KONE Corporation's Interim Report for January-March 2012

KONE Corporation, stock exchange release, April 24, 2012 at 12:30 p.m. EET

KONE's Q1: Strong start to the year

January-March 2012

• In January-March 2012, orders received totaled EUR 1,366 (1-3/2011: 1,045) million. Orders received increased by 30.7% at historical exchange rates and by 27.1% at comparable exchange rates. The order book stood at EUR 4,843 (Dec 31, 2011: 4,348) million at the end of March 2012.
• Net sales grew by 17.8% to EUR 1,241 (1,054) million. At comparable exchange rates the growth was 15.1%.
• Operating income was EUR 132.7 (118.7) million or 10.7% (11.3%) of net sales.
• Cash flow from operations was EUR 248.3 (237.3) million.
• KONE upgrades its outlook slightly for 2012 due to stronger than expected orders received and sales growth in Asia-Pacific and more favorable material cost development than expected. KONE's net sales is estimated to grow by 10-15% at comparable exchange rates as compared to 2011. The operating income (EBIT) is expected to be in the range of EUR 750-800 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2012. KONE previously estimated its net sales to grow by 8-13% at comparable exchange rates as compared to 2011. The previous operating income (EBIT) outlook was EUR 730-790 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2012.

Key Figures

Matti Alahuhta, President & CEO, in conjunction with the review:

"Our operating environment developed in line with our expectations in the first quarter of the year. The new equipment market declined slightly from a relatively good level in Central and North Europe and remained at a low level in South Europe. The gradual recovery of the new equipment market in North America continued. The markets in Asia-Pacific continued to grow, but as expected, at a clearly lower rate than last year.

Our orders received growth was very strong. Our order intake grew in all geographic regions, particularly rapidly in Asia-Pacific. This resulted in a record-high order intake level of EUR 1,366 million, representing a growth rate of 30% as compared to the first quarter of 2011. The consolidation of GiantKONE in China at the end of 2011 contributed to the good development in orders received.

Sales growth was 18%. Sales grew in all businesses. Growth was very strong in the new equipment business. Also the service business had a growth of over ten percent. Following the consolidation of GiantKONE, the share of Asia-Pacific grew to 30% of our total sales.

KONE's operating income grew by 11.8% to EUR 133 million. This was the result of stronger than expected sales growth in Asia-Pacific and good development in our maintenance business. In addition, favorable translation exchange rate developments contributed to the growth in operating income. The growth of our operating income remained burdened by increased material costs, higher labor costs in Asia, intense price competition as well as intangible asset amortizations resulting from the consolidation of GiantKONE. In addition, we continued to increase fixed costs in areas that support the growth of the business, in particular in Asia-Pacific, research and development and process development. Cash flow was very strong, EUR 248 million. I am very pleased with the development of our business, and I want to thank all of our people, who have again done an excellent job.

We have upgraded our business outlook for 2012. This is due to higher than expected growth in orders received and sales in Asia in the first quarter as well as to a more favorable than expected development of material prices. While we look forward with confidence, there is uncertainty related in particular to the development of construction markets in Asia-Pacific in the second half of the year.

The development programs, with which we improve our competitiveness, have progressed well. We are now about to start work to simplify and improve the processes of our support functions globally. In addition, we will adjust our operations in certain countries where the market has declined significantly over the past years. These plans are expected to decrease costs somewhat, but the priority is to improve our operations. The plans and their estimated impacts will be communicated in connection with our second quarter's results release."

Operating environment in January-March

The operating environment developed in line with KONE's expectations in the first quarter of 2012. In the Europe, Middle East and Africa (EMEA) region, the new equipment market declined slightly but remained at a relatively good level in Central and North Europe, while it remained weak in South Europe. The new equipment market in the Americas region continued to gradually recover. The market in Asia-Pacific continued to grow, albeit at a clearly lower rate than in the previous year. The major projects segment remained active, in particular in Asia-Pacific and the Middle East. The global modernization market declined slightly, although with regional variations. Maintenance markets continued to develop favorably in all regions. The pricing environment continued to be challenging in particular in markets suffering from a prolonged weakness in the new equipment market.

Market outlook 2012

The new equipment markets are expected to continue to grow in Asia-Pacific, but at a significantly lower rate than in 2011, and there is uncertainty related to the development in the second half of the year. The markets in Central and North Europe are expected to remain relatively stable or decline slightly, and the markets in South Europe are expected to decline from an already weak level. The market in North America is expected to continue to gradually recover from a low level. The modernization markets are expected to be at about the same level as in 2011 or grow slightly. The maintenance markets are expected to continue to develop well.

Business outlook 2012

KONE upgrades its outlook slightly for 2012 due to stronger than expected orders received and sales growth in Asia-Pacific and more favorable material cost development than expected.

KONE's net sales is estimated to grow by 10-15% at comparable exchange rates as compared to 2011.

The operating income (EBIT) is expected to be in the range of EUR 750-800 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2012.

Previous business outlook

KONE's net sales is estimated to grow by 8-13% at comparable exchange rates as compared to 2011.

The operating income (EBIT) is expected to be in the range of EUR 730-790 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2012.

Analyst and media meeting and conference call

A meeting for the press, conducted in Finnish, will be held on Tuesday, April 24, 2012 at 2:15 p.m. Eastern European Time.

A telephone conference and a meeting for analysts, conducted in English, will begin at 3:45 p.m. Eastern European Time. The meeting can also be followed as a webcast on www.kone.com.

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

Telephone conference numbers:

Finnish callers: +358 923 101 527
US callers: +1 866 458 4087
Non-US callers: +44 203 043 2436
Participant code: KONE

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

About KONE
KONE is one of the global leaders in the elevator and escalator industry. The company has been committed to understanding the needs of its customers for the past century, providing industry-leading elevators, escalators and automatic building doors as well as innovative solutions for modernization and maintenance. The company'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. In 2011, KONE had annual net sales of EUR 5.2 billion and on average 35,000 employees. KONE class B shares are listed on the NASDAQ OMX Helsinki Ltd in Finland.

www.kone.com

For further information please contact:
Henrik Ehrnrooth, CFO, tel. +358 (0) 204 75 4260

Sender:

KONE Corporation

Henrik Ehrnrooth
CFO

Anne Korkiakoski
Executive Vice President,
Marketing and Communications

KONE Interim Report Q12012