ANNUAL REVIEW
KONE 2020
CONTENTS
KONE in brief
1
KONE’s strategy
4
Board of Director’s report
6
Shares and shareholders
30
Key figures and financial development
34
Calculation of key figures
36
Consolidated financial statements
37
Consolidated statement of income
37
Consolidated statement of financial position
39
Consolidated statement of changes in equity
40
Consolidated statement of cash flows
41
Notes to the consolidated financial
statements
42
1. Basis of preparation
42
2. Financial performance
44
2.1 Sales
45
2.2 Costs and expenses
46
2.3 Depreciation and amortization
47
2.4 Foreign exchange sensitivity
48
2.5 Financing income and expenses
50
2.6 Income taxes
50
2.7 Earnings per share
51
2.8 Other comprehensive income
52
3. Net working capital
53
3.1 Inventories
54
3.2 Accounts receivable and contract assets and liabilities
55
3.3 Deferred assets
56
3.4 Accruals
57
3.5 Provisions
57
3.6 Deferred tax assets and liabilities
58
4. Acquisitions and capital expenditure
60
4.1 Acquisitions
61
4.2 Goodwill
62
4.3 Intangible assets
63
4.4 Tangible assets
64
5. Capital structure
67
5.1 Capital management
68
5.2 Shareholders’ equity
69
5.3 Financial risks and instruments
71
5.4 Share holdings and other non-current financial assets
75
5.5 Deposits and loans receivable
75
5.6 Commitments
75
5.7 Employee benefits
75
6. Others
79
6.1 Management remuneration
80
6.2 Share -based payments
81
6.3 Related party transactions
81
Parent company financial statements
83
Subsidiaries
95
Board of Director’s dividend proposal and
signatures
99
Auditor’s report
100
Corporate governance
statement
105
Corporate governance principles
105
Board of Directors
111
Executive Board
112
1 KONE ANNUAL REVIEW 2020
KONE IN BRIEF
At KONE, our mission is to improve the flow of urban life. As a
and escalator industry, KONE provides elevators, escalators and automatic building doors,
as well as solutions for maintenance and modernization, which add value to the life cycle
of any building. Through more effective People Flow®, we make people’s journeys safe,
convenient and reliable, in taller, smarter buildings. Together with our partners and
customers around the world, we help cities to become better places to live in.
Sales MEUR
9,939
in 2020
>60,000
employees
We move over
1 billion
people every day
~550,000
customers
>1,400,000
equipment in KONE’s
maintenance base
Operations in over
60
countries
Authorized distributors
and agents in close to
100 countries
KEY FIGURES
2 KONE ANNUAL REVIEW 2020
KEY FIGURES
1–12/2020
1–12/2019
Change
Change at
comparable
exchange
rates
Orders received
MEUR
8,185.1
8,399.8
-2.6%
-0.6%
Order book
MEUR
7,728.8
8,051.5
-4.0%
0.7%
Sales
MEUR
9,938.5
9,981.8
-0.4%
1.4%
Operating income
MEUR
1,212.9
1,192.5
1.7%
Operating income margin
%
12.2
11.9
Adjusted EBIT*
MEUR
1,250.5
1,237.4
1.1%
Adjusted EBIT margin*
%
12.6
12.4
Income before tax
MEUR
1,224.2
1,217.5
0.6%
Net income
MEUR
947.3
938.6
0.9%
Basic earnings per share
EUR
1.81
1.80
0.6%
Cash flow from operations (before financing items and
taxes)
MEUR
1,907.5
1,549.6
Interest-bearing net debt
MEUR
-1,953.8
-1,552.9
Equity ratio
%
45.5
46.5
Return on equity
%
29.7
30.1
Net working capital (including financing items and taxes)
MEUR
-1,160.1
-856.0
Gearing
%
-61.1
-48.6
* In September 2017, KONE introduced a new alternative performance measure, adjusted EBIT, to enhance comparability of the business performance
between reporting periods during the Accelerate program. Restructuring costs related to the Accelerate program are excluded from the calculation of the
adjusted EBIT.
Orders received *, MEUR
*) Orders received do not include
maintenance contracts
Sales , MEUR
Adjusted EBIT, MEUR and adjusted
EBIT margin, %
KEY FIGURES
3 KONE ANNUAL REVIEW 2020
39 %
(41 %)
20 %
(21 %)
41 %
(39 %)
EMEA
Americas
Asia-Pacific
1-12/2020
(1-12/2019)
54 %
(53 %)
32 %
(32 %)
14 %
(15 %)
New equipment
Maintenance
Modernization
1-12/2020
(1-12/2019)
Sales by region
Sales by business
Cash flow*, MEUR
*) Cash flow from operations before financing
items and taxes
Earnings per share, EUR
Dividend per class B share, EUR
*) Board’s proposal. Includes proposed
extraordinary dividend EUR 0.50 per class B
share.
STRATEGY
4 KONE ANNUAL REVIEW 2020
KONE’S STRATEGY
At KONE, our mission is to improve the flow of urban life. We understand urbanization and help our
customers make the best of the world’s cities, buildings and public spaces. Our vision is to create the best
People Flow experience. We believe our vision can be best achieved by working together with our customers
and partners in every step of the process.
KONE’s strategic phase 2021–2024 is called
‘Sustainable success with customers’.
During the four-
year strategy period, KONE will focus on increasing the
value it creates for customers with new intelligent
solutions and will embed sustainability even deeper
across all of its operations.
Urbanization, sustainability and technology are
three megatrends which continue to be key drivers in
the development of the elevator and escalator industry.
Against this backdrop, ‘Sustainable success with
customers’ will address the needs of a digitally enabled
world, where the ways people live, work and commute
continue to change. KONE will focus on developing
smart and sustainable solutions that adapt to future
needs, together with its customers and partners. By
doing this, KONE will enable customers’ facilities to
function more effectively and to deliver an improved
user experience.
KONE MISSION AND VISION
KONE’s mission is to improve the flow of urban life.
This means understanding urbanization and helping
customers make cities better and more sustainable
places to live.
KONE’s vision is to create the best People Flow
experience. The best experience can be created by
working together with customers and partners in every
step of the process, from early engagement to
upgrading equipment.
CLEAR FOCUS AREAS FOR SUCCESS
In order to bring clear direction to our strategy, KONE
has defined four
Where to Win
areas, representing the
biggest opportunities for profitable growth and
differentiation:
◾
Core products and services
,
matching
customer specific needs for a seamless
experience through connectivity and
adaptability. All products and services will be
optimi zed for cost efficiency and sustainability.
◾
New solutions for customer value
,
which
are developed and integrated with core
products and services to create value for
customers in new ways.
◾
Smart and sustainable cities
: becoming the
preferred partner for smart and sustainable city
development.
◾
Service business in China:
becoming a clear
market leader in this very fast-growing and
fragmented market.
In addition, the following
Ways to Win
are KONE-wide
transformation and development initiatives which will
enable us to create ‘Sustainable success with
customers’:
◾
Empowered people:
having the most capable
and engaged team of professionals who
succeed in a changing world and are able to
develop with continuous learning opportunities.
◾
Marketing and sales renewal:
creating a
seamless, unified customer experience across
multiple channels.
◾
Lean KONE:
leveraging Lean skills, practices
and leadership to eliminate waste and ensure
continuous improvement.
◾
Digital + physical enterprise:
having future-
proof technology infrastructure, building the
capabilities to use data and analytics and
further developing the efficiency and resilience
of our supply chain.
KONE’S STRATEGIC AND FINANCIAL
TARGETS
KONE measures progress against five strategic targets:
◾
Great place to work
◾
Most loyal customers
◾
Faster than market growth
◾
Best financial development
◾
Leader in sustainability
The company’s long-term financial targets are:
◾
Growth: Faster than the market
◾
Profitability: To reach an EBIT margin of 16%
◾
Cash flow: Improved working capital rotation
STRATEGY
5 KONE ANNUAL REVIEW 2020
BOARD OF DIRECTORS’ REPORT | KONE’S BUSINESS MODEL
6 KONE ANNUAL REVIEW 2020
BOARD OF DIRECTORS’ REPORT
KONE’s Business model
KONE provides value for the customers during the entire lifespan 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.
Materials used 1,514,500 tonnes
Heating and vehicle fleet fuels 428,700
MWh
Electricity and district heat 85,300 MWh
Water consumption 325,600 m3
NATURAL RESOURCES*
Equity EUR 3.2 billion
Interest-bearing net debt EUR -2 billion
Net working capital EUR -1.2 billion
Capital expenditure 2.0% of sales
FINANCIAL
12 manufacturing units in 8 countries
~2,000 component suppliers and
thousands of installation suppliers
Logistics network
Supplier Sustainability Maturity
Assessment
MANUFACTURING AND
DELIVERY CHAIN
*2019 figures. 2020 figures will be
published in the 2020 Sustainability
Report in Q2 2021
.
One of the leading brands in the
elevator and escalator industry
BRAND AND REPUTATION
>5,000 granted or pending patents
globally
R&D spend 1.8% of sales, 8 global
R&D units
~1,400 technology professionals in
R&D
Global KONE way processes and
systems
Safe and efficient maintenance and
installation methods
INNOVATIONS, PROCESSES
AND SYSTEMS
Co-creation with customers
Partnering to develop new technologies
Collaboration with >300 universities and
educational institutes
Distributors and agents important part
of go-to-market
>60,000 employees of 147 different
nationalities, ca. half of employees in
the field
Personnel voluntary turnover rate 5.5%
Wide development opportunities on all
organizational levels around the world
>6,000 courses in 40 different
languages
Management systems and certificates
(e.g. ISO 14001, ISO 9001, OHSAS
18001)
Governance structures, ethical business
practices and compliance, 96% of
employees completed our Code of
Conduct training
SUSTAINABLE SUCCESS
WITH CUSTOMERS
BUSINESS MODEL
INPUTS
PARTNERING
PEOPLE AND LEADERSHIP
CREATING VALUE BY IMPROVING THE FLOW OF
URBAN LIFE
BOARD OF DIRECTORS’ REPORT | KONE’S BUSINESS MODEL
7 KONE ANNUAL REVIEW 2020
Growth drivers
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 majority of units delivered will
end up in KONE’s maintenance base. However, KONE
maintains also other OEM’s equipment. The main
growth drivers for modernization are the aging installed
base and higher requirements for efficient people flow,
safety and sustainability. Having a strong maintenance
base is crucial for the growth in 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. The 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 five strategic inputs crucial in
creating value for customers, shareholders and the
society. These are:1) competent and engaged people
and strong leadership, 2) innovative offering and global
processes and systems, 3) best partners, 4) efficient
manufacturing and delivery chain as well as 5) strong
brand and solid reputation. These are described in
more detail in the picture below. In addition to these,
KONE sees that the lifecycle business model and the
existing maintenance base of over 1.4 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.
Operating income EUR 1,213 million
Dividend proposal EUR 2.25 per class B share (incl.
extraordinary dividend), total amount of proposed dividends
MEUR 1,166
Return on equity 29.7%
ENVIRONMENT*
3.1% y/y reduction on operational carbon footprint relative
to sales
5.4% y/y reduction of Scope 1&2 carbon footprint relative to
sales
37% of green electricity
93.9% of waste recycled or incinerated
100% of corporate units, major manufacturing units and
R&D units are ISO 14001 and ISO 9001 certified
91% of strategic suppliers with ISO 14001 certification at
the end of 2019
EMISSIONS AND WASTE*
Carbon footprint from own operations
327,100 tCO
2
e
Waste 42,900 tonnes
Wastewater effluents 8 tonnes
Recognized for our contribution to better societies and
urban environment by several external parties, e.g. CDP,
Forbes and The Financial Times’ Diversity leaders report
Wages, salaries, other employment expenses and pensions
EUR 3.0 billion
Industrial Injury Frequency Rate (IIFR) 1.2
83% of external hires into leadership positions from local
communities
19% of director level positions held by women
Increased amount of skilled workforce
Direct purchases EUR 4.0 billion
Income taxes EUR 276.9 million with effective tax rate
22.6%
~180,000 new elevators and escalators
ordered in 2020
Maintenance and modernization
services, >1.4 million units in
maintenance base
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
IMPACT
OUTPUTS
SOCIETY
MOVING OVER 1
BILLION PEOPLE
EVERY DAY
SHAREHOLDERS
THE MOST SUSTAINABLE
OFFERING
BOARD OF DIRECTORS’ REPORT
8 KONE ANNUAL REVIEW 2020
Operating environment by region
New equipment market
in units
Maintenance market
in units
Modernization
market
1
–
12/2020
1
–
12/2020
1–12/2020
Total market
Stable
+
Stable
EMEA
–
+
– –
Central and North Europe
Stable
+
– –
South Europe
– –
Stable
– –
Middle East
– –
+
–
North America
– – –
+
+
Asia-Pacific
+
++
+
China
++
++
++
Rest of Asia-Pacific
– – –
+
Stable
– – – Significant decline (>10%), – – Clear decline (5–10%), – Slight decline (<5%), Stable,
+ Slight growth (<5%), ++ Clear growth (5–10%), +++ Significant growth (>10%)
KONE’s operating environment
In 2020, the global elevator and escalator market was
impacted by the COVID-19 pandemic. Governments
across the world were taking significant measures to
contain the outbreak by restricting the movement of
people. In many places, this resulted in actions such as
closing down construction sites and limiting
manufacturing operations especially in the first half of
the year. In most countries, maintenance was deemed
an essential service which was allowed with some
limitations even during lockdowns. In the beginning of
the year, COVID-19 had the biggest impacts on the
market in China, whereas from the second quarter
onwards China was driving the growth and other
markets were more impacted.
new equipment market
, demand decreased
in most parts of the world
.
In Asia-Pacific
, the new
equipment volumes
grew slightly
as a result of high
level of activity
in China
after the challenging first
quarter.
In the rest of Asia-Pacific
, the new equipment
markets declined significantly.
In the EMEA region
, the
new equipment market declined slightly. The new
equipment market in Central and North Europe was
stable,
whereas in South Europe and in the Middle
East, the market declined clearly.
In North America
,
the new equipment market declined significantly.
was resilient during
2020. The increased uncertainty had a bigger impact on
the
modernization markets
due to delayed decision-
making .
pricing
environment
BOARD OF DIRECTORS’ REPORT
9 KONE ANNUAL REVIEW 2020
Orders received
MEUR
2020
2019
Change
Change at
comparable
exchange rates
Orders received
8,185.1
8,399.8
-
2.6%
-
0.6%
Order book
7,728.8
8,051.5
-
4.0%
0.7%
– – – Significant decline (>10 %), – – Clear decline (5–10 %), – Slight decline (<5 %), Stable,
+ Slight growth(<5 %) , ++ Clear growth (5–10 %), +++ Significant growth (>10 %)
Orders received development by region*
New equipment orders
Modernization orders
Total orders
EMEA
– –
– –
– –
Americas
– – –
+++
– –
Asia-Pacific
++
++
++
China
+++
+++
+++
Orders received and order book
Orders received consist predominantly of new equipment and modernization orders. Maintenance contracts are not included in orders received, but the
figure includes orders related to the maintenance business, such as repairs.
Orders received declined by 2.6% as compared to
January –December 2019 and totaled EUR 8,185.1
million. At comparable exchange rates, KONE’s orders
received declined by 0.6%.
At comparable rates, new equipment orders
received declined slightly with slight growth in the
volume business and significant decline in major
projects. In modernization, orders received grew slightly
with slight decline development in the volume business
and significant growth in major projects.
The relative margin of orders received improved
slightly compared to the comparison period. This was a
result of solid pricing supported by new product and
service launches and easing cost pressures.
KONE’s new equipment orders received in elevator
and escalator units amounted to approximately 180,000
units (2019: 173,000).
Orders received in the EMEA region
clearly at comparable exchange rates as compared to
January –December 2019. New equipment orders
declined clearly and modernization orders declined
clearly.
In the Americas region
, orders received declined
clearly at comparable rates as compared to January–
December 2019. New equipment orders declined
significantly and modernization orders grew
significantly.
Orders received in the Asia-Pacific region
clearly at comparable rates as compared to January–
December 2019. In China, new equipment orders grew
significantly in units and grew significantly in monetary
value . Like-for-like prices were slightly higher than in
the comparison period and mix contributed also
positively. In the rest of Asia-Pacific, new equipment
orders received declined significantly. Modernization
orders received grew significantly in China and declined
clearly in the rest of Asia-Pacific.
The order book
end of December 2019 but stood at a strong level of
EUR 7,728.8 million at the end of the reporting period.
Customer cancellations remained at a low level.
Terminology: Slight <5%, clear 5– 10%, significant >10%
BOARD OF DIRECTORS’ REPORT
10 KONE ANNUAL REVIEW 2020
MEUR
2020
2019
Change
Change at
comparable
exchange rates
New equipment sales
5,340.2
5,318.8
0.4%
2.7%
Service sales
4,598.4
4,663.0
-
1.4%
0.1%
Maintenance
3,215.6
3,192.0
0.7%
2.2%
Modernization
1,382.8
1,471.0
-
6.0%
-
4.5%
Total sales
9,938.5
9,981.8
-
0.4%
1.4%
Sales by business
– – – Significant decline (>10 %), – – Clear decline (5–10 %), – Slight decline (<5 %), Stable,
+ Slight growth(<5 %) , ++ Clear growth (5–10 %), +++ Significant growth (>10 %)
Sales development by region and by business*
New equipment
Maintenance
Modernization
EMEA
– –
+
– –
Americas
–
–
– –
Asia-Pacific
++
++
++
MEUR
2020
2019
Change
Change at
comparable
exchange rates
EMEA
3,916.2
4,045.4
-
3.2%
-
2.2%
Americas
1,939.5
2,046.7
-
5.2%
-
2.7%
Asia-Pacific
4,082.8
3,889.7
5.0%
7.5%
Total sales
9,938.5
9,981.8
-
0.4%
1.4%
Sales by region
Sales
KONE’s sales declined by 0.4% as compared to
January –December 2019, and totaled EUR 9,938.5
million. At comparable exchange rates, KONE’s sales
grew by 1.4%. The sales consolidated from the
companies acquired in 2020 had only a minor impact on
KONE’s sales for the financial period.
Sales were impacted by the COVID-19 related
restrictions in many markets.
New equipment sales accounted for EUR 5,340.2
million and grew by 0.4% over the comparison period.
At comparable exchange rates, new equipment sales
grew by 2.7%. The growth in China offset the decline in
activity in many other areas.
Service (maintenance and modernization) sales
declined by 1.4%, and totaled EUR 4,598.4 million. At
comparable exchange rates, service sales grew by
0.1%. Maintenance sales grew by 0.7% (2.2% at
comparable exchange rates) and totaled EUR 3,215.6
million with resilient contract sales but lower
discretionary spend by customers. Modernization sales
were more impacted by the restrictions and declined by
6.0% (declined by 4.5% at comparable exchange rates)
totaling EUR 1,382.8 million.
KONE’s elevator and escalator maintenance base
continued to grow and was over 1.4 million units at the
end of 2020 (over 1.3 million units at the end of 2019).
The growth of the maintenance base was driven, in
particular, by a continued good level of conversions of
new equipment deliveries to the maintenance base.
Acquisitions had only a minor positive contribution to
the growth. In 2020, the balance of maintenance
contracts that were won from or lost to competition was
slightly negative.
The largest individual countries in terms of sales
were China (~30%), The United States (>15%),
Germany (6%) and France (5%).
Sales in the EMEA region
totaled 3,916.2 million. At comparable exchange rates,
sales declined by 2.2%. New equipment sales declined
clearly, maintenance sales grew slightly and
modernization sales declined clearly in the region.
In the Americas
, sales declined by 5.2% and
totaled EUR 1,939.5 million. At comparable exchange
rates, sales declined by 2.7%. New equipment sales
declined slightly, maintenance sales declined slightly
and modernization sales declined clearly in the region.
In Asia-Pacific
, sales grew by 5.0% and totaled EUR
4,082.8 million. At comparable exchange rates, sales
grew by 7.5%. New equipment sales grew clearly,
maintenance sales grew clearly and modernization
sales grew clearly in the region.
Terminology: Slight <5%, clear 5– 10%, significant >10%
BOARD OF DIRECTORS’ REPORT
11 KONE ANNUAL REVIEW 2020
Financial result
Jan 1
–
Dec 31, 2020
Jan 1
–
Dec 31, 2019
Operating income, MEUR
1,212.9
1,192.5
Operating income margin, %
12.2
11.9
Adjusted EBIT, MEUR
1,250.5
1,237.4
Adjusted EBIT margin, %
12.6
12.4
Income before taxes, MEUR
1,224.2
1,217.5
Net income, MEUR
947.3
938.6
Basic earnings per
share, EUR
1.81
1.80
Jan 1
–
Dec 31, 2020
Jan 1
–
Dec 31, 2019
Cash flow from operations (before financing items and
taxes), MEUR
1,907.5
1,549.6
Net working capital (including financing items and taxes),
MEUR
-
1,160.1
-
856.0
Interest
-
bearing net debt, MEUR
-
1,953.8
-
1,552.9
Gearing, %
-
61.1
-
48.6
Equity ratio, %
45.5
46.5
Equity per share, EUR
6.12
6.13
Cash flow and financial position
Financial result
KONE’s operating income (EBIT) was EUR 1,212.9
million or 12.2% of sales. The adjusted EBIT, which
excludes restructuring costs related to the Accelerate
program, was EUR 1,250.5 million or 12.6% of sales.
Going into this year we had an overall positive
outlook for our margins. Despite the uncertain
environment, profitability improved. This was a result of
earlier improved margin of orders and lower
discretionary spend offsetting the negative impacts of
the COVID-19 pandemic.
Translation exchange rates had a negative impact
of 18.4 million on the operating income. Restructuring
costs related to the Accelerate program were EUR 37.7
million and savings from the program were over EUR
50 million.
KONE’s income before taxes was EUR 1,224.2
million. Taxes totaled EUR 276.9 (278.9) million. This
represents an effective tax rate of 22.6% for the full
financial year. Net income for the period was EUR
947.3 million.
Basic earnings per share was EUR 1.81.
Cash flow and financial position
KONE’s financial position was very strong at the end of
December 2020.
Cash flow from operations (before financing items
and taxes) during January–December 2020 was
exceptionally strong at EUR 1,907.5 million.
Net working capital (including financing items and
taxes) was EUR -1,160.1 million at the end of
December 2020. The improvement was driven by a
positive development in several net working capital
items.
Interest -bearing net debt was EUR -1,953.8 million
at the end of December 2020. KONE’s cash and cash
equivalents together with current deposits and loan
receivables were EUR 2,629.4 (Dec 31, 2019: 2,252.0)
million at the end of the reporting period. Interest-
bearing liabilities were EUR 695.8 (Dec 31, 2019:
721.6) million, including a pension liability of EUR 187.2
(Dec 31, 2019: 172.9) million and leasing liability of
EUR 342.9 (Dec 31, 2019: 371.0) million. Additionally,
KONE had an asset on employee benefits, EUR 19.2
(Dec 31, 2019: 21.7) million. Gearing was -61.1% and
equity ratio was 45.5% at the end of December 2020.
Equity per share was EUR 6.12.
BOARD OF DIRECTORS’ REPORT
12 KONE ANNUAL REVIEW 2020
MEUR
Jan 1
–
Dec 31, 2020
Jan
1
–
Dec 31, 2019
On fixed assets
87.5
98.0
On leasing agreements
113.4
102.5
On acquisitions
29.0
36.0
Total
230.0
236.5
Capital expenditure & acquisitions
R&D expenditure
MEUR
Jan 1
–
Dec 31, 2020
Jan 1
–
De
c 31, 2019
R&D expenditure
179.6
170.9
As percentage of sales, %
1.8
1.7
Capital expenditure and acquisitions
KONE’s capital expenditure and acquisitions totaled
EUR 230.0 million in January–December 2020. Capital
expenditure was mainly related to equipment and
facilities in R&D, IT, operations and production. Capital
expenditure on leases consists mainly of maintenance
vehicles and office facilities.
Acquisitions totaled EUR 29.0 million in January–
December 2020. KONE completed small acquisitions of
maintenance businesses in the EMEA region.
In the Financial Statement Bulletin 2019, KONE
mentioned it had been evaluating acquisition
opportunities related to the thyssenkrupp Elevator
Technology business. On February 17, 2020 KONE
published a stock exchange release stating it has
withdrawn from these discussions with thyssenkrupp.
Research and development
KONE’s vision is to create the Best People Flow®
experience . The objective of KONE’s solution and service
development is to drive differentiation further by putting
the needs of customers and users at the center of all
development. By closer collaboration with customers and
partners, KONE will increase the speed of bringing new
services and solutions to the market.
Research and development expenditure totaled EUR
179.6 million, representing 1.8% of sales in January–
December 2020. R&D expenditures include the
development of new product and service concepts as well
as further development of existing solutions and services.
At
KONE, we find it especially important to continue to
invest in research and development in challenging market
conditions and have thus accelerated some development
programs during 2020.
During January–December 2020, KONE launched new
solutions as well as updates to its offering.
In the beginning of 2020, KONE started the launch of a
new elevator series, KONE DX Class elevators, from
Europe and the roll-out continued to Middle East, Russia,
Turkey and countries in the Asia-Pacific region during the
year. This new elevator series featuring built-in
connectivity and an enhanced user experience was
introduced in the end of 2019 and will replace the current
KONE elevator range across areas. In the second quarter,
KONE DX Class elevators won four awards in the
renowned Red Dot Award: Product Design 2020
competition. The KONE DX Class elevator interior
collection and the KONE DX Class digital experience
elevator concept were awarded for their outstanding
design features, innovativeness and smart elements.
During the year, the KONE DX Class elevators were made
available also for modernization in many markets. This
enables customers to access the digital services and
applications offered by KONE and KONE’s ecosystem
partners by modernizing their equipment to DX Class.
In the second quarter, KONE introduced a range of
people flow solutions to help make buildings and cities
safer and healthier places to live, work and commute.
These solutions address the challenges of adapting to a
new way of life in the face of the current pandemic. The
KONE People Flow Planning and Consulting service has
been tailored to better support planning a safe return to
offices and other buildings. By using data, simulation tools,
and expertise from KONE's interior architects and data
scientists, customers can quickly see how to reduce
crowding and bottlenecks and enable people to move
around safely in buildings. In addition, other new solutions
introduced improve air quality in elevators, help disinfect
escalator handrails and reduce the need to touch
surfaces.
In the third quarter, KONE launched KONE
MonoSpace® 300 elevator in the Americas. KONE
MonoSpace 300 is a cost-efficient machine room-less
elevator offering better ride comfort and improved energy-
efficiency for a market segment previously dominated by
hydraulic elevators.
In the fourth quarter, KONE introduced KONE Office
Flow™ for offices in high-rise buildings in selected key
markets in North America, Europe, Middle East and Asia
Pacific. KONE Office Flow™ is a modular, connected
people flow solution delivering personalized access and
enhanced user experiences in smart, adaptive
BOARD OF DIRECTORS’ REPORT
13 KONE ANNUAL REVIEW 2020
workplaces. With touchless access and predictive elevator
calling it integrates with mobile devices, removing the
need for key cards and tags. It features a newly designed
destination control system, visitor management and
guidance to reduce waiting and journey times.
BOARD OF DIRECTORS’ REPORT
14 KONE ANNUAL REVIEW 2020
Non-financial information
Sustainability is a source of innovation and a
competitive advantage for KONE. We want to be the
most trusted partner to our customers throughout the
building life cycle and help them achieve their
sustainability objectives, creating better urban
environments. At KONE, sustainability covers our
offering, operations and culture and encompasses the
environmental aspect, diversity and inclusion, safety,
quality and ethics and compliance. Our strategy and
values reflect our commitment to sustainable practices.
KONE is proud to conduct its
business in a responsible and
sustainable way, and we expect the
same commitment from all our
partners. We are committed to the
laws and regulations of the countries
where we operate. KONE is a
member of the UN Global Compact
and dedicated to upholding its ten
principles, which are aimed at
promoting sustainability and fairness
in the business environment. The
principles are embedded in our
strategy, policies and procedures, such as KONE’s
Code of Conduct, Competition Compliance Policy, and
our Environmental Excellence Program, as well as
related processes. In addition, KONE supports the UN
Sustainable Development agenda and its goals. KONE
has also signed the Paris Pledge for Action climate
initiative and in 2020, set Science Based Targets for its
operations, offering and the value chain, showing
climate leadership and commitment to limiting global
warming to 1.5 degrees Celsius in accordance with the
Paris Climate Agreement. KONE has started applying
the Task Force on Climate-related Financial Disclosure
(TCFD) reporting principles in order to report about
climate -related financial risks and opportunities.
KONE’s initial TCFD reporting will take place within this
Non-Financial information section and in other parts of
this report. The table on in this text maps the pages of
the report where content according to TCFD
requirements can be found.
KONE’s strategy and business model are described
on pages 4–7 of KONE’s Annual Review 2020. Risks
and risk management related to matters below are
described in the risk section under Risks and risk
management related to the reporting of non -financial
information .
More information on KONE’s approach to
sustainability can be found in the Sustainability Report.
KONE published its Sustainability Report for 2019 in
April 2020. KONE’s Sustainability Report for 2020 will
be published during Q2 2021 according to GRI
Standards .
Management and Board of Directors’ oversight of
sustainability
KONE has integrated the management of non-financial
matters and sustainability into operations throughout
the organization. KONE’s management and supervisors
work to ensure that employees are familiar with and
comply with the legislation, regulations, and internal
operating guidelines of their respective areas of
responsibility, and that KONE’s products and services
are in full compliance with all codes and standards
applicable to them.
Ultimately, sustainability and its management are
the responsibilities of KONE’s Executive Board and our
President and CEO. KONE’s Executive Board
discusses sustainability topics, including e.g.
environmental, social and compliance topics, in its
meetings regularly. In 2020, climate related topics alone
were discussed 3-4 times. Furthermore, KONE has
established forums where sustainability
and climate -related topics are regularly
discussed: The Quality and
Environmental Board and the Solution
Board, both chaired by KONE
President and CEO and with Executive
Board level members. In 2020, KONE
also established a Sustainability Board,
a steering committee dedicated to
sustainability topics, climate and
environment among the priority areas.
Several members of KONE’s Executive
Board are members of the
Sustainability Board, chaired by KONE’s EVP of
Operations Development.
KONE’s Board of Directors is responsible for
overseeing and supervising the implementation of
KONE’s strategy, including sustainability topics and
climate change issues. The Board also reviews risks
and risk management of which environmental, social
and anti-corruption matters are a part of.
During 2020, sustainability was on the agenda of
Executive Board and Board of Directors meetings as
part of the preparation of KONE’s new strategy. In
addition, one focus area during the year was Science-
Based Targets, which KONE set in September 2020
(see more information in Environmental matters).
External recognitions
KONE has received external recognition for efforts to
conduct business in a sustainable way. For example, in
early 2020, KONE was ranked as the 32nd most
sustainable company in the world by Corporate Knights
Inc. KONE was second among peer companies in the
machinery manufacturing industry category and the
only elevator and escalator industry company to make
the Global 100 Most Sustainable Corporations in the
World ranking. Furthermore, KONE was again included
in the FTSE4Good index and made CDP’s Climate
Change A List among the top climate change
performers. CDP is an international non-profit
organization that drives engagement for climate action.
This is the eighth consecutive year that KONE has
achieved a leadership score of A or A- in the Climate
Change rating, which describes long-term commitment
to environmental work and sustainability. KONE was
also awarded the best A grade in CDP’s 2019 Supplier
Engagement Rating, demonstrating leadership and best
practice in engaging our suppliers on climate change
issues. In addition, KONE has been awarded the
Eco Vadis platinum medal for our sustainability
performance, placing us among the top 1% of all
assessed companies.
KONE’s Sustainability
Report 2020
●
Will be published during
Q2 2020
●
In the report, you can
find more detailed
information about
sustainability
BOARD OF DIRECTORS’ REPORT
15 KONE ANNUAL REVIEW 2020
Key performance indicator
Target s in 2020*
2020 results
2019 results
Environmental
matters
Annual reduction of KONE’s
carbon footprint relative to
sales, %
1)
3% annual reduction
relative to sales
Will be published in
the Sustainability
Report during Q2
2021.
3.1% reduction relative
to sales
Share of key suppliers ISO
14001 certified, %
100%
90%
91%
Share of green electricity
used in our facilities, %
50% by 2021
Will be published in
the Sustainability
Report during Q2
2021.
37%
Share of landfill waste at our
manufacturing units, %
0% by 2030
Will be published in
the Sustainability
Report during Q2
2021.
0.9%
Personnel and
social matters
Industrial Injury Frequency
Rate (IIFR)
2)
Zero injuries
IIFR 1.2
IIFR 1.7
Employee engagement
Maintain employee
engagement on a
strong level
The response rate in
the Pulse employee
engagement survey
was record high at
92%. The global
survey results took a
great leap up and
engagement was at a
very strong level. All
survey dimensions
improved and the
vast majority of
KONE’s global scores
were above external
high performance
benchmarks.
Focused on completing
the actions agreed
based on 2018
employee engagement
survey and organized
dedicated discussions,
Pulse Talks, across the
organization. Almost
80% of employees
participated in the Pulse
Talks.
Personnel voluntary
turnover rate, %
3)
Maintain voluntary
turnover below
market level
5.5%
7.6%
Gender distribution, %
More balanced
gender split
11% women, 89%
men
11% women, 89% men
Gender distribution in
director level positions, %
20% of director level
positions occupied by
women by 2020
19%
18%
Human rights,
anti-corruption
& bribery
Share of employees with
completed Code of Conduct
training, %
100%
96% of nearly 60,000
employees in 64
countries
90% of nearly 58,000
employees in 64
countries
Share of key suppliers who
have signed the Supplier
Code of Conduct, %
100%
84% (scope
expanded from
previous year)
95%
Share of distributors who
have signed the Distributor
Code of Conduct, %
100%
100% of our
distributors in China
and 88% in the rest of
the world.
100% of distributors in
China, and 87% in the
rest of the world
* Some targets will be updated for 2021 in line with KONE’s new sustainability ambitions.
1)
Corporate Accounting and Reporting Standard and Corporate Value Chain (Scope 3) Accounting and Reporting Standard. The
Scope 2 emissions have been calculated according to the dual reporting principles of the GHG Protocol Scope 2 Guidance
(market- and location-based method). RES-GO guarantees of origin subject to EECS (European Energy Certificate System)
have been acquired for the purchased green electricity, as well as some supplier specific instruments. KONE’s greenhouse gas
emissions and water consumption at KONE’s manufacturing units have been externally assured by Mitopro Oy. The emission
factors are based on the data sources of DEFRA (UK Department for Environment, Food & Rural Affairs), World Resource
Institute GHG Emission Factors Compilation, AIB (Association of Issuing Bodies) European Residual Mix Report, and supplier
specific factors for Finland.
2)
3)
Sum of voluntarily left employees (with permanent contract) over 12 months divided by average closing headcount over 12
months
Non-financial key performance indicators