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Investor Presentaiton

1. China 2. USA 3. Germany 6 5 4. France C 5. Great Britain A 6. Italy w 7. Australia w 8. India w 9. Finland N 10. Canada N CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE 2.1 SALES Due to KONE's business model, the nature of its operations and its governance structure, KONE has one operating segment. Sales by customer KONE's customer base consists of a large number of customers in several market areas with no significant customer concentration. In 2022 the single biggest customer, residing in China, generated 0.9% of total revenue. Sales by business Jan 1-Dec 31, MEUR New equipment Services Maintenance Modernization Total 2022 % 5,399.3 50 5,507.4 50 3,890.4 36 1,616.9 15 10,906.7 Jan 1-Dec 31, 2021 % 5,637.7 54 4,876.4 46 3,450.6 33 1,425.9 14 10,514.1 Sales by geographical area MEUR EMEA) Americas Asia-Pacific Total Jan 1-Dec 31, 2022 % 4,237.7 39 2,239.8 21 4,429.2 41 Jan 1-Dec 31, 2021 10,906.7 % 4,036.9 38 1,902.9 18 4,574.3 44 10,514.1 EMEA = Europe, Middle East, Africa Top 10 countries by sales, % ~31 17 Accounting principles Revenue recognition Revenue from contracts with KONE's customers is recognized at an amount that reflects the consideration to which KONE expects to be entitled to in exchange for delivering promised goods or services to a customer. KONE recognizes revenue when or as it satisfies a performance obligation by transferring control on the promised goods or services (performance obligation) to a customer. A performance obligation is a distinct good or service within a contract that a customer can benefit from on a stand- alone basis. For KONE's new equipment and modernization contracts, a performance obligation typically means delivery and installation of a single unit, i.e. an elevator, an escalator or other People Flow™ solution. For KONE's maintenance contracts, maintenance of a single unit is considered as a distinct performance obligation and for repairs business, typically a service order is a performance obligation for KONE. In new equipment and modernization contracts, KONE transfers the control of a single unit to a customer over time and, therefore, satisfies the performance obligation and recognizes revenue over time. The percentage of completion method requires accurate estimates of future revenues and costs over the full term of the contracts. These significant estimates form the basis for the amount of revenue to be recognized and include the latest updated estimate of total revenue and costs, adjusted with risks based on historical experience on typical estimation revisions for similar types of contracts. These estimates may materially change due to the stage of completion of the contract, changes in the contract scope, cost estimates and customer's plans and other factors. Revenues from the rendering of maintenance services and repairs are recognized when the services have been rendered or over the contract term when the work is being carried out. For maintenance contracts the performance obligation is satisfied over time because the customer simultaneously receives and consumes the benefits provided as KONE performs the services. Most of KONE's revenue is derived from fixed-price contracts and, therefore, the amount of revenue to be earned from each contract is determined by reference to those fixed prices. KONE's customer contracts do not typically contain any significant financing components. In new equipment and modernization contracts payment terms are typically based on either specific contractual milestones or progress of work performed. In maintenance contracts customers generally pay based on fixed payment schedules. The transfer of control is initiated when ordered equipment is delivered to a customer site as then the customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, a unit constructed by KONE. Upon this milestone and onwards up to the project handover, revenue is recognized under the percentage of completion method using a cost-to-cost input method. Based on KONE's assessment it best depicts the transfer of control on the deliverable to the customer. Percentage of completion is defined as the proportion of an individual performance obligation's cost incurred to date from the total estimated costs prices. Where these are not directly observable, they are for that particular performance obligation. When customer contracts contain multiple performance obligations, the transaction price is allocated to each performance obligation based on the standalone selling estimated based on estimated costs plus margin approach. 50 KONE ANNUAL REVIEW 2022
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