Annual Report 2006 Annual Report 2006

102 Pages·2007·2.66 MB·English

annual report 2006
Change.
CONtENtS

1 | Review 2006
KONE in Brief ____________________________________________________________4
Year in Brief _____________________________________________________________6
For Our Shareholders _____________________________________________________8
CEO’s Review ____________________________________________________________9
Business Review _________________________________________________________
Personnel _______________________________________________________________22
Environment ____________________________________________________________25
Corporate Governance ___________________________________________________27
Board of Directors ______________________________________________________32
Executive Board _________________________________________________________34
Shares and Shareholders _________________________________________________36
Global References _______________________________________________________42
2 | Financial StatementS
Board of Directors’ Report ________________________________________________50
iFRS Financial Statements
Consolidated Statement of Income ________________________________________55
Consolidated Balance Sheet_______________________________________________56
Consolidated Statement of Changes in Equity _______________________________58
Consolidated Statement of Cash Flow ______________________________________59
Notes on the Consolidated Financial Statements ____________________________60
Calculation of Key Figures ________________________________________________86
Summary in Figures ______________________________________________________87
Board of Directors’ Dividend Proposal______________________________________88
Auditors’ Report _________________________________________________________89
3 | pRO FORma cOmpaRaBle Data
In order to facilitate the evaluation of the financial performance and status
of the company, pro forma comparable data for 2005 have been included.
Review 2006 with Pro Forma Comparison Figures ___________________________90
Consolidated Statement of Income with Pro Forma Comparison Figures _______93
Consolidated Balance Sheet with Pro Forma Comparison Figures ______________94
Consolidated Statement of Cash Flow with Pro Forma Comparison Figures _____95
Quarterly Key Figures ____________________________________________________96
Summary in Figures 2003–2006 ___________________________________________97
4 | inveStOR inFORmatiOn
KONE as an Investment __________________________________________________98
Information for Shareholders ____________________________________________00
REvIEw 2006
2
3
KONE IN BRIEF
4
KONE is one of the world’s 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.
Strategy
KONE gives a performance edge to its customers with innovative services and
solutions. Simultaneously, KONE’s products and services are cost-competitive and
its processes characterized by globally aligned operational excellence.
In 2006, KONE continued to successfully implement its strategy, which was
revised early 2005. the key development programs in the implementation of
the strategy are; increasing the customer focus, broadening and improving the
product and service portfolio, improving business processes and productivity,
utilizing sourcing power, and strengthening KONE’s position in the Asian market.
In 2006, sales growth, healthy sales margins, extended product portfolios and
improved productivity contributed to strengthening KONE’s market position and
positive progress in profitability.
customers
KONE’s most important customer groups are building owners, constructors, and
facility management companies. Architects, elevator consultants, development
companies, and designers are key parties in the decision-making process regard-
ing elevators and escalators.
KONE has approximately 250,000 customers globally, of which the majority
are maintenance customers. Customer segments and maintenance contracts vary
from one-elevator residential buildings with yearly contracts to large international
accounts with long-term performance-based maintenance agreements.
SAlES, % SAlES BY mARKEt, %
13
41
22
59
65
New equipment Europe, middle East,
Africa (EmEA)
Service
Americas
Asia-Pacific
5
Hyvinkää
Head Office, Helsinki
Keighley
Hattingen
Ústí nad labem
Pero
moline, Il
mcKinney, texas
Kunshan
torreón
Chennai
KONE is present
Head Office
Global R&D centers
Production units
market Size and KOne’s position
the annual size of the market for elevator installation, maintenance, repair and
modernization is estimated to exceed EUR 30 billion. the corresponding escalator
market is nearly EUR 3 billion, and the market for door service amounts to roughly
EUR 5 billion annually.
As one of the leading elevator and escalator companies, KONE has production
in all major continents. It has operations in all key markets through some 800
service centers worldwide. In Europe, sales correspond to approximately 65
percent of total net sales. the North American sales correspond to approximately
22 percent and the Asia-Pacific sales to 3 percent. However, the importance of
Asia-Pacific is continuously increasing.
In mature markets such as Europe and North America the modernization
market is increasingly becoming more important. the main driver behind this
development is safety (regulatory) and the need for upgrading. In emerging
markets, the new equipment market is mainly driven by urbanization and
economic growth.
KONE’s share of the global market is approximately 0 percent.
YEAR IN BRIEF
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Key Releases A yearly summary of all KONE’s releases in 2006 is available on the Internet at www.kone.com.
11 may
31 January 28 February KONE won a major service 13 June
KONE booked an order to KONE and contract for the london KONE won a
provide all elevators for the old Hewlett-Packard Underground. the value of major order for
london Stock Exchange Building. signed a global the contract over the 2-year the vienna
the value of the order was It infrastructure period will be approximately International
approximately EUR 9 million. agreement. EUR 95 million. Airport.
1 2 3 4 5 6
6 February 19 april 26 april
KONE secured KONE won three KONE won two orders
major orders in Italy orders from the madrid to deliver all elevators
and Qatar with a metro. the combined for Beijing’s National
combined value value of the contracts Stadium, which will
of approximately was approximately host the 2008
EUR 27 million. EUR 22 million. Olympic Games.
net Sales and profit increased (pro Forma) Strengthened management and continued
KONE’s net sales progressed well. Net sales grew by progress in Development programs
 percent, amounting to EUR 3,60 million. Net sales Changes took place in key managerial posts relating
increased in the EmEA region by approximately 8 to business process development and It systems and
percent. the corresponding increases in the Americas development of the quality of KONE’s solutions and
and Asia-Pacific were 6 percent and 20 percent operations from the customer’s perspective. top
respectively. management and the whole group continued to focus
Orders increased by 8 percent in 2006 and the on the development programs, which started to
order book stood at a record high level of EUR 2,762 contribute to the strengthening of KONE’s market
million at the end of 2006. position and positive profitability performance.
Operating income was EUR 360 million, or 0
percent of net sales. this is the best result in the acquisition of mainly Small Service companies
company’s history KONE continued its active acquisition policy during
KONE distributed a dividend of EUR 0.99 per class the year and strengthened its market position in all
A share and .00 per class B share from the profit for key markets. A total of over 20, mainly service
2005, and the Board of Directors proposes to the companies were acquired.
Annual General meeting that EUR .00 per class B
share be distributed as a dividend for the year 2006.
KONE’s market capitalization*) increased from EUR
4,26 million to EUR 5,382 million during 2006.
*) market capitalization is calculated based on both
the unlisted class A and the listed class B shares.
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21 July 26 October 18 December
KONE acquired KONE introduced the world’s Antti Herlin’s title was changed
Evin SAS, an flattest technology for autowalks. into Chairman of the Board of
elevator company the first KONE Innotracktm units KONE Corporation, and matti
located in lille, will be installed at Amsterdam Alahuhta’s title to President &
France. Airport Schiphol. CEO of KONE Corporation.
9 October 3 november
It was announced that KONE’s new factory KONE and marimekko
in mexico would deliver all elevators for the entered into cooperation
North American markets. on elevator car interiors.
7 8 9 10 11 12
14 august 15 September 28 november
KONE won a contract KONE signed a contract with Aker Yards for KONE Corporation and KmZ
to design, supply and the design, supply and installation of all the Karacharovo mechanical
install all the elevators elevators on a mega-cruise ship. the new Factory agreed to withdraw
on Celebrity Cruises’ ship type has been developed under the from their plans to set up a
three new cruise project name “Genesis” for Royal Caribbean joint venture elevator
ships. International (RCl). company in Russia.
Key Figures 2006
pro forma
2006 2005 change %
Sales mEUR 3,60 3,242 
Orders received mEUR 3,6 2,639 8
Order book as of 3 December mEUR 2,762 2,327 9
Operating income mEUR 360 272) 32
Income before taxes mEUR 356 78
Net income mEUR 234 09
total assets mEUR 2,292 2,45
Basic earnings per share 2) EUR .86 0.87
Equity/share 2) EUR 5.55 5.24
Return on equity 2) % 34.3 5.6
Return on capital employed 2) % 35.4 8.3
total equity/total assets 2) % 30.5 3.2
Gearing 2) % 7.9 4.8
Number of employees
as of 3 December 29,32 27,238
) Excluding mEUR 89,2 provision for the development and restructuring program.
2) the principles of calculating key figures can be found on page 86.
FOR OUR SHAREHOlDERS
8
the year 2006 was a successful one for KONE and its shareholders. KONE’s
change was systematically carried forward during the year. the stock markets also
showed confidence in the company’s revised strategy.

the performance of KONE’s share price reflects the confidence that shareholders
have in the company’s sharpened strategy and in the progress of the develop-
ment programs created to fulfil it. During the last year and a half – i.e. from the
demerger until the present day – KONE’s market capitalization increased from
approximately EUR 2.8 billion to EUR 5.4 billion, and KONE is counted among the
most highly valued companies on the Helsinki Stock Exchange. the number of
shareholders has increased steadily, and KONE now has almost 4,000 owners.
I want to thank the shareholders for their trust.
I am very proud of the fact that, during the past year, we made excellent progress
in winning orders and especially in increasing our profit in very competitive
markets. Our strong order book and earnings ability create a solid platform from
which to further develop KONE towards the targets laid out in the strategy. I want
to express my heartfelt thanks to the personnel whose work has been integral in
changing the company, and to the President & CEO who has successfully piloted
it to its present success.
late in the year, a change was made in the titles of our corporate executives, as a
result of which the title of CEO, previously used by me, was transferred to the
President, matti Alahuhta. the new practice reflects the nature of our collabor-
ation and the division of tasks that is already in place. Simultaneously, it conveys
my own confidence in the future of KONE.
January 2007
antti Herlin
Chairman of the Board