Our path towards the financial targets

Transcription

1 KONE CMD 2018 Our path towards the financial targets ILKKA HARA, CFO SEPTEMBER 25, 2018

2 FINANCIAL OVERVIEW TOWARDS OUR FINANCIAL TARGETS

3 Financial overview 3

4 Orders received have returned to growth Growth in orders received at comparable exchange rates In 2018, orders received has grown in all regions and in 8% all businesses 6% 5.5% 6.3% 7.0% 5.3% 6.8% 6.4% 4% 2% 3.6% 3.3% 1.1% 2.1% 0% -2% -4% -6% Q Q Q Q % Q % Q Q % Q % Q Q Q Q Q Q

5 Margin of orders received has stabilized Gross margin of orders received Illustrative Stabilization of the margin of orders received (y/y) started during Q4/2017 The lead time from orders received to sales in the Chinese volume business is around 9 months LIKE FOR LIKE PRICES IN CHINA NEW EQUIPMENT Y/Y: RAW MATERIALS/COMPONENT COSTS Y/Y: Q Q Q Q Q Q Q Q Q Q Q Q Q Q

6 Sales growth has recently been driven by services, new equipment growth starting to now recover Sales growth MEUR 8,647 8,942 H1/2018 sales growth at comparable currencies: New equipment 6.8% Services 6.1% 6, New Service, Acquisitions equipment, organic organic FX 2015 New Service, Acquisitions FX 2017 equipment, organic organic Organic sales growths based on estimated acquisition impacts sales as reported, not restated for IFRS 15 and IFRS 9 6

7 Adjusted EBIT recently burdened by profitability headwinds and currencies Adjusted EBIT growth MEUR 1,242 1, Growth Profitability (incl. mix) FX 2015 Growth Profitability (incl. mix) FX adjusted EBIT as reported, not restated for IFRS 15 and IFRS 9 7

8 Foreign exchange rates continue to be a headwind Recent trade tensions have weakened several of KONE s key currencies against EUR With current spot rates, FX estimated to have MEUR ~45 negative impact on 2018 adjusted EBIT KONE s foreign exchange exposure Sales by currency 2017 EUR RMB USD Others With current spot rates, FX estimated to have a somewhat negative impact on 2019 adjusted EBIT H1/2018 average Sep 20, 2018 spot EUR / RMB EUR / USD

9 Raw materials and trade tariffs put further upward pressure on component prices in 2019 Higher raw material prices continue to be a headwind still in 2019 KONE s raw material exposure is >5% of sales Indicative New trade tariffs for steel and aluminum imports to US and for several products imported from China to the US Estimated to have roughly MEUR 10 impact in 2019, visibility to the impact is still limited Steel (stainless, hot-rolled, billets) Copper Aluminium Rare earths Car fuel MEUR Impact from raw materials and tariffs ~100 A headwind but less than in

10 Cash flow capital allocation Cash flow from operations MEUR 1,213 1,032 1, ,342 1,510 1, EBITDA 1,345 Change in NWC 1,474 1,263 1, Capital allocation MEUR Capex Acquisitions ,324 1, Other incl. financing items and taxes Dividends 2017: Capex 1.3% of sales Acquisitions 0.4% of sales We have also increased our R&D and IT spend by 80 bps as % of sales from 2013 to

11 Good financial development has enabled a steadily increasing dividend Split-adjusted dividend per class B share EUR Dividend payout in 2017: 87% of earnings per share CAGR: +21 % Effective dividend yield, 2017: 3.7% Ordinary dividend Extraordinary dividend Adjusted for share splits in 2002 (1:3), 2005 (1:2), 2008 (1:2) and 2013 (1:2) 11

12 Towards our financial targets 12

13 We remain committed to our financial targets GROWTH Faster than market growth PROFITABILITY 16% EBIT margin CASH FLOW Improved working capital rotation 13

14 Improved working capital rotation Strong cash generation is a continuous area of focus Customers payment terms have remained on a good level Cash conversion has remained on a good level Cash flow from operations*/ebitda Opportunities to improve inventory rotation Continuous improvements in 0.6 accounts receivable and accounts 0.4 payables Q Q Q Q Q Q * Before financing items and taxes 14

15 Faster than market growth Continued faster than market growth in new equipment HOW WE PLAN TO ACHIEVE IT FOCUS ON OUTCOMES FOR CUSTOMERS NEW SERVICES AS A DIFFEREN- TIATOR BUILDING COMPETEN- CES IN THE GROWTH MARKETS INNOVATION 15

16 Faster than market growth Strong position in new equipment a great backdrop for faster than market growth in services IMPROVING CONVERSION AND RETENTION THROUGH DIFFERENTIATI ON AND SERVICE MINDSET NEW REVENUE STREAMS AND BUSINESS MODELS BUILDING COMPETEN- CES CAPTURING THE MODERNI- ZATION OPPORTUNITY 16

17 16% EBIT margin There are several levers for profitability improvement OUR ULTIMATE TARGET IS TO IMPROVE THE ABSOLUTE EBIT 16% EBIT MARGIN TARGET GROWTH DIFFERENTIATION CUSTOMER SATISFACTION QUALITY AND PRODUCTIVITY ECONOMIES OF SCALE BETTER PRICING FROM UNIQUE VALUE TO CUSTOMERS HIGHER RETENTION COST COMPETITIVENESS CUSTOMER FOCUS, SPEED AND EFFICIENCY PROVIDED BY THE ACCELERATE PROGRAM 17

18 Accelerate: customer centricity, speed and efficiency January 2017 Launch of Winning with Customers strategy September 2017 Accelerate program launched to speed up the execution of KONE s strategy and to support profitable growth November 2017 June 2018 Several organizational changes initiated, e.g. in HR, Finance, Sourcing 2020 Accelerate program completion Estimated costs MEUR 100, whereof the majority are expected to accrue over the first two years Estimated savings, 2019: MEUR ~50 Estimated run rate savings by the end of 2020: MEUR

19 Summary We are well on a growth track Profitability is burdened by several headwinds, however, orders received margin has stabilized We are committed to our financial targets

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