KONE Q4 2011 details

KONE Corporation (OMX: KNEBV) managed to grow quicker than its peers once again while keeping margins relatively high in 2011. In fact this is the 7th year in a row the company has done just that. Markets took the report positively but the stock had been selling going into the report and still ended the week in the red.

Orders received in 2011 were very near 4.5 billion Euros, a new record, and Q4 contributed almost 1.1 billion into that number. Operating income was 233 million on 14.7% operating margin of net sales compared to 15.3% margin in Q4 2010. The slight decline in margins reflects increased labour costs in Asia, material costs and price competition. Earnings per share including a one-off gain from GiantKONE shares revaluation is 2.52 Euros per share for the fiscal year. Board is suggesting a dividend of 1.4 Euro per share for 2011.

KONE has seen growing or stable markets across all geographies excluding Southern Europe, which KONE described as weak, even if the rate of growth has come down in some places. Decision making times are somewhat longer, particularly in Australia. KONE has managed to grow its maintenance business to include over 850.000 elevators and escalators. This greatly lessens cyclical impacts on KONE’s earnings.

In December KONE became the majority owner in GiantKONE Elevator Co., Ltd, which is a joint venture formed in 2005 with Zhejiang Giant Elevator Co., Ltd. KONE will consolidate the company in its accounts. Impact on the revaluation of the previously held 40% stake contributes 22 cents into 2011 EPS.

After the transaction KONE owns 80% of the firm with Zhejiang Giant Holdings Co., Ltd maintaining a 20% stake. The Parties have an option on a transaction for the remaining 20%. In 2012 the transaction’s impact on EBIT is expected to be marginal due to intangible asset amortizations. . KONE is now set to become the second largest company in the segment in China behind Otis Elevator Company from the US.

KONE is targeting 16% EBIT margin, improved working capital rotation and growth faster than the market in the long term. In 2012 the company expects good development in Asia-Pacific, stable or slightly declining market conditions in Central & Northern Europe and even further decline in Southern Europe. North American market is presumed to start improving somewhat in new equipment orders. KONE expects 730-790 million EBIT for 2012. In 2011 the number was 725 million.