Financial Statement Bulletin of KONE Corporation for January–December 2023

KONE Corporation, stock exchange release, January 26, 2024 at 8.30 a.m. EET

Financial Statement Bulletin of KONE Corporation for January-December 2023

Strong finish to the year

October-December 2023

Orders received grew by 5.4% to EUR 2,049.2 (10-12/2022: 1,944.2) million. At comparable exchange rates, orders grew by 10.5%.
Sales declined by 3.5% to EUR 2,809.9 (2,911.5) million. At comparable exchange rates, sales grew by 0.7%.
Operating income (EBIT) was EUR 362.1 (367.1) million or 12.9% (12.6%) of sales. The adjusted EBIT was EUR 358.6 (365.0) million or 12.8% (12.5%) of sales.*
Cash flow from operations (before financing items and taxes) was EUR 381.1 (33.3) million.

January-December 2023

Orders received declined by 6.1% to EUR 8,577.7 (1-12/2022: 9,131.3) million. At comparable exchange rates, orders declined by 1.4%.
Sales grew by 0.4% to EUR 10,952.3 (10,906.7) million. At comparable exchange rates, sales grew by 5.0%.
Operating income (EBIT) was EUR 1,200.1 (1,031.2) million or 11.0% (9.5%) of sales. The adjusted EBIT was EUR 1,248.4 (1,076.6) million or 11.4% (9.9%) of sales.
Cash flow from operations (before financing items and taxes) was EUR 1,485.2 (754.7) million
The Board proposes a dividend of EUR 1.75 per class B share for the year 2023.

Business outlook for 2024

KONE expects its sales to be stable or to grow slightly at comparable exchange rates in 2024. The improvement in adjusted EBIT margin is expected to continue in 2024, albeit with less tailwinds than in 2023.

Key figures		10-12/2023	10-12/2022	Change	1-12/2023	1-12/2022	Change
Orders received	MEUR	2,049.2	1,944.2	5.4%	8,577.7	9,131.3	-6.1%
Order book	MEUR				8,715.7	9,026.1	-3.4%
Sales	MEUR	2,809.9	2,911.5	-3.5%	10,952.3	10,906.7	0.4%
Operating income	MEUR	362.1	367.1	-1.4%	1,200.1	1,031.2	16.4%
Operating income margin	%	12.9	12.6		11.0	9.5
Adjusted EBIT*	MEUR	358.6	365.0	-1.8%	1,248.4	1,076.6	16.0%
Adjusted EBIT margin*	%	12.8	12.5		11.4	9.9
Income before tax	MEUR	360.6	364.1	-1.0%	1,206.1	1,028.4	17.3%
Net income	MEUR	276.3	276.3	0.0%	931.6	784.5	18.8%
Basic earnings per share	EUR	0.53	0.53	0.4%	1.79	1.50	19.7%
Cash flow from operations (before financing items and taxes)	MEUR	381.1	33.3		1,485.2	754.7
Interest-bearing net debt	MEUR				-1,013.4	-1,309.0
Equity ratio	%				40.9	40.3
Return on equity	%				33.0	25.9
Net working capital (including financing items and taxes)	MEUR				-861.2	-903.9
Gearing	%				-36.4	-45.7

* KONE presents adjusted EBIT as an alternative performance measure to enhance comparability of business performance between reporting periods. In January-December 2023, items affecting comparability amounted to EUR 48.3 million including EUR 57.7 million costs recognized on restructuring measures and a positive effect of EUR 8.0 million recognized on completion of the sale of operations in Russia. In the comparison period, items affecting comparability included a charge for the impairment of assets and recognition of provisions for commitments in Russia and Ukraine as well as restructuring costs.

Philippe Delorme, President and CEO:

"Our fourth quarter results underlined again the resilience of our business. Despite the economic and geopolitical uncertainty in the world, nine out of KONE's twelve end-markets continue to grow. Our orders received grew by double-digits at comparable exchange rates with positive development across Areas and Businesses in the final quarter of 2023. Also, KONE's financial results were solid in the final quarter of 2023. The highlights for me were the continued strong growth in Service sales and the 20% sales growth in Modernization at comparable exchange rates. Importantly, we continued to also improve profitability, and cash generation was healthy.

Overall, many things developed favorably in 2023. We regained momentum in orders received, our sales grew by 5% at comparable exchange rates in a challenging market, we improved profitability with good cash conversion, and made great progress in sustainability. All of this gives us a solid starting point for 2024. In 2024, we expect sales to be stable or to grow slightly at comparable exchange rates. The improvement in adjusted EBIT margin is expected to continue, albeit with less tailwinds than in 2023.

For me, 2024 will be a year of learning, and I will be spending most of my time traveling and meeting customers and KONE teams. I see many unique and exciting opportunities for us to lead our industry, and we will raise the bar where we need to. I'm impressed by the strong culture and teams at KONE. The operating model renewal completed in 2023, will also help us execute our strategy with greater speed and attention to the differences between our geographical areas. With that, I'm confident that we will have a successful future and I'm excited to start our journey together."

Operating environment in October-December 2023

The global New Building Solutions market declined clearly during the fourth quarter as a result of higher interest rates and slowing economic growth in the more mature markets combined with continued challenging market dynamics in China. In Asia-Pacific, weak consumer sentiment weighed on demand in China. Elsewhere in the region, activity grew significantly with continued strong demand in India and Southeast Asia. Activity was mixed also in the EMEA region.Weakness in the residential markets drove a slight decline in Europe, while activity was stable in the Middle East and Africa.In North America, the market declined significantly.

Both the Service and Modernization markets developed positively with growth across all regions.

Intense competition continued to impact the New Building Solutions pricing environment in China, while elsewhere pricing was more stable. In the Service and Modernization markets, the pricing environment remained favorable.

Operating environment in January-December 2023

Regional differences in demand trends were apparent in the global New Building Solutions market during 2023. In the more mature markets, sentiment was impacted by rising interest rates and slowing economic growth, while activity in many emerging markets was more favorable. In China, the focus on completing unfinished projects was strong throughout the year. New construction related key indicators saw some policy driven improvement in the first quarter but weakened thereafter. Property developers' access to financing remained constrained and consumer sentiment was poor. In the rest of Asia-Pacific, activity grew clearly, supported by strong development in India and recovery in Southeast Asia. In the EMEA region, activity declined significantly in Europe due to weakness in the residential segment and grew slightly in the Middle East and Africa. In North America, the market declined significantly.

Both the Service and Modernization markets developed positively with growth across all regions.

Competition remained intense in China, impacting the pricing environment. Outside China the pricing environment was more favorable.

Market outlook 2024

We have a positive market outlook for nine of our twelve end-markets.

Activity is expected to decline slightly both in North America and in Europe. In China, the New Building Solutions market is expected to decline clearly. In Asia-Pacific, Middle East and Africa activity is expected to grow clearly.

Modernization markets are expected to grow in all regions supported by an aging equipment base as well as the focus on sustainability and adaptability of buildings.

Service markets are expected to grow slightly in the more mature markets and grow clearly in Asia-Pacific, Middle East and Africa and in China.

Business outlook 2024

Key drivers for sales growth are positive outlook for Service and Modernization and the strong order book. Declining New Building Solutions market in China, and continued uncertainty in Europe and North America are headwinds.

The key profitability drivers are sales growth in Service and Modernization, better pricing coming through in deliveries and savings from the operating model renewal. Persistent cost inflation and decision to slightly increase investments in R&D and IT are expected to impact profitability negatively.

Press and analyst meetings

A Microsoft Teams call for the press, conducted in English, will be held on Friday, January 26, 2024 at 9:00 a.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 10:30 a.m. EET and will be available on https://cloud.webcast.fi/kone/kone_2024_0126_q4. 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.: +1 786 697 3501
UK: +44 (0) 33 0551 0200
Finland: +358 (0)9 2319 5437
Participant code: 260124

For further information, please contact:

Sanna Kaje, Vice President, Investor Relations, KONE Corporation, tel. +358 204 75 0031

Sender:

KONE Corporation

Philippe Delorme
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 2023, KONE had annual sales of EUR 11.0 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 2023