Investor Presentaiton
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CAPITAL STRUCTURE
KONE has a credit facility of EUR 200 (0) million and a
loan of EUR 200 (200) million from the European Investment
Bank (EIB) for R&D purposes. The fixed interest rate loan will
mature in 2026. The fair value of the loan is estimated based
on discounted cash flow method using a current borrowing
rate (level 2 fair value hierarchy) as the discount rate. KONE
has also an uncommitted commercial paper program of EUR
500 (500) million and a sustainability-linked revolving credit
facility of EUR 850 (850) million to ensure sufficient liquidity.
The sustainability targets included in the facility relate to
KONE's decarbonization and gender diversity commitments.
Interest rate risks
KONE's cash and short-term investments were EUR 1,965.6
(2,884.1) million at the statement of financial position date. At
the same time, KONE's interest-bearing debt was EUR 673.9
(746.5) million and consisted of EUR 532.6 (547.1) million of
financial debt including lease liabilities, EUR 1.3 (5.1) million
of option liabilities from acquisitions, and EUR 140.0 (194.3)
million of employee benefit liabilities. Additionally, KONE had
an asset on employee benefits of EUR 10.0 (22.9) million.
As KONE's financial investments are mainly invested in
tenors of less than one year, changes in the interest rates do
not have any significant impact on their market values.
Changes in the interest rates may however impact future
interest income.
When calculating the interest rate sensitivity analysis, the
interest-bearing net financial debt, excluding foreign exchange
forward contracts, is assumed to remain on the level of the
closing balance of 2022 during the following financial period.
The sensitivity analysis presents the impact of a 1 percentage
point change in the interest rate level on the net interest
income for the financial period by taking into account the net
financial debt tied to interest periods of less than one year,
EUR -1,854.5 (-2,768.5) million. For 2022 a 1 percentage
point change in the interest rate level would mean a change of
EUR -18.5 (-27.7) million in net interest income. The interest
rate sensitivity is calculated before taxes.
A change in interest rates does not have a material impact
on the net interest on employee benefits, on financial debt or
option liabilities from acquisition.
Accounting principles
Loans
Loans payable are in the consolidated statement of financial
position presented as part of other financial liabilities. They are
measured initially at fair value net of directly attributable
transaction costs incurred and are subsequently carried at
amortized cost using the effective interest rate method. Lease
liabilities are measured to the present value of future lease
payments discounted with the incremental borrowing rate.
Financial assets
Financial assets are classified into three categories: measured
at amortized cost, at fair value through other comprehensive
income (FVOCI) and at fair value through profit or loss.
The classification is made at the time of the original
acquisition based on the objective of the business model and
the characteristics of contractual cash flows of the investment.
KONE assesses on a forward-looking basis the expected
credit losses associated with its assets carried at amortized
cost. The impairment methodology applied depends on whether
there has been a significant increase in credit risk.
Derivatives
Treasury policy for hedging purposes is applied to all
derivative contracts.
The majority of the foreign exchange forward contracts
and swaps mature within a year.
The fair values of foreign exchange forward contracts and
swaps are measured based on price information derived from
active markets and commonly used valuation methods (fair
value hierarchy level 2). Financial contracts are executed only
with counterparties that have high credit ratings. The credit
risk of the counterparties and KONE is considered when
assessing the fair values of outstanding financial assets and
liabilities.
The fair values of the derivatives are represented in the
balance on a gross basis and can be set off on conditional
terms such as breach of contract or bankruptcy. Derivative
financial receivables from counterparties after set off would be
EUR 4.0 (49.9) million and payables EUR 9.4 (3.9) million.
All of these financial assets are considered to have low credit
risk, and thus the impairment provision assessment is based on
12 months expected losses.
Current deposits and loans receivable
Current deposits and loans receivable are initially recognized at
fair value and thereafter at amortized cost using the effective
interest rate method except for interest rate funds which are
classified and measured as investments at fair value through
profit or loss. Only substantial transaction costs are considered
for when measuring the acquisition cost.
Investments in commercial papers, short-term bank
deposits, interest rate funds and other money market
instruments are included in deposits and loans receivable.
Cash and cash equivalents
Cash and cash equivalents include cash-in-hand and bank
account balances. Bank overdrafts are included in other
current liabilities.
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