Investor Presentaiton
BOARD OF DIRECTORS' REPORT | KONE'S BUSINESS MODEL
BOARD OF DIRECTORS'
REPORT
KONE's business model
KONE provides value for customers during the whole life
cycle of the building. In the new equipment business, we offer
innovative, intelligent and sustainable elevators, escalators,
automatic building doors and integrated access control
solutions to deliver the best people flow experience. In
maintenance, we ensure the safety and availability of the
equipment in operation, and in modernization we offer
solutions for aging equipment ranging from the replacement of
components to full replacements.
The key growth drivers of the new equipment business are
urbanization and changing demographics. New equipment
deliveries are the main growth driver of the maintenance
business as the majority of units delivered will end up in
KONE's maintenance base. In addition, KONE also maintains
other OEMs' equipment. The main growth drivers for
modernization are the aging installed base and increased
requirements for efficient people flow, safety and
sustainability. Having a strong maintenance base is crucial for
the growth of the modernization. KONE also sees significant
growth opportunities in increasing the value created for
customers in all of its businesses with the help of new
technologies and connectivity.
Business characteristics
KONE's business model is capital light as working capital is
negative in all businesses and we work extensively with
component suppliers to complement our own manufacturing
capacity. The maintenance business is very stable due to high
requirements for safety and reliability. Customer relationships
are also typically long and stable (>90% annual retention
rate). New equipment and modernization are more cyclical in
nature and follow the construction cycles.
Key value drivers
KONE has identified the following strategic inputs that are
crucial in creating value for customers, shareholders and the
society: competent and engaged people and strong
leadership; innovative, sustainable offering and global
processes and systems; best partners; efficient manufacturing
and delivery chain; solid financial position; environmentally
sustainable operations as well as strong brand and solid
reputation. In addition to these, KONE sees that the life cycle
business model and the existing maintenance base of well
over 1.5 million units have a crucial role in value creation. The
different businesses support the growth of each other and
together provide stability for the business.
INPUTS
PEOPLE AND LEADERSHIP
■>60,000 employees representing 151
different nationalities, ca. half of
employees in the field
Global diversity and inclusion strategy
■ Personnel voluntary turnover rate
7.9%
■ Wide development opportunities on all
organizational levels around the world.
■Management systems and certificates
(e.g. ISO 14001, ISO 9001, ISO
45001)
■ Governance structures, ethical
business practices and compliance,
98% of employees who had been
assigned the competition compliance
training had completed the course,
accounting for over 30,000 course
completions
INNOVATIONS, PROCESSES
AND SYSTEMS
■ -4,800 different IPRs including
patents, utility models and designs
R&D spend 1.7% of sales, 8 global
R&D units
■ -1,700 technology professionals in
R&D, ca. half in software development
■ Global KONE Way processes and
systems
■ Safe and efficient maintenance and
installation methods
BRAND AND REPUTATION
■ One of the leading brands in the
elevator and escalator industry
PARTNERING
■ Co-creation with customers
■ Partnering to co-develop new
technologies and solutions
Collaboration with universities and
educational institutes
■ Dynamic network of innovative
companies in different fields of
technologies
Distributors and agents important
part of go-to-market
MANUFACTURING AND
DELIVERY CHAIN
10 manufacturing units in 7
countries
-2,000 material and component
suppliers and -8,000 installation
suppliers
■ Optimized logistics network
■ Supplier sustainability assessment
FINANCIAL
Equity EUR 2.9 billion
■ Interest-bearing net debt EUR -1.3
billion
■Net working capital EUR -0.9 billion
Capital expenditure 1.9% of sales
NATURAL RESOURCES*
■ Materials used 1,795,400 tonnes
Heating and vehicle fleet fuels
443,100 MWh
■ Electricity and district heat 86,100
MWh
■ Water consumption 328,000 m3
BUSINESS MODEL
SUSTAINABLE SUCCESS WITH
CUSTOMERS
NEW EQUIPMENT 50%
Share of sales
OUTPUTS
MOVING OVER 1 BILLION
PEOPLE EVERY DAY
■-172,000 new elevators and escalators ordered
in 2022
Trusted People FlowⓇ partner for >550,000
customers
"Maintenance and modernization services, well
over 1.5 million units in maintenance base
IMPACT
SHAREHOLDERS
Operating income EUR 1,031 million
Dividend proposal EUR 1.75 per class B share, total amount of
proposed dividends MEUR 904.7 (incl. dividend proposal per class A
share)
■Return on equity 25.9%
Creating value for
customers through
the whole life cycle
of the building
MODERNIZATION 15%
MAINTENANCE 36%
THE MOST SUSTAINABLE
OFFERING
■ Best in class energy efficiency, ISO 25745 A-
class energy rating as the first elevator
company
■ Up to 70% energy savings through
modernization of elevators
■ Focus on safety and accessibility
SOCIETY
■Recognized for our contribution to better societies and urban
environment by several external parties, e.g. Corporate Knights, CDP,
EcoVadis, FTSE4Good index as well as Forbes 2022 World's Best
Employers
■ Wages, salaries, other employment expenses and pensions EUR 3.5
billion
Industrial Injury Frequency Rate (IIFR) 1.4
■81% of external hires into leadership positions from local communities
■ 23.5% of director level positions held by women
■ An increased amount of skilled labor
■ Direct purchases EUR 4.5 billion
■Income taxes EUR 244.0 million with effective tax rate 23.7%
EMISSIONS AND WASTE*
Carbon footprint from own operations 130,900
tCO2e
■ Waste 37,400 tonnes
■ Wastewater effluents 8 tonnes
Carbon footprint from our products and
value chain 15.6 MtCO2
ENVIRONMENT*
■15% reduction in absolute GHG emissions from our own operations
(Scope 1 and 2) compared to 2018
■ 0.4% increase in product-related GHG emissions (Scope 3) relative to
ordered products compared to 2018
80% of green electricity
■ 91% of waste recycled or incinerated
■ Corporate units as well as all manufacturing and R&D units are ISO
9001 and ISO 14001 certified
■ 88% of key suppliers with ISO 14001 certification at the end of 2021
*2021 figures. 2022 figures will be published in
the 2022 Sustainability Report in Q2 2023.View entire presentation