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CEO Antti Herlin’s Comments in Conjunction with KONE's January-September Interim Report

CEO Antti Herlin’s Comments in Conjunction with KONE's January-September Interim Report

Stock Exchange Release Published 22/10/2002

The acquisition of Partek has been proceeding well. KONE now owns 99.5 percent of Partek’s shares. Cooperation between KONE and Partek has started briskly in all areas.
KONE is grouped in two strong divisions: KONE Elevators & Elevators (KEE) and KONE Materials Handling (KMH). KMH comprises Partek’s businesses.
Partek’s non-core businesses are being divested. We expect results from this process in the near future. Through KONE's strong cash flow and non-core divestments, we aim to reduce gearing to below 80 percent by the end of 2003. The cash flow of the elevator and escalator business has been very strong during the period under review. Also next year's cash flow for the entire group is anticipated to remain strong.
Annual savings that can be realized quickly are estimated to total EUR 30-40 million. Savings will be achieved through the integration of headquarters functions, improved tax planning and coordinated financial management. Most of these savings will already be achieved in 2003.
We expect net sales for 2002 to total approximately EUR 4.3 billion and operating profit before goodwill depreciation (EBITA) to be about EUR 350 million after the consolidation of Partek’s figures into KONE’s totals from 1 July.
The 2003 target for new equipment orders is to reach at least the 2002 level. The growth target is five percent for elevator and escalator service and 20 percent for door service. KONE Materials Handling has been assigned the goal of growing its after-sales business.
KONE Elevators & Escalators’ profitability target in 2003 is for EBITA to exceed 10 percent of net sales. Our strong order book and reliable service business support this effort. Further savings continue to be sought through internal process improvements.
In KONE Materials Handling, the target for core businesses is to exceed an EBITA margin of 5 percent in 2003. Key measures in raising profitability include: leveraging the after-sales know-how of KONE throughout the entire organization, exploiting opportunities in purchasing on a wide scale, increasing outsourcing to improve flexibility, devoting special attention to underperforming units, and developing lean and capital-effective processes. As longer-term synergies are realized, the aim is also to raise profitability targets in KONE Materials Handling closer to the target level of KONE Elevators & Escalators.
Sender:
KONE Corporation
Antti Herlin
CEO
www.kone.com