Financial Statement Bulletin of KONE Corporation for January-December 2020

Stock Exchange Release Published 28/01/2021

KONE Corporation, stock exchange release, January 28, 2021 at 12.30 p.m. EET

Financial Statement Bulletin of KONE Corporation for January-December 2020

Earnings growth in a challenging operating environment

October-December 2020

  • Orders received grew by 4.0% to EUR 2,068.7 (10-12/2019: 1,988.3) million. At comparable exchange rates, orders grew by 7.9%.
  • Sales declined by 2.4% to EUR 2,621.2 (2,684.6) million. At comparable exchange rates, sales grew by 0.8%.
  • Operating income (EBIT) was EUR 367.1 (356.4) million or 14.0% (13.3%) of sales. The adjusted EBIT was EUR 380.6 (367.5) million or 14.5% (13.7%) of sales.*
  • Cash flow from operations (before financing items and taxes) was EUR 368.1 (385.7) million.

January-December 2020

  • Orders received declined by 2.6% to EUR 8,185.1 (1-12/2019: 8,399.8) million. At comparable exchange rates, orders declined by 0.6%.
  • Sales declined by 0.4% to EUR 9,938.5 (9,981.8) million. At comparable exchange rates, sales grew by 1.4%.
  • Operating income (EBIT) was EUR 1,212.9 (1,192.5) million or 12.2% (11.9%) of sales. The adjusted EBIT was EUR 1,250.5 (1,237.4) million or 12.6% (12.4%) of sales.*
  • Cash flow from operations (before financing items and taxes) was EUR 1,907.5 (1,549.6) million.
  • The Board proposes a dividend of EUR 1.75 per class B share for the year 2020. Further the Board proposes an extraordinary dividend of EUR 0.50 per class B share and therefore the total proposed dividend is EUR 2.25 per class B share.

Business outlook for 2021 

In 2021, KONE's sales growth is estimated to be in the range of 0% to 6% at comparable exchange rates as compared to 2020. The adjusted EBIT margin is expected to be in the range of 12.4% to 13.4%. Assuming that foreign exchange rates would remain at the January 2021 level, foreign exchange rates are estimated to impact the adjusted EBIT negatively by around EUR 20 million.

KEY FIGURES10-12/
2020
10-12/
2019
Change1-12/
2020
1-12/
2019
Change
Orders receivedMEUR2,068.71,988.34.0%8,185.18,399.8-2.6%
Order bookMEUR7,728.88,051.5-4.0%
SalesMEUR2,621.22,684.6-2.4%9,938.59,981.8-0.4%
Operating income (EBIT)MEUR367.1356.43.0%1,212.91,192.51.7%
Operating income margin (EBIT margin)%14.013.312.211.9
Adjusted EBIT*MEUR380.6367.53.6%1,250.51,237.41.1%
Adjusted EBIT margin*%14.513.712.612.4
Income before taxMEUR372.5366.01.8%1,224.21,217.50.6%
Net incomeMEUR287.2283.01.5%947.3938.60.9%
Basic earnings per shareEUR0.550.540.8%1.811.800.6%
Cash flow from operations (before financing items and taxes)MEUR368.1385.71,907.51,549.6
Interest-bearing net debtMEUR-1,953.8-1,552.9
Equity ratio%45.546.5
Return on equity%29.730.1
Net working capital (including financing items and taxes)MEUR-1,160.1-856.0
Gearing%-61.1-48.6

* KONE presents adjusted EBIT as an alternative performance measure to enhance comparability of the business performance between reporting periods during the Accelerate program. Restructuring costs related to the Accelerate program are excluded from the calculation of the adjusted EBIT.

Henrik Ehrnrooth, President and CEO:

"We had a strong finish to the year. I am incredibly proud of the KONE team and what we have achieved together in a truly exceptional year. Our strong performance in 2020 was achieved through care for one another, a persistence to deliver on our promises to our customers and empowered teams. I want to express my sincere gratitude to our customers for the trust they have shown in us and to everyone at KONE for making 2020 a successful year.

The fourth quarter results were solid. For me, the highlights were the growth in orders received and the improved profitability. Our orders received grew in all regions and order margins were stable demonstrating strong competitiveness. Our adjusted EBIT margin improved both in the quarter and the full year. We have been consistently taking actions to improve profitability and I am pleased that this is now visible in the results. For the full year, our exceptionally strong cash flow was a clear highlight.

2020 was the final year of the 'Winning with Customers' strategy. We made progress on several fronts during the four-year period. There was a clear shift towards a more customer-centric mindset and we are collaborating with our customers and partners in new ways. We also have a more differentiated offering with which we create additional value for our customers. I believe that we are now better equipped to succeed and support our customers in a digitalizing and rapidly changing environment.

We are now entering a new phase in our strategy: 'Sustainable success with customers'. The next phase of KONE's strategy will build on what we have achieved and learnt during the previous phase of our strategy. We will continue to enhance the value we create for our customers. We will do this by leveraging our connected and adaptable core products and services and by pursuing an active role in smart and sustainable city development. The services business in China will also provide strong growth opportunities in the coming years. In addition, we will further raise our ambitions in sustainability, by embedding it deeper in all aspects of our business. Overall, I see many attractive growth opportunities for KONE, both through capturing growth in markets and through expanding the value we create for our customers. I'm confident that we are in a strong position to capture these opportunities.  

We enter 2021 with optimism despite the high level of uncertainty. We see good potential for another year of sales growth and profitability improvement, and are excited to continue our journey taking KONE to the next level."

Operating environment in October-December 2020

In the fourth quarter of 2020, the global elevator and escalator market continued to be impacted by the COVID-19 pandemic. Governments across the world continued to take measures to contain the outbreak by restricting the movement of people.

 As a result of the increased uncertainty related to the COVID-19 pandemic, demand in the new equipment market decreased in most parts of the world. In Asia-Pacific, the new equipment volumes grew slightly driven by China where the market continued to grow. The growth in China was more moderate compared to the second and third quarter when the volumes were extraordinarily high. In the rest of Asia-Pacific, the new equipment markets declined significantly. In the EMEA region, the new equipment market declined slightly. The new equipment market in Central and North Europe stabilized from previous quarters while in South Europe, the market declined significantly. In the Middle East, the market declined clearly. In North America, the market declined significantly.

Global maintenance market remained resilient. The increased uncertainty had a significant impact on the modernization markets due to delayed decision-making. In North America, the volume market was significantly down and the growth was driven by major projects.

Intensifying competition affected the pricing environment adversely in October-December.

Operating environment in January-December 2020

In 2020, the global elevator and escalator market was impacted by the COVID-19 pandemic. Governments across the world were taking significant measures to contain the outbreak by restricting the movement of people. In many places, this resulted in actions such as closing down construction sites and limiting manufacturing operations especially in the first half of the year. In most countries, maintenance was deemed an essential service which was allowed with some limitations even during lockdowns. In the beginning of the year, COVID-19 had the biggest impacts on the market in China, whereas from the second quarter onwards China was driving the growth and other markets were more impacted.

In the new equipment market, demand decreased in most parts of the world. In Asia-Pacific, the new equipment volumes grew slightly as a result of high level of activity in China after the challenging first quarter. In the rest of Asia-Pacific, the new equipment markets declined significantly. In the EMEA region, the new equipment market declined slightly. The new equipment market in Central and North Europe was stable, whereas in South Europe and in the Middle East, the market declined clearly. In North America, the new equipment market declined significantly.

Global maintenance market was resilient during 2020. The increased uncertainty had a bigger impact on the modernization markets  due to delayed decision-making.

Intensifying competition affected pricing environment adversely in January-December. 

Market outlook 2021

The new equipment market is expected to be stable or to grow in China. In the rest of the world, the market is expected to decline year-on-year in the first quarter due to a high comparison point and then to start recovering.

The maintenance markets are expected to be resilient, excluding the direct impacts of the lockdown measures.

In the modernization markets, the fundamental growth drivers are intact, but uncertainty could delay decision-making in modernization projects.

Business outlook 2021

In 2021, KONE's sales growth is estimated to be in the range of 0 % to 6 % at comparable exchange rates as compared to 2020. The adjusted EBIT margin is expected to be in the range of 12.4% to 13.4%. Assuming that foreign exchange rates would remain at the January 2021 level, foreign exchange rates are estimated to impact the adjusted EBIT negatively by around EUR 20 million.

KONE has a solid order book and maintenance base for 2021. The improvement seen in the margin of orders received is expected to support profitability together with continual improvements in quality and productivity.

The key headwinds for 2021 results are the potential impacts from COVID-19 as well as the rising raw material and logistics costs. KONE also continues to invest actively in building the capability to sell and deliver digital services and solutions

The Board's proposal for the distribution of profit

The parent company's non-restricted equity on December 31, 2020 is EUR 2,046,658,825.95 of which the net income for the financial year is EUR 389,581,522.35. The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 1.7475 be paid on the outstanding 76,208,712 class A shares and EUR 1.75 on the outstanding 442,181,142 class B shares. Further, the Board proposes an extra dividend of EUR 0.4975 to be paid on the outstanding 76,208,712 class A shares and EUR 0.50 on the outstanding 442,181,142 class B shares, result-ing in a total amount of proposed dividend of EUR 1,165,996,127.94. The Board of Directors further proposes that the remaining non-restricted equity, EUR 880,662,698.01 be retained and carried forward. The Board proposes that the dividends be payable from March 11, 2021. All the shares existing on the dividend record date are entitled to dividend for the year 2020 except for the own shares held by the parent company. 

Press and analyst meetings

A Microsoft Teams call for the press, conducted in English, will be held on Thursday, January 28, 2021 at 2:15 p.m. EET. Journalists are kindly asked to sign up to media@kone.com, and they will receive a link to the call upon registration.

A webcast for analysts, conducted in English, will begin at 3:45 p.m. EET and will be available on www.kone.com/investors. An on-demand version of the webcast will be available on www.kone.com later the same day. The event can also be joined via a telephone conference.

U.S.: +1 646-828-8143
UK: +44 (0)330 336 9105
Finland: +358 (0)9 7479 0361
Participant code:  7837933

For further information, please contact:
Sanna Kaje, Vice President, Investor Relations, tel. +358 204 75 4705

Sender:

KONE Corporation

Henrik Ehrnrooth
President and CEO 

Ilkka Hara
CFO

About KONE
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. In 2020, KONE had annual sales of EUR 9.9 billion, and at the end of the year over 60,000 employees. KONE class B shares are listed on the Nasdaq Helsinki Ltd. in Finland.
www.kone.com

KONE Financial Statement Bulletin 2020


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