KONE Corporation's Interim Report for January-June 2009>
KONE Corporation's Interim Report for January-June 2009
(Thomson Reuters ONE) - KONE Corporation, stock exchange release, July 21, 2009 at 12:30 p.m.KONE's Q2: Continued good performanceApril-June- In April-June 2009, orders received totaled EUR 953.9 (4-6/2008:1,092) million. Orders received declined by 12.7%, or 13.6% atcomparable exchange rates.- Net sales increased by 2.3% to EUR 1,169 (1,142) million. Atcomparable exchange rates, the growth was 1.5%.- Operating income excluding one-time costs was EUR 146.3 (136.7)million or 12.5% (12.0%) of net sales. The operating income,including the one-time cost of EUR 33.6 million related to the fixedcost adjustment program, was EUR 112.7 million.- The plans for the fixed cost adjustment program have now beendefined. The annual fixed cost reduction is expected to be at leastEUR 40 million starting in 2010 and the total one-time cost relatingto this program is EUR 33.6 million. The program is implemented inresponse to the weak new equipment market in order to be betterprepared for 2010.- KONE further specifies its full-year outlook for 2009. In netsales, the objective is to grow 2-5% as compared to net sales in2008. In operating income (EBIT), the objective is EUR 570-595million excluding the one-time cost of EUR 33.6 million.January-June- In January-June 2009, orders received totaled EUR 1,852 (1-6/2008:2,210) million. Orders received declined by 16.2%, or 17.1% atcomparable exchange rates. At the end of June 2009, the order bookwas EUR 3,754 (Dec 31, 2008: 3,577) million.- Net sales increased by 6.9% to EUR 2,190 (2,047) million. Atcomparable exchange rates, the growth was 6.4%.- Operating income excluding one-time costs was EUR 237.5 (223.2)million or 10.8% (10.9%) of net sales. The operating income,including the one-time cost of EUR 33.6 million related to the fixedcost adjustment program, was EUR 203.9 million.Key Figures 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ 2009 2008 2009 2008 2008Orders received MEUR 953.9 1,092.4 1,852.4 2,209.9 3,947.5Order book MEUR 3,754.1 3,838.7 3,754.1 3,838.7 3,576.7Sales MEUR 1,168.6 1,142.1 2,189.6 2,047.4 4,602.8Operating income MEUR 146.3 1) 136.7 237.5 1) 223.2 558.4Operating income % 12.5 1) 12.0 10.8 1) 10.9 12.1Cash flowfrom operationsbefore financingitems and taxes) MEUR 201.1 118.9 371.4 285.5 527.4Net income MEUR 86.5 98.8 165.2 162.7 418.1Totalcomprehensiveincome MEUR 79.4 99.9 159.6 152.6 436.7Basic earningsper share EUR 0.34 0.39 0.65 0.65 1.66Interest-bearingnet debt MEUR -167.1 87.0 -167.1 87.0 -58.3Total equity/total assets % 38.8 30.0 38.8 30.0 39.0Gearing % -16.1 11.7 -16.1 11.7 -5.61) Excluding a EUR 33.6 million one-time cost related to the fixedcost adjustment program.Matti Alahuhta, President and CEO, in conjunction with the review:"I am very pleased with our performance in the second quarter. OurOrders Received was higher than in the previous three quartersdespite the weakened market environment. This is a result of animproved customer focus and strong actions to improve our solutioncompetitiveness. Our record high cash flow exceeding EUR 200 millionwas another great achievement.The new equipment markets continued to be weak. We communicated inApril our intentions to adjust our fixed costs by EUR 40 million inorder to be better prepared for 2010. We have now defined the plansfor this program. Most of the efficiency improvements will beachieved by developing our organization globally to have flatterstructures with wider spans of control. This will not only improveour efficiency, but it will also bring us closer to our customers,strengthen hands-on leadership at KONE, enable better internallearning transfer and increase the speed of continuous change.As a result of the weaker market situation and this organizationaldevelopment, the number of jobs at KONE is estimated to decreaseglobally by approximately 500 during the next nine months. The impactwill be biggest in those country organizations where the newequipment market has weakened most. Simultaneously, we continue torecruit in those countries which provide growth opportunities.Our business has developed well during the first half of this year.Our order book is strong and the Operating Income, excluding theone-time item related to the cost adjustment, has developedpositively. Our competitiveness has improved in many market segmentsthat provide the best growth opportunities in the current verychallenging business environment. Based on this, I have goodconfidence also for the full-year development and the fixed costsadjustment program is an additional action in preparation for 2010."Analyst and media conference and conference callA meeting for the press, conducted in Finnish, will be held onTuesday, July 21, 2009 at 1:45 p.m. Eastern European Time.A telephone conference and a meeting for analysts, conducted inEnglish, will begin at 3:00 p.m. Eastern European Time. The telephoneconference will also be available as a webcast on www.kone.com.Both meetings will take place in the KONE Building, located atKeilasatama 3, Espoo, Finland.Telephone conference numbers:US callers: +1 334 323 6201Non-US callers: +44 (0)20 7162 0025Participant code: KONEAn on demand version of the telephone conference will be available atwww.kone.com later the same day.About KONEKONE's objective is to offer the best people flow experience bydeveloping and delivering solutions that enable people to movesmoothly, safely, comfortably and without waiting in buildings in anincreasingly urbanizing environment. KONE provides its customers withindustry-leading elevators, escalators and innovative solutions formodernization and maintenance, and is one of the global leaders inits industry. In 2008, KONE had annual net sales of EUR 4.6 billionand over 34,800 employees. KONE class B shares are listed on theNASDAQ OMX Helsinki in Finland.www.kone.comFor further information please contact:Henrik Ehrnrooth, Executive Vice President, Finance, tel. +358 (0)204 75 4260Sender:KONE CorporationHenrik EhrnroothExecutive Vice President,FinanceAnne KorkiakoskiExecutive Vice President,Marketing and CommunicationsAccounting PrinciplesKONE Corporation's Interim Report for January 1-June 30, 2009 hasbeen prepared in line with IAS 34, 'Interim Financial Reporting'.KONE has applied the same accounting principles in the preparation ofthe interim report as in its financial statements for 2008. Theaccounting principles for the financial statements have beenpresented in the KONE 2008 Financials report published on January 23,2009. Additionally, the changes in the presentation of statement ofcomprehensive income and the statement of changes in equity accordingto the revised IAS1 have been applied in the Interim Report. Theinformation presented in this Interim Report has not been audited.April-June 2009 reviewOperating environment in April-JuneIn the second quarter of 2009, overall demand for new equipmentcontinued to be weak in most geographical areas. The overall rate ofdecline decreased, but the market situation differed substantiallyfrom market to market. The modernization market was stable andcontinued to provide growth opportunities. The global maintenancemarket, which by nature less cyclical, continued to grow.In the Europe, Middle East and Africa region (EMEA), the businessenvironment remained difficult. Most new equipment markets declined.The weakest markets were the Middle East, Russia, United Kingdom,Netherlands and Spain. The infrastructure and hospital segmentsshowed growth in some countries. The demand for modernization wasgood in France in particular and it improved in several othercountries. The maintenance markets continued to develop well.In the Americas region, the new equipment market continued todecrease in the United States. Customers' difficulties to accessfinancing remained an obstacle to decision making. The market inCanada slowed down. In Mexico, the market continued to be very weak.The modernization activity remained relatively stable. Themaintenance market developed well, but was very competitive.In the Asia-Pacific region, the new equipment markets weakened. InChina however, the sequential market development was positive andprovided good growth opportunities. Real estate investments increaseddue to improved lending activity for home buyers and land developers.The Indian market continued to decline further because of thedifficult funding environment for our customers. In Australia andSoutheast Asia the construction market activity was on a very lowlevel. The maintenance market in Asia-Pacific developed favorably.Financial performance in April-JuneKONE's orders received in the second quarter of 2009 declined by12.7% and totaled EUR 953.9 (4-6/2008: 1,092) million. At comparableexchange rates, the decline was 13.6%. The orders received in thesecond quarter was higher than in the previous three quarters. Allgeographical regions showed decline in orders received. In China,however, the development was very positive. KONE's progress wasparticularly good in modernization and in major projects. The levelof orders received is good evidence of KONE's continuously improvedcompetitiveness and that our actions have been effective. Maintenancecontracts are not included in orders received.The largest orders received in the April-June period included anorder to supply and install all elevators and escalators for the newTower 185 in Frankfurt, Germany and an order to supply escalators forChina's national high-speed railway project, also known as theBeijing-Shanghai Express Railway. KONE was awarded a maintenancecontract on all equipment for a period of two years for this project.KONE won an order to supply elevators for the new Infinity Tower inDubai, United Arab Emirates. The installation of the equipment willstart in 2010 and is estimated to be completed in 2011. KONE also wona contract to design, supply and install all elevators on CelebrityCruises' two new passenger cruise ships. In addition, KONE wasawarded a contract to provide both new installations andmodernization to all elevators and escalators at the Los AngelesInternational Airport (LAX) in the United States. The contract coversmaintenance, new installation, equipment repairs and upgrades in eachof the eight terminals at LAX.KONE's net sales grew by 2.3% as compared to April-June 2008 andtotaled EUR 1,169 (1,142) million. At comparable exchange rates, thegrowth was 1.5%. Growth was strongest in Asia-Pacific.New equipment sales accounted for EUR 548.5 (549.1) million of thetotal which represented a decline of 0.1% over the comparison period.At comparable currency rates, the decline was 1.4%.Service sales (maintenance and modernization) increased by 4.6% andtotaled EUR 620.1 (593.0) million. At comparable currency rates, thegrowth was 4.2%.The operating income excluding one-time costs for the April-Juneperiod totaled EUR 146.3 (136.7) or 12.5% (12.0%) of net sales. Theoperating income, including the one-time cost of EUR 33.6 millionrelated to the fixed cost adjustment program, was EUR 112.7 million.The good operating income was primarily a result of the developmentprograms that have led to improved productivity, favorabledevelopment in sourcing costs and tight cost control.Sales by geographical regions, MEUR 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ 2009 % 2008 % 2009 % 2008 % 2008 %EMEA 1) 736.1 63 747.3 65 1,374.9 63 1,365.0 67 3,001.5 65Americas 222.3 19 214.0 19 456.4 21 375.7 18 888.3 19Asia-Pacific 210.2 18 180.8 16 358.3 16 306.7 15 713.0 16Total 1,168.6 1,142.1 2,189.6 2,047.4 4,602.81) EMEA = Europe, Middle East, AfricaThe 2010 fixed cost adjustment programIn connection with the first quarter result, KONE announced that itintends to reduce the 2010 run-rate of fixed costs by EUR 40 milliondue to the weak new equipment market. The plans for the program havenow been defined. The annual impact on this fixed cost reduction planis expected to be at least EUR 40 million starting in 2010. The totalone-time cost relating to this program is EUR 33.6 million, whichcost has been booked in the second quarter 2009.The majority of the fixed cost savings will be achieved throughorganizational development. This development will flatten theorganizational structures to bring management closer to customers,broaden the span of control for managers to ensure better hands-onmanagement and uniform structures globally to improve internalcollaboration. The program, which will be implemented by thebeginning of 2010, will improve the efficiency and speed of KONE.Selective actions will also be taken in the supply chain andoutsourcing. In addition to these actions, an overall tighter costcontrol is targeted throughout the company.The program is estimated to decrease jobs globally by approximately500 during the next nine months. Simultaneously, KONE continues torecruit in certain markets that are providing growth opportunities,such as China.January-June 2009 reviewKONE's Orders Received and Order Book in January-JuneThe overall market situation was very demanding in new equipmentthroughout the reporting period. The modernization markets remainedquite stable compared to 2008, but became increasingly competitive inthe different geographical areas. The global maintenance market,which is by nature less cyclical, continued to grow.In January-June 2009, KONE's orders received declined by 16.2% andtotaled EUR 1,852 (1-6/2008: 2,210) million. At comparable exchangerates, the decline was 17.1%. Maintenance contracts are not includedin orders received.The order book increased from the end of 2008 by 5.0% and stood atEUR 3,754 (Dec 31, 2008: 3,577) million at the end of June 2009. Asearlier, the margin of the order book continued to be at a goodlevel. Cancellations of orders have remained at a very low level.In the EMEA region, orders received declined in the continuouslyweakening markets in January-June 2009. Despite this, KONE performedparticularly well in Germany. KONE also had a good performance in themodernization market. KONE's orders received in modernization havebeen good in France, Italy and Sweden in particular.In the Americas region, KONE experienced a decline in ordersreceived. In spite of the weak market, KONE has been able tostrengthen its market position in many segments due to its advancedelevator and escalator solutions and improved competitiveness.In the Asia-Pacific region, KONE's new equipment order intakedeclined year-on-year, however it continued to develop positively inChina.Net SalesIn January-June 2009, KONE's net sales rose by 6.9%, compared to lastyear, and totaled EUR 2,190 (1-6/2008: 2,047) million. Growth atcomparable currency rates was 6.4%.New equipment sales accounted for EUR 993.6 (932.5) million of thetotal and represented growth of 6.6% over the comparison period. Atcomparable currency rates, the growth was 5.5%.Service sales (maintenance and modernization) increased by 7.3% andtotaled EUR 1,196 (1,115) million. At comparable currency rates, thegrowth was 7.2%.Of the sales, 63% (67%) were generated from EMEA, 21% (18%) by theAmericas and 16% (15%) by Asia-Pacific.Financial ResultKONE's operating income excluding one-time costs was EUR 237.5million (1-6/2008: 223.2 million) or 10.8% (10.9%) of net sales. Theoperating income, including the one-time cost of EUR 33.6 millionrelated to the fixed cost adjustment program, was EUR 203.9 million.The strong growth was primarily a result of the development programsthat have led to improved productivity, favorable development insourcing costs and tight cost control. Net financing items were EUR15.6 (-3.3) million and include dividends received from ToshibaElevator and Building Systems Corporation (TELC).KONE's income before taxes for January-June 2009 was EUR 221.1(220.7) million. Taxes totaled EUR 55.9 (58.0) million, taking intoaccount taxes proportionate to the amount estimated for the financialyear. This represents an effective tax rate of 25.3%. InJanuary-December 2008, the effective tax rate was 25.8%. Net incomefor the period under review was EUR 165.2 (162.7) million.Earnings per share were EUR 0.65 (0.65). Equity per share was EUR4.09 (2.96).Financial Position and Cash FlowKONE's financial position remained strong and the company had apositive net cash position at the end of June. In January-June 2009,cash flow generated from operations (before financing items andtaxes) was EUR 371.4 (1-6/2008: 285.5) million. The strong cash flowis primarily a result of an improved operating income and continuedgood payment terms and hence increased advanced payments received. Atthe end of June, net working capital was negative at EUR -181.8 (Dec31, 2008: -76.4) million, including financing items and taxes.Interest-bearing assets exceeded interest-bearing net debt and thenet cash position totaled EUR 167.1 (Dec 31, 2008: 58.3) million.Gearing was -16.1% (11.7%) and total equity/total assets ratio was38.8% (30.0%).Capital expenditure, acquisitions and divestmentsKONE's capital expenditure, including acquisitions, totaled EUR 48.4(1-6/2008: 64.7) million. Capital expenditure, excludingacquisitions, was mainly related to facilities and equipment in R&D,IT and production. Acquisitions accounted for EUR 29.0 (37.6) millionof this figure. Acquisitions made in January-June will have nomaterial effect on the 2009 full-year figures.In January-June, KONE completed the acquisition of FairWay ElevatorInc, an independent elevator service company in the Philadelphia areain the United States. Through this acquisition, KONE establishesitself as one of the largest elevator and escalator companies in thePhiladelphia region. In addition, KONE acquired Excel Elevator Inc,an independent elevator service company based in Los Angeles. Excelhas a great reputation in the Southern California market for itsquality work in modernizing vertical transportation systems as wellas its significant maintenance base.Research and developmentResearch and development expenses totaled EUR 30.9 (1-6/2008: 29.9)million, representing 1.4% (1.5%) of net sales. R&D expenses includethe development of new concepts and further development of existingsolutions and services. KONE's elevators and escalators are based onenergy-efficient technology.During the reporting period, KONE strengthened its offering to bettermeet the demands of the challenging market.KONE released new solutions for the infrastructure, modernization andaffordable housing segments. In addition, new solutions for the 2-3landing machine-room-less segment in the United States wereintroduced. The focus has mainly been on solutions that deliverimproved performance, fresh visual options and improvedenergy-efficiency. The KONE JumpLift(TM) is an example of theexpanded elevator offering. This innovative offering puts theelevator into operation already as the building is under constructionphase, enabling more efficient flow of workers, delivering improvedsafety and productivity to the job site.In addition, KONE launched a new escalator release in response to thedemand of the growing infrastructure segment. The cost structure hasbeen improved and the application scope has been enlarged by adding afull outdoor solution package and higher vertical rise alternativesto the offering.In January 2009, KONE Corporation was awarded a 2008 GOOD DESIGNaward for its innovative elevator design concept. KONE is the firstelevator and escalator company to ever receive such a prestigiousaward. Founded in 1950, GOOD DESIGN is renowned as one of the mostrecognized design awards program in the world. The awards are givenby The Chicago Athenaeum and The European Centre for Architecture ArtDesign and Urban Studies to highlight the best new designs and designinnovations for products and graphics made between 2006 and 2008.PersonnelThe main goals of KONE's personnel strategy are to further increasethe interest in KONE as an employer and to secure the availability,commitment and continuous development of its personnel. KONE'sactivities are also guided by ethical principles. The personnel'srights and responsibilities include the right to a safe and healthyworking environment, personal wellbeing as well as the prohibition ofany kind of discrimination.KONE had 34,285 (Dec 31, 2008: 34,831) employees at the end of June2009. The average number of employees was 34,461 (1-6/2008: 33,301).The geographical distribution of KONE employees was 56% (56%) inEMEA, 17% (17%) in the Americas and 27% (27%) in Asia-Pacific.People Leadership is one of KONE's five development programs. KONE isincreasingly investing in people development programs, personalcoaching and change management.EnvironmentKONE published its first Corporate Responsibility Report during thereporting period.The development of eco-efficient solutions focused on stand-by energysaving solutions and regenerative units for elevators. As a result ofthese improvement actions, a reduction of 30 percent in the newestrelease was accomplished. By next year, an additional 20 percentreduction will be achieved.In the service business, eco-efficiency aspects have been included inthe analysis, which provides customers with a comprehensiverecommendation on how to maintain and modernize their equipment in acost-effective way.The most significant Green House Gas emission (CO2) impact of KONE'sown operations relate to the company's vehicle car fleet, electricityconsumption and logistics. As a consequence, projects relating toKONE's global car fleet and business travel are ongoing. KONE aims toreduce its operational carbon footprint by 5 percent per unit by2010.Capital and Risk ManagementThe ultimate goal of capital and risk management in the KONE Group isto contribute to the creation of shareholder value.Capital is managed in order to maintain a strong financial positionand to ensure that the Group's funding needs can be optimized in acost-efficient way even in a critical funding environment. In thepresent weak economic situation, having no net debt is a strength.The financial turmoil has been extremely severe since mid-2008. KONEis focusing on two major issues regarding its capital and riskmanagement. Firstly, the capability to adapt its cost structure tochanging volumes in order to stay competitive, and secondly, toensure that the Group's liquidity is guaranteed to cover bothshort-term and long-term funding needs.To avoid an unnecessary cost burden in this market environment,overall cost control has been tightened and a program to decrease therun-rate of fixed costs has been initiated. In addition, the Group'scost structure is flexible because of outsourcing in different areasof the business.The key area in guaranteeing good liquidity in the short run is tokeep the present good working capital position. In a difficulteconomic situation, it is increasingly important to maintain ahealthy order book without deterioration in payment terms, and toimprove credit control and collection activities. Long-term fundingis guaranteed by existing committed lines.KONE's business activities are exposed to risks, which may arise fromchanges in KONE's business environment or incidents resulting fromoperating activities. The most significant risks are increases inpersonnel costs and raw material costs, fluctuation in currency andchanges in the development of the world economy.The global economic slowdown and financial turmoil may bring about adecrease in the number of new equipment orders received by KONE,cancellations of agreed-on deliveries, or delays in the commencementof projects. A significant part of KONE's sales consist of serviceswhich are less susceptible to the effects of an economic recession.The economic recession may affect the liquidity and payment schedulesof KONE's customers and lead to credit losses. Credit risks aremanaged by applying advance payments, actively monitoring theliquidity of customers and active receivable collection efforts.As a global group, KONE is exposed to foreign exchange fluctuations.The Group Treasury function manages exchange rates and otherfinancial risks centrally on the basis of principles approved by theBoard of Directors. The main effect of exchange rate fluctuations isseen in the consolidated financial statements of the KONE Groupresulting from the translation of financial statements of foreignsubsidiaries into euros.A significant part of KONE's sales consist of services which are verylabor-intensive. If the increases in labor costs cannot betransferred to prices or the productivity targets are not met, theprofit development of the Group will be adversely affected. A failureto efficiently reallocate personnel resources in response to reducedor changed business opportunities may also have a negative effect onthe profit development.Changes in raw material prices are reflected directly in theproduction costs of components made by KONE, such as doors and cars,and indirectly in the prices of purchased components. The maintenancebusiness deploys a significant fleet of service vehicles, and oilprice fluctuations can affect the cost of maintenance.Appointment to the Executive BoardKONE appointed Henrik Ehrnrooth M.Sc. (Econ) Executive VicePresident, Finance (Chief Financial Officer) and a Member of theExecutive Board as of May 1, 2009. Henrik Ehrnrooth succeeded AimoRajahalme, who served as CFO since 1991.Decisions of the Annual General MeetingKONE Corporation's Annual General Meeting was held in Helsinki onFebruary 23, 2009. The meeting approved the financial statements anddischarged the responsible parties from liability for the January1-December 31, 2008 financial period.The number of Members of the Board of Directors was confirmed aseight and it was decided to elect one deputy Member. Re-elected asMembers of the Board were Matti Alahuhta, Reino Hanhinen, AnttiHerlin, Sirkka Hämäläinen-Lindfors and Sirpa Pietikäinen and asdeputy Member Jussi Herlin. Anne Brunila, Juhani Kaskeala andShunichi Kimura were elected as new Members of the Board ofDirectors.At its meeting held after the Annual General Meeting, the Board ofDirectors elected, from among its members, Antti Herlin as its Chairand Sirkka Hämäläinen-Lindfors as Vice Chair.Antti Herlin was elected as Chairman of the Audit Committee. SirkkaHämäläinen-Lindfors and Anne Brunila were elected as independentMembers of the Audit Committee.Antti Herlin was elected as Chairman of the Nomination andCompensation Committee. Reino Hanhinen and Juhani Kaskeala wereelected as independent Members of the Nomination and CompensationCommittee.The Annual General Meeting confirmed an annual compensation of EUR54,000 for the Chairman of the Board, EUR 42,000 for the ViceChairman, EUR 30,000 for Board Members and EUR 15,000 for the deputyMember. In addition, a compensation of EUR 500 was approved forattendance at Board and Committee meetings.The Annual General Meeting approved the Board of Directors proposalto repurchase KONE's own shares. Altogether, no more than 25,570,000shares may be repurchased, of which no more than 3,810,000 may beclass A shares and 21,760,000 class B shares, taking intoconsideration the provisions of the Companies Act regarding themaximum amount of own shares that the Company is allowed to possess.The minimum and maximum consideration for the shares to be purchasedis determined for both class A and class B shares on the basis of thetrading price for class B shares determined on the NASDAQ OMXHelsinki Ltd. on the time of purchase.In addition, the Annual General Meeting authorized the Board ofDirectors to decide on the distribution of any shares repurchased bythe company. The authorization is limited to a maximum of 3,810,000class A shares and 21,760,000 class B shares. The Board shall havethe right to decide to whom to issue the shares, i.e. to issue sharesin deviation from the pre-emptive rights of shareholders.These authorizations shall remain in effect for a period of one yearfrom the date of the decision of the Annual General Meeting.Authorized public accountants Heikki Lassila andPricewaterhouseCoopers Oy were re-nominated as the Company'sauditors.Dividend for 2008The Annual General Meeting approved the Board's proposal fordividends of EUR 0.645 for each of the 38,104,356 class A shares andEUR 0.65 for the 214,643,060 outstanding class B shares. The date ofrecord for dividend distribution was February 26, 2009, and dividendswere paid on March 5, 2009.Share Capital and Market CapitalizationThe KONE 2005B options based on the KONE Corporation 2005 optionprogram were listed on the main list of the NASDAQ OMX Helsinki Ltd.on June 1, 2005. Each option entitled its holder to subscribe fortwelve (12) class B shares at a price of EUR 4.02 per share. As the2005B options subscription period ended on March 31, 2009, 4,660remaining series B options held by the subsidiary expired. Theremaining 12,034 options had been used and the shares were entered inthe Finnish Trade Register in April.In 2005, KONE also granted a conditional option program, 2005C. The2005C stock options were listed on the NASDAQ OMX Helsinki in Finlandas of April 1, 2008. The total number of 2005C stock options is2,000,000 of which 522,000 are owned by a subsidiary of KONECorporation. Each option right entitles its owner to subscribe fortwo (2) KONE Corporation class B shares at a price of EUR 11.90 pershare. At the end of June 2009, the remaining 2005C options entitledtheir holders to subscribe for 3,909,150 class B shares. Thesubscription period for series C options will end on April 30, 2010.In December 2007, KONE Corporation's Board of Directors decided togrant stock option rights to approximately 350 employees of KONE'sglobal organization. The share subscription period for 2007 stockoption will be April 1, 2010-April 30, 2012. The share subscriptionperiod begins only if the average turnover growth of the KONE Groupfor the 2008 and 2009 financial years exceeds the market growth andif the earnings before interest and taxes (EBIT) of the KONE Groupfor the financial year 2008 exceeds the EBIT for the 2007 financialyear, and the EBIT for the 2009 financial year exceeds the EBIT forthe 2008 financial year.As of June 30, 2009, KONE's share capital was EUR 64,417,742.50,comprising 219,566,614 listed class B shares and 38,104,356 unlistedclass A shares.KONE's market capitalization was EUR 5,522 million on June 30, 2009,disregarding own shares in the Group's possession.Repurchase of KONE sharesOn the basis of the Annual General Meeting's authorization, KONECorporation's Board of Directors decided to commence repurchasingshares at the earliest on March 3, 2009.During January 1-June 30, 2009, KONE did not use its authorization torepurchase its own shares. In April 2009, 195,264 KONE class B sharesassigned to the share-based incentive plan for the company's seniormanagement were transferred from KNEBV Incentive Oy to theparticipants due to achieved targets for the financial year 2008. Atthe end of June, the Group had 4,710,242 class B shares in itspossession. The shares in the Group's possession represent 2.1% ofthe total number of class B shares. This corresponds to 0.8% of thetotal voting rights.Shares traded on the NASDAQ OMX Helsinki Ltd.The NASDAQ OMX Helsinki traded 92.6 million of KONE Corporation'sclass B shares in January-June, equivalent to a turnover of EUR 1,677million. The daily average trading volume was 759,261 (1-6/2008:778,000; the numbers of shares have been adjusted to the increase inthe number of shares due to the share issue without payment). Theshare price on June 30, 2009 was EUR 21.83. The volume weightedaverage share price during the period was EUR 18.14. The highestquotation during the period under review was EUR 22.67 and the lowest13.80.The number of registered shareholders at the beginning of the reviewperiod was 16,354 and 19,263 at its end. The number of privatehouseholds holding shares totaled 17,394 at the end of the period,which corresponds to approximately 12% of the listed B-shares.According to the nominee registers, 44.3% of the listed class Bshares were owned by foreigners as of June 30, 2009. Other foreignownership at the end of the period totaled 7.7%; thus a total of52.0% of the company's listed class B shares were owned byinternational investors, corresponding to approximately 19% of thetotal votes in the company.Market outlookIn 2009, the maintenance market will continue to develop well. Themodernization market will be at about last year's level. The rate ofdecline will decrease in the new equipment market.OutlookKONE further specifies its outlook for 2009.KONE's objective in net sales is to grow 2-5% as compared to netsales in 2008.In operating income (EBIT), the objective is EUR 570-595 millionexcluding the one-time cost of EUR 33.6 million.Previous outlookIn 2009, KONE's objective in net sales is to reach a growth of 5percent or at least approximately the net sales level of 2008.In operating income (EBIT), the objective is to reach a growth of 5percent or at least approximately the operating income level of 2008.Helsinki, July 21, 2009KONE CorporationBoard of DirectorsThis Interim Report contains forward-looking statements that arebased on the current expectations, known factors, decisions and plansof the management of KONE. Although management believes that theexpectations reflected in such forward-looking statements arereasonable, no assurance can be given that such expectations willprove to be correct. Accordingly, results could differ materiallyfrom those implied in the forward-looking statements as a result of,among other factors, changes in economic, market and competitiveconditions, changes in the regulatory environment and othergovernment actions and fluctuations in exchange rates.Consolidated income statement 4-6/ 4-6/ 1-6/ 1-6/ 1-12/MEUR 2009 % 2008 % 2009 % 2008 % 2008 %Sales 1,168.6 1,142.1 2,189.6 2,047.4 4,602.8Costs andexpenses -1,040.4 -990.4 -1,954.7 -1,794.5 -3,979.6Depreciation -15.5 -15.0 -31.0 -29.7 -64.8Operatingincome 112.7 9.6 136.7 12.0 203.9 9.3 223.2 10.9 558.4 12.1Share ofassociatedcompanies'net income 1.5 0.4 1.6 0.8 2.6Financingincome 3.0 1.9 21.7 7.5 24.4Financingexpenses -1.7 -5.3 -6.1 -10.8 -21.6Incomebeforetaxes 115.5 9.9 133.7 11.7 221.1 10.1 220.7 10.8 563.8 12.2Taxes -29.0 -34.9 -55.9 -58.0 -145.7Net income 86.5 7.4 98.8 8.7 165.2 7.5 162.7 7.9 418.1 9.1Net incomeattributableto:Shareholdersof theparentcompany 86.1 98.7 164.7 162.3 417.3Minorityinterests 0.4 0.1 0.5 0.4 0.8Total 86.5 98.8 165.2 162.7 418.1Earnings per share for profit attributable to the shareholders of theparent company, EUR 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ 2009 2008 2009 2008 2008Basic earningsper share 0.34 0.39 0.65 0.65 1.66Diluted earningsper share 0.34 0.39 0.65 0.64 1.65Consolidated statement of comprehensive income 4-6/ 4-6/ 1-6/ 1-6/ 1-12/MEUR 2009 2008 2009 2008 2008Net income 86.5 98.8 165.2 162.7 418.1Othercomprehensiveincome,netof tax:Translationsdifference -7.1 6.6 1.5 -14.3 38.0Hedging offoreingsubsidiaries 0.9 -1.6 -1.0 2.5 -22.9Cash flowhedges -0.9 -3.9 -6.1 1.7 3.5Othercomprehensiveincome,net of tax -7.1 1.1 -5.6 -10.1 18.6Totalcomprehensiveincome 79.4 99.9 159.6 152.6 436.7Totalcomprehensiveincomeattributableto:Shareholders ofthe parentcompany 79.0 99.8 159.1 152.2 435.9Minorityinterests 0.4 0.1 0.5 0.4 0.8Total 79.4 99.9 159.6 152.6 436.7Condensed consolidated statement of financial positionAssets Jun 30, Jun 30, Dec 31,MEUR 2009 2008 2008Non-current assetsIntangible assets 699.0 644.2 670.2Tangible assets 209.5 203.7 214.7Loans receivable and otherinterest-bearing assets 1.8 1.7 2.3Deferred tax assets 126.7 110.5 122.1Investments 142.8 135.2 169.1Total non-current assets 1,179.8 1,095.3 1,178.4Current assetsInventories 936.9 896.6 885.5Advance payments received -926.9 -842.5 -805.4Accounts receivable and other noninterest-bearing assets 1,134.6 1,049.2 1,046.5Current loans and receivables 177.0 121.5 204.0Cash and cash equivalents 170.3 162.0 147.8Total current assets 1,491.9 1,386.8 1,478.4Total assets 2,671.7 2,482.1 2,656.8Equity and liabilities Jun 30, Jun 30, Dec 31,MEUR 2009 2008 2008Equity 1,036.6 745.3 1,035.9Non-current liabilitiesLoans 28.9 219.6 172.4Deferred tax liabilities 39.5 28.3 39.7Employee benefits 119.0 124.9 115.8Total non-current liabilities 187.4 372.8 327.9Provisions 79.4 76.9 49.9Current liabilitiesLoans 153.1 152.6 123.4Accounts payable and other liabilities 1,215.2 1,134.5 1,119.7Total current liabilities 1,368.3 1,287.1 1,243.1Total equity and liabilities 2,671.7 2,482.1 2,656.8Consolidated statement of changes in equity1) Share capital2) Share premium account3) Paid-up unrestricted equity reserve4) Fair value and other reserves5) Translation differences6) Own shares7) Retained earnings8) Net income for the period9) Minority interests10) Total equityMEUR 1) 2) 3) 4) 5) 6) 7) 8) 9) 10)Jan 1, 2009 64.4 100.4 3.3 9.0 -16.2 -83.1 957.2 0.9 1,035.9Totalcomprehensiveincome forthe period -6.1 0.5 164.7 0.5 159.6Transactionswithshareholdersandminorityshareholders:Dividendspaid -164.1 -164.1Issue ofshares(optionrights) 0.0 0.9 0.9Purchase ofown shares -Sale ofown shares -Change inminorityinterests -Option andshare-basedcompensation 3.0 1.3 4.3Jun 30, 2009 64.4 100.4 4.2 2.9 -15.7 -80.1 794.4 164.7 1.4 1,036.6MEUR 1) 2) 3) 4) 5) 6) 7) 8) 9) 10)Jan 1, 2008 64.2 100.2 - 5.5 -31.3 -87.8 698.1 0.3 749.2Totalcomprehensiveincomefor theperiod 1.7 -11.8 162.3 0.4 152.6Transactionswithshareholdersandminorityshareholders:Dividendspaid -163.6 -163.6Issue ofshares(optionrights) 0.0 0.2 0.7 0.9Purchase ofown shares -Sale ofown shares -Change inminorityinterests 0.5 0.5Option andshare-basedcompensation 4.7 1.0 5.7Jun 30, 2008 64.2 100.4 0.7 7.2 -43.1 -83.1 535.5 162.3 1.2 745.3MEUR 1) 2) 3) 4) 5) 6) 7) 8) 9) 10)Jan 1, 2008 64.2 100.2 - 5.5 -31.3 -87.8 698.1 0.3 749.2Totalcomprehensiveincome forthe period 3.5 15.1 417.3 0.8 436.7Transactionswithshareholdersand minorityshareholders:Dividendspaid -163.6 -163.6Issue ofshares(optionrights) 0.2 0.2 3.3 3.7Purchase ofown shares -Sale ofown shares -Change inminorityinterests -0.2 -0.2Option andshare-basedcompensation 4.7 5.4 10.1Dec 31, 2008 64.4 100.4 3.3 9.0 -16.2 -83.1 539.9 417.3 0.9 1,035.9Condensed consolidated statement of cash flowsMEUR 4-6/2009 4-6/2008 1-6/2009 1-6/2008 1-12/2008Operating income 112.7 136.7 203.9 223.2 558.4Change in workingcapital 72.9 -32.8 136.5 32.6 -95.8Depreciation 15.5 15.0 31.0 29.7 64.8Cash flow fromoperations 201.1 118.9 371.4 285.5 527.4Cash flowfrom financingitems and taxes -49.9 -35.2 -65.6 -50.6 -99.5Cash flowfromoperatingactivities 151.2 83.7 305.8 234.9 427.9Cash flowfrom investingactivities -10.2 -25.5 -32.5 -61.3 -128.6Cash flowafterinvestingactivities 141.0 58.2 273.3 173.6 299.3Purchase andsale of own shares - - - - -Issue of shares 0.6 0.7 0.9 0.9 3.7Dividends paid -12.1 -12.2 -164.0 -163.3 -163.3Change inloans receivable -1.5 -10.4 26.2 -5.6 -82.7Change inloans payable -133.1 -75.6 -114.2 1.5 -62.7Cash flowfromfinancingactivities -146.1 -97.5 -251.1 -166.5 -305.0Change in cashand cashequivalents -5.1 -39.3 22.2 7.1 -5.7Cash and cashequivalents atend of period 170.3 162.0 170.3 162.0 147.8Translationdifference -2.1 -0.9 -0.3 0.0 1.4Cash and cashequivalents atbeginningof period 173.3 200.4 147.8 154.9 154.9Change incash and cashequivalents -5.1 -39.3 22.2 7.1 -5.7Change in interest-bearing net debtMEUR 4-6/2009 4-6/2008 1-6/2009 1-6/2008 1-12/2008Interest-bearingnet debt atbeginning of period -40.3 137.8 -58.3 91.7 91.7Interest-bearingnet debt atend of period -167.1 87.0 -167.1 87.0 -58.3Change ininterest-bearingnet debt -126.8 -50.8 -108.8 -4.7 -150.0Key figures 1-6/2009 1-6/2008 1-12/2008Basic earningsper share EUR 0.65 0.65 1.66Diluted earningsper share EUR 0.65 0.64 1.65Equity per share EUR 4.09 2.96 4.10Interest-bearingnet debt MEUR -167.1 87.0 -58.3Total equity/total assets % 38.8 30.0 39.0Gearing % -16.1 11.7 -5.6Return on equity % 31.9 43.5 46.8Return oncapital employed % 26.9 31.1 35.9Total assets MEUR 2,671.7 2,482.1 2,656.8Assets employed MEUR 869.5 832.3 977.6Working capital(includingfinancing andtax items) MEUR -181.8 -150.8 -76.4Sales by geographical regionsMEUR 1-6/2009 % 1-6/2008 % 1-12/2008 %EMEA 1) 1,374.9 63 1,365.0 67 3,001.5 65Americas 456.4 21 375.7 18 888.3 19Asia-Pacific 358.3 16 306.7 15 713.0 16Total 2,189.6 2,047.4 4,602.81= EMEA = Europe, Middle East, AfricaQuarterly Key Figures Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ 2009 2009 2008 2008 2008 2008Ordersreceived MEUR 953.9 898.5 845.2 892.4 1,092.4 1,117.5Order book MEUR 3,754.1 3,753.1 3,576.7 4,002.8 3,838.7 3,617.4Sales MEUR 1,168.6 1,021.0 1,431.6 1,123.8 1,142.1 905.3Operatingincome MEUR 146.3 1) 91.2 189.2 146.0 136.7 86.5Operating %income 12.5 1) 8.9 13.2 13.0 12.0 9.6 Q4/ Q3/ Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ 2007 2007 2007 2007 2006 2006 2006 2006Ordersreceived MEUR 901.9 926.3 944.4 902.1 712.1 742.0 821.9 840.3Orderbook MEUR 3,282.3 3,473.6 3,318.0 3,105.7 2,762.1 2,951.0 2,818.0 2,654.0Sales MEUR 1,294.2 971.6 1,001.9 811.2 1,145.6 879.8 840.4 735.0Operating 160.8income MEUR 2) 126.7 116.4 69.3 3) 123.4 101.1 83.9 51.7Operating %income 12.4 2) 13.0 11.6 8.5 3) 10.8 11.5 10.0 7.01) Excluding a MEUR 33.6 one-time cost related to the fixed costadjustment program.2) Excluding a MEUR 22.5 provision for the Austrian cartel court'sfine decision and a MEUR 12.1 sales profit from the sale of KONEBuilding.3) Excluding a MEUR 142.0 fine for the European Commission'sdecision.Orders receivedMEUR 1-6/2009 1-6/2008 1-12/2008 1,852.4 2,209.9 3,947.5Order book Jun 30, Jun 30, Dec 31,MEUR 2009 2008 2008 3,754.1 3,838.7 3,576.7Capital expenditureMEUR 1-6/2009 1-6/2008 1-12/2008In fixed assets 16.3 23.6 65.1In leasing agreements 3.1 3.5 9.3In acquisitions 29.0 37.6 60.0Total 48.4 64.7 134.4R&D expenditureMEUR 1-6/2009 1-6/2008 1-12/2008 30.9 29.9 58.3R&D Expenditure as percentage of sales 1.4 1.5 1.3Number of employees 1-6/2009 1-6/2008 1-12/2008Average 34,461 33,301 33,935At the end of the period 34,285 34,013 34,831Notes on the consolidated financial statementsCommitments Jun 30, Dec 31,MEUR 2009 Jun 30, 2008 2008Mortgages Group and parent company 0.7 0.7 0.7Pledged assets Group and parent company 1.9 4.8 2.0Guarantees Associated companies 3.6 3.7 4.1 Others 6.7 6.1 7.2Operating leases 172.7 149.0 171.7Total 185.6 164.3 185.7The future minimum lease payments under non-cancellable operatingleases Jun 30, Jun 30, Dec 31,MEUR 2009 2008 2008Less than 1 year 41.6 39.2 43.31-5 years 98.7 90.6 96.9Over 5 years 32.4 19.2 31.5Total 172.7 149.0 171.7DerivativesFair values of derivative financial instruments positive negative net net net fair fair fair fair fair value value value value value Jun 30, Jun 30, Jun 30, Jun 30, Dec 31,MEUR 2009 2009 2009 2008 2008FX Forward contracts 8.7 10.2 -1.5 12.6 10.9Currency options 1.6 1.0 0.6 0.0 0.4Cross-currency swaps,due under one year 2.3 13.5 -11.2 - 1.8Cross-currency swaps,due in 1-3 years - - - 10.4 -22.7Electricity derivatives 0.0 0.8 -0.8 1.7 -1.0Total 12.6 25.5 -12.9 24.7 -10.6Nominal values of derivative financial instruments Jun 30, Jun 30, Dec 31,MEUR 2009 2008 2008FX Forward contracts 472.8 603.8 615.7Currency options 99.8 46.0 90.4Cross-currency swaps,due under one year 136.7 - 23.6Cross-currency swaps,due in 1-3 years - 136.7 113.1Electricityderivatives 4.3 3.0 4.7Total 713.6 789.5 847.5Share and shareholders June 30, 2009 Class A Class B shares shares TotalNumber of shares 38,104,356 219,566,614 257,670,970Own shares inpossession 1) 4,710,242Share capital, EUR 64,417,743Market capitalization, MEUR 5,522Number of shares traded,million, 1-6/2009 92.6Value of shares traded MEUR,1-6/2009 1,677Number of shareholders 3 19,263 19,263 Close High LowClass B share price,EUR, 1-6/2009 21.83 22.67 13.801) During January-June 2009, the authorization to repurchase shareswas not used. In April 2009, 195,264 KONE class B shares assigned tothe share-based incentive plan for the company's senior managementwere transferred from KNEBV Incentive Oy to the participants due toachieved targets for the financial year 2008. During 2008, theauthorization to repurchase shares was not used. In April 2008,326,000 class B shares assigned to the share-based incentive plan forthe company's senior management were transferred from KNEBV IncentiveKy to the participants due to achieved targets for the financial year2007. Due to the share issue without payment (registered on February28, 2008) the number of shares in the company was increased byissuing new shares to the shareholders without payment in proportionto their holdings so that one class A share was given for each classA share and one class B share for each class B share.http://hugin.info/3057/R/1330029/314231.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
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" alt="Estimated Net Asset Value(s)>">Datum: 21.07.2009 - 11:30 Uhr
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