KONE (KNEBV) Q3 2024 earnings summary

Executive summary

• Service and Modernization segments drove growth, with service sales up nearly 10% and modernization orders up about 20% year-over-year at comparable currencies, offsetting significant declines in New Building Solutions, especially in China where sales and profitability fell by 20%.

• Americas, Europe, Asia Pacific, Middle East, and Africa saw robust performance and around 10% sales growth at comparable currencies, while China faced intensified headwinds.

• New strategy 'Rise' launched, focusing on scalable growth, resilience, innovation, and sustainability, with strong internal and customer reception and industry recognition.

• 11 of 12 markets are growing or stable, but China remains a significant headwind.

• Performance improvement initiatives launched to accelerate profitability, focusing on pricing, sales and operations excellence, and procurement efficiency.

Financial highlights

• Q3 2024 orders received increased 4.4% to €2,076.6 million; sales grew 0.1% to €2,753.6 million year-over-year; service sales grew 9.6%, modernization 10.5%, but new building solutions declined 9.3%.

• Adjusted EBIT margin improved to 11.6% in Q3 and 11.3% for the nine months, with adjusted EBIT at €319.4 million.

• Basic EPS was €0.48 in Q3 and €1.37 for nine months, both up year-over-year.

• Cash flow from operations was €344.8 million in Q3 and €1,055.6 million for nine months, slightly down year-over-year.

• Increased provisions for bad debt, especially in China, negatively impacted adjusted EBIT by around €20 million.

Outlook and guidance

• 2024 sales expected to grow by 0–3% at comparable exchange rates, with adjusted EBIT margin between 11.5% and 11.9%.

• Modernization and services markets expected to remain active and positive; new building solutions outlook stable in North America and Europe, growth in Asia-Pacific, Middle East, and Africa, but continued difficulty in China.

• Midterm targets for 2025–2027: mid-single-digit annual sales growth, 13–14% adjusted EBIT margin by 2027, driven by strong service and modernization growth.

• Margin improvement expected to accelerate toward 2027 as performance initiatives take effect and China headwinds ease.

• Persistent cost inflation and increased R&D/IT investments expected to weigh on profitability.