KONE Corporation, stock exchange release, April 24, 2024 at 8.30 a.m. EEST
Interim Report of KONE Corporation for January-March 2024
Good start to the year with sales growth and improved profitability
January-March 2024
- Orders received declined by 1.2% to EUR 2,235.7 (1-3/2023: 2,263.1) million. At comparable exchange rates, orders grew by 1.6%.
- Sales grew by 0.5% to EUR 2,568.2 (2,556.6) million. At comparable exchange rates, sales grew by 2.7%.
- Operating income (EBIT) was EUR 262.4 (238.3) million or 10.2% (9.3%) of sales. Adjusted EBIT was EUR 262.4 (241.9) million or 10.2% (9.5%) of sales.*
- Cash flow from operations (before financing items and taxes) was EUR 398.2 (456.0) million.
Business outlook for 2024 (specified)
KONE expects its sales to grow 0-5% at comparable exchange rates in 2024. Adjusted EBIT margin is expected to be in the range of 11.5%-12.3%. Assuming that foreign exchange rates remain at the April 2024 level, the impact of foreign exchange rates on the adjusted EBIT would be limited.
KONE previously expected its sales to be stable or to grow slightly at comparable exchange rates in 2024. The improvement in adjusted EBIT margin was expected to continue in 2024, albeit with less tailwinds than in 2023.
| Key figures | 1-3/2024 | 1-3/2023 | Change | 1-12/2023 | |
| Orders received | MEUR | 2,235.7 | 2,263.1 | -1.2% | 8,577.7 |
| Order book | MEUR | 9,133.0 | 9,176.2 | -0.5% | 8,715.7 |
| Sales | MEUR | 2,568.2 | 2,556.6 | 0.5% | 10,952.3 |
| Operating income | MEUR | 262.4 | 238.3 | 10.1% | 1,200.1 |
| Operating income margin | % | 10.2 | 9.3 | 11.0 | |
| Adjusted EBIT* | MEUR | 262.4 | 241.9 | 8.4% | 1,248.4 |
| Adjusted EBIT margin* | % | 10.2 | 9.5 | 11.4 | |
| Income before tax | MEUR | 265.7 | 241.1 | 10.2% | 1,206.1 |
| Net income | MEUR | 205.9 | 185.7 | 10.9% | 931.6 |
| Basic earnings per share | EUR | 0.39 | 0.36 | 10.5% | 1.79 |
| Cash flow from operations (before financing items and taxes) | MEUR | 398.2 | 456.0 | 1,485.2 | |
| Interest-bearing net debt | MEUR | -437.9 | -738.8 | -1,013.4 | |
| Equity ratio | % | 32.8 | 32.5 | 40.9 | |
| Return on equity | % | 33.8 | 30.0 | 33.0 | |
| Net working capital (including financing items and taxes) | MEUR | -921.8 | -1,032.3 | -861.2 | |
| Gearing | % | -20.9 | -35.4 | -36.4 |
*KONE presents adjusted EBIT as an alternative performance measure to enhance comparability of business performance between reporting periods. In January-March 2024, there were no items affecting comparability. In the comparison period, items affecting comparability included restructuring costs and a positive effect arising from the revaluation of operations in Russia classified as held for sale.
Philippe Delorme, President and CEO:
"We had a good start to the year in a mixed operating environment. We had very good orders received in many parts of the world with strongest growth in India, South-East Asia and North America. We won several important infrastructure projects in both Modernization and New Building Solutions and continued to gain market share in Modernization more broadly. At the same time our New Building Solutions orders continued to be negatively impacted by the property market downturn especially in China. Despite this, we are optimistic about the growth opportunities in the markets. We have made a modest upgrade to our market outlook for the New Building Solutions markets in Europe and Americas as well as the Modernization market in Americas.
Overall, our Q1 financial results demonstrated again the resilience of our business. Our sales grew by 3% at comparable exchange rates driven by strong growth in Service and Modernization. Profitability continued to improve, and cash generation was healthy. All in all, I'm happy with many aspects of our first quarter development while recognizing we still have work to do to reach our ambitions. I want to extend a big thank you to everyone at KONE for the solid start for 2024. With one quarter behind us, we have now specified our guidance for the year, and expect sales to grow by 0-5% at comparable exchange rates, and the adjusted EBIT margin to be in the range of 11.5%-12.3% in 2024.
During my first quarter at KONE, I have had the opportunity to spend more time with our KONE teams and customers around the world, and I see many great opportunities ahead of us. We have several strengths to build on such as our unique culture and outstanding innovations which we now need to scale at speed. One exciting opportunity stems from combining our existing strengths in service mindset with the digital transformation we are accelerating in services. Sustainability has also come across as a shared priority for our people and our customers, and we are paving the way for faster scope 3 emission reductions for example by pushing for regenerative drives as a standard. Today we will also publish our Sustainability Report where we share more about our progress on leading the way in sustainability in our industry."
Operating environment in January-March 2024
The global New Building Solutions market declined slightly during the first quarter with regional differences in demand. In North America, the market declined clearly. In Europe, the activity was mixed with growth in Southern and Eastern parts of Europe, and weak market in the Western parts and Nordics. In Asia-Pacific, Middle East and Africa, activity grew significantly with continued strong demand for example in India. Activity declined clearly in China due to property market downturn.
Growth in Service markets was broad-based with slight growth in more mature markets and clear growth in Asia-Pacific, Middle East and Africa and China. Modernization markets grew across all areas.
Intense competition impacted the New Building Solutions pricing environment in China, while elsewhere pricing was more stable. In the Service and Modernization markets, the pricing environment was favorable.
Market outlook 2024 (updated)
In the New Building Solutions market, activity is expected to be stable both in North America and in Europe. In Asia-Pacific, Middle East and Africa activity is expected to grow clearly. In China, market is expected to decline close to 10% in units.
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 (specified)
KONE expects its sales to grow 0-5% at comparable exchange rates in 2024. Adjusted EBIT margin is expected to be in the range of 11.5%-12.3%. Assuming that foreign exchange rates remain at the April 2024 level, the impact of foreign exchange rates on the adjusted EBIT would be limited.
Key drivers for sales growth are positive outlook for Service and Modernization and the strong order book. Declining New Building Solutions market in China is a headwind.
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 Wednesday, April 24, 2024 at 9:00 a.m. EEST. 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. EEST and will be available on https://join.rajucast.tv/kone-2024-0424-q1. 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:
240424
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