Financial Statement Bulletin of KONE Corporation for January-December 2014

KONE Corporation, stock exchange release, January 29, 2015 at 12.30 p.m. EET

Financial Statement Bulletin of KONE Corporation for January-December 2014
                                    
October-December 2014: Good progress in orders received and strong cash flow

• In October-December 2014, orders received totaled EUR 1,704 (10-12/2013: 1,473) million. Orders received grew by 15.6% at historical exchange rates and by 10.7% at comparable exchange rates.
• Net sales grew by 6.5% to EUR 2,166 (2,033) million. At comparable exchange rates the growth was 3.9%.
• Operating income was EUR 315.3 (292.8) million or 14.6% (14.4%) of net sales.
• Cash flow from operations (before financing items and taxes) was EUR 367.8 (240.8) million.

January-December 2014: Continued profitable growth

• In January-December 2014, orders received totaled EUR 6,813 (1-12/2013: 6,151) million. Orders received grew by 10.8% at historical exchange rates and by 11.9% at comparable exchange rates. The order book stood at EUR 6,952 (Dec 31, 2013: 5,587) million at the end of December 2014.
• Net sales grew by 5.8% to EUR 7,334 (6,933) million. At comparable exchange rates the growth was 6.7%.
• Operating income was EUR 1,036 (953.4) million or 14.1% (13.8%) of net sales. Basic earnings per share was EUR 1.47 (1.37).
• Cash flow from operations (before financing items and taxes) was EUR 1,345 (1,213) million.
• In 2015, KONE's net sales is estimated to grow by 6-9% at comparable exchange rates as compared to 2014. The operating income (EBIT) is expected to be in the range of EUR 1,130-1,230 million, assuming that translation exchange rates would remain at approximately the average level of January 2015.
• The Board proposes a dividend of EUR 1.20 per class B share for the year 2014.

Key Figures

Henrik Ehrnrooth, President and CEO, in conjunction with the review:

"In the fourth quarter of the year, our business developed well. We saw again very solid growth in orders received, which totaled EUR 1,704 million. Favorable translation exchange rates contributed positively to our growth in the quarter. In comparable currencies, growth in orders was 10.7%. Sales growth was slower than in previous quarters with an increase of 3.9% at comparable rates to EUR 2,166 million. Good sales growth continued in Asia-Pacific, but overall sales growth was burdened by a weaker development in the EMEA region and North America. Despite the slower sales growth, operating income developed positively and was EUR 315 million or 14.6% of sales. A particular highlight of the quarter was the very strong cash flow, EUR 368 million.


Looking at our development for the full year, our performance was strong overall. In 2014, we achieved an almost 12% growth in orders received at comparable rates, with total orders of EUR 6,813 million. Sales grew by 6.7% in comparable currencies, totaling EUR 7,334 million, with growth in both new equipment and service sales. Our growth continued to be profitable and operating income grew faster than sales. Operating income reached EUR 1,036 million or 14.1% of sales. Cash flow improved from the earlier high level and was EUR 1,345 million.

I want to express my gratitude to all of KONE's employees for the good results we have again achieved with strong collaboration.

We reached a historical milestone in 2014, as our maintenance base exceeded globally a million units. We have been focused on developing our sales capabilities and processes in maintenance and modernization, and can already start to see a positive impact from this work in a market situation that continues to see a high level of price competition. In new equipment, we continued to make good progress, with record high order and delivery volumes. We achieved this through the continued investments we have made into improving our competitiveness. Our product offering for both the volume business and major projects were strengthened during the year.

Going forward, our development programs provide the direction and framework for further improving our competitiveness. We will continue to develop our solutions to stay at the forefront of technological advancement in our industry. We will also work actively on accelerating growth in our service business. Achieving a constant improvement in customer loyalty and in our employee engagement remain in focus throughout our development actions.

In 2015, we expect to see a mixed market environment. In new equipment, we expect to see Asia-Pacific and North America providing the main growth opportunities. In line with our previous expectations, we anticipate the market growth in China to slow down from the previous year; we expect the market in China to remain at the good level of 2014 or grow slightly. In maintenance, we expect the market to develop rather well in most countries, and the global modernization market to be flat or grow slightly.

Our objective is to continue to achieve higher than market growth in a profitable way. We start 2015 with a strong order book, strong positions in many of the key growth markets, and a highly capable and committed team."

Operating environment in October-December (Q4 2014)


In the last quarter of 2014, positive development in the global new equipment market continued. Markets in Asia-Pacific and North America continued to grow, while the development in the EMEA region was mixed. The major projects segment grew compared to the previous year, driven in particular by activity in Asia. The modernization market saw growth in North America and in Asia-Pacific, but was rather weak overall in Europe. Maintenance markets grew globally, although at low rates in such countries, where new equipment activity has been weak for the past years.

Operating environment in January-December 2014


In 2014, good growth in the global new equipment market continued. Markets in Asia-Pacific, North America and the Middle East developed positively, while development in Europe was rather stable. The modernization market was on a slightly declining trend overall, with positive  development in North America and Asia-Pacific, but a decline in the large European  modernization market. The major projects segment grew globally, driven by strong activity in Asia-Pacific, the Middle East and North America. Maintenance market growth was the fastest in Asia-Pacific, driven by growth in new equipment installations. In the more mature maintenance markets, the growth rate was lower, with intense price competition seen in many countries.

Market outlook 2015


In new equipment, the market in Asia-Pacific is expected to grow slightly in 2015, with the expectation that the market in China will remain at the good level of 2014 or grow slightly. In the Europe, Middle East and Africa region, the market is expected to be rather stable. In Central and North Europe, the market is expected to be stable or grow slightly, while in South Europe it is expected to remain at a weak level. In the Middle East, the market is expected to be stable at the previous year's level. The market in North America is expected to continue to grow.


The modernization market is expected to remain rather stable in Europe, but to continue to grow in North America and Asia-Pacific. This is expected to result in a rather stable or slightly growing market globally.


The maintenance markets are expected to develop rather well in most countries.

Business outlook 2015

In 2015, KONE's net sales is estimated to grow by 6-9% at comparable exchange rates as compared to 2014.

The operating income (EBIT) is expected to be in the range of EUR 1,130-1,230 million, assuming that translation exchange rates would remain at approximately the average level of January 2015.

The Board's proposal for the distribution of profit

The parent company's non-restricted equity on December 31, 2014 is EUR 1,238,147,924.86 of which the net profit for the financial year is EUR 404,065,028.22.

The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 1.1975 be paid on the outstanding 76,208,712 class A shares and EUR 1.20 on the outstanding 437,517,818 class B shares, resulting in a total amount of proposed dividends of EUR 616,281,314.22. The Board of Directors further proposes that the remaining non-restricted equity, EUR 621,866,610.64 be retained and carried forward.


The Board proposes that the dividends be payable from March 4, 2015. All the shares existing on the dividend record date are entitled to dividend for the year 2014 except for the own shares held by the parent company.

Press and analyst meetings

A meeting for the press, conducted in Finnish, will be held on Thursday, January 29, 2015 at 2:15 p.m. EET.

A meeting for analysts, conducted in English, will begin at 3:45 p.m. EET. The meeting will be available as a live webcast on www.kone.com. The meeting participants can also join a telephone conference that will be arranged in conjunction with the meeting. The telephone conference details are set out below.

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

Telephone conference numbers:

US callers: +1 334 323 6203  
UK callers: +44 (0)207 1620 177
Finnish callers: +358 (0)9 2313 9202
Participant code: KONE

An on-demand version of the webcast will be available on www.kone.com later during the same day.

For further information, please contact:
Katri Saarenheimo, Director, Investor Relations, tel. +358 204 75 4705

Sender:

KONE Corporation

Henrik Ehrnrooth
President and CEO

Eriikka Söderström
CFO

About KONE
KONE is one of the global leaders in the elevator and escalator industry. KONE's objective is to offer the best People Flow® experience by developing and delivering solutions that enable people to move smoothly, safely, comfortably and without waiting in buildings in an increasingly urbanizing environment. KONE provides industry-leading elevators, escalators, automatic building doors and integrated solutions to enhance the People Flow in and between buildings. KONE's services cover the entire lifetime of a building, from the design phase to maintenance, repairs and modernization solutions. In 2014, KONE had annual net sales of EUR 7.3 billion, and at the end of the year over 47,000 employees. KONE class B shares are listed on the NASDAQ OMX Helsinki Ltd. in Finland.

www.kone.com
 

KONE Financial Statement Bulletin 2014