KONE Sustainability Report 2017

KONE 2017 | SUSTAINABILITY REPORT Enabling our partners and societies to prosper 39 GENERATING LONG-TERM RETURNS KONE continuously develops its business with a long-term focus. We have a chal- lenger mindset and we are constantly developing our competitiveness in order to strengthen our position as one of the global leaders in the elevator and escala- tor industry. Long-term financial targets KONE has three long-term financial targets: Growing faster than the market, achieving an EBIT margin of 16%, and improving working capital rotation. We have achieved two of them: In recent years, KONE has grown faster than the market and we have improved our working capital rotation at the same time. For the 16% EBIT margin, no target date has been set. With our life cycle busi- ness model, the short-term focus is on growing absolute EBIT while achieving improved relative profitability over time with growth, further differentiation and productivity gains. KONE’s strong financial performance has enabled increasing dividends to our shareholders. Also with a longer-term per- spective, our track record on dividend dis- tribution has been sustainable. KONE had over 61,000 shareholders at the end of December 2017 (Dec. 2016: over 57,000 shareholders). Creating wealth via taxes and employment We are committed to paying all taxes that are legally due, and to meeting all disclo- sure requirements in the countries where we operate. Our objective is to ensure predictability in all tax matters. In addi- tion, every transaction must have a solid business rationale without compromising tax compliance principles. The location of KONE’s group entities is driven by business reasons, such as the location of customers, suppliers, raw materials and know-how. We insist on transparency in all our activities, including our relationships with tax authorities. KONE has been Orders received (MEUR)* 0 2,000 4,000 6,000 8,000 10,000 2016 2015 2017 7,554 7,621 7,959 Adjusted EBIT (MEUR) and adjusted EBIT margin (%) Sales (MEUR) 0 2,000 4,000 6,000 8,000 10,000 2016 2017 8,942 8,784 8,647 2015 collaborating with the Finnish Tax Author- ities in promoting tax transparency since 2015. KONE’s complete tax strategy can be found at kone.com . KONE’s income taxes globally amounted to EUR 300.1 (307.7) million in 2017, with the ten largest countries by sales accounting for 80% of the corporate taxes. Income taxes of the Finnish KONE companies totalled EUR 68.4 (56.7) mil- lion in 2017. Our largest direct economic impacts come from the employment opportunities we provide. KONE is a global company with global processes and guidelines, but our operations are at the same time very local. In our subsidiaries, management and field personnel are predominantly local. In 2017, the largest KONE countries by the number of employees were China, the United States and India. Read more about our people on p. 34–37. KONE class B share dividend per share, 2005–2017 EUR 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0 2013 2012 2011 2010 2014 2015 2016 2017 2009 2008 2007 2006 2005 Extraordinary dividend Dividend KONE’s largest individual shareholder is Antti Herlin, Chairman of KONE’s Board of Directors, who controls over 20% of the share capital and over 60% of votes. For KONE’s domestically registered major shareholders, see monthly updated list on kone.com . Read more about KONE's financial performance in our Annual Review 2017. 1,500 1,250 1,000 750 500 250 0 24 20 16 12 8 4 0 2015 2016 2017 *Orders received do not include maintenance contracts. Adjusted EBIT* Adjusted EBIT margin * In September 2017, KONE introduced a new alternative performance measure, adjusted EBIT, to enhance comparability of the business performance between reporting periods during the Accelerate program. Restructuring costs related to the Accelerate program are excluded from the calculation of the adjusted EBIT. 1,241 1,293 1,230 14.4% 14.7% 13.8%