2014-10-21 Interim Report of KONE Corporation for January-September 2014 (2)

KONE Corporation, stock exchange release, October 21, 2014 at 12:30 p.m. EET

Interim Report of KONE Corporation for January-September 2014

KONE's Q3:Strong orders received and positive development overall

July-September 2014

In July-September 2014, orders received totaled EUR 1,577 (7-9/2013: 1,327) million. Orders received grew by 18.8% at historical exchange rates and by 17.4% at comparable exchange rates.
Net sales grew by 8.0% to EUR 1,878 (1,739) million. At comparable exchange rates the growth was 7.9%.
Operating income was EUR 277.5 (257.5) million or 14.8% (14.8%) of net sales.
Cash flow from operations (before financing items and taxes) was EUR 372.1 (349.0) million.
KONE specifies its outlook for 2014. KONE's net sales is estimated to grow by 6-8% at comparable exchange rates as compared to 2013. The operating income (EBIT) is expected to be in the range of EUR 1,015-1,045 million. KONE previously estimated its net sales to grow by 6-9% at comparable exchange rates as compared to 2013. The previous operating income (EBIT) outlook was EUR 1,000-1,050 million assuming that translation exchange rates would not materially deviate from the situation of the beginning of 2014.

January-September 2014

In January-September 2014, orders received totaled EUR 5,109 (1-9/2013: 4,678) million. Orders received grew by 9.2% at historical exchange rates and by 12.3% at comparable exchange rates. The order book stood at EUR 6,996 (Sep 30, 2013: 5,642) million at the end of September 2014.
Net sales grew by 5.5% to EUR 5,169 (4,900) million. At comparable exchange rates the growth was 7.9%.
Operating income was EUR 720.4 (660.7) million or 13.9% (13.5%) of net sales.
Cash flow from operations (before financing items and taxes) was EUR 977.6 (972.2) million.

Key Figures

		7-9/ 2014	7-9/ 2013	1-9/ 2014	1-9/ 2013	1-12/ 2013
Orders received	MEUR	1,577.2	1,327.2	5,108.8	4,677.8	6,151.0
Order book	MEUR	6,995.8	5,642.1	6,995.8	5,642.1	5,587.5
Sales	MEUR	1,877.9	1,739.2	5,168.6	4,899.6	6,932.6
Operating income (EBIT)	MEUR	277.5	257.5	720.4	660.7	953.4
Operating income (EBIT)	%	14.8	14.8	13.9	13.5	13.8
Cash flow from operations (before financing items and taxes)	MEUR	372.1	349.0	977.6	972.2	1,213.1
Net income	MEUR	215.2	207.8	563.2	527.3	713.1
Basic earnings per share	EUR	0.41	0.40	1.07	1.01	1.37
Interest-bearing net debt	MEUR	-767.3	-817.7	-767.3	-817.7	-622.0
Total equity/total assets	%	41.5	45.2	41.5	45.2	43.7
Gearing	%	-41.9	-43.4	-41.9	-43.4	-36.1

Henrik Ehrnrooth, President & CEO, in conjunction with the review:

"We continued our solid performance in the third quarter. I am particularly pleased with our strong order intake of EUR 1,577 million, which represented a growth of 18.8%, as well as our very strong cash flow of EUR 372.1 million. Our orders received grew in all regions. New equipment orders developed very positively with good development in the volume business and an exceptionally strong development in major projects.

Our sales developed also well, totaling EUR 1,878 million, with a growth of 8.0%. Sales grew in all businesses. On a regional basis, growth was the strongest in Asia-Pacific. Also the EMEA region saw some growth. In North America, our sales was stable. Operating income grew and was EUR 277.5 million. Our growth continued to be profitable and the operating margin was at last year's level at 14.8%.

We saw no major changes in the market environment during the third quarter. The Chinese new equipment market continued to grow well, although the development varied clearly between regions within the country. The rest of Asia-Pacific saw a mixed development. In North America, good development continued with the United States developing particularly well. In Europe, uncertainty in the market increased again somewhat. Pricing competition remained intense in many markets both in new equipment and in services. I want to thank our employees for continuously delivering good results in these varying market situations.

To sustain our good development in the current environment, we continue to work on further improving our understanding of the markets at a granular level as well as on driving our sales activities. We also have strong focus on developing the cost competitiveness of our products and on managing fixed costs.

Our development programs are progressing well. As a good example, the focus on customer experience has resulted in improving customer loyalty, as we could see in the results of our most recent customer loyalty survey, which was finalized during the quarter. What is important for us going forward is to further improve our interaction with our customers - both in terms of customer communication and in receiving feedback from them. This helps us in serving our customers better and strengthening our differentiation."

Operating environment in July-September 2014

In the third quarter of 2014, good growth in the global new equipment market continued. Markets in Asia-Pacific and North America continued to grow, while the development in the Europe, Middle East and Africa (EMEA) region was mixed. The major projects segment was rather stable compared to the previous year, with good activity in North America, China and the Middle East but a weaker development in Europe. The modernization market was rather weak overall in Europe, developed positively in North America and saw some growth also in Asia-Pacific. Maintenance markets grew globally, although at low rates in such countries, where new equipment activity has been weak for the past years.

Operating environment in January-September 2014

During January-September 2014, the new equipment market in Asia-Pacific continued to grow, driven by clear growth in China. In the EMEA region, the development of new equipment markets was varied. The market grew slightly in Central and North Europe and saw positive development in the Middle East, but remained on a declining trend in South Europe. In North America, strong development in new equipment demand continued. In modernization, the market in Central and North Europe saw some growth, but declined in South Europe. In North America the modernization market developed very positively, and growth was seen also in Asia-Pacific. The maintenance market continued to grow globally, driven by Asia-Pacific following the positive development of the new equipment market in the region. The pricing environment was challenging in all businesses, in particular in countries suffering from a prolonged weakness in the new equipment market.

Market outlook 2014

In new equipment, the market in Asia-Pacific is expected to grow clearly in 2014. The market in China is expected to grow by approximately 10%. The market in the EMEA region is expected to grow slightly. In Central and North Europe, the market is expected to remain stable or grow slightly, to further slightly decline in South Europe, and to grow in the Middle East. The market in North America is expected to continue to grow.

The modernization market is expected to be rather stable or grow slightly.

The maintenance markets are expected to develop rather well in most countries.

Business outlook 2014

KONE specifies its outlook for 2014.

KONE's net sales is estimated to grow by 6-8% at comparable exchange rates as compared to 2013.

The operating income (EBIT) is expected to be in the range of EUR 1,015-1,045 million.

Previous business outlook

KONE's net sales is estimatedto grow by 6-9% at comparable exchange rates as compared to 2013.

The operating income (EBIT) is expected to be in the range of EUR 1,000-1,050 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2014.

Press and analyst meetings

A meeting for the press, conducted in Finnish, will be held on Tuesday, October 21, 2014 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 can be found below.

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

Telephone conference numbers:

US callers: +1 334 323 6203
UK callers: +44 (0)207 1620 177
Finnish callers: +358 (0)9 2313 9202
Participant code: KONE

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

For further information, please contact:

Katri Saarenheimo, Director, Investor Relations, tel. +358 (0) 204 75 4705

Sender:

KONE Corporation

Henrik Ehrnrooth
President and CEO

Eriikka Söderström
CFO

About KONE

KONE is one of the global leaders in the elevator and escalator industry. KONE'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. KONE provides industry-leading elevators, escalators, automatic building doors and integrated solutions to enhance the People Flow in and between buildings. KONE's services cover the entire lifetime of a building, from the design phase to maintenance, repairs and modernization solutions. In 2013, KONE had annual net sales of EUR 6.9 billion, and at the end of the year over 43,000 employees. KONE class B shares are listed on the NASDAQ OMX Helsinki Ltd in Finland.

www.kone.com

KONEs Interim Report for January-September 2014