Inside information: KONE plans to renew its operating model to strengthen its competitiveness and customer focus in a changing operating environment

KONE Corporation, inside information, January 26, 2023 at 12.20 EET

Inside information: KONE plans to renew its operating model to strengthen its competitiveness and customer focus in a changing operating environment

KONE plans to renew its operating model to strengthen its competitiveness and customer focus. The target is to drive KONE's strategy forward with greater speed and efficiency and operate more closely with customers, through stronger geographic Areas.

The planned operating model builds on many of KONE's existing strengths, combining scale and local accountability. The company's geographic Areas will have greater accountability for their commercial strategy. This will give them even more flexibility to respond to local customer needs and market conditions, as well as equipping them better to capture growth opportunities.

The role of global functions will be to ensure a common direction and the strategic development of KONE's businesses. Through global product and services platforms, supply chain and technology & innovation development, KONE will retain the benefits of scale and ensure long-term competitiveness.

"Rapidly changing environments provide great opportunities to further strengthen both our market position and differentiation. Market developments over the coming years are expected to differ significantly across geographic Areas. With a simpler operating model, strengthened accountability, combined with our leading product and services platforms, we aim to improve our growth and profitability. By speeding up the execution of our strategy we can further increase the value we create for our customers", says Henrik Ehrnrooth, President and CEO, KONE Corporation.

Planned organizational structure and composition of the Executive Board under the new operating model

The proposed new structure is planned to be effective on July 1, 2023,at which point the roles mentioned below will form KONE's new Executive Board led by President and CEO Henrik Ehrnrooth.

Geographic Areas:
- Greater China, led by Joe Bao
- Asia-Pacific, Middle East and Africa, led by Samer Halabi
- Europe, led by Karla Lindahl. Current Areas of Central and North Europe and South Europe and Mediterranean are planned to be combined to form Europe
- Americas, led by Ken Schmid
Global functions:
- Finance, led by Ilkka Hara
- People & Communications, led by Susanne Skippari
- Legal, led by Johannes Frände
- Commercial & Operations, led by Hugues Delval. This new global function would bring together the competence of our global business lines (new equipment, modernization, and maintenance), marketing and brand, and field operations development, to strengthen lifecycle thinking and work closer together, while continuing to address the distinct characteristics of our businesses
- Strategy & Transformation, led by Axel Berkling. This new function would ensure a common direction and the right strategic priorities
- Supply Chain, led by Mikko Korte.As a new function, Supply Chain would be accountable for manufacturing, sourcing, logistics, and for ensuring the most competitive and resilient supply chain in the industry
- Technology & Innovation, led by Tomio Pihkala. Technology & Innovation would continue to drive KONE's innovation, execute on the R&D roadmaps and ensure competitive IT systems

The current Executive Board remains in place and continues to lead through the transition until July 1, when the new structure becomes effective. Two current Executive Board members will step down from the Executive Board at that time:

Tricia Weener, who leads the Marketing & Communications function in the current organization, and
Maciej Kranz, who leads KONE's current Technology & Innovation function.

"I would like to extend my gratitude to the great contributions of Tricia and Maciej. They have both successfully driven significant changes that have advanced our strategy to expand the scope of business with our customers, as well as embed sustainability in all our offering and operations.

Since Tricia joined KONE, she has established a step-change and clear vision on how we create concrete value through marketing and our brand. She has also established and led our Marketing and Sales Renewal program to create a competitive advantage for KONE. Marketing and Sales Renewal remains a core strategic program for KONE going forward.

Maciej has significantly strengthened our People Flow vision by embedding digital solutions as part of our core offering. Today, KONE is showing the way in our industry, in particular with digital and sustainable solutions.

I wish them both the best of luck in their next endeavors."

These planned changes will be reflected across the rest of the organization, and the plans for the new structure and operating model will form during the coming months. Design work and consultation processes will commence in those units, where applicable.

Initial estimates are that the planned measures could result in the reduction of approximately 1,000 jobs globally, of which 150 are expected to be in Finland.The detailed impact of the changes will be communicated, and when necessary, negotiated locally as the plans progress. The planned changes are estimated to generate annual cost savings of around EUR 100 million. The cost savings are expected to be achieved gradually as of the second half of 2023 with full impact from 2024 onwards. Restructuring costs related to the program are expected to amount to a total of approximately EUR 130 million, the majority of which are expected to accrue during 2023.

Note: Proposed organizational changes referenced in this release may be subject to consultations with employee representatives in certain jurisdictions and are not final until such processes are completed.

For further information, please contact:

Natalia Valtasaari, Head of Investor Relations, tel. +358 204 75 4705

Hanna Rutanen, Head of Global Communications, tel. +358 41 507 1361

Sender:

KONE Corporation

Henrik Ehrnrooth
President and CEO

Susanne Skippari
Executive Vice President, Human Resources

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 2021, KONE had annual sales of EUR 10.5 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.