Key Targets Achieved and Demerger Approved
- The plan to demerge the company into two separately listed corporations, KONE Corporation and Cargotec Corporation, and to extend the current accounting period from 12 to 15 months, ending 31 March, 2005 was approved by an extraordinary shareholders’ meeting on 17 December, 2004.
- Matti Alahuhta started in the position of President of KONE Corporation on 1 January, 2005.
- The value of orders received amounted to MEUR 3,994 (2003: 4,558*). KONE Elevators & Escalators accounted for MEUR 2,104 (2,021), which represents seven percent growth at comparable exchange rates. Order intake in Kone Cargotec was MEUR 1,890 (1,482), reflecting growth of 31 percent at comparable exchange rates.
- Net sales totaled MEUR 4,447 (5,410*). KONE Elevators & Escalators’ sales amounted to MEUR 2,866 (2,856), which represents three percent growth at comparable exchange rates. Sales in Kone Cargotec were MEUR 1,581 (1,364) reflecting growth of 19 percent at comparable exchange rates.
- Operating income (EBIT) was MEUR 547.1 (437.0*), or 12.3 (8.1) percent of net sales. Disregarding non-recurring income due to a provision reversal regarding disability pensions, EBIT in Elevators & Escalators was MEUR 240.9 (289.6), or 8.4 (10.1) percent of net sales, and in Kone Cargotec MEUR 111.9 (76.7) or 7.1 (5.6) percent of net sales. The non-recurring income was EUR 15.3 million and EUR 3.1 million respectively for the divisions. Unallocated headquarter costs totaled MEUR 10.4 (13.5). Consolidated operating income includes capital gains of EUR 187.4 (24.9) million.
- Cash flow from operating activities before financial items and taxes was MEUR 412.2 (536.5*).
- Interest-bearing net debt decreased to MEUR 63.8 (end of 2003: 746.7).
- Net income rose 8.5 percent to MEUR 325.6 (300.2*).
- Diluted earnings per share rose to EUR 5.25 from EUR 4.77.
KONE changed over to the International Financial Reporting Standards (IFRS) effective 1 January, 2004. The comparison figures for 2003 have been adjusted to reflect IFRS practices. For further information regarding the impact of the transition from Finnish Accounting Standards (FAS) to IFRS, please refer to KONE’s 8 April, 2004 and 18 June, 2004 announcements.
Pro forma figures for the corporations to be formed in the demerger are enclosed at the end of this report. Pro forma operating profit for Kalmar and Hiab are presented in the presentation material in regards to the 12-month Financial Statements. The presentation is available at KONE’s Internet site, www.konecorp.com, as of 28 January 2005 at 2 p.m. KONE’s demerger prospectus published on 9 December, 2004 includes the pro forma calculation principles.
KONE CEO and Chairman of the Board Antti Herlin in Conjunction with the 12 Month Interim Report:
The decision of KONE’s board to demerge the company into two separately listed corporations was one of the key initiatives in 2004 from a shareholder perspective. During the past two years, KONE has created value for its shareholders and customers by developing both its divisions. We have now achieved most synergies between the two businesses. From now on it is in the interest of both the businesses and our shareholders to develop the divisions according to their own strategies as separate corporations.
For Elevators & Escalators, 2004 was a very challenging year. On many market areas targets were achieved, but overall profitability and growth was disappointing. The board initiated a development and restructuring program to secure the long-term competitiveness of the new equipment business in particular. The plan is being prepared and is due to be published by the end of March 2005.
Kone Cargotec benefited from strong demand both within Kalmar and Hiab, and was able to take full advantage of the good market environment and restructuring actions taken. Kone Cargotec’s container and load handling businesses were supplemented by acquiring the marine cargo flow solutions business, MacGREGOR Group. In the future, the new Cargotec will grow its three globally leading businesses.
During 2004, we distributed EUR 125 million in dividends, finalized the sale of non-core assets with the sale of the Tractor business, and repurchased KONE B shares and assigned them to finance the MacGREGOR acquisition. This has created value, which has not gone unnoticed. KONE’s share has maintained its position among the most traded stocks on the Helsinki Stock Exchange, with total trading volume exceeding EUR 2 billion, and the share price rising by 25.5 percent in 2004.
Corporate restructuring will be finalized by bringing two strong global companies to the Helsinki Stock Exchange in the beginning of June 2005. This provides our shareholders with increased transparency of both businesses and shares in two corporations. After the separation, both companies will focus firmly on developing their businesses to their full potential.
I wish to welcome the new President of KONE, Matti Alahuhta, who was appointed by the board to begin his mandate as of 1 January, 2005. He is taking the lead of the corporation in a challenging time, when competition has become truly global in the elevator and escalator industry. Mr. Alahuhta has extensive experience and global know-how, which coupled with the traditional strengths of KONE; technological leadership, efficient harmonized business models and a strong financial position, will support KONE’s elevator and escalator business in achieving its long-term target of growing faster than the industry on average.
* The consolidated comparison figures include the Tractors and Forest Machines as well as minor holdings, which have since been divested.
Executive Vice President, Finance and Information Services
Senior Vice President, Corporate Communications & IR
For further information please contact:
Aimo Rajahalme, Executive Vice President, Finance and Information Services,
tel. +358 (0)204 75 4484