KONE CMD 2013

Strong progress in an uncertain environment

Matti Alahuhta, President & CEO
September 24, 2013

© Sellar
Agenda

Managing a global company in a three-speed world

Continuous development of competitiveness

Strategic priorities going forward

2013 outlook and long-term financial targets

 January–June 2013: Very strong development

Historical Comparable
1–6/2013 1–6/2012
change change

Orders received MEUR 3,350.6 2,879.3 16.4% 16.3%

Order book MEUR 5,874.4 5,305.3 10.7% 14.1%

Sales MEUR 3,160.4 2,785.4 13.5% 13.7%

Operating income (EBIT) MEUR 403.2 344.9 1) 16.9%

Operating income (EBIT) % 12.8 12.4 1)

EBITA MEUR 413.1 362.2 1) 14.1%

EBITA % 13.1 13.0 1)

Cash flow from MEUR 623.2 448.4
operations
(before financing
items and taxes)

1) Excluding a MEUR 37.3 one-time cost related to the support function development and cost adjustment programs.
Comparative figures for 2012 have been restated according to the revised IAS 19 `Employee Benefits´.
3 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta
Asia-Pacific has been the driver for new
equipment market growth in 2007-2012
New elevators and escalators in 2007: New elevators and escalators in 2012:
495,000 units 670,000 units

17%

33%
6%

56%

11%
77%

KONE’s estimated market share KONE’s estimated market share

12% 18%
globally (in new equipment units) globally (in new equipment units)

EMEA Americas APAC

4 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta EMEA = Europe, Middle East, Africa.
EMEA continues to represent ~50% of the
global E&E maintenance base
Elevators and escalators in operation Elevators and escalators in operation
in 2007: 8.7 million units in 2012: >11 million units

25%

37%

49%

58%
17%

14%

KONE’s maintenance base KONE’s maintenance base

~650,000 >900,000
(in units) (in units)

EMEA Americas APAC

5 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta EMEA = Europe, Middle East, Africa.
A three-speed world: European markets
remain challenging
New equipment Modernization Maintenance

Slight decline in many

Market slightly
countries, although Market growing,
declining in many
Central from a good level. intensity of price
countries; best
and Germany, Austria, competition varies
development in
North Switzerland and between countries.
Germany, Austria,
Europe Russia showing
Switzerland.
strongest
development.

Market at low level, Market relatively

Continued decline in economic situation stable, intense price
South
France, Italy and preventing pent-up competition due to
Europe
Spain. demand from low new equipment
materializing. levels.

6 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta

A three-speed world: North American
markets, particularly the US, are recovering

New equipment Modernization Maintenance

US market recovery Market showing Market growing,

primarily driven by some growth, pricing pricing environment
the residential and competitive. showing slight
office segments; improvement.
North
improvement in
America
pricing in the volume
segments. Market in
Canada and Mexico
rather stable.

7 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta

A three-speed world: Asia-Pacific and the
Middle East are driving global growth
New equipment Modernization Maintenance

Demand driven by Still a very small market

Good growth; price
residential and due to rebuild of
competition intense in
China commercial segments; buildings, but some
affordable housing;
intense price opportunities in the
wage inflation high.
competition. larger cities.

Market growing, but

Growth, but macro Market growing; high
India some impact from
uncertainties high. wage inflation.
uncertainty.

Good growth in
Southeast Market improving in Good market growth;
Southeast Asia,
Asia and Australia, opportunities high wage inflation in
demand picking up in
Australia also in Southeast Asia. Southeast Asia.
Australia.

Middle Saudi Arabia driving Moderate growth on the

Market growing.
East growth. market.
8 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta
Strong growth in new equipment in Asia has
made our geographic mix more balanced
The weight of Asia-Pacific has ...as well as the share
increased... of new equipment
Sales by market 2007 – H1 2013 Sales by business 2007– H1 2013
EMEA Americas Asia-Pacific New equipment Service

49% 46% 45% 48% 47% 46% 46% 50%

55% 52%
62% 58%
65% 65%

16%
16%
18%
21%
19% 21% 55% 52% 53% 54% 54%
21% 50% 48%
35% 38%
27%
16% 17% 21%
14%

2007 2008 2009 2010 2011 2012 H1 2007 2008 2009 2010 2011 2012 H1
2013 2013

9 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta

New equipment: we have been able to grow our
market share from 10% in 2005 to 18% in 2012
KONE’s market position 2005 2009 2012

EMEA:
Central and North Europe nr. 2  nr. 2  shared nr. 1

South Europe nr. 3  shared nr. 2  nr. 3

Middle East nr. 4  nr. 3  nr. 1

Russia nr. 4  nr. 4  nr. 4

Asia-Pacific:

China nr. 8  nr. 4  nr. 1

India nr. 2  shared nr. 2  nr. 1
Southeast Asia nr. 5  nr. 3  nr. 2
Australia nr. 2  shared nr. 1  shared nr. 1
North America: nr. 4  nr. 4  nr. 4

10 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta Source: Based on KONE’s estimate, in new equipment units
 KONE further strengthened its position in
China in 1H/2013
Market and KONE growth in new
E&E units in 1H/2013, % KONE development in 1H/2013

 KONE grew clearly faster than the market in

Market 1H/2013, with good margins
%
KONE
40
 KONE and GiantKONE’s pricing positions
complement each other

 KONE’s new volume elevators NMiniSpace

and NMonoSpace launched in 2012 with
20 solid volume growth

 GiantKONE’s new product launched at the

end of 2012 to target affordable housing
market well received by the market

0
 Rapid growth of KONE’s service business in
Q1 Q2 China continues

11 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta Source: KONE’s estimates on the market growth
We started to accelerate our development
actions in China at the right time

Focus areas 2005 2012 Future objectives

Continued close co-

Expanding operation between local
KONE focused on Broadly competitive
product team and global R&D to
higher mid-end segment offering for all segments
portfolio further develop
competitiveness

Expanding Geographical coverage

Ensure presence in all
geographical concentrated in larger Approx. 400 locations
attractive growth regions
coverage cities

Develop and promote

Target to attract the best
Active talent Improved retention rate internal talent;
talent and retain key
management and employee satisfaction Attract external talent to
people
support fast growth

GiantKONE JV Ownership in GiantKONE Dual brand strategy to

Two-brand
established – 80% – clearly differentiated strengthen
strategy
40% ownership role for each brand competitiveness further

Building a
Small maintenance 2005-2012 Further expand the
leading
base; target to achieve maintenance base maintenance network,
maintenance
fast growth CAGR close to 40% focus on conversions
business

12 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta

Maintenance: Solid growth in Europe and North
America as well as continuing fast growth
opportunities in Asia-Pacific
KONE’s maintenance base growth rate (CAGR) by region 2008—2012

KONE
~4.5%
KONE Market
~4% ~2%
Market
~1% KONE
~19%
Market:
~18.5%

 KONE’s maintenance base was >900,000

units at the end of 2012

 CAGR 2008-2012: 6.2%

13 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta Based on KONE’s estimates. APAC excluding Japan and Korea.
Modernization: we aim to capture the significant
untapped modernization potential in Europe and
North America

Comparison of the age of installed E&E base by We are focused on capturing the
region, end of 2012 opportunity
5.3M
 Increased focus on
developing modernization
sales capabilities and
tools
Over 50%
2.4M
 Developing a more
granular understanding of
1.0M growth opportunities
Over 50%
0.1M  Further improved
competitiveness in the full
Total Of which Total US Of which Total Of which
European at least installed at least Chinese at least replacement segment
installed 20 years base 20 years installed 20 years with new volume elevator
base old old base old offering
Europe United States China
14 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta
Since the financial crisis, our approach has
been to take the challenging situation as an
opportunity

More granular market

understanding in order to have New equipment market share from
better focus on growth 12% in 2007 to 18% in 2012
opportunities

Continued strengthening of
Acceleration of development
competitiveness throughout the
programs
business system

Increasing investments in people Improved employee satisfaction and

development engagement

15 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta

Active development of competitiveness has
enabled continued EBIT growth

12 months quarterly rolling absolute EBIT progression, Q4/2005-Q2/2013

MEUR
900

800

700

600

500

400

300

200

100

0
Q1/2006 Q1/2007 Q1/2008 Q1/2009 Q1/2010 Q1/2011 Q1/2012 Q1/2013

16 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta Note: Excluding one-time items.
Managing a global company in a three-speed world

Continuous development of competitiveness

Strategic priorities going forward

2013 outlook and long-term financial targets

We continue to develop our competitiveness
in a systematic way

18 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta

Three-year cycle development programs
support our continuous renewal

Increasing
differentiation
Agility and speed
Common
vision
Development
of culture
Process
alignment

2005 2006 2007 2008 2009 2010 2011 2012 2013

Customer Focus Customer Focus Customer Experience

Product and Service Excellence People Flow Solutions Employee Engagement

Innovative Solutions for People
Operational Excellence Operational Excellence
Flow™
Sourcing Environmental Excellence Service Leadership

Focus in Asia People Leadership Delivery Chain Excellence

19 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta

Innovations are essential in further improving
our product competitiveness
 2012: New volume elevator offering
– Improved competitiveness in all key
aspects

 2013: UltraRopeTM
– Revolutionary technology for the
high-rise segment

 KONE was again ranked as one of the

world’s most innovative companies
(#37 in Forbes’ ranking in 2013)

20 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta

Managing a global company in a three-speed world

Continuous development of competitiveness

Strategic priorities going forward

2013 outlook and long-term financial targets

We are targeting good growth with solid
margins across all our businesses

Continue targeting faster than

New market growth in order to achieve
equipment increasing benefits from economies
of scale

Accelerate growth and productivity

Maintenance development in the maintenance
business

Capitalize on the untapped

modernization opportunities and the
Modernization
accumulated demand – stronger
focus on modernization than before

22 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta

We will continue building on our strengths
going forward

Continued good growth as a result of market share

gains and market growth driven by
global megatrends

Strong market position in Asia brings growth

opportunities and strength in
service business brings stability

Challenger attitude and consistent active

development of competitiveness

High-quality execution of a capital-light and

cash-generative business model
Low amount of fixed assets required
Negative working capital
High return on invested capital

23 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta

Managing a global company in a three-speed world

Continuous development of competitiveness

Strategic priorities going forward

2013 outlook and long-term financial targets

Market outlook 2013

New equipment markets

 The market in Asia-Pacific is expected to grow clearly.
The market in China is expected to grow by 10–15% in
2013.
 The market in Central and North Europe is expected to
decline slightly and the market in South Europe to decline
further from an already weak level.
 The market in North America is expected to continue to
grow.

Modernization markets
 The modernization market is expected to be at about the
same level as in 2012 or decline slightly.

Maintenance markets
 The maintenance market is expected to continue to
develop rather well in most countries.

25 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta

Business outlook 2013

Sales
 KONE’s net sales is estimated to grow by
11–14% at comparable exchange rates as
compared to 2012.

Operating income
 The operating income (EBIT) is expected to
be in the range of EUR 920–955 million,
assuming that translation exchange rates do
not materially deviate from the situation of
the beginning of September 2013.

26 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta

Our long-term financial targets

Growth Faster than market

Profitability EBIT-% 16

Cash flow
Improved working capital
rotation

27 ©KONE Corporation | Capital Markets Day 2013 | Matti Alahuhta