• Dividend Proposal: EUR 1.80 per B class share, representing a dividend yield of 3.8%.
• Orders Received Growth (Outside China): Over 10% growth.
• Orders Received Decline (China): Declined by over 20%.
• Sales Growth: Increased by 5.1% at comparable currencies.
• Sales Decline (China): Decreased by nearly 15%.
• Service Sales Growth: Double-digit growth.
• Modernization Sales Growth: Double-digit growth.
• Adjusted EBIT Margin Improvement: Improved by 20 basis points.
• Cash Flow (Q4): EUR 534 million.
• Full Year Cash Flow: EUR 1.589 billion.
• Adjusted EBIT: EUR 387 million.
• Operating Income: EUR 333 million.
• Service Base: Over 1.7 million units.
• Sales Growth (Outside China): Over 10% at comparable currencies.
• Modernization Sales Growth Rate: 12.8%.
• Service Sales Growth Rate: 10.5%.
• New Building Solutions Sales Decline: 2.9%.

• Warning! GuruFocus has detected 4 Warning Signs with KNYJF.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• KONE Oyj (KNYJF) launched a new strategy, Rise, which has been executed successfully, contributing to the company's resilience.
• The Service and Modernization segments showed excellent momentum, accounting for 90% of the company's profit.
• KONE Oyj (KNYJF) experienced good order growth in regions outside China, including the Americas, Europe, Asia Pacific, Middle East, and Africa.
• The company achieved eight consecutive quarters of profitability improvement, with a proposed dividend of EUR 1.80 per B class shares.
• KONE Oyj (KNYJF) reported strong cash generation in Q4, driven by improved working capital management and profit improvement.

Negative Points

• The construction market in China remains challenging, significantly impacting the New Building Solutions business.
• Orders received in China declined by over 20%, and sales decreased by nearly 15%, affecting overall performance.
• Inflation posed a challenge, and the margin decline in China was a significant headwind.
• The company did not make progress towards its safety targets, which will require special attention in 2025.
• There were restructuring costs in China and global teams, impacting the financial results.

Q & A Highlights

Q: Can you explain the margin guidance for 2025, particularly regarding China and the impact of restructuring? A: Ilkka Hara, CFO, explained that the restructuring in China aligns the business with market realities, focusing on Service and Modernization. Despite market challenges, China remains profitable. The restructuring costs were mainly in China, with some global impacts, totaling EUR 54 million. Philippe Delorme, CEO, emphasized prioritizing cash flow and selecting customers with better margin potential in China.

Q: What are the expected savings from the EUR 50 million restructuring, and what other measures are being implemented? A: Ilkka Hara noted that the restructuring aligns teams with the new strategy, with performance initiatives in procurement and operational excellence expected to ramp up towards the end of the year. Philippe Delorme highlighted the focus on procurement and operational excellence, aiming for continuous margin improvement.

Q: Can you clarify the slight margin decline in Q4 order intake, particularly in China? A: Ilkka Hara stated that the margin decline was mainly due to the challenging market in China, with stable margins in the rest of the world. Modernization margins in China remain high, and the business is growing, especially in partial modernization.

Q: How did the Service business perform in 2024, and what are the expectations for 2025? A: Ilkka Hara reported stable Service margins in 2024, with labor inflation offset by price adjustments. The focus is on growing the Service business, which saw over 10% growth. Philippe Delorme emphasized the role of digitalization and pricing strategies in driving future margin improvements.

Q: What is the outlook for the North American market, and how is Kone performing there? A: Philippe Delorme expressed optimism about the North American market, noting strong growth in Modernization and a positive outlook for new construction. Ilkka Hara added that orders in the Americas showed double-digit growth, indicating a robust market environment.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.