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KONE CAPITAL MARKETS DAY 2012 Accelerating the development of KONE’s competitiveness Matti Alahuhta, President & CEO June 8, 2012 Agenda 2 June 8, 2012 KONE’s performance Global market in 2011 and KONE’s market share development Developing KONE further Launching a new product offering Market development in 2012 Market and business outlook | © KONE Corporation | Capital Markets Day | Matti Alahuhta We had a strong start to the year Q1/2012 Q1/2011 Historical change Comparable change Orders received MEUR 1,365.9 1,044.7 30.7% 27.1% Order book MEUR 4,842.8 3,737.5 29.6% 24.5% Sales MEUR 1,241.3 1,053.8 17.8% 15.1% Operating income (EBIT) MEUR 132.7 118.7 11.8% Operating income (EBIT) % 10.7 11.3 MEUR 141.4 122.1 % 11.4 11.6 MEUR 248.3 237.3 EBITA 1) EBITA Cash flow from operations 15.8% (before financial items and taxes) 1) 3 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta Operating income excluding amortization of acquisition-related intangible assets. Our order intake has grown to a new level over the past 7 years Quarterly Orders Received, 12 months rolling, Q4/2005-Q1/2012 5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 0 1-12 2005 4 June 8, 2012 1-12 2006 1-12 2007 | © KONE Corporation | Capital Markets Day | Matti Alahuhta 1-12 2008 1-12 2009 1-12 2010 1-12 2011 Sales has grown as a result of good progress in both new equipment and service business Quarterly Sales, 12 months rolling, Q4/2005-Q1/2012 5 500 5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 0 1-12 2005 5 June 8, 2012 1-12 2006 1-12 2007 | © KONE Corporation | Capital Markets Day | Matti Alahuhta 1-12 2008 1-12 2009 1-12 2010 1-12 2011 2011 Sales by market: Asia-Pacific’s share of sales grew to 27% of total sales CAGR,% Sales by market 2005-2011, MEUR 4 603 4 744 4 987 5 225 8.3 55% 5.1 18% 5.3 23.2 4 079 3 601 3 242 62% 65% 66% 22% 65% 22% 6 65% 21% 19% 21% 27% 2010 2011 12% 13% 14% 16% 2005* 2006 2007 2008 2009 June 8, 2012 Americas 21% 21% 17% EMEA 58% Asia-Pacific | © KONE Corporation | Capital Markets Day | Matti Alahuhta *) 2005 figures are pro forma Our operating income has grown solidly Quarterly EBIT, 12 months rolling, Q4/2005-Q1/2012 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0 1-12 2005 7 June 8, 2012 1-12 2006 1-12 2007 | © KONE Corporation | Capital Markets Day | Matti Alahuhta 1-12 2008 1-12 2009 1-12 2010 1-12 2011 8 June 8, 2012 KONE’s performance Global market in 2011 and KONE’s market share development Developing KONE further Launching a new product offering Market development in 2012 Market and business outlook | © KONE Corporation | Capital Markets Day | Matti Alahuhta Elevator and escalator market in 2011 (2010 figures in brackets) New elevator and escalator market 610,000 units Elevators and escalators in operation 2011 ~11M units 6 % (6%) 7 % (7%) 18 % (20%) 3 % (3%) 18 % (15%) 3 % (4%) 51 % (53%) 5 % (6%) 10 % (11%) 4% (4%) 64 % (60%) EMEA South America China 9 June 8, 2012 North America Japan and Korea Rest of Asia Pacific | © KONE Corporation | Capital Markets Day | Matti Alahuhta 11 % (11%) EMEA North America South America Japan and Korea China Rest of Asia Pacific Source: Based on KONE’s estimate. New equipment: we have been able to significantly grow our market share KONE’s market position 2005 2009 2011 Central and North Europe nr. 2 nr. 2 shared nr. 1 South Europe nr. 3 shared nr. 2 nr. 2 Middle East nr. 4 nr. 3 nr. 2 Russia nr. 4 nr. 4 nr. 4 China nr. 8 nr. 4 nr. 2 India nr. 2 shared nr. 2 nr. 1 Southeast Asia nr. 5 nr. 3 nr. 3 Australia nr. 2 shared nr. 1 nr. 1 nr. 4 nr. 4 with significantly improved market share nr. 4 with further improved market share EMEA: Asia-Pacific: North America: 10 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta Source: Based on KONE’s estimate, in new equipment units Service: our maintenance base has grown steadily – we continue to be an active challenger Development of KONE’s elevator and escalator maintenance base, 2005-2011 Units 900 000 >850 000 800 000 700 000 600 000 500 000 400 000 300 000 200 000 100 000 0 2005 2006 2007 2008 2009 2010 Maintenance base growth CAGR 2005-2011: 6,7% 11 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta 2011 12 June 8, 2012 KONE’s performance Global market in 2011 and KONE’s market share development Developing KONE further Launching a new product offering Market development in 2012 Market and business outlook | © KONE Corporation | Capital Markets Day | Matti Alahuhta We have accelerated the development of our competitiveness 13 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta Our Development Programs provide focus areas in developing our operations Customer Experience Employee Engagement Innovative Solutions for People Flow® Service Leadership Delivery Chain Excellence 14 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta Customer Experience Develop communication with customers in all touch points Increase granularity in market understanding Improve impact and efficiency of sales teams 15 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta Employee Engagement Develop leadership capabilities Improve professional growth opportunities Promote well-being 16 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta Innovative Solutions for People FlowTM New global product offering - Ride comfort - Visual design - Eco-efficiency Improve cost competitiveness in all product categories 17 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta Service Leadership Shorten follow-up cycles Further develop field mobility tools Train and coach technicians, supervisors and service managers Develop modernization product offering, sales and processes 18 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta Delivery Chain Excellence Implement LEAN and SixSigma Fast ramp-up of new products Juho Malmberg Business specific delivery chain 19 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta Our objective is to continuously take the difficult market situation as an opportunity in the current uncertain environment Stronger differentiation from competition with our development programs Focus on growth markets and segments Improving quality and productivity Development of personnel 20 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta We measure our performance in five key areas to assess our development 21 Customer satisfaction Target: Continuously improved customer loyalty Employee satisfaction Target: Continuously improved employee engagement Faster than market growth Target: Continue to grow faster than the market Financial performance vs. competition Target: Better financial development than that of key global competitors Sustainability Target: Good progress in the area of sustainability June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta 22 June 8, 2012 KONE’s performance Global market in 2011 and KONE’s market share development Developing KONE further Launching a new product offering Market development in 2012 Market and business outlook | © KONE Corporation | Capital Markets Day | Matti Alahuhta We have worked very actively to further improve our product competitiveness Developing innovative solutions for People Flow® is a key focus area and one of our five Development Programs We have increased our R&D expenditure We have now introduced a new global product offering 23 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta The new offering covers our global volume elevator range 60% 90% of new equipment volume of full replacement volume Machine-room-less and small machine room elevators for residential, hotel, office and retail segments 24 24 June 8, 2012 April 24, 2012 Confidential | © KONE Corporation | | © KONE Corporation | Capital Markets Day | Matti Alahuhta The new offering features significant developments in competitiveness and added value for customers USER EXPERIENCE Improved ride comfort Enhanced visual design CUSTOMER EXPERIENCE Better eco-efficiency Improved space efficiency KONE is an even closer and more dedicated partner to our customers IMPROVED TECHNOLOGY Harmonized and modular global product platform: – New machines, hoisting mechanics – Cars, slings, signalization, visuals Simplification across product range 25 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta 26 June 8, 2012 KONE’s performance Global market in 2011 and KONE’s market share development Developing KONE further Launching a new product offering Market development in 2012 Market and business outlook | © KONE Corporation | Capital Markets Day | Matti Alahuhta Central and North Europe: New equipment market stable or slightly declining NEW EQUIPMENT Market stable or decreasing slightly Market at a relatively good level in Germany, Austria, Switzerland and the Nordic countries Market weak in the Netherlands, Ireland and parts of eastern Europe MODERNIZATION Market stable or declining slightly MAINTENANCE Market developing well, but pricing environment challenging Source: Based on KONE’s estimate. 27 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta South Europe: Continued weakness NEW EQUIPMENT Market continues to weaken France: market declining slightly Italy: market continues to decline Spain: market at a very low level MODERNIZATION Market declining slightly MAINTENANCE Intense price competition Source: Based on KONE’s estimate. 28 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta Middle East and Russia: Continued growth NEW EQUIPMENT Most markets in the Middle East developing positively Saudi Arabia: continued growth United Arab Emirates: some signs of market recovery Continued gradual growth in Russia MODERNIZATION Markets still small, but growing MAINTENANCE Markets developing positively Source: Based on KONE’s estimate. 29 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta North America: Gradual recovery NEW EQUIPMENT United States: continued gradual recovery in the market with regional variations Canada: stable market at a good level Mexico: stable market MODERNIZATION Market continues to grow MAINTENANCE Market developing well, but pricing environment remains intense Source: Based on KONE’s estimate. 30 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta Asia-Pacific: Slower growth than last year NEW EQUIPMENT China: continued growth but at a lower rate than earlier; the affordable housing segment growing the fastest India: market growing slightly despite continued financing constraints Australia: market declining due to longer lead times in decision-making Southeast Asia: continued growth MODERNIZATION Market declining slightly in Australia MAINTENANCE Continued good development Source: Based on KONE’s estimate. 31 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta 32 June 8, 2012 KONE’s performance Global market in 2011 and KONE’s market share development Developing KONE further Launching a new product offering Market development in 2012 Market and business outlook | © KONE Corporation | Capital Markets Day | Matti Alahuhta Market outlook 2012 The new equipment markets are expected to continue to grow in Asia-Pacific, but at a significantly lower rate than in 2011, and there is uncertainty related to the development in the second half of the year. The markets in Central and North Europe are expected to remain relatively stable or decline slightly, and the markets in South Europe are expected to decline from an already weak level. The market in North America is expected to continue to gradually recover from a low level. The modernization markets are expected to be at about the same level as in 2011 or grow slightly. The maintenance markets are expected to continue to develop well. 33 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta Business outlook 2012 KONE’s net sales is estimated to grow by 10-15% at comparable exchange rates as compared to 2011. The operating income (EBIT) is expected to be in the range of EUR 750-800 million, assuming that translation exchange rates do not materially deviate from the situation of the beginning of 2012. 34 June 8, 2012 | © KONE Corporation | Capital Markets Day | Matti Alahuhta