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KONE Corporation's financial statement bulletin 2010

Stock Exchange Release Published 26/01/2011

October-December 2010: Strong order intake and record operating income

- In October–December 2010, orders received totaled EUR 1,006 (10–12/2009: 813.5) million. Orders received increased by 23.7% at historical exchange rates and by 16.0% at comparable exchange rates.
- Net sales increased by 4.3% to EUR 1,489 (1,427) million. At comparable exchange rates net sales decreased by 1.4%.
- Operating income was EUR 227.3 (202.7) million or 15.3% (14.2%) of net sales.
- Cash flow from operations reached EUR 195.1 (198.2) million.

January-December 2010: Strong performance throughout the year

- In January–December 2010, orders received totaled EUR 3,809 (2009: 3,432) million. Orders received increased by 11.0% at historical exchange rates and by 6.0% at comparable exchange rates. The order book stood at EUR 3,598 (3,309) million at the end of December 2010.
- Net sales increased by 5.1% to EUR 4,987 (4,744) million. At comparable exchange rates it increased by 0.6%.
- Operating income was EUR 696.4 (600.3) million or 14.0% (12.7%) of net sales (2009 figures exclude a one-time cost of EUR 33.6 million related to the fixed cost adjustment program). Earnings per share were 2.10 (1.84).
- Cash flow from operations was EUR 857.2 (825.1) million.
- In 2011, KONE’s net sales is estimated to grow 0–5% at comparable exchange rates as compared to 2010. The operating income (EBIT) is expected to be in the range of EUR 700–750 million, assuming that translation exchange rates do not deviate materially from the situation of the beginning of 2011.
- The Board proposes a dividend of EUR 0.90 per class B share for the year 2010.

Key Figures
10-12/
2010
10-12/ 2009
Change
%
1-12/ 2010
1-12/ 2009
Change
%
Orders
received

MEUR
1,006.3
813.523.73,809.03,432.411.0
Order
book

MEUR
3,597.83,309.18.73,597.83,309.18.7
SalesMEUR1,488.81,426.84.34,986.64,743.75.1
Operating
income

MEUR
227.3202.712.1696.4600.3 1)16.0
Operating
income

%
15.314.214.012.7 1)
Cash flow
From
operations (before
financing
items and
taxes)

MEUR
195.1198.2857.2825.1
Net income
MEUR
173.8166.6535.9466.4
Total comprehensive income
MEUR
190.1165.9577.6449.5
Basic earnings per share
EUR
0.680.662.101.84
Interest-bearing net debtMEUR-749.8-504.7-749.8-504.7
Total equity / total assets
%
49.347.049.347.0
Gearing%-46.8-37.7-46.8-37.7

1) Excluding a MEUR 33.6 one-time restructuring cost related to the fixed costs adjustment program, which was booked in the second quarter in 2009.

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

“In 2010, our performance was strong throughout the year and I am very pleased with our results in a challenging operating environment. Our operating income and cash flow were again at a record level and the growth in orders received was encouraging towards the end of the year. I want to thank all of our people for a work well done!

Our development was good in many respects. The quality of our products and operations as well as our productivity improved and we continued to progress well in the Asia-Pacific markets. I am also pleased with us reaching our long-term operating income goal of 14%. We achieved this goal by the systematic development work in our entire business system during the last several years. In 2010, external factors, such as foreign exchange translation rates and favorable sourcing costs, also contributed to our strong improvement in operating income.

Our strong progress in 2010 lays a good foundation for the future. We have again chosen five development programs, which will help us develop KONE to become an even stronger company within our industry. Our operating environment remains mixed. Asia-Pacific continues to develop positively. There is still uncertainty in the EMEA region and the Americas, but the trend also in these regions looks somewhat more positive.”

Financial statements bulletin 2010 (pdf) >>

KONE Financial Statements 2010 (pdf) >>


Operating environment in October-December 2010 (Q4 2010)

The trends in KONE’s principal markets remained largely unchanged from the previous quarter. The markets in Asia-Pacific continued to grow rapidly, although at a somewhat lower rate than earlier in the year. In the Europe, Middle East and Africa (EMEA) region and in the Americas the situation continued to be mixed with some markets gradually recovering and other markets remaining stable at a low level. The major projects markets were rather active. The modernization markets were overall quite stable but with regional variations. The maintenance markets continued to develop favorably. The overall pricing environment remained intense in all businesses.


Operating environment in January-December 2010

In 2010, KONE’s operating environment was twofold. The new equipment markets in the Asia-Pacific region developed well throughout the year, whereas the situation in the Europe, Middle East and Africa (EMEA) region as well as the Americas was mixed with some markets recovering and others having a low level of activity. The size of the modernization market was approximately at the prior year’s level. Maintenance markets continued to grow supported by continued good new equipment delivery volumes. Price competition remained intense in all businesses.


Market outlook 2011

The new equipment markets in Asia-Pacific are expected to continue to develop positively, although with certain regional differences. The recovery of the new equipment markets in Central and North Europe is expected to continue in most countries, whereas most markets in South Europe are expected to be relatively stable at the current low level. The new equipment markets in the North America are expected to recover modestly. The modernization markets are expected to be at about last year’s level. The maintenance markets are expected to continue to develop well.


Outlook 2011

KONE’s net sales is estimated to grow 0–5% at comparable exchange rates as compared to 2010.

The operating income (EBIT) is expected to be in the range of EUR 700–750 million, assuming that translation exchange rates do not deviate materially from the situation of the beginning of 2011.


The Board’s proposal for the distribution of profit

The parent company’s non-restricted equity on December 31, 2010 is EUR 1,797,898,068.97 of which the net profit for the financial year is EUR 564,813,127.90.

The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.895 be paid on the outstanding 38,104,356 class A shares and EUR 0.90 on the outstanding 217,582,729 class B shares. Under the proposal, the total amount of dividends will be EUR 229,927,854.72. The Board of Directors further proposes that the remaining non-restricted equity, EUR 1,567,970,214.25 be retained and carried forward.

The dividend is proposed to be paid on March 10, 2011. All the shares existing on the dividend record date are entitled to dividend for the year 2010, except for the own shares held by the parent company.

New disclosure procedure

KONE Corporation follows the new disclosure procedure enabled by Standard 5.2b published by the Finnish Financial Supervision Authority and hereby publishes its financial statement bulletin enclosed to this stock exchange release. KONE Corporation’s financial statement bulletin is attached to this release in pdf format and is also available on the company’s web site at www.kone.com.


Press and analyst meetings and conference call

A meeting for the press, conducted in Finnish, will be held on Wednesday, January 26, 2011 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:

Finnish callers: +358 923 101 527
US callers: +1 866 458 40 87
Other callers: +44 203 043 2436
Participant code: KONE

An on-demand version of the webcast will be available on www.kone.comempty 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 2010, KONE had annual net sales of EUR 5.0 billion and approximately 33,800 employees. KONE class B shares are listed on the NASDAQ OMX Helsinki Ltd in Finland.

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

Sender:
KONE Corporation
Henrik Ehrnrooth
CFO

Anne Korkiakoski
Executive Vice President,
Marketing and Communications