kone’s interim report for january–march 2016 · kone’s interim report for january–june 2016...
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KONE’s interim report for January–June 2016 JULY 19, 2016 HENRIK EHRNROOTH, PRESIDENT & CEO
Figures for January–June 2016 Key figures for January–June 2016
Q2 2016 Key figures
Q2/2016 Q2/2015 Historical change
Comparable change
Orders received MEUR 2,067.8 2,193.5 -5.7% -1.9%
Order book MEUR 8,763.6 8,627.4 1.6% 5.5%
Sales MEUR 2,272.6 2,210.4 2.8% 6.0%
Operating income (EBIT) MEUR 348.6 325.2 7.2%
Operating income (EBIT) % 15.3 14.7
Cash flow from operations (before financing items and taxes)
MEUR 393.3 426.0
Basic earnings per share EUR 0.54 0.51
3 July 19, 2016 Interim Report January-June 2016 | © KONE Corporation
STRONG EXECUTION AND PROFITABLE SALES GROWTH
January–June 2016 Key figures
1–6/2016 1–6/2015 Historical change
Comparable change
Orders received MEUR 4,010.1 4,247.3 -5.6% -3.1%
Order book MEUR 8,763.6 8,627.4 1.6% 5.5%
Sales MEUR 4,020.9 3,901.2 3.1% 5.2%
Operating income (EBIT) MEUR 570.0 537.1 6.1%
Operating income (EBIT) % 14.2 13.8
Cash flow from operations (before financing items and taxes)
MEUR 699.0 638.2
Basic earnings per share EUR 0.90 0.80
4 July 19, 2016 Interim Report January-June 2016 | © KONE Corporation
SOLID OPERATING PERFORMANCE
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Q2 2016 Orders received ORDERS RECEIVED DECLINED BUT REMAINED AT A HIGH LEVEL
Significant growth in
modernization orders; some decline in new equipment orders
Some growth in the EMEA region and clear growth in the Americas; orders in Asia-Pacific declined due to China
500
2,500
2,000
1,500
1,000
0
Q1
1,942
-5.7% -5.4%
Q4 Q3 Q2
2,068
MEUR
At historical exchange rates. At comparable exchange rates.
July 19, 2016 Interim Report January-June 2016 | © KONE Corporation 6
Q2 2016 Sales GOOD GROWTH IN SERVICE BUSINESSES
MEUR
3,000
2,500
2,000
1,500
1,000
500
0
+2.8%
+3.4%
Q4 Q3
2,273
Q1
1,748
Q2
Slight growth in new
equipment, some growth in maintenance and strong growth in modernization sales
Sales in EMEA was stable, some growth in Asia-Pacific and significant growth in the Americas
At historical exchange rates. At comparable exchange rates.
July 19, 2016 Interim Report January-June 2016 | © KONE Corporation 7
Q2 2016 Operating income GROWTH DRIVEN BY POSITIVE DEVELOPMENT IN ALL REGIONS AND BUSINESSES
MEUR
349
221
0
50
100
150
200
250
300
350
400+7.2%
+4.5%
Q4 Q3 Q2 Q1
Development
particularly positive in North America and Asia-Pacific
Progress in product
and cost competitiveness helped in offsetting the intense price pressure
At historical exchange rates. At comparable exchange rates.
July 19, 2016 Interim Report January-June 2016 | © KONE Corporation 8
13% (11%)
34% (33%)
53% (56%)
Modernization Maintenance New equipment
18% (16%)
39% (40%)
43% (44%)
EMEA (Europe, Middle East and Africa) Americas Asia-Pacific
BY BUSINESS BY AREA
1–6/2016 Sales split SHARE OF MODERNIZATION AND THE AMERICAS OUT OF TOTAL SALES CONTINUED TO GROW
1–6/2015 figures in brackets. Figures in charts are rounded and at historical exchange rates.
Figures for January–June 2016 Business and market development
Q2 2016 Business development highlights
July 19, 2016 Interim Report January-June 2016 | © KONE Corporation 10
First in Customer Loyalty
A Winning Team of True Professionals
The Most Competitive People Flow® Solutions
Preferred Maintenance Partner
Top Modernization Provider
In June, we opened our new R&D and manufacturing facility in Allen, Texas to support the growth of the North American business
The facility enables us to further improve our competitiveness and customer service in the North American market in new equipment and modernization
OUR DEVELOPMENT PROGRAMS
Our strengthened modernization offering and processes and continued focus on sales management contributed to the good development in orders received and sales
Q2 2016 New equipment markets
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GLOBAL NEW EQUIPMENT MARKET VOLUMES WEAKENED DUE TO A DECLINE IN CHINA
NEW EQUIPMENT
ASIA-PACIFIC
Market weakened slightly as the market in China declined
Markets in India and Australia grew, while other markets in the region remained slow
In China, price competition intensified during the quarter
EMEA REGION
Market continued to grow in Central and North Europe, while the markets in South Europe were rather stable
Market in the Middle East continued to show growth opportunities despite uncertainty in the region
NORTH AMERICA
Market grew slightly driven by the United States in particular
Pricing of new equipment continued to develop positively
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Q2 2016 Service markets SERVICE MARKETS CONTINUED TO GROW GLOBALLY
MAINTENANCE MODERNIZATION
EMEA REGION Maintenance market grew in the region, but with
significant variation between countries; price competition remained intense
Modernization market grew strongly in Central and North Europe; South Europe saw further signs of stabilization in demand
NORTH AMERICA
Maintenance market grew slightly; price competition remained rather intense
Modernization market saw slight growth
ASIA-PACIFIC Maintenance market continued to develop positively
Demand developed positively
Figures for January–June 2016 Outlook
Market outlook
July 19, 2016 Interim Report January-June 2016 | © KONE Corporation 14
Asia-Pacific: The market in China is expected to decline by 5–10% in units ordered and also the price competition to continue intense. In the rest of Asia-Pacific, the market is expected to see some growth.
Europe, Middle East and Africa: the market is expected to grow slightly with growth in Central and North Europe and a more stable development in South Europe and the Middle East.
North America: the market is expected to see some growth.
The maintenance markets are expected to see the strongest growth rate in Asia-Pacific, and to develop rather well also in other regions.
NEW EQUIPMENT MARKETS
MAINTENANCE MARKETS
The modernization market is expected to grow slightly in Europe, to continue to grow in North America, and to develop strongly in Asia-Pacific.
MODERNIZATION MARKETS
Business outlook (upgraded)
KONE’s net sales is estimated to grow by 2–6% at comparable exchange rates as compared to 2015.
July 19, 2016 Interim Report January-June 2016 | © KONE Corporation 15
The operating income (EBIT) is expected to be in the range of EUR 1,250–1,330 million, assuming that translation exchange rates would remain at approximately the average level of January–June 2016.
SALES
OPERATING INCOME
APPENDIX
July 19, 2016 17
KONE’s Capital Markets Day 2016 KONE’s CMD 2016 will be held in Helsinki on September 28, 2016. The event will be held in central Helsinki, followed by an optional tour of KONE’s manufacturing facilities in Hyvinkää.
Presentations will be held by: Henrik Ehrnrooth, CEO
Tomio Pihkala, CTO
Larry Wash, EVP, Americas
William B. Johnson, EVP, Greater China
E&E market and KONE’s performance in China in Q2 2016
July 19, 2016 Interim Report January-June 2016 | © KONE Corporation 19
Share of sales
~35%
Share of orders
received
<40% ~40% ~35%
FY 2015
Share of sales
Share of orders
received
NEW EQUIPMENT MARKETS New equipment orders received in units vs. market growth
CHINA’S SHARE OF TOTAL ORDERS/SALES In monetary value
-20
-10
0
10
20
30
40
50
Q2/2016
~-5% ~-5%
Q1/2016
>-10%
2015
<5%
2014
~10% >15%
2013
>15%
~23%
2006-2012 CAGR
~20%
~44% Market KONE
~-5% ~-8%
Q2 2016
Q2 2016 Balance sheet - assets employed
July 19, 2016 Interim Report January-June 2016 | © KONE Corporation 20
MEUR Jun 30, 2016 Jun 30, 2015 Dec 31, 2015 Assets employed
Goodwill 1,305.4 1,297.8 1,306.7
Other intangible assets 271.2 275.9 271.5
Tangible assets 357.6 328.4 345.4
Investments 139.9 118.7 122.7
Net working capital -1,033.4 -940.0 -983.4
Assets employed total 1,040.8 1,080.8 1,062.9
Financed by
Equity 2,186.1 2,036.1 2,575.5
Net debt -1,145.4 -955.3 -1,512.6
Equity and net debt total 1,040.8 1,080.8 1,062.9
Q2 2016 Net working capital
July 19, 2016 Interim Report January-June 2016 | © KONE Corporation 21
MEUR Jun 30, 2016 Jun 30, 2015 Dec 31, 2015
Net working capital
Inventories 1,457.1 1,428.4 1,326.7
Advance payments received -2,055.3 -2,002.3 -1,829.4
Accounts receivable 1,512.4 1,500.1 1,480.2
Other non-interest-bearing assets 532.8 467.3 434.0
Net deferred tax assets / liabilities 161.9 146.6 158.8
Provisions -174.0 -132.7 -173.6
Accounts payable -676.2 -692.6 -728.9
Other non-interest-bearing liabilities -1,792.1 -1,654.8 -1,651.3
Net working capital total -1,033.4 -940.0 -983.4
Q2 2016 Consolidated cash flow
July 19, 2016 Interim Report January-June 2016 | © KONE Corporation 22
MEUR 4–6/2016 4–6/2015 1–6/2016 1–6/2015 1–12/2015
Operating income 348.6 325.2 570.0 537.1 1,241.5
Change in working capital before financing items and taxes 18.9 75.9 77.7 51.7 132.3
Depreciation and amortization 25.8 24.9 51.3 49.3 100.0
Cash flow from operations before financing items and taxes 393.3 426.0 699.0 638.2 1,473.7
Financing items and taxes -99.7 -19.8 -138.4 15.4 -27.0
Cash flow from operating activities 293.6 406.2 560.6 653.6 1,446.7
Investing activities -41.6 -27.7 -95.2 -59.5 -155.0
Purchase of own shares -39.3 - -39.3 - -71.2
Increase in equity (option rights) 6.4 13.3 6.4 13.3 13.5
Profit distribution -59.9 -52.6 -718.2 -616.3 -616.3
Changes in non-controlling interest -19.9 - -19.9 - -18.4
Free cash flow 139.4 339.2 -305.6 -8.9 599.5
As approximately 75% of KONE’s revenues are in other currencies than the euro, currency fluctuations have a translation impact
July 19, 2016 Interim Report January-June 2016 | © KONE Corporation 23
EUR Others
USD
RMB
SALES BY CURRENCY 1–12/2015
A substantial part of KONE operations are denominated in local functional currencies and do not therefore give rise to transaction risk. In addition, KONE’s policy is to hedge the foreign exchange exposure of the order book.
As approximately 75% of KONE’s revenues occur in functional currencies other than the euro, the translation risk is significant for KONE. In 2015, KONE’s biggest geographical market areas outside the eurozone in terms of net sales included China, United States, Great Britain, Australia, Sweden and India.
TRANSACTION RISK
TRANSLATION RISK
Our absolute EBIT has grown faster than sales
July 19, 2016 Interim Report January-June 2016 | © KONE Corporation 24
16%
14%
12%
10%
0%
1,400
1,200
1,000
800
600
400
200
0
14.5
Q1/2015 Q1/2014 Q1/2013 Q1/2012 Q1/2011 Q1/2010
12.1
EBIT EBIT-%
12 months quarterly rolling absolute EBIT and EBIT margin progression, 2009–Q2/2016
MEUR
We have seen improvement both
in absolute and relative EBIT
Q1/2016
Sales by market 2005–2015 (MEUR)
July 19, 2016 25
0
10,000
2,000
4,000
6,000
8,000
65%
2005*
3,242
66% 16%
49%
2011
5,225
27%
18%
55%
2010
4,987
21%
21%
58%
2009
4,744
17% 21%
3,601
2008
4,603
16% 19%
65%
2007
4,079
14% 21%
7,334
2015
8,647
44%
17%
41%
2014
38%
16%
46%
2012
6,277
35%
62% 15%
44%
2013
6,933
65%
2006
22%
39%
EMEA Asia-Pacific Americas
12% 22%
13%
*2005 figures are pro forma.
8.4% 10.0% 11.6% 12.1% 12.7% 14.0% 13.9% 13.2% 13.8% 14.1% 14.4% EBIT margin %
CAGR, %
10.3%
4.6%
7.7%
25.4%
Interim Report January-June 2016 | © KONE Corporation
Sales by business 2005–2015 (MEUR)
July 19, 2016 26
10,000
8,000
2,000
4,000
0
6,000
19% 13%
55%
2013
6,933
32%
14%
54%
2012
6,277
34%
16%
50%
2011
8,647
2015
32%
12%
7,334
31%
2014
46%
5,225
40%
19%
41%
2005*
3,242
41%
40%
47%
2008
4,603
33%
19%
48%
2007
37% 36%
19%
45%
2006
3,601
17%
46%
57%
2010
4,987
37%
17%
2009
4,744
34%
4,079
New equipment Maintenance Modernization
19%
*2005 figures are pro forma.
8.4% 10.0% 11.6% 12.1% 12.7% 14.0% 13.9% 13.2% 13.8% 14.1% 14.4% EBIT margin %
CAGR, %
10.3%
6.0%
7.0%
14.3%
Interim Report January-June 2016 | © KONE Corporation