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 OEM's 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 sees significant
growth opportunities also in creating value for customers in
new ways with the help of new technologies and connectivity.
Business characteristics
KONE's business model is capital light as the 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 close to
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 145
different nationalities, ca. half of
employees in the field
■Global diversity and inclusion
strategy
■ Personnel voluntary turnover rate
7.8%
■ Wide development opportunities on
all organizational levels around the
world
■Management systems and
certificates (e.g. ISO 14001, ISO
9001, OHSAS 18001)
■Governance structures, ethical
business practices and compliance,
96% of employees completed at least
one compliance training during 2021
INNOVATIONS, PROCESSES
AND SYSTEMS
■>5,000 granted or pending patents
globally
■ R&D spend 1.8% of sales, 7 global
R&D units
■ -1,500 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 >300 universities
and educational institutes
Distributors and agents important
part of go-to-market
MANUFACTURING AND
DELIVERY CHAIN
10 manufacturing units in 7
countries
-2,000 component suppliers and
thousands of installation suppliers
■ Optimized logistics network
■Supplier Sustainability Assessment
FINANCIAL
Equity EUR 3.2 billion
Interest-bearing net debt EUR -2.2
billion
■Net working capital EUR -1.5 billion
■ Capital expenditure 2.1% of sales
NATURAL RESOURCES*
■Materials used 1,643,400 tonnes
Heating and vehicle fleet fuels
408,200 MWh
Electricity and district heat 81,600
MWh
Water consumption 301,900 m3
BUSINESS MODEL
SUSTAINABLE SUCCESS WITH
CUSTOMERS
OUTPUTS
MOVING OVER 1 BILLION
PEOPLE EVERY DAY
■-196,000 new elevators and escalators ordered
in 2021
■Maintenance and modernization services, <1.5
million units in maintenance base
IMPACT
SHAREHOLDERS
■ Operating income EUR 1,295 million
■ Dividend proposal EUR 2.10 per class B share (incl. extraordinary
dividend), total amount of proposed dividends MEUR 1,087
Return on equity 32.0%
NEW EQUIPMENT 54%
Share of sales
Creating value for
customers through
the whole life cycle
of the building
MODERNIZATION
ATION 14%
CE 33%
MAINTENANCE.
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
EMISSIONS AND WASTE*
■ Carbon footprint from own operations 135,100
tCO2e
Waste 39,600 tonnes
■ Wastewater effluents 8 tonnes
Carbon footprint from our products and
value chain 14.1 MtCO2
SOCIETY
■Recognized for our contribution to better societies and urban
environment by several external parties, e.g. CDP, EcoVadis, Forbes
as well as The Financial Times' Diversity Leaders and Climate Leaders
report
■ Wages, salaries, other employment expenses and pensions EUR 3.2
billion
Industrial Injury Frequency Rate (IIFR) 1.6
81% of external hires into leadership positions from local communities
■21% of director level positions held by women
Increased amount of skilled workforce
■ Direct purchases EUR 4.3 billion
■Income taxes EUR 298.1 million with effective tax rate 22.6%
ENVIRONMENT*
12% reduction in absolute GHG emissions from our own operations
(Scope 1 and 2) compared to 2018
■ 0.7% increase in product-related GHG emissions (Scope 3) relative to
ordered products compared to 2018
41% of green electricity
■94.0% 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
*2020 figures. 2021 figures will be published in
the 2021 Sustainability Report in Q2 2022.View entire presentation