KONE (KNEBV) CMD 2024 summary

Strategic context and market overview

• Strategy for 2025–2030 focuses on accelerating growth in services and modernization, shifting away from reliance on new construction, especially in China, due to market changes and declining new equipment demand.

• The elevator market is valued at €80–85 billion, with 25 million units globally, 10 million of which are over 15 years old, presenting a significant modernization opportunity.

• Services now account for 40% of sales (up from 32% in 2020), and modernization for 20% (up from 14%), both growing near or above 10% annually, with ~90% of profits from these segments.

• Key megatrends shaping strategy: urban renewal, digital transformation (especially AI), sustainability, and urbanization, with a focus on affordable living and energy efficiency.

• Fragmented service markets in Europe and China present consolidation and acquisition opportunities.

Strategic priorities and operational shifts

• The “Rise to Lead” strategy emphasizes courage, speed, and simplicity, aiming for leadership in employee/customer satisfaction, innovation, and sustainability.

• Four operational priorities: accelerate digital for services, drive modernization, win in residential (especially fit-for-purpose solutions), and cut carbon emissions.

• Digitalization aims to connect all elevators, enable predictive maintenance, and boost technician productivity, targeting close to 10% sales growth in services and up to 30% productivity gains.

• Modernization focuses on activating customers, standardizing partial modernization packages, expanding to non-KONE units, and doubling sales, with double-digit growth potential.

• Sustainability targets include reducing Scope 3 emissions by focusing on energy-efficient elevators and tracking customer-enabled carbon reductions.

Financial guidance and performance initiatives

• Midterm (2027) targets: mid single-digit annual sales growth and 13–14% adjusted EBIT margin; long-term ambition for 16% EBIT.

• Service and modernization are expected to drive growth and profitability, with digitalization and industrialization of offerings as key levers.

• Performance initiatives include sales and operational excellence, procurement efficiency, functional efficiency, and end-to-end process improvements, aiming for 150 basis points of margin improvement.

• Capital-light business model supports high return on capital and strong cash flow, enabling flexibility for acquisitions and dividends.

• Dividend policy remains stable, with growth linked to cash flow and profitability improvements.