
responsible for Central and North Europe 2016–2021. Prior to
joining KONE, Thomas served as Regional CEO for ISS
Western Europe 2016 and for ISS APAC 2012 –2016. He has
also held 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,
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
115 KONE ANNUAL REVIEW 2021
More information
Corporate governance page 107
More information
Shareholdings of KONE Corporation’s public insiders are
available on page 111
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.
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 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
Armatury Group.
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 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.
Tricia Weener
Marketing and Communications
b. 1970, B.A. Business studies
Member of the Executive Board and employed by KONE
since January 2021.
Previously served at HSBC as Chief Marketing Officer,
Commercial & Global Banking & Markets 2019–2020 and
Commercial Banking 2016–2020, Group Head of Brand
Partnerships 2017–2019, Asia Head of Marketing,
Commercial & Global Banking & Markets 2013-2019, Head of
Integrated Marcoms 2011 –2013, and Europe Head of
Marketing and Comms, Commercial Bank 2009–2011. Prior to
HSBC, Tricia was the CEO and Founder of Intelligent
Marketing & Communications Ltd 2003–2009, worked at The
Marketing Partnership Ltd 1997–2003, ALPHA Airports Group
1996 -1997 and British Aerospace Defence Ltd 1989–1994.
Susanne Skippari served as interim Executive Vice President,
Marketing and Communications until January 18, 2021. Klaus
Cawén served as Executive Vice President responsible for
M&A, Strategic Alliances and Legal Affairs until January 31,
2021 and Pierre Liautaud served as Executive Vice President
responsible for South Europe, Middle East and Africa until
March 31, 2021.
After the reporting period, on January 18, 2022, KONE
announced that Thomas Hinnerskov, Executive Vice
President responsible for South Europe, Middle East and
Africa, has decided to leave KONE for a position outside the
company latest at the end of May 2022.
CORPORATE GOVERNANCE STATEMENT
116 KONE ANNUAL REVIEW 2021
More information
The Board of Directors’ proposal for the distribution of
profit, page 100.
Shares and shareholders, page 28.
Annual General Meeting
KONE Corporation’s Annual General Meeting will be held on
Tuesday 1 March 2022 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 2021 dividend of EUR
1.7475 be paid for each class A share and a dividend of EUR
1.7500 be paid for each class B share. Further, the Board
proposes an extraordinary dividend of EUR 0.3475 to be paid
on the outstanding class A shares and EUR 0.3500 on the
outstanding class B shares, resulting total dividend of 2.0950
per class A share and 2.1000 per class B share. All shares
existing on the dividend record date, March 3, 2022 are
entitled to the dividend. The dividend is proposed to be paid
on March 10, 2022.
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.
INFORMATION FOR SHAREHOLDERS
CORPORATE GOVERNANCE STATEMEN T
117 KONE ANNUAL REVIEW 2021
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. The aim of 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 that of all other communication with
investors and analysts is to accomplish this task.
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 are 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 and other means of
communication.
Contact information
Natalia Valtasaari
Head of Investor Relations
Tel. +358 (0)204 75 4705
investors@kone.com
KONE’s financial reporting schedule 2022
Financial Statement Bulletin and Financial Statements for 2021
Wednes day, February 2, 2022
Interim report for January 1–March 31, 2022
Wednesday, April 27, 2022
Half-year Financial Report for January 1–June 30, 2022
Wedne sday, July 20, 2022
Interim report for January 1–September 30, 2022
Thursday, October 27, 2022
KONE will publish its Sustainability Report for the year 2021 during the second quarter of 2022.
118 KONE ANNUAL REVIEW 2021
This report 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.
119 KONE ANNUAL REVIEW 2021
Front and back cover reference images
With an estimated 25 million visitors over the 6
months the Expo 2020 Dubai is open, the event
brings the world together. At the Expo, a striking
tent-meets-snow motif forms the basis for the
structure that is the Finland Pavilion. The theme for
Finland is ‘Sharing future happiness’ – a task that it
will accomplish by showcasing the best and
brightest in Finnish expertise, innovations, and
solutions. KONE is helping provide smooth people
flow and multisensory experiences to visitors to the
pavilion. The company has a lot to offer when it
comes to technology and know-how on enabling
smart and sustainable urbanization with an
emphasis on well-being and happiness.
KONE
CORPORATION
Corporate Offices
Tel. +358 (0)204 751
www.kone.com
For further information
please contact
Natalia Valtasaari
Head of Investor Relations
Tel . +358 (0)204 75 4705