KONE Corporation, Stock Exchnage Release, 26 January, 2007 at
12:30 p.m. Finnish time
KONE Corporations Review: JanuaryDecember 2006 (with Pro Forma
Comparison Figures for January-December, 2005)
KONE achieved 10 percent operating income (EBIT) already in 2006
- Order intake growth for January-December 2006 exceptionally
strong at 18 percent.
- Net sales grew by 11 percent and totaled EUR 3,601 (3,242)
million for January-December 2006.
- Operating income (EBIT) improved by 32 percent to EUR 360.1
(272.0) million, corresponding to a 10.0 (8.4) percent operating
income (EBIT) margin.
- KONEs target for 2007 is to achieve an approximate 10
percent increase in net sales, calculated at comparable exchange
rates, compared to 2006. The operating income (EBIT) target is to
achieve growth of approximately 20 percent from the comparable
2006 figure of EUR 360 million.
- In 2008, KONEs objective is to achieve an about 12 percent
operating income (EBIT) margin.
- The Board of Directors proposes a dividend of EUR 1.00 per
class B share.
Key Figures
accounting
pro previous
forma period
10-12/ 10-12/ 1-12/ 1-12/ 6-12/
2006 2005 2006 2005 2005
Orders MEUR 712.1 702.5 3,116.3 2,639.2 1,622.1
Order book MEUR 2,762.1 2,326.8 2,762.1 2,326.8 2,326.8
Sales MEUR 1,145.6 1,013.4 3,600.8 3,242.2 2,101.4
Operating MEUR 123.4 93.6 360.1 272.0 1) 194.7
income
Cash flow from MEUR 97.7 111.3 371.7 329.4 215.4
operations
(before financial
items and taxes)
Net income MEUR 80.2 53.8 234.4 108.8 124.0
Net debt MEUR 124.9 99.3 124.9 99.3 99.3
Total equity/ % 30.5 31.2 30.5 31.2 31.2
total assets
Gearing % 17.9 14.8 17.9 14.8 14.8
1) Excluding a EUR 89.2 million provision for the development and
restructuring program. Operating income including the provision
was EUR 182.8 million in 2005.
Matti Alahuhta, President & CEO, says:
I am very satisfied with KONEs performance last year. In
comparison with competition, we succeeded very well in increasing
our orders and especially our profitability. We strengthened our
market position in the Asia-Pacific region, continued to improve
the profitability of our U.S. operations and also advanced
strongly in many European markets. Our comprehensive development
program has progressed well and produced results.
KONE Corporations first financial reporting period was 1 June31
December, 2005. KONEs reporting period follows the calendar year
as of 2006. In order to facilitate evaluation of the financial
performance and status of the company KONE has, in addition to the
Financial Statements Bulletin, published this separate pro forma
review, in which the company has used 1 January31 December 2005
data for comparison.
KONE Corporations audited Financial Statements are available on
the companys website at www.kone.com.
Analyst and Media Conferences and Conference Call
A meeting for the press, conducted in Finnish, will be held on
Friday 26 January, 2007 at 2:00 p.m. Finnish time at KONE
Building, address Keilasatama 3, 02150 Espoo.
A telephone conference and a meeting for analysts, conducted in
English, will begin on Friday 26 January, 2007 at 3:30 p.m.
Finnish time at KONE Building, address Keilasatama 3, 02150 Espoo.
The telephone conference will also be available as webcast on the
company website. Callers may access the conference directly at the
following telephone numbers:
US callers: +1 334 323 6201
Non-US callers: +44 (0)20 7162 0025
Participant code: KONE
On demand version of the conference will be available on the
companys website www.kone.com later the same day.
KONEs Financial Statement Bulletin and Pro Forma Report for 2006,
and presentation material will be available in the meetings. The
presentation material and KONEs Annual Report for 2006 will be
available in pdf-format on the companys website as of 2:00 p.m.
The printed Annual Report will be published in the week starting 5
February.
Sender:
KONE Corporation
Aimo Rajahalme Minna Mars
Executive Vice President, Senior Vice President,
Finance Corporate Communications & IR
For further information please contact:
Aimo Rajahalme, Executive Vice President, Finance, tel. +358
(0)204 75 4484
KONE is one of the worlds leading elevator and escalator
companies. It provides its customers with industry-leading
elevators and escalators and innovative solutions for their
maintenance and modernization. KONE also provides maintenance of
automatic building doors. In 2006, KONE had annual net sales of
EUR 3.6 billion and about 29,000 employees. Its class B shares are
listed on the Helsinki Stock Exchange in Finland.
www.kone.com
KONEs Operating Environment
The operating environment remained good in most markets throughout
the year. The need to modernize equipment and cater for ageing
populations is driving demand in Europe and North America, while
urbanization and economic growth are continuing to increase the
demand for elevators and escalators and the related service in
Asia.
In Europe, the Middle East and Africa (EMEA), the business
environment continued to be favorable. Despite tough competition,
KONE succeeded in strengthening its position even further. The
residential market was the main driver of Europes new equipment
business in most countries, although commercial construction
progressed at a fairly lively rate especially in the U.K. The
Southern European market slowed down at the end of the year. The
Middle East market was buoyant due to energetic construction
growth in most segments.
In North America, the new equipment market continued to progress
strongly. The market for hotel and leisure building solutions was
especially active, whereas growth in the U.S. residential segment
slowed down during the second half of the year.
The Asia-Pacific region developed well, with most markets
maintaining a high level of activity. Rapid urbanization and
economic growth were the main factors affecting the new equipment
and modernization markets in the region. In China, the central
government made several consecutive controlling actions
particularly to guide residential construction towards more
affordable housing for people migrating to the cities, which
temporarily slowed down growth somewhat.
The pricing environment for new elevators and escalators continued
to be competitive in all market areas.
The maintenance market progressed well under continuous tough
price competition. A high level of demand continued for the
modernization of elevators and escalators in both Europe and North
America, but also in some markets in Asia-Pacific. The growing
modernization market became an increasingly important market for
KONE, even though it is attracting the attention of both global
and local players.
During the fourth quarter, the market environment for new
equipment remained similar to the previous quarter in North
America and the Asia-Pacific region. The EMEA market exhibited
contrasting trends, with many of the Central and North European
markets and the Middle East growing rather well, but several South
European markets continuing to weaken.
The maintenance market continued to develop favorably despite the
tough price competition. The modernization market remains
important for growth, especially in those countries that have
adopted SNEL (Safety Norms for Existing Lifts) in Europe, but also
in North America and in some markets in Asia.
Orders Received and Order Book
The value of orders received during 2006, excluding the value of
maintenance contracts, increased exceptionally strongly by
approximately 18 percent and totaled EUR 3,116 (January-December
2005: 2,639) million. At comparable exchange rates, the growth was
also approximately 18 percent. The order book was EUR 2,762 (31
December, 2005: 2,327) million at the end of December. This
represents an increase of nearly 19 percent on the year-end order
book. At comparable exchange rates this corresponded 24 percent.
The order intake for new equipment and modernizations in the EMEA
region was strong. Modernization order growth was good
particularly in countries that have adopted SNEL in their
legislation.
In North America, order intake growth was strong. The success of
the KONE extended machine-room-less (MRL) elevators and
encouraging escalator demand in the public sector resulted in good
order intake growth. The demand for modernizations continued to
grow also in the U.S.
The Asia-Pacific region continued to be characterized by high
demand for new equipment. KONEs market share grew rapidly
especially in China, where progress has been especially good.
KONEs position has strengthened in the whole Asia-Pacific region.
KONEs largest orders of the financial year were orders to supply
all elevators for the old London Stock Exchange Building, to
modernize escalators and walkways in the Roman metro system and
major projects for the Madrid Metro. KONE also received an order
for the Vienna International Airport, a service contract for the
London Underground, and a major order for the retail sector from
Tesco PLC to supply ramps and elevators for stores across the U.K.
In addition, KONE received orders to design, supply and install
all elevators on four cruise ships. In China, KONE was able to
gain ground by signing orders with the China National Stadium in
Beijing, for example.
Orders received during October - December 2006 totaled EUR 712.1
(10-12/2005: 702.5) million, an increase of approximately 1.4
percent. At comparable exchange rates, the growth was 4 percent.
The main reason for the lower order intake during the fourth
quarter was that several major project awards were postponed to
the next quarter in the EMEA region. During the fourth quarter,
North America recorded the highest growth in new orders.
Sales by geographical areas MEUR
previous
pro accounting
forma period
10-12/ % 10-12/ % 1-12/ % 1-12/ % 6-12/ %
2006 2005 2006 2005 2005
EMEA 1) 762.1 67 670.3 66 2,319.4 65 2,149.4 66 1,388.6 66
Americas 232.1 20 219.1 22 805.1 22 696.8 22 452.7 22
Asia-Pacific 151.4 13 124.0 12 476.3 13 396.0 12 260.1 12
Total 1,145.6 1,013.4 3,600.8 3,242.2 2,101.4
1) EMEA = Europe, Middle East, Africa
Net Sales
In comparison to 2005, KONEs net sales increased by approximately
11 percent and totaled EUR 3,601 (January-December 2005: 3,242)
million. Growth at comparable exchange rates was also
approximately 11 percent. New equipment sales accounted for EUR
1,491 (1,301) million of the total and represented an approximate
15 percent increase compared to the same period in 2005. Service
sales increased by approximately 9 percent and totaled EUR 2,110
(1,942) million.
Net sales growth was almost totally organic and resulted from
favorable market conditions and good progress in the companys
development programs, i.e. programs to increase customer focus and
competitiveness through a better product portfolio. In 2006, the
annual sales for closed acquisitions amounted to approximately EUR
50 million. Net sales grew in all geographical areas. In 2006,
growth was strongest in Asia-Pacific, and especially in China.
In the fourth quarter, KONEs net sales totaled EUR 1,146 (1,013)
million, an approximate 13 percent improvement over the same
period in 2005. At comparable exchange rates, the growth was
approximately 16 percent. New equipment sales accounted for EUR
527.7 (435.0) million. Service sales continued to increase and
totaled EUR 617.9 (578.4) million.
Result
KONEs operating income improved in comparison to 2005 and stood
at EUR 360.1 (January-December 2005: 272.0) million or 10.0 (8.4)
percent of net sales (the 2005 figures exclude the EUR 89.2
million provision made in the first quarter of 2005). Net
financial items were EUR -3.5 (-6.4) million. The increase in
operating income compared to the corresponding period of 2005 was
driven by continued productivity improvements, which resulted from
ongoing development programs.
KONEs profit before taxes was EUR 356.3 (177.9) million. Taxes
totaled EUR 121.9 (69.1) million, representing a 34.2 (38.8)
percent tax rate.
Net income for January-December was EUR 234.4 (108.8) million.
Earnings per share were EUR 1.86 (0.87).
Fourth quarter operating income was EUR 123.4 (93.6) million, or
10.8 (9.2) percent of net sales. The negative impact of higher raw
material costs increased towards the end of the year. Net
financial items in the fourth quarter were EUR 0.3 (-1.4) million.
Fourth quarter profit before taxes was EUR 123.9 (92.5) million.
Taxes totaled EUR 43.7 (38.7) million.
In the fourth quarter, net income was EUR 80.2 (53.8) million and
earnings per share were EUR 0.64 (0.43).
Cash Flow and Financing
Cash flow from operations (before financial items and taxes) for
2006 was EUR 371.7 (January-December 2005: 329.4) million. At the
end of December, net working capital was negative at EUR -139.5
(31 December, 2005: -158.0) million, including financial items and
taxes. Although the record net sales of the last quarter increased
receivables, the overall cash flow was in accord with the result.
Net debt totaled EUR 124.9 (31 December, 2005: 99.3) million.
Gearing was 17.9 percent compared to 14.8 percent at the end of
December, 2005. KONEs total equity/total assets ratio was 30.5
(31 December, 2005: 31.2) percent at the end of December.
Capital Expenditure, Acquisitions and Cooperation Agreements
In 2006, KONEs capital expenditure, including acquisitions,
totaled EUR 150.5 (January-December 2005: 173.7) million.
Acquisitions accounted for EUR 90.1 (93.2) million of this figure.
KONE continued its acquisition policy of buying small local
elevator or door service companies. Acquisitions were made mainly
in Europe and the U.S. in 2006.
In Germany, KONE increased its shareholding in Lödige
Aufzugstechnik to 85 percent. The company has 5,500 units under
maintenance and employs approximately 100 people.
KONE signed an agreement to acquire Evin SAS, an elevator company
located in France. Evin SAS was consolidated into KONE in
September 2006. The company recorded sales of EUR 14 million in
2005 and employed somewhat over 100 persons. Evin SAS installed,
maintained and modernized elevators and automatic building doors
in several regions in France.
In November, KONE Corporation and KMZ Karacharovo Mechanical
Factory agreed to withdraw from their plans to set up a joint
venture elevator company in Russia, which was announced by the
parties in April 2005. KONE and KMZ will, however, continue their
cooperation on the local Russian elevator market.
KONE and Marimekko signed an agreement to start cooperation under
license concerning the decoration of elevator car interiors.
Research and Product Development
Product development expenses totaled EUR 50.3 (January-December
2005: 50.8) million, representing 1.4 (1.6) percent of net sales.
R&D expenses include development of new product concepts and
further development of existing products and services. During the
year the focus was on developing KONEs product portfolio even
further in order to maximize the accessible markets.
In Europe, a preferred offering for the new equipment market was
released, providing better flexibility in fulfilling customer
needs. It included a new set of visual outlooks for the car
interiors and improved performance, such as the more efficient use
of space.
KONEs machine-room-less (MRL) product offering for the North
American market now covers most hydraulic elevator segments.
Further performance improvements were also released during the
year, including the possibility for bigger loads.
In the Asian market, KONE continued to increase the flexibility of
its product offerings and the coverage of its visual offering. In
2006, the first escalator product from KONEs subsidiary, KONE
TELC Industries Co., Ltd, was released in most Asian markets,
including India, and in Australia, South Africa and some European
markets.
With respect to modernizations, a solution featuring enhancements
in accessibility, safety (optimized for the European Standard
Safety Norm for Existing Lifts, SNEL), visual outlook and
performance was released in 2006.
KONE also announced that it has developed the worlds flattest
autowalk technology, which makes designing locations for and
installing autowalks considerably easier. Due to the innovative
pallet return mechanism and a new kind of motor solution, each
KONE InnoTrack autowalk is so flat that, unlike conventional
solutions, it can be installed entirely on the floor level.
During 2005 and 2006 product creation at KONE has been developed
to become much more cross-functional. This has significantly
reduced the time to market in R&D.
Significant Events
KONE and Hewlett Packard (HP) signed a seven-year agreement
covering IT infrastructure services. Under this agreement, HP will
consolidate and maintain KONEs servers, local area networks and
operating help desks, and will harmonize desk-top computing
environments in KONEs global network.
The production of elevator doors and cars for the North American
market started in the second quarter in KONEs purpose-built
facility in Torreón, Mexico. KONE also decided to build the
capability to deliver all elevators for the North American markets
from Torreón by the middle of 2007. In line with KONEs global
manufacturing processes, the new factory in Mexico employs the
same modern production technology as other KONE component plants.
European Commission Investigation
In March 2006, KONE submitted its reply to the European Commission
concerning that bodys investigation of localized anticompetitive
practices in the elevator and escalator industry in Belgium,
Germany, Luxembourg and the Netherlands. KONE received a Statement
of Objections on 10 October, 2005. Since the initiation of the
investigation in January 2004, KONE has fully cooperated with the
European Commission. KONE has not made a provision in this
respect.
Personnel
KONEs personnel are professional and specialized. As an employer
the company focuses on securing the availability, commitment and
continuous development of its human resources.
KONE had 29,321 (31 December, 2005: 27,238) employees at the end
of December 2006. The average number of employees during January -
December 2006 was 28,366 (January-December 2005: 26,405). Most of
the personnel growth was in the fastest growing geographical
markets, such as Asia-Pacific and the Middle East, with additional
recruitment being carried out in service and installation
operations due to growing volumes. The geographical distribution
of KONE employees was 58 (59) percent in EMEA, 18 (19) percent in
the Americas and 24 (22) percent in Asia-Pacific.
Operational Risks
KONEs business activities are exposed to risks, of which the most
significant are fluctuations in currency rates and increases in
raw material prices and personnel costs.
A rise in raw material prices is reflected directly in the
production costs of components made by KONE, such as doors and
cars, and indirectly in the prices of purchased components. The
price of oil affects maintenance costs.
Subsidiary investments are hedged from currency risks in
accordance with the hedging policy to ensure that the total effect
of foreign exchange rates on the Corporations gearing is neutral.
As the expenses and income of the elevator and escalator business
occur mainly in the same currency, exchange rate movements are
reflected mostly in the translation of the achieved result into
euros.
Environment
Elevators and escalators are durable and give long-lasting service
when appropriately maintained. The environmental impact of
maintenance is chiefly related to the disposal of replaced
components, the cleaning of equipment, and exhaust from service
vehicles.
KONE takes care of the environment not only by its own proactive
initiatives, but also by complying with the laws and
recommendations related to its business and by continuously
monitoring the changes made to them.
KONE strives to develop its products, manufacturing processes and
operating procedures so that their environmental impact will
remain as small as possible throughout the products entire life
cycle.
Title Changes within KONE Corporation
The Board of Directors announced that, from December 18, 2006,
Antti Herlin's title will be Chairman of the Board of KONE
Corporation, while Matti Alahuhta's title will be President and
CEO of KONE Corporation. Previously, Herlin was the CEO in
addition to serving as Chairman of the Board.
Appointment to the Executive Board
KONE Corporation appointed Juho Malmberg, M.Sc. (Computer
Science), as Executive Vice President, Development and as a member
of the Executive Board as of 1 February, 2006.
Annual General Meeting and Board of Directors
KONE Corporations Annual General Meeting held in Helsinki on 27
February, 2006 decided to maintain the number of members of the
Board of Directors at eight (8). Sirpa Pietikäinen was elected as
a new member of the Board. Re-elected as full members of the Board
were Matti Alahuhta, Jean-Pierre Chauvarie, Reino Hanhinen, Antti
Herlin, Sirkka Hämäläinen-Lindfors, Masayuki Shimono and Iiro
Viinanen. The Boards term expires at the next Annual General
Meeting. At its meeting held after the Annual General Meeting, the
Board of Directors elected Antti Herlin as its Chairman and Sirkka
Hämäläinen-Lindfors as Vice Chairman of the Board.
In addition, the Board of Directors proposal that the Annual
General Meeting authorize it to repurchase KONEs own shares with
assets distributable as profit was approved. Altogether no more
than 12,785,000 shares may be repurchased, of which no more than
1,905,000 are to be class A shares and 10,880,000 class B shares,
taking into consideration the provisions of the Companies Act
regarding the maximum amount of own shares that the Company is
allowed to possess. The proposed amount corresponds to nearly 10
percent of both the share capital of the Company and the total
voting rights.
In addition, the Board of Directors was authorized, with respect
to the distribution of the repurchased shares, to decide to whom
and in which order the repurchased shares will be distributed. The
Board of Directors may decide on the distribution of repurchased
shares otherwise than in proportion to the existing pre-emptive
right of shareholders to purchase the Companys own shares. The
repurchased shares may be used as compensation in acquisitions and
in other arrangements, as well as to implement the Companys share-
based incentive plans in the manner and to the extent decided by
the Board of Directors. These authorizations shall remain in
effect for a period of one (1) year from the date of the Annual
General Meetings decision.
The Annual General Meeting elected PricewaterhouseCoopers Oy and
Heikki Lassila, Authorized Public Accountant, as the auditors of
the company.
The Annual General Meeting approved the Boards proposal for a
dividend for the reporting period, 1 June31 December, 2005, of
EUR 0.99 per class A share and EUR 1.00 per class B share, making
a total of EUR 127.3 million. The date of the dividend payment was
set at 9 March, 2006. The rest of the distributable equity, EUR
1,078 million, was retained and carried forward.
Incentive Programs, Share Capital and Market Capitalization
KONE Corporation has two classes of shares: the un-listed class A
share and the listed class B share. KONE Corporations Articles
of Association state that the minimum share capital is EUR 60
million and the maximum share capital is EUR 260 million. The
share capital can be raised or reduced within these limits without
an amendment to the Articles of Association. At the end of
December 2006, the share capital was EUR 64,033,314. The share
capital was increased by EUR 105,594 due to subscriptions of
shares with KONE 2005A and 2005B options during the financial
year.
KONE 2005A and 2005B option rights based on the KONE Corporation
option program 2005 were listed on the main list of the Helsinki
Stock Exchange on 1 June, 2005. Each option right entitles its
holder to subscribe for six (6) class B shares at a price of EUR
8.04 per share.
As of 31 December 2006, 557,118 shares have been subscribed for
with the option rights, raising KONEs share capital to EUR
64,033,314, comprising 109,014,450 listed class B shares and
19,052,178 unlisted class A shares.
The remaining 2005A option rights entitle their holders to
subscribe for 226,572 class B shares, while the remaining 2005B
option rights entitle their holders to subscribe for 524,820 class
B shares. The share subscription period for series A option rights
share subscription period ends on 31 March, 2008 and the for
series B option rights on 31 March, 2009.
The remaining number of shares that can be subscribed for is
751,392. The subscription price is EUR 8.04 per share. In
addition, KONE has granted in 2005 a conditional option program,
2005C, and a conditional share based incentive plan.
KONEs market capitalization grew by approximately 28 percent
during 2006 and was EUR 5,382 million on 31 December, 2006,
disregarding own shares in the groups possession.
Repurchase of KONE Shares
On the basis of the Annual General Meetings authorization, KONE
Corporations Board of Directors decided to commence repurchasing
shares on 7 March, 2006 at the earliest.
During the financial year, KONE Corporation repurchased 1,963,913
class B shares at an average price of EUR 35.29. At the end of
December, the group possessed 2,738,753 of its own class B shares,
representing 2.5 percent of the total number of class B shares.
This corresponds to 0.9 percent of the total voting rights.
At the end of the reporting period, KONEs Board of Directors had
no current authorization to raise the share capital or to issue
convertible or warrant loans.
The Boards proposal of distributable equity
The parent companys non-restricted equity on 31 December 2006 is
EUR
1,271,423,830.92 of which net profit from the financial year is
EUR 262,326,865.64.
The Board of Directors proposes to the Annual General Meeting that
a dividend of EUR 0,99 be paid on the 19,052,178 class A shares
and EUR 1,00 on the outstanding 106,675,697 class B shares. The
total amount of proposed dividends will be EUR 125,537,353.22. The
Board of Directors further proposes that the rest, EUR
1,145,886,477.70 be retained and carried forward.
The Board proposes that the dividends be payable from 8 March,
2007.
Outlook
We estimate that market growth will not be equally strong in all
markets this year as in 2006. This will be the case especially in
North America and Southern Europe. However, market development in
e.g. Asia-Pacific will continue to be strong.
KONEs target for 2007 is to achieve an approximate 10 percent
increase in net sales, calculated at comparable exchange rates,
compared to 2006. The operating income (EBIT) target is to achieve
growth of approximately 20 percent from the comparable 2006 figure
of EUR 360 million.
In 2008, KONEs objective is to achieve an about 12 percent
operating income (EBIT) margin.
Helsinki, 26 January, 2007
KONE Corporation
Enclosures
1 Consolidated Statement of Income
2 Consolidated Balance Sheet and Consolidated Statement of Changes
in Equity
3 Consolidated Cash Flow
4 Notes on the Consolidated Financial Statements
KONE Corporations audited Financial Statements are available on
the company web site at www.kone.com.
KONE Corporation will release its Interim Report for 1 January31
March on Tuesday, 24 April 2007.
The presentation used in the Analyst and Media Conference is
available on the company web site at www.kone.com.
This bulletin contains forward-looking statements that are based on
the current expectations, known factors, decisions and plans of
the management of KONE. Although management believes that the
expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will
prove to be correct. Accordingly, results could differ materially
from those implied in the forward-looking statements as a result
of, among other factors, changes in economic, market and
competitive conditions, changes in the regulatory environment and
other government actions and fluctuations in exchange rates.
Consolidated statement of income
previous
account-
pro ing
forma period
MEUR 10-12 % 10-12 % 1-12 % 1-12 % 6-12 %
/2006 /2005 /2006 /2005 /2005
Sales 1,145.6 1,013.4 3,600.8 3,242.2 2,101.4
Costs and
expenses -1,007.9 -905.3 -3,182.4 -3,000.4 -1,871.9
Depreciation -14.3 -14.5 -58.3 -59.0 -34.8
Operating 123.4 10.8 93.6 9.2 360.1 10.0 182.8 5.6 194.7 9.3
income
Share of 0.2 0.3 -0.3 1.5 0.9
associated
companies'
income
Financing 0.3 -1.4 -3.5 -6.4 -2.1
income and
expenses
Income before 123.9 10.8 92.5 9.1 356.3 9.9 177.9 5.5 193.5 9.2
taxes
Taxes -43.7 -38.7 -121.9 -69.1 -69.5
Net income 80.2 7.0 53.8 5.3 234.4 6.5 108.8 3.4 124.0 5.9
Net income
attributable
to:
Shareholders of 80.1 54.3 234.8 110.2 124.8
the parent
company
Minority 0.1 -0.5 -0.4 -1.4 -0.8
interests
Total 80.2 53.8 234.4 108.8 124.0
Earnings per
share for
profit
attributable to
the
shareholders of
the parent
company, EUR
Basic earnings 0.64 0.43 1.86 0.87 0.98
per share
Diluted 0.63 0.42 1.85 - 0.97
earnings per
share
Consolidated balance sheet
previous
accounting
Assets period
MEUR 31 Dec. 31 Dec.
2006 2005
Non-current assets
Intangible assets 615.7 551.6
Tangible assets 217.7 217.7
Loans receivable and other interest-bearing 5.1 53.1
assets
Deferred tax assets 134.1 130.1
Investments 129.6 157.2
Total 1,102.2 1,109.7
Current assets
Inventories 668.8 584.9
Advance payments received -552.1 -464.2
Loans receivable and other interest-bearing 44.6 0.6
assets
Accounts receivable and other non interest- 805.1 706.7
bearing assets
Cash, cash equivalents and financial assets 223.8 206.8
Total 1,190.2 1,034.8
Total assets 2,292.4 2,144.5
previous
accounting
Equity and liabilities period
MEUR 31 Dec.2006 31 Dec.2005
Equity 698.6 669.2
Non-current liabilities
Loans 100.2 144.2
Deferred tax liabilities 30.3 24.7
Employee benefits 145.0 148.9
Total 275.5 317.8
Provisions 71.8 112.0
Current liabilities
Loans 298.2 215.6
Accounts payable 948.3 829.9
Total 1,246.5 1,045.5
Total equity and liabilities 2,292.4 2,144.5
Consolidated Statement of Changes in Equity
MEUR Share Fair Translat- Own Retained Minority Total
Share prem- value ion shares earnings interests equity
capit- ium and differen-
tal ac- other ces
count eserves
1 Jan, 2006 63.9 96.4 -5.1 9.9 -21.9 523.2 2.8 669.2
Net income 234.8 -0.4 234.4
for the
period
Items
booked
directly
into
equity:
Transaction
s with
shareholder
s and
minority
shareholder
s:
Dividends
paid -126.9 -126.9
Issue of 0.1 1.6 1.7
shares
(option
rights)
Purchase of
own shares -69.3 -69.3
Sales of -
own shares
Change in 1.1 1.1
minority
interests
Cash flow 4.6 4.6
hedge
Translation -30.4 -30.4
differences
Hedging of 8.8 8.8
foreign
subsidiarie
s
Tax impact -2.3 -2.3
of hedging
Option and 7.7 7.7
share based
compensation
31 Dec, 64.0 98.0 -0.5 -14.0 -91.2 638.8 3.5 698.6
2006
Pro forma
MEUR Share Share Fair Trans- Own Retained Minority Total
capital premium value lation shares earnings interests equity
account and differ-
other ences
reserves
1 Jan, 2005 63.7 91.6 11.0 -1.7 0.0 539.6 22.6 726.8
Dividends -127.3 -127.3
paid
Issue of 0.2 4.8 5.0
shares
(option
rights)
Purchase of -21.9 -21.9
own shares
Sales of
own shares
Cash flow -16.1 -16.1
hedge
Change in 11.8 11.8
translation
differences
Change in -18.4 -18.4
minority
interests
Option and 0.5 0.5
share based
compensation
Net income 110.2 -1.4 108.8
for the
period
31 Dec, 63.9 96.4 -5.1 10.1 -21.9 523.0 2.8 669.2
2005
MEUR Share Share Fair Trans- Own Retained Minority Total
capital premium value lation shares earnings interests equity
account and differ-
other ences
reserves
1 Jun, 2005 63.8 93.8 -2.2 0.0 0.0 397.9 22.9 576.2
Net income for the 124.8 -0.8 124.0
period
Items booked
directly into
equity:
Transactions with
shareholders and
minority
shareholders:
Dividends paid -
Issue of shares 0.1 2.6 2.7
(option rights)
Purchase of own -21.9 -21.9
shares
Sales of own -
shares
Change in minority -19.3 -19.3
interests
Cash flow hedge -2.9 -2.9
Translation 15.2 15.2
differences
Hedging of foreign -7.1 -7.1
subsidiaries
Tax impact of 1.8 1.8
hedging
Option and share 0.5 0.5
based compensation
31 Dec, 2005 63.9 96.4 -5.1 9.9 -21.9 523.2 2.8 669.2
Consolidated cash flow
previous
accounting
pro period
forma
MEUR 1-12/2006 1-12/2005 6-12/2005
Operating income 360.1 182.8 194.7
Change in working -46.7 87.6 -14.1
capital
Depreciation 58.3 59.0 34.8
Cash flow from 371.7 329.4 215.4
operations
Cash flow from -105.9 -163.4 -140.7
financial items and
taxes
Cash flow from 265.8 166.0 74.7
operating activities
Cash flow from -97.0 -182.5 -65.6
investing activities
Purchase and sales of -69.3 -21.9 -22.0
own shares
Share issue 1.7 5.0 2.7
Dividends paid -126.8 -127.3 -
Change in net debt -25.6 -160.7 -10.2
Net debt in the 99.3 -61.4 89.1
beginning of period
Net debt in the end of 124.9 99.3 99.3
period
Change in net debt -25.6 -160.7 -10.2
Key figures
pro previous
forma accounting
period
1-12/2006 1-12/2005 6-12/2005
Basic earnings per share EUR 1.86 0.87 0.98
Diluted earnings per share EUR 1.85 - 0.97
Equity per share EUR 5.55 5.24 5.24
Interest bearing net debt MEUR 124.9 99.3 99.3
Total equity/total assets % 30.5 31.2 31.2
Gearing % 17.9 14.8 14.8
Return on equity % 34.3 15.6 34.1
Return on capital employed % 35.4 18.3 36.4
Total assets MEUR 2,292.4 2,144.5 2,144.5
Assets employed MEUR 823.5 768.5 768.5
Working capital (including MEUR -139.5 -158.0 -158.0
financing and tax items)
pro previous
forma accounting
period
Sales by geographical % % %
areas MEUR 1-12/2006 1-12/2005 6-12/2005
EMEA 1) 2,319.4 65 2,149.4 6 1,388.6 66
Americas 805.1 22 696.8 22 452.7 22
Asia Pacific 476.3 13 396.0 12 260.1 12
Total 3,600.8 3,242.2 2,101.4
1) EMEA = Europe, Middle
East, Africa
pro previous
forma accounting
period
Orders received MEUR
1-12/2006 1-12/2005 6-12/2005
3,116.3 2,639.2 1,622.1
previous
accounting
period
Order book MEUR 31 Dec. 31 Dec.
2006 2005
2,762.1 2,326.8
pro previous
forma accounting
period
Capital expenditure MEUR
1-12/2006 1-12/2005 6-12/2005
In fixed assets 51.3 47.5 26.4
In leasing agreements 9.1 10.0 3.0
Total 60.4 57.5 29.4
pro previous
forma accounting
period
Expenditure for R&D MEUR
1-12/2006 1-12/2005 6-12/2005
50.3 50.8 29.7
Expenditure for R&D as 1.4 1.6 1.4
percentage of sales
pro previous
forma accounting
period
Number of employees
1-12/2006 1-12/2005 6-12/2005
Average 28,366 26,405 27,016
In the end of the period 29,321 27,238 27,238
Notes
Commitments previous
accounting
period
MEUR 31 Dec. 2006 31 Dec.
2005
Mortgages
Group and parent company 30.7 30.7
Pledged assets
Group and parent company 5.4 5.8
Guarantees
Associated companies 1.8 2.0
Others 3.4 23.6
Operating leases 115.8 118.9
Total 157.1 181.0
The future minimum lease payments under non-cancellable
operating leases previous
accounting
period
31 Dec. 31 Dec.
2006 2005
Less than 1 year 34.6 31.2
1-5 years 72.5 72.2
Over 5 years 8.7 15.5
Total 115.8 118.9
The European Comission initiated an investigation In January
2004 concerning alleged anticompetitive practices in the
elevator and escalator market in Europe. As a result of the
Commission's investigations, KONE received at the end of 2005 a
Statement of the Objections from the Comission concerning
localized anticompetititive practices in Belgium, Germany,
Luxemburg and the Netherlands.KONE submitted its reply to the
Statement of Objections to the Comission in 2006. Since the
initiation of the investigation, KONE has fully cooperated with
the European Commission. The European Commission has not issued
a decision nor decided on possible fines yet. KONE has not made
a provision in this respect.
Net
fair
value
previo
us
Derivatives Positi Negati Net accoun
ve ve ting
fair fair fair
value value value period
Fair values of derivative 31Dec. 31Dec. 31Dec. 31Dec.
financial instruments 2006 2006 2006 2005
MEUR
FX Forward contracts 3.9 2.7 1.2 -6.1
Currency options 0.1 0.1 0.0 0.0
Cross-currency swaps, due 43.2 - 43.2 -
under one year
Cross-currency swaps, due 2.8 - 2.8 32.6
in 1-3 years
Electricity derivatives 0.5 0.2 0.3 0.7
Total 50.5 3.0 47.5 27.2
previous
accounting
period
Nominal values of derivative 31Dec. 31Dec.
financial instruments MEUR 2006 2005
FX Forward contracts 392.8 859.3
Currency options 32.3 7.4
Cross-currency swaps, due under 153.8 -
one year
Cross-currency swaps, due in 1-3 43.6 173.8
years
Electricity derivatives 2.9 2.4
Total 625.4 1,042.9
Quarterly
Figures
pro pro
forma forma
Q4/2006 Q3/2006 Q2/2006 Q1/2006 Q4/2005 Q3/2005 Q2/2005 Q1/2005
Orders MEUR 712.1 742.0 821.9 840.3 702.5 649.4 688.3 604.1
received
Order book MEUR 2,762.1 2,951.0 2,818.0 2,654.0 2,326.8 2,371.7 2,264.7 2,023.1
Sales MEUR 1,145.6 879.8 840.4 735.0 1,013.4 804.7 783.1 649.3
Operating MEUR 123.4 101.1 83.9 51.7 93.6 79.1 60.8 39.0 1)
income
Operating % 10.8 11.5 10.0 7.0 9.2 9.8 7.8 6.0 1)
income
1) excluding MEUR 89.2 provision for the development and
restructuring program
Share and shareholders
31 December 2006 Class A Class B Total
shares shares
Number of shares 19,052,178 109,014,450 128,066,628
Own shares in possession 1) 2,738,753
Share capital, EUR 64,033,314
Market capitalization, MEUR 5,382
Number of shares traded, million 75.5
2006
Value of shares traded MEUR, 2,662
2006
Number of shareholders 3 13,673 13,673
Close High Low
Class B share price, EUR, Jan- 42.94 43.41 27.80
Dec, 2006
1) During the reporting period 1 January31 December, 2006,
KONE Corporation repurchased a total of 1,963,913 own class B
shares. During the accounting period 1 June31 December, 2005,
KONE Corporation repurchased a total of 374,840 own class B
shares. In addition, relating to the shares-based incentive
plan, a company included in the consolidated financial
statements acquired 400,000 KONE class B shares in December
2005.
KONE Corporations Review: JanuaryDecember 2006 (with Pro Forma Comparison Figures for January-Dece
| Source: KONE Oyj