1 KONE Annual Review 2023
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Annual Review 2023
2 KONE Annual Review 2023
Contents
KONE in brief
3
KONE’s strategy
5
Board of Directors’ report
7
Shares and shareholders
40
Key figures and financial development
44
Calculation of key figures
46
Consolidated financial statements
47
Consolidated statement of income
47
Consolidated statement of financial position
48
Consolidated statement of changes in equity
49
Consolidated statement of cash flows
51
Notes to the consolidated financial
statements
52
1. Basis of preparation
52
2. Financial performance
55
2.1 Sales
56
2.2 Costs and expenses
57
2.3 Depreciation and amortization
58
2.4 Foreign exchange sensitivity
59
2.5 Financing income and expenses
61
2.6 Income taxes
61
2.7 Earnings per share
63
2.8 Other comprehensive income
64
3. Net working capital
65
3.1 Inventories
66
3.2 Accounts receivable and contract assets and liabilities
67
3.3 Deferred assets
69
3.4 Accruals
69
3.5 Provisions
70
3.6 Deferred tax assets and liabilities
71
4. Acquisitions and capital expenditure
72
4.1 Acquisitions
73
4.2 Goodwill
75
4.3 Intangible assets
77
4.4 Tangible assets
78
5. Capital structure
80
5.1 Capital management
81
5.2 Shareholders’ equity
81
5.3 Financial risks and instruments
85
5.4 Shareholdings and other non-current financial assets
90
5.5 Deposits and loans receivable
90
5.6 Commitments
90
5.7 Employee benefits
91
6. Others
94
6.1 Management remuneration
95
6.2 Share-based payments
97
6.3 Related party transactions
98
Parent company financial statements
99
Subsidiaries
114
Board of Director’s dividend proposal and
signatures
117
Auditor’s report
118
Auditor’s ESEF assurance
report
122
Corporate governance
statement
124
Corporate governance principles
124
Board of Directors
130
Executive Board
132
3 KONE Annual Review 2023
KONE in brief
At KONE, our mission is to improve the flow of urban life. As a global
leader in the elevator and escalator industry, KONE provides elevators,
escalators and automatic building doors, as well as solutions for
maintenance and modernization to add value to buildings throughout their
life cycle. Through more effective People Flow®, we make people's
journeys safe, convenient and reliable, in taller, smarter buildings.
Sales MEUR 10,952.3
in 2023
We move over 1 billion
people every day
More than 1,600,000
equipment in KONE’s service base
More than 60,000
employees
Close to 600,000
customers
Operations in over 60
countries
Authorized distributors and agents
in close to 100 countries
Key figures
4 KONE Annual Review 2023
Key figures
Orders received*, MEUR
Sales, MEUR
Adjusted EBIT, MEUR and
adjusted EBIT margin, %
Cash flow*, MEUR
Earnings per share, EUR
Dividend per class B share,
EUR
*) Orders received do not include
Service contracts
*) Cash flow from operations before
financing items and taxes
8,853
9,131
8,578
2021 2022 2023
10,514
10,907
10,952
2021 2022 2023
1,310
1,077
1,248
12.5%
9.9%
11.4%
2021 2022 2023
1,829
755
1,485
2021 2022 2023
1.96
1.50
1.79
2021 2022 2023
2.10
1.75
1.75
2021 2022 2023*
Sales by region
41 %
(39 %)
23 %
(21 %)
36 %
(41 %)
EMEA Americas Asia-Pacific
1-12/2023 (1-12/2022)
Sales by business
45 %
(50 %)
38 %
(36%)
17 %
(15 %)
New Building Solutions Service Modernization
1-12/2023 (1-12/2022)
1–12/2023
1–12/2022
Change
Change at
comparable
exchange rates
Orders received
MEUR
8,577.7
9,131.3
-6.1%
-1.4%
Order book
MEUR
8,715.7
9,026.1
-3.4%
0.1%
Sales
MEUR
10,952.3
10,906.7
0.4%
5.0%
Operating income
MEUR
1,200.1
1,031.2
16.4%
Operating income margin
%
11.0
9.5
Adjusted EBIT*
MEUR
1,248.4
1,076.6
16.0%
Adjusted EBIT margin*
%
11.4
9.9
Income before tax
MEUR
1,206.1
1,028.4
17.3%
Net income
MEUR
931.6
784.5
18.8%
Basic earnings per share
EUR
1.79
1.50
19.7%
Cash flow from operations (before financing items and taxes)
MEUR
1,485.2
754.7
Interest-bearing net debt
MEUR
-1,013.4
-1,309.0
Equity ratio
%
40.9
40.3
Return on equity
%
33.0
25.9
Net working capital (including financing items and taxes)
MEUR
-861.2
-903.9
Gearing
%
-36.4
-45.7
* KONE presents adjusted EBIT as an alternative performance measure to enhance comparability of business performance between reporting periods. In January–
December 2023, items affecting comparability amounted to EUR 48.3 million including EUR 57.7 million costs recognized on restructuring measures and a positive effect
of EUR 8.0 million recognized on completion of the sale of operations in Russia. In the comparison period, items affecting comparability included a charge for the
impairment of assets and recognition of provisions for commitments in Russia and Ukraine as well as restructuring costs.
Adjusted EBIT
Adjusted EBIT margin
*) Board’s proposal
Dividend
Extraordinary dividend
KONE’s strategy
5 KONE Annual Review 2023
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 ‘Sustainable success with
customers’ focuses on increasing the value we create for our
customers with new intelligent solutions and on embedding
sustainability even deeper across all of our operations.
The global elevator and escalator industry is shaped by
three major megatrends: urbanization, sustainability and
technology. Against this backdrop, ‘Sustainable success with
customers’ addresses the needs of a digitally enabled world,
in which 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 deliver an
improved user experience.
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
optimized for cost efficiency and sustainability.
• New solutions for customer value: 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 and Modernization business in China: becoming
a clear market leader in this 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
We measure progress against five strategic targets:
• Great place to work
• Most loyal customers
• Faster than market growth
• Best financial development
• Leader in sustainability
Our long-term financial targets are:
• Growth: Faster than the market
• Profitability: To reach an EBIT margin of 16%
• Cash flow: Improved working capital rotation
6 KONE Annual Review 2023
KONE’s strategy
Board of Directors’ report | KONE’S business model
7 KONE Annual Review 2023
Board of Directors’ report
KONE’s business model
KONE provides value for customers during the whole life
cycle of the building. In New Building Solutions, we offer
innovative, intelligent and sustainable elevators, escalators,
automatic building doors and integrated access control
solutions to deliver the best people flow experience. In
Service, 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.
The key growth drivers of New Building Solutions are
urbanization and changing demographics. New Building
Solutions deliveries are the main growth driver of Service
business as the majority of units delivered will end up in
KONE’s service base. In addition, KONE also maintains other
OEMs’ equipment. The main growth drivers for Modernization
are the aging installed base and increased requirements for
efficient people flow, safety and sustainability. Having a strong
service base is crucial for the growth in Modernization. KONE
also sees significant growth opportunities in increasing the
value created for customers in all of its businesses with the
help of new technologies and connectivity.
Business characteristics
KONE’s business model is capital light as working capital is
negative in all businesses and we work extensively with
component suppliers to complement our own manufacturing
capacity. Service business is very stable due to high
requirements for safety and reliability. Customer relationships
are also typically long and stable (>90% annual retention
rate). New Building Solutions follows construction cycles,
while Modernization needs are stable by nature but decision-
making can be influenced by sentiment.
Key value drivers
KONE has identified the following strategic inputs that are
crucial for creating value for customers, shareholders and the
society: competent and engaged people and strong
leadership; innovative, sustainable offering and global
processes and systems; best partners; efficient manufacturing
and delivery chain; solid financial position; environmentally
sustainable operations as well as strong brand and solid
reputation. In addition to these, KONE sees that the life cycle
business model and the existing service base of well over 1.6
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.
>60,000 employees representing 152
different nationalities, ca. half of
employees in the field
Global diversity and inclusion strategy
Personnel voluntary turnover rate
7.9%
Wide development opportunities on all
organizational levels around the world
Management systems and certificates
(e.g. ISO 14001, ISO 9001, ISO
45001)
Mandatory Anti-Bribery & Corruption
(ABC) e-learning for all KONE
employees. 87% (over 55,000
completions) of all active KONE
employees had completed the training
by year end.
People and leadership
Co-creation with customers
Partnering to co-develop new
technologies and solutions
Collaboration with universities and
educational institutes
Dynamic network of innovative
companies in different fields of
technologies
Distributors and agents important
part of go-to-market
Partnering
10 manufacturing units in 7
countries
~2,000 material and component
suppliers and ~8,000 installation
suppliers
Optimized logistics network
Supplier sustainability assessment
Manufacturing and delivery
chain
~4,800 different IPRs including
patents, utility models and designs
R&D spend 1.7% of sales, seven
global R&D units
~1,600 technology professionals in
R&D, ca. half in software development
Global KONE Way processes and
systems
Safe and efficient maintenance and
installation methods
Materials used 1,595,350 tonnes
Heating and vehicle fleet fuels
456,100 MWh
Electricity and district heat 86,600
MWh
Water consumption 239,800 m3
Natural resources*
Equity EUR 2.8 billion
Interest-bearing net debt EUR
-1,013.4 million
Net working capital EUR -861.2
million
Capital expenditure 2.9 % of
sales
Financial
One of the leading brands in the
elevator and escalator industry
Brand and reputation
Carbon footprint from own operations 126,800
tCO2e
Waste 39,000 tonnes
Wastewater effluents 1 tonnes
Carbon footprint from our products and
value chain 13.1 MtCO2
Emissions and waste*
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
Carbon neutral elevators and escalators
Carbon neutral maintenance
The most sustainable offering
Operating income EUR 1,200.1 million
Dividend proposal EUR 1.75 per class B share, total amount of
proposed dividends MEUR 905.0 (incl. dividend proposal per class A
share)
Return on equity 33.0%
Shareholders
Recognized for our contribution to better societies and urban
environment by several external parties, e.g. Corporate Knights, CDP,
EcoVadis, FTSE4Good index as well as Forbes 2023 World’s Best
Employers
Wages, salaries, other employment expenses and pensions EUR 3.7
million
Industrial Injury Frequency Rate (IIFR) 1.1
25.2% of director level positions held by women
Direct purchases EUR 4.2 million
Income taxes EUR 274.6 million with effective tax rate 22.8%
Society
17% reduction in absolute GHG emissions from our own operations
(Scope 1 and 2) compared to 2018
4.3% decrease in product-related GHG emissions (Scope 3) relative to
ordered products compared to 2018
84% of green electricity
91% of waste recycled or incinerated
Corporate units as well as all manufacturing and R&D units are ISO
9001 and ISO 14001 certified
100% of key suppliers with ISO 14001 certification at the end of 2023
Carbon neutral manufacturing units
88% of strategic suppliers with ISO 14001 certification at the end of
2021
Environment*
Inputs
Business model
Outputs
Impact
Sustainable success with customers
Innovations, processes and
systems
~164,000 new elevators and escalators ordered
in 2023
Trusted People Flow® partner for close to
600,000 customers
Maintenance and modernization services, well
over 1.6 million units in service base
Moving over 1 billion people
every day
*2022 figures. 2023 figures will be published in
the 2023 Sustainability Report in Q2 2024.
Terminology: slight <5%, clear 5–10%, significant >10%
Board of Directors’ Report
8 KONE Annual Review 2023
KONE’s operating environment
Regional differences in demand trends were apparent in the
global New Building Solutions market during 2023. In the
more mature markets, sentiment was impacted by rising
interest rates and slowing economic growth, while activity in
many emerging markets was more favorable. In China, the
focus on completing unfinished projects was strong
throughout the year. New construction related key indicators
saw some policy driven improvement in the first quarter but
weakened thereafter. Property developers’ access to
financing remained constrained and consumer sentiment was
poor. In the rest of Asia-Pacific, activity grew clearly,
supported by strong development in India and recovery in
Southeast Asia. In the EMEA region, activity declined
significantly in Europe due to weakness in the residential
segment and grew slightly in the Middle East and Africa. In
North America, the market declined significantly.
Both the Service and Modernization markets developed
positively with growth across all regions.
Competition remained intense in China, impacting the
pricing environment. Outside China the pricing environment
was more favorable.
New building solutions
market in units
1–12/2023
Service market
in units
1–12/2023
Modernization market
in monetary value
1–12/2023
Total market
---
+
++
EMEA
---
+
++
Europe
---
+
++
Middle East and Africa
+
+
+++
North America
---
+
+
Asia-Pacific
---
++
+++
China
---
++
+++
Rest of Asia-Pacific
++
++
+++
The table represents the development of the operating environment compared to the corresponding period last year.
--- Significant decline (>10%), -- Clear decline (5–10%), - Slight decline (<5%), Stable,
+ Slight growth (<5%), ++ Clear growth (5–10%), +++ Significant growth (>10%)
Board of Directors’ Report
Terminology: slight <5%, clear 5–10%, significant >10%
9 KONE Annual Review 2023
Orders received and order book
Orders received declined by 6.1% as compared to January–
December 2022 and totaled EUR 8,577.7 million. At
comparable exchange rates, KONE’s orders received
declined by 1.4%.
At comparable rates, orders received in New Building
Solutions declined clearly with clear decline in the volume
business and clear decline in major projects. The decline was
largely driven by the weak orders in China during the first half
of the year, and the impact of increased interest rates and
slowing economic growth to orders in Europe and North
America. In Modernization, orders received grew significantly.
Orders grew significantly in the volume business and grew
significantly in major projects.
The margin of orders received increased year-on-year.
The improvement was driven by lower commodity costs in
China and favorable pricing development in other regions. In
China like-for-like new equipment prices declined slightly and
mix was slightly negative.
KONE’s orders received in New Building Solutions in
elevator and escalator units amounted to approximately
164,000 units (2022: approximately 172,000).
Orders received in the EMEA region grew clearly at
comparable exchange rates as compared to January–
December 2022. New Building Solutions orders declined
slightly due to weaker activity in Europe. In the Middle East,
New Building Solutions orders grew significantly.
Modernization orders grew significantly in the region.
Orders received in the Americas region declined slightly
at comparable rates as compared to January–December
2022. New Building Solutions orders declined significantly and
Modernization orders grew significantly.
Orders received in the Asia-Pacific region declined
clearly at comparable rates as compared to January–
December 2022. In China, New Building Solutions orders
declined slightly in units and declined significantly in monetary
value. In the rest of Asia-Pacific, New Building Solutions
orders grew significantly. Modernization orders grew
significantly in China and grew clearly in the rest of Asia-
Pacific.
The order book declined by 3.4% compared to the end of
December 2022, nevertheless standing at a strong level of
EUR 8,715.7 million at the end of the reporting period. At
comparable rates, the order book grew by 0.1%.
The order book margin continued to be at a healthy level.
Customer cancellations were at a low level.
MEUR
2023
2022
Change
Change at
comparable exchange
rates
Orders received
8,577.7
9,131.3
-6.1%
-1.4%
Order book
8,715.7
9,026.1
-3.4%
0.1%
– – – Significant decline (>10%), – – Clear decline (5–10%), – Slight decline (<5%), Stable,
+ Slight growth (<5%) , ++ Clear growth (5–10%), +++ Significant growth (>10%)
New Building Solutions
orders
Modernization orders
Total orders
EMEA
-
+++
++
Americas
---
+++
-
Asia-Pacific
--
+++
--
China
---
+++
---
In monetary value at comparable exchange rates
Orders received consist predominantly of New Building Solutions and Modernization orders. Service contracts are not included in orders received, but the
figure includes orders related to the Service business, such as repairs.
Terminology: slight <5%, clear 5–10%, significant >10%
Board of Directors’ Report
10 KONE Annual Review 2023
Sales
KONE’s sales grew by 0.4% as compared to January–
December 2022, and totaled EUR 10,952.3 million. At
comparable exchange rates, KONE’s sales grew by 5.0% as a
result of the strong growth in Service and Modernization
sales. The sales consolidated from the companies acquired
during 2023 did not have a material impact on KONE’s sales
for the financial period.
New Building Solutions sales declined by 3.1% at
comparable exchange rates. Service sales grew by 9.1% at
comparable exchange rates, thanks to service base growth,
improved pricing and continued momentum in value-added
services. Modernization sales grew by 21.2% at comparable
exchange rates.
KONE’s elevator and escalator service base continued to
grow and was well over 1.6 million units at the end of 2023
(well over 1.5 million units at the end of 2022).
The growth of the service base was driven, in particular,
by a continued good level of conversions of new equipment
deliveries to the service base. Bolt-on acquisitions had a
positive contribution to the growth. In 2023, the balance of
service contracts that were won from or lost to competition
was slightly negative.
The largest individual countries in terms of sales were
China (~26%), the United States (19%), Germany (7%) and
France (6%).
Sales in the EMEA region grew by 6.0% and totaled EUR
4,490.2 million. At comparable exchange rates, sales grew by
9.0%. New Building Solutions sales were stable, Service sales
grew clearly and Modernization sales grew significantly in the
region.
In the Americas, sales grew by 10.3% and totaled EUR
2,470.2 million. At comparable exchange rates, sales grew by
12.6%. New Building Solutions sales grew significantly,
Service sales grew clearly and Modernization sales grew
significantly in the region.
In Asia-Pacific, sales declined by 9.9% and totaled EUR
3,991.9 million. At comparable exchange rates, sales declined
by 3.2%. New Building Solutions sales declined clearly due to
lower deliveries in China. Elsewhere in the region New
Building Solutions sales grew significantly. Service sales grew
clearly and Modernization sales grew significantly in the
region.
MEUR
2023
2022
Change
Change at
comparable exchange
rates
New Building Solutions
4,921.5
5,399.3
-8.8%
-3.1%
Service
4,127.0
3,890.4
6.1%
9.1%
Modernization
1,903.8
1,616.9
17.7%
21.2%
Total sales
10,952.3
10,906.7
0.4%
5.0%
– – – Significant decline (>10%), – – Clear decline (5–10%), – Slight decline (<5%), Stable,
Slight growth (<5%), ++ Clear growth (5–10%), +++ Significant growth (>10%)
New Building Solutions sales
Service sales
Modernization sales
EMEA
stable
++
+++
Americas
+++
++
+++
Asia-Pacific
--
++
+++
In monetary value at comparable exchange rates.
MEUR
2023
2022
Change
Change at
comparable exchange
rates
EMEA
4,490.2
4,237.7
6.0%
9.0%
Americas
2,470.2
2,239.8
10.3%
12.6%
Asia-Pacific
3,991.9
4,429.2
-9.9%
-3.2%
Total sales
10,952.3
10,906.7
0.4%
5.0%
Board of Directors’ Report
11 KONE Annual Review 2023
Financial result
KONE’s operating income (EBIT) was EUR 1,200.1 million or
11.0% of sales. The adjusted EBIT was EUR 1,248.4 million
or 11.4% of sales. Profitability improved thanks to strong
growth in Service and Modernization sales, better pricing on
deliveries and lower material costs. Cost savings from
operating model renewal contributed positively as well.
Inflation was a headwind.
In January–December 2023, items affecting comparability
amounted to EUR 48.3 million including EUR 57.7 million
costs recognized on restructuring measures and a positive
effect of EUR 8.0 million recognized on completion of the sale
of operations in Russia. KONE completed the sale of its
Russia operations in October 2023.
With comparable exchange rates, the translation impact
on operating income for the comparison period was EUR -
37.5 million.
KONE’s income before taxes was EUR 1,206.1 million.
Taxes totaled EUR 274.6 (244.0) million. This represents an
effective tax rate of 22.8% for the full financial year. Net
income for the period was EUR 931.6 million.
Basic earnings per share was EUR 1.79.
Cash flow and financial position
KONE’s financial position was strong at the end of December
2023.
Cash flow from operations (before financing items and
taxes) during January–December 2023 improved to EUR
1,485.2 million due to the increase in operating income and
changes in net working capital.
Net working capital (including financing items and taxes)
was EUR -861.2 million at the end of December 2023.
Compared to the beginning of the year net working capital
was broadly stable. Foreign exchange rates had an
approximately EUR 37 million negative impact.
Interest-bearing net debt was EUR -1,013.4 million at the
end of December 2023. KONE’s cash and cash equivalents
together with current deposits and loan receivables were EUR
1,688.4 (Dec 31, 2022: 1,970.4) million at the end of the
reporting period. Interest-bearing liabilities were EUR 687.8
(Dec 31, 2022: 673.9) million, including a pension liability of
EUR 132.9 (Dec 31, 2022: 140.0) million and a leasing liability
of EUR 349.1 (Dec 31, 2022: 324.0) million. Additionally,
KONE had an asset on employee benefits, EUR 9.2 (Dec 31,
2022: 10.0) million. Gearing was -36.4% and the equity ratio
was 40.9% at the end of December 2023.
Equity per share was EUR 5.32.
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
Operating income, MEUR
1,200.1
1,031.2
Operating income margin, %
11.0
9.5
Adjusted EBIT, MEUR
1,248.4
1,076.6
Adjusted EBIT margin, %
11.4
9.9
Income before taxes, MEUR
1,206.1
1,028.4
Net income, MEUR
931.6
784.5
Basic earnings per share, EUR
1.79
1.50
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
Cash flow from operations (before financing items and
taxes), MEUR
1,485.2
754.7
Net working capital (including financing items and taxes),
MEUR
-861.2
-903.9
Interest-bearing net debt, MEUR
-1,013.4
-1,309.0
Gearing, %
-36.4
-45.7
Equity ratio, %
40.9
40.3
Equity per share, EUR
5.32
5.49
Board of Directors’ Report
12 KONE Annual Review 2023
Capital expenditure and acquisition
KONE’s capital expenditure and acquisitions totaled EUR
512.7 million in January–December 2023. Capital expenditure
excluding acquisitions was mainly related to manufacturing
and R&D facilities, IT licenses as well as tools and equipment
in R&D. Most of the investments in manufacturing related to
strengthening KONE’s supply chain resilience. Capital
expenditure on leases consists mainly of maintenance
vehicles and office facilities.
Acquisitions totaled EUR 190.3 million in January–
December 2023. KONE completed several predominantly
service-related acquisitions in Europe and acquired a
distributor in the Middle East.
Research and development
The objective of KONE’s research and development (R&D) is
to drive differentiation by putting the needs of customers and
users at the center of all development. Our R&D activities
focus on designing smart and sustainable solutions that adapt
to future needs. By integrating elevators and escalators with
digital systems, we enable an even smoother people flow and
an improved user experience. Built-in connectivity in our
newest elevator models makes them a digital platform for
various services and new business models. We support our
customers in achieving their eco-efficiency goals throughout
the building life cycle, for instance by continuously developing
the energy-efficiency of our solutions. Additionally, we
continue to develop a variety of strategic partnerships to
further enhance our customer focused solutions. Thanks to
KONE’s worldwide engagement with regulating authorities
and extensive contribution to standardization, we ensure
regulatory conformity as well as cost competitive market
access for our innovative solutions.
Research and development expenditure totaled EUR
185.0 million, representing 1.7% of sales in January–
December 2023. R&D expenditure includes the development
of new products and service concepts as well as further
development of existing solutions and services.
During the first quarter, KONE introduced the first KONE
Escalator DX offering features, including KONE Design
Lighting. This offering forms a set of value-adding features
and services for our standard escalator product range and our
escalator modernization offering.
During the fourth quarter, a new state-of-the-art R&D
facility, including an elevator test tower and labs, became
operational near Chennai in India. The engineering excellence
will be leveraged for escalator production, subsequently
increasing the resilience of our supply chain.
During 2023, KONE was granted the ISO 27001
cybersecurity certification for its digital services which
complements the IEC 62443 cybersecurity certification for
KONE DX class elevators. The ISO 27001 certification covers
KONE 24/7 Connected Services, KONE Online and KONE
Mobile solutions, and KONE’s API Ecosystem and IoT
Platform. KONE was the first in the global elevator and
escalator industry to be awarded both the IEC 62443 and ISO
27001 certifications. Certifications showcase KONE’s
continuous commitment to ensuring that all innovation on our
connected products and services meet the relevant customer
and regulatory cybersecurity requirements and are
sustainable also going forward.
MEUR
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
On fixed assets
161.2
101.7
On leasing agreements
161.1
107.5
On acquisitions
190.3
28.1
Total
512.7
237.4
MEUR
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
R&D expenditure
185.0
187.8
As percentage of sales, %
1.7
1.7
Board of Directors’ Report
13 KONE Annual Review 2023
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 conducts its business in a responsible and
sustainable way, and we expect the same commitment from
all our partners. We are committed to complying with the laws
and regulations of the countries in which 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, Human Rights
Policy, Anti-Bribery and Corruption Policy, Competition
Compliance Policy, and Climate and Environmental
Excellence Program, as well as in 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 reducing emissions in its own operations, offering
and the value chain by 2030, showing climate leadership and
commitment to limiting global warming to 1.5 degrees celsius
in accordance with the Paris Climate Agreement. KONE
applies the Task Force on Climate-related Financial
Disclosure (TCFD) reporting principles in order to report about
climate-related financial risks and opportunities. The table on
this text maps the pages of the report where disclosures
according to TCFD requirements can be found.
KONE’s previous materiality assessment was conducted
in 2019-2020. In 2023, we initiated the revision of the
assessment with all key internal stakeholders based on the
future reporting requirements such as Corporate Sustainability
Reporting Directive (CSRD). Results will be published in
2025.
KONE’s strategy and business model are described on
pages 5–7 of KONE’s Annual Review 2023. Risks and risk
management related to the matters below are described in the
section ‘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, which is prepared
according to GRI Standards. KONE published its
Sustainability Report for 2022 in the second quarter of 2023.
KONE’s Sustainability Report for 2023 will be published
during the second quarter of 2024.
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 President and CEO and the
Executive Board. KONE’s Executive Board discusses
sustainability topics, including e.g. environmental, social and
compliance topics, in each meeting given the strong emphasis
on sustainability in KONE’s strategy ‘Sustainable Success
with Customers’. Furthermore, KONE has established forums
where sustainability and climate-related topics are regularly
discussed. At the end of 2023 these forums included the
Safety, Quality, Environment and Sustainability Board and the
Offering & Technology Board, both chaired by KONE
President and CEO. Both committees consist of Executive
Board level members. KONE also has a Sustainability
Disclosure Board, which steers the development of KONE’s
sustainability disclosure practices. It is chaired both by the
Executive Vice President of Supply Chain and Chief Financial
Officer. The members of the Sustainability Disclosure Board
include Vice President of Sustainability & Environment and
Vice President of Compliance and Human Rights, Corporate
Controller, as well as senior experts from the investor
relations, assurance, environmental, communications and
corporate controlling functions. KONE global business lines
and functions share with area organizations a common
roadmap for creating value for customers through
sustainability. KONE’s global business lines and areas have a
regular cadence on reviewing sustainability related
advancements in continuous improvement team meetings.
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, including
environmental, social and anti-corruption matters. In addition,
the Board and its Nomination and Compensation Committee
review and approve the sustainability related key performance
indicator in the share-based long-term incentive plan and
monitor KONE’s progression against it.
External recognitions
KONE has received external recognition for its efforts to
conduct business in a sustainable way.
KONE was ranked among Corporate Knights’ 2023 100
Most Sustainable Corporations in the World. Global 100
companies represent the top echelon in the world on
sustainability performance. Moreover, KONE was again
included in the FTSE4Good index as well as in CDP’s Climate
Change A List 2022 among the top climate change
performers. CDP is an international not-for-profit organization
that runs a global disclosure system that enables companies,
cities, states, and regions to measure and manage their
environmental impacts. This is the tenth consecutive year that
KONE has achieved a leadership score of A or A- in the
Climate Change rating, which demonstrates our long-term
commitment to environmental work and sustainability. KONE
was also awarded A- score in CDP’s 2022 Supplier
Engagement Rating, recognizing companies for supplier
engagement on climate topics. In addition, KONE was
awarded Gold medal in the annual EcoVadis sustainability
KONE’s Sustainability
Report 2023
• Will be published during Q2 2024
• In the report, you can find more detailed
information about sustainability
14 KONE Annual Review 2023
Board of Directors’ Report
performance assessment covering environment, labor and
human rights, ethics and sustainable procurement. This
places KONE in the top 5% of all companies assessed in
2023.
On top of the above, KONE was once again awarded as
one of the best employers in the world by Forbes business
magazine on their Forbes 2023 World’s Best Employers list.
15 KONE Annual Review 2023
Board of Directors’ Report
Key performance indicator
Target
2023 results
2022 results
Environmental
matters
Greenhouse gas emissions from own
operations (Scope 1 and 2) 1)
Long-term target (2030):
50% reduction in absolute emissions from
2018, carbon neutral operations
Carbon neutral manufacturing units (end of
2024)
2023 target: 17% reduction in Scope 1 and
2 absolute carbon footprint from 2018
and 21% reduction in Scope 1 and 2
absolute carbon footprint from 2019
(comparable reporting scope)
Will be published in the Sustainability
Report during Q2 2024
Carbon neutral manufacturing units
achieved 18 months ahead of schedule by
the end of Q2/2023
21%
Product-related greenhouse gas emissions
(Scope 3) 1)
Long-term target (2030):
40% reduction in product-related Scope 3
emissions relative to ordered products
Will be published in the Sustainability
Report during Q2 2024
KONE’s product and value chain emissions
(Scope 3) relative to ordered products
decreased by 4.7% compared to 2021 and
by 4.3% compared to 2018.
Share of renewable electricity used
in our facilities, %
Long-term target (2030): 100%
2025 target: 80%
2022 target: 75%
Will be published in the Sustainability
Report during Q2 2024
84%
Share of key suppliers ISO 14001 certified,
%
100%
100%
100%
Share of landfill waste at our manufacturing
units, %
0% by 2030
Will be published in the Sustainability
Report during Q2 2024
0.2%
Number of products covered by
Environmental Product Declarations
20 by 2023
21
17
Personnel and
social matters
Industrial Injury Frequency Rate (IIFR) 2)
Zero injuries
IIFR 1.1
IIFR 1.4
Employee engagement
Maintain employee engagement on a
strong level
No employee engagement survey run in
2023
Results remained clearly above the global
norm
Personnel voluntary turnover rate, % 3)
Maintain voluntary turnover below market
level
7.9%
7.9%
Share of women in director level positions, %
35% of director level positions occupied by
women by 2030
25.2%
23.5%
Average learning hours per employee
>40 hours per year
33
35
Human rights,
anti-corruption
& bribery
% of total employees who have completed at
least one ethics & compliance training during
the year
92%
85%
53%
Planned global training was delayed due to
Russian sanctions work and COVID-19
% of KONE's overall external spend that is
covered by KONE Supplier Code of Conduct
or equivalent accepted by KONE
85%
86%
86%
% of distributors who have signed the
Distributor Code of Conduct
100%
92%
42%
As of 2022, we track the share of
distributors who have signed the 2018 or
2021 version of the Distributor Code of
Conduct
1)
The greenhouse gas emissions from our own operations and value chain have been calculated in accordance with ISO 14064 and the Greenhouse Gas Protocol 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).
2)
The number of lost time injuries of one day or more, per million hours worked
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
16 KONE Annual Review 2023
Board of Directors’ Report
Environmental matters
In line with KONE’s strategic target of being a leader in
sustainability, our environmental approach supports the
ongoing green and digital transformation of the built
environment into smart eco-cities, low-carbon communities,
and net zero energy buildings.
We have defined our environmental ambition and
objectives as well as our commitment to environmental
sustainability in all activities in our Environmental Policy,
which is publicly available at kone.com.
In 2023, KONE became the first in the industry to achieve
carbon neutral manufacturing units globally. KONE reached
this major milestone 18 months ahead of schedule, when
KONE's manufacturing units became carbon neutral at the
end of the second quarter of 2023. This achievement
showcases KONE's dedication to its climate pledge and
ensuring best-in-class supply chain operations globally. KONE
has ten manufacturing units in seven countries across the
globe. All of them have actively worked to reduce their scope
1 & 2 greenhouse gas (GHG) emissions by 71% compared to
the 2018 baseline. As part of scope 1 emission targets, KONE
is constantly investing in energy efficiency and working on
transitioning to electric vehicles in all its manufacturing units.
KONE has invested in heating, ventilation and air condition
systems to increase energy savings. Additionally, to enhance
energy efficiency, investments have been made into
manufacturing line robotics and automation. In eight out of ten
factories, forklifts have been replaced with electric powered
forklifts, and most of the remaining diesel-powered forklifts are
now powered by biofuels. Additionally, KONE has installed
solar panels in nine out of ten of its manufacturing units, and
all units have been purchasing 100% renewable electricity
since the beginning of 2023. Two manufacturing units have
switched to green district heating partners. The remaining
carbon emissions are compensated through a third-party
partner.
In 2023, KONE participated in the first ever Finnish
Pavilion in the 28th Conference of the Parties (COP28) in
Dubai. Together with partners from both public and private
sectors, KONE organized and participated in several events
all aimed to speed up green and sustainable transformation in
cities globally. As success of ‘actions over words’, KONE
showcased its achievement with carbon neutral manufacturing
units.
KONE’s climate related disclosures according to TCFD
TCFD recommended disclosures
Content in KONE’s report
Governance
Board’s oversight of climate-related risks and
opportunities
Non-financial information / Management and Board of
Directors’ oversight of sustainability, p. 13
Management’s role in assessing and managing
climate-related risks and opportunities
Non-financial information / Management and Board of
Directors’ oversight of sustainability, p. 13
Strategy
Climate-related risks and opportunities over the
short, medium and long term
Non-financial information / Environmental matters, p. 16
Risks and risk management related to the reporting of non-
financial information, p. 34
Impact of climate-related risks and
opportunities on the organization’s businesses,
strategy and financial planning
Strategy, p. 5
Risks and risk management related to the reporting of non-
financial information, p. 34
Resilience of strategy, taking into consideration
different climate-related scenarios
Risks and risk management related to the reporting of non-
financial information, p. 34
Risk
management
Processes for identifying and assessing
climate-related risks
Risks and risk management related to the reporting of non-
financial information, p. 34
Processes for managing climate-related risks
Risks and risk management related to the reporting of non-
financial information, p. 34
How processes for identifying, assessing and
managing climate-related risks are integrated
into the organizations overall risk management
Risks and risk management related to the reporting of non-
financial information, p. 34
Metrics and
targets
Metrics used to assess climate-related risks
and opportunities
Non-financial information / Key performance indicators, p. 15
Non-financial information / Environmental matters, p. 16
Scope 1, Scope 2 and Scope 3 emissions and
the related risks
Non-financial information / Key performance indicators, p. 15
Non-financial information / Environmental matters, p. 16
Targets used to manage climate-related risks
and opportunities and performance against
targets
Non-financial information / Key performance indicators, p. 15
Non-financial information / Environmental matters, p. 16
Board of Directors’ Report
17 KONE Annual Review 2023
Our Climate and Environmental Excellence Program
covers four focus areas: partner with customer, offering,
operations and mindset and behavior. In line with our
Environmental Policy, we develop smart and sustainable
technologies for People Flow® and aim to be the preferred
partner for environmentally sustainable urban environments.
We drive transformation towards sustainable, circular and
carbon neutral operations, and engage our employees,
customers, suppliers and partners on climate and
environmental action. KONE Code of Conduct, Supplier Code
of Conduct, Distributor Code of Conduct and KONE Global
Vehicle Fleet, Facility and Travel Policies also set out
environmental requirements relevant to the operations of
KONE or our partners.
KONE has a climate pledge with science-based targets for
significant greenhouse gas emissions reductions. We are
committed to a 50% cut in the emissions from our own
operations (scope 1 and 2 emissions) by 2030, compared to a
2018 baseline and pledged to have carbon neutral operations
by 2030. This target is in line with limiting global warming to
1.5°C, which is currently the most ambitious criteria for setting
science-based targets. Additionally, we target a 40%
reduction in the emissions related to our products’ materials
and lifetime energy use (scope 3 emissions) over the same
period, relative to orders received. KONE was the first to
validate its science-based targets against the latest climate
science in the elevator and escalator industry and KONE’s
targets are among the most ambitious in the industry to date.
With our climate pledge, we are taking even stronger action
and leading the way in our industry to create more sustainable
urban environments.
We are working actively together with our suppliers to cut
emissions, increase the use of sustainable materials and limit
the use of hazardous substances. We screen our suppliers’
performance in terms of their environmental and social
responsibility with our Supplier Sustainability Assessment. In
addition to more advanced criteria, the assessment includes
the basic criteria that must be met in order to continue doing
business with KONE.
Most of KONE’s environmental figures for 2023 will be
published in the Sustainability Report during the second
quarter of 2024.
KONE’s sustainable offering
Requirements for smart and sustainable materials, solutions
and buildings are increasing. We see these shifts in demand
as a growth opportunity and want to be the preferred partner
for our customers. To further understand the emerging needs
and technologies in sustainable, resilient urban environments
and people’s behavior in them, we actively participate in large-
scale research projects and consortiums.
Our innovations can have a significant role in advancing
climate action. We support smart and sustainable construction
through our energy efficient and innovative offering, functional
and sustainable materials, as well as transparent
documentation about our products’ environmental impacts.
Lifetime energy consumption is one of the main
considerations in green buildings and it is also the single most
significant environmental impact of KONE’s products overall.
This underlines the importance of eco-efficient solutions.
We launched the first carbon neutral elevator in the
industry in 2022. In 2023, we continued to develop our
sustainable offering by introducing a carbon neutral escalator.
Now our customers can choose a carbon neutral option of
both highly energy efficient KONE DX Class elevator and
KONE escalator (TM110/TM110T) for which embodied carbon
emissions until the handover (including emissions from
materials, manufacturing, logistics and installation) are
compensated. We follow a three-step approach to reach
carbon neutrality: measure, reduce, and compensate. We
measure and communicate our product carbon footprint in our
Environmental Product Declarations (EPDs). We actively
reduce our carbon emissions in line with KONE’s Climate
Pledge, KONE’s environmental guidelines and overall
emission reduction targets. The remaining carbon emissions
are compensated through a third party – South Pole.
In 2023, we expanded our carbon neutral service to new
markets (first launched in 2021) to support our customers in
reaching their ambitious climate targets throughout the
building lifecycle. During the reporting year, we have made
energy savings visible for customers with updated energy
consumption reports in the Modernization business. We were
also the first in our industry to publish the partial
modernization EPD promoting circularity and life cycle
understanding in existing building market.
We currently have 36 best-in-class energy efficiency
references for our elevator and escalator platforms according
to the international ISO 25745 standard for the energy
performance of lifts, escalators and moving walks.
Several KONE solutions have received external
recognition for their environmental performance. During 2023,
we received Singapore Green Building Product (SGBP)
certifications for elevators such as KONE N MonoSpace DX,
KONE S Monospace DX, KONE 3000 MiniSpace™, KONE
TranSys™, and KONE TravelMaster™ 110 escalator. KONE
currently has nine SGBP certifications with the highest
‘Leader’ ratings. KONE was the first elevator and escalator
company to achieve such top ratings in the vertical
transportation category. The SGBP certified solutions are
recommended for Green Mark certified buildings.
In 2023, KONE also received the Green Label certification
in Malaysia from MyHIJAU (Malaysia’s Green recognition
scheme) for KONE N MonoSpace®, KONE N MiniSpace™,
KONE MiniSpace™, KONE TranSys™ and KONE 3000 S
Monospace ® elevators and KONE TravelMaster™ 110 and
KONE TransitMaster™ 140 escalators. MyHIJAU Mark is
endorsed by the Government of Malaysia, bringing together
certified products and services that meet local and
international environmental standards under one single mark.
During 2023, KONE received Byggvarubedömningen
(BVB) approvals for nine products. BVB is a nonprofit
organization that evaluates solutions for buildings and drives
the use of sustainable building materials.
Important achievements were also made in transparent
communication about the environmental impacts of our
products with EPDs published for a total of four of our
solutions, including two EPDs for modernization solutions.
EPDs were published for KONE MiniSpace™ DX HighRise
elevator with Steel Rope and KONE TransitMaster™ 120
escalator as well as for full replacement solution of KONE
NanoSpace™ DX and partial modernization solution of KONE
MonoSpace® Upgrade DX. At the end of 2023, KONE had 21
third party verified EPDs in line with EN15804. Our EPDs
cover the most sold elevator platforms from low- to high-rise.
KONE also holds a total of eight Health Product Declarations
(HPDs), of which three were published in 2023, namely for
TranSsys™ DX elevator and TravelMaster™ 110 and
TransitMaster™ 120 escalators.
Own operations
During the first quarter of 2023, we finalized the calculations
of our 2022 carbon footprint. KONE’s total carbon footprint
data (Scope 1, 2 and 3 GHG emissions) have been externally
assured. In 2022, KONE’s target was to reduce its operational
18 KONE Annual Review 2023
Board of Directors’ Report
carbon footprint (Scope 1 and 2) by 16% compared to 2018.
This target was exceeded as our overall operational carbon
footprint decreased by 17% compared to 2018. To reflect the
expansion of our operations, we also measure comparable
carbon footprint scope which decreased by 21% in 2022
compared to 2019. The largest individual factor contributing to
the reduction of Scope 1 and 2 GHG emissions was the
increased use of renewable electricity in our facilities. KONE
is committed to reducing electricity consumption in its own
operations and has set a target to increase the share of
electricity from renewable sources to more than 80% by the
end of 2022 and to 100% by 2030. In 2022, we exceeded our
green electricity target as electricity from renewable sources
accounted for 84% of all our electricity consumption, up from
80% the previous year (2021). Apart from India, all our
manufacturing units use only on-site generated or purchased
renewable electricity.
Furthermore, many KONE subsidiaries continued to
transition their vehicle fleets. We are continuously reducing
our fuel consumption by transforming our vehicle fleet with
electric cars and reducing the number of driven kilometers
with service plans optimization, connectivity, and remote
troubleshooting. For example, in our service operations,
KONE continues to use e-cargo bikes and e-scooters, while
replacing old motorcycles with new, electric ones in Hong
Kong. At the end of 2022, 31% of our car fleet in Norway and
over 13% in the Netherlands comprised of electric vehicles.
Good progress was made in 2023 towards achieving our
target of reducing GHG emissions in our own operations
(Scope 1 and 2).
The vast majority of emissions associated with KONE’s
activities are generated outside of our immediate operations in
the value chain, particularly by our products’ lifetime energy
consumption and material use. In 2022, our product- and
value chain-related Scope 3 GHG emissions decreased by
4.7% compared to 2021 and by 4.3% compared to 2018,
relative to ordered products. One of the major contributing
factors was our products’ further improved energy efficiency.
As an example, this was achieved through an increased share
of energy efficient electrification systems and regenerative
drives in the elevators ordered. Furthermore, in 2022 a larger
share of our customers’ buildings was located in countries that
increased the share of renewable energy in their national
electricity production, thus emitting fewer GHG emissions. We
are constantly improving our product-related Scope 3 GHG
emissions calculations as we work with our suppliers and
partners for more transparent and efficient data collection. In
2023, we continued to invest in our supplier sustainability,
strengthening our organization but also our collaboration with
our key suppliers.
We have also set a separate target of 4% annual reduction
in our Scope 3 logistics carbon footprint relative to units
delivered. In 2022, our logistics GHG emissions increased by
3.5% relative to units delivered as compared to the previous
year. In terms of waste, our long-term target of 0% landfill
waste from our manufacturing units by 2030 remains in place.
In 2022, we were already at a low level of 0.2% (2021: 0.4%).
KONE has a long-term (2030) and annual biodiversity
target stating that KONE manufacturing units must not be
located in or near UNESCO Word Heritage sites, Nature 2000
or other conservation parks or biodiversity sensitive areas. In
2023, KONE met the target. In 2023, KONE participated in UN
Global Compact Science based target for Nature training
program which helps companies to strengthen their
biodiversity work by using science-based best practices and
enhance strategies to achieve nature-related goals.
Additionally, biodiversity leadership program was completed
by selected KONE employees.
KONE uses the ISO 14001 environmental management
system to enhance its environmental performance. It covers
our corporate units, including all R&D and manufacturing units
as well as 32 major country organizations. Three KONE
manufacturing units have ISO 50001 energy management
system certification. At the end of 2023, 100% (2022: 100%)
of our key suppliers were ISO 14001 certified, our target being
100%.
An increasing trend in customer demand is the focus on
wooden buildings. To accommodate this, KONE’s
manufacturing unit in Finland continues to hold the FSC®
(Forest Stewardship Council) Chain of Custody certification,
providing credible assurance that elevators manufactured in
this unit come with wooden components from environmentally
and socially responsible sources. KONE’s subsidiaries in
Great Britain and Northern Ireland continue to hold the FSC®
Chain of Custody certification, meaning that customers can
now be provided this assurance for the full delivery chain for
elevators installed in these countries.
Board of Directors’ Report
19 KONE Annual Review 2023
Personnel and social matters
KONE’s main goal is to have the most capable and engaged
team of professionals, who succeed in a changing world.
Great employee experience, a diverse and inclusive culture,
continuous learning, flexibility, and wellbeing are the core
elements in our Empowered People Way to Win, one of the
four KONE-wide transformation and development initiatives,
which enable us to succeed in our strategy. KONE’s activities
are all guided by ethical principles. Employee rights and
responsibilities include the right to a safe and healthy working
environment, fair and equitable labor conditions, personal
wellbeing, freedom of association, collective bargaining, non-
discrimination, and the right to a working environment in which
harassment and bullying are not tolerated.
Operating model renewal and its impact on the
way we work
In January 2023, KONE announced plans to renew its
operating model to strengthen its competitiveness and
customer focus in a changing operating environment. The
objective was to drive KONE's strategy forward with greater
speed and efficiency and operate more closely with
customers, through stronger geographic Areas. The changes
were initially estimated to result in the reduction of
approximately 1,000 jobs globally. The new organizational
structure was implemented on July 1, 2023. At that time, the
changes in KONE’s Executive Board became effective and
new governance and business performance management
models were taken into use. The operating model will be
further defined through continuous development after the
program. Actions targeting the 100 MEUR fixed cost savings
were completed by the end of 2023.
Diversity, equity and inclusion
We actively drive diversity at KONE, and our values guide us
in upholding an inclusive culture. We follow diversity globally
from several perspectives, including industry background,
competence and gender. As one of the Diversity, Equity and
Inclusion (DEI) specific goals, we have committed to making a
step-change in the share of women at director level and
increase it to 35% by 2030. In 2023, the share of women in
director level positions increased to 25.2 % from 23.5% in
2022. Most of our employees are men representing 88%
(89%) of our people globally. We continue our efforts towards
achieving a more balanced gender split in all levels of the
organization. During the reporting year, KONE’s workforce
included 152 (151) nationalities. To strengthen our global
approach and deepen our customer and market insights, we
also have goals to increase cultural diversity in our global
functions.
In 2023, we continued to engage our senior leaders in a
DEI learning journey to pave the way for a more inclusive
culture. We also continued to strengthen DEI maturity in our
countries through various actions, from transparent
communication to data-driven decision-making and more
inclusive talent practices and culture. We celebrated
International Women’s Day and Pride month, and continued
collaboration with our Women’s Employee Resource Group
(SPARK) and our LGBTIQ+ Employee Resource Group
(#fromKONEwithPride), with the aim to continuously improve
our employees’ inclusion experience through open discussion
and positive actions. We continued our partnership with
Workplace Pride to learn more about LGBTIQ+ workplace
inclusion and increased our Workplace Pride Global
Benchmark by 7% from 2022.
Our focus on driving DEI is visible also in KONE’s share-
based long-term incentive plan’s sustainability metric, which
includes diversity related targets.
KONE culture & employee engagement
During 2023, we continued developing KONE’s culture to
ensure that it supports our strategic targets. We focused on
embedding cultural development into existing processes and
transformational activities, namely our employee journey,
programs, and leadership development. We also continued
raising awareness of the role each employee plays in
contributing to the success of our strategy with their actions
and behaviors and utilizing our Culture Playbook to invite
everyone at KONE to take part in developing our ways of
thinking and working together.
Fostering employee well-being is a key factor in making
KONE a great place to work and our care for our employees is
reflected in our culture and values. Well-being is steered
through global well-being strategy, and well-being agenda in
the countries is driven by KONE Elevate Your Health frame
which includes supporting physical, emotional, financial, and
social well-being.
KONE promotes flexible working arrangements and in
2023 we increased our flexible working possibilities for
example by offering our employees the possibility for hybrid
working, flexible working time and compressed workweek. We
believe that flexibility is about creating sustainable working
practices that enable employees to have a better work-life
balance and build long-term careers with us.
KONE hosts a European Employee Forum annually to
bring together employee representatives and top
management to discuss issues ranging from safety to
business development. A smaller working group meets two to
four times a year to ensure continuous discussion on
important developments affecting our employees. In 2023,
topics covered in the Employee Forum included regular
business updates and discussions about the ‘Sustainable
Success with Customers’ strategy. Specific focus areas
included the operating model renewal and developing the
work of service technicians as well as safety, sustainability
and quality.
Learning and development
In 2023, learning and development focused on ensuring that
our professionals on the field, in sales and with leadership
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
Average number of employees
63,164
63,186
Number of employees at the end of period
63,536
63,277
EMEA
23,583
23,628
Americas
7,625
7,442
Asia-Pacific
32,328
32,208
Personnel voluntary turnover rate was 7.9% (7.9%). Employee costs for the reporting period totaled EUR 3,656 (3,533) million. The geographical distribution of
KONE employees was 37% (December 31,2022: 37%) in EMEA, 12% (12%) in the Americas and 51% (51%) in Asia-Pacific.
20 KONE Annual Review 2023
Board of Directors’ Report
accountabilities have the needed skills and competences to
best perform in their jobs. With continuous competence
development we have an impact on employees’ safety, well-
being and retention at KONE.
Most of the training, especially for our field colleagues, is
delivered by field trainers on job sites. We also offer a wide
range of digital, gamified and virtual reality enabled learning
solutions for self-study as well as blended learning
opportunities for face-to-face training. During 2023, formal
learning hours per employee were more than 30 globally.
In 2023, we also focused on leadership development
especially due to the operating model renewal. Leaders and
managers were provided with a wide selection of learning
opportunities on a variety of topics, such as change
management, handling difficult discussions, and leading in
turbulent times. In addition, leaders were provided with tools
and support in setting up their new teams.
Global learning dashboard was launched in 2022 and
during 2023 it was complemented by field training related
priority learning solutions completion data to increase
transparency. Nurturing a learning culture continued, and
employees were encouraged to take responsibility of their
own development through regular performance discussions,
by expressing their career and development aspirations, and
by preparing individual development plans.
Talent attraction
A key focus area within KONE people strategy is attracting the
best talent by providing a great employee experience.
Recruitment volumes dropped during the first half of 2023
due to the operating model renewal but returned to normal
levels by the end of the year. Targeting new competencies
and increasing diversity through recruitment continued to be
one of KONE’s key focus areas. Our efforts to increase
diversity through recruitment resulted in a large number of
applicants and hires from outside of the elevator and escalator
industry and from our customer industries. We were also able
to recruit an increasing number of people with new
competencies such as digitalization and solution selling.
Systematic activities around talent attraction and building
talent pipelines have helped us keep our time-to-hire and
quality of hires on a good level despite the increasingly
challenging talent market.
In 2023 we also continued to build KONE’s employer
brand through active school collaboration by providing early
career opportunities through more than 2,000 apprenticeships
and offered local trainee positions for university students.
Safety
Safety is our highest priority. We aim to set the benchmark for
health and safety in our industry, and to continually improve
our health and safety performance. To guide us in ensuring
the safety of our employees, the users of our equipment and
our partners alike, KONE has an integrated company-wide
Safety Management System (SMS) in place that sets forth
minimum company requirements. Our SMS is based on the
requirements of ISO 45001 Occupational health and safety
management systems and in many cases, it sets higher
standards than local legislation. During 2023, we revised our
safety governance model and enhanced our strategic longer-
term plans for safety development, supporting the transition
towards more proactive safety management practices and
better integration with other functions of the company.
Our dedication to safety is reflected across the company –
from design, engineering and production to installation,
service, training, and customer support. We consistently apply
the KONE SMS in all our activities and design our solutions
and processes to enable us to conduct our business in a safe
and sustainable manner. Managers perform regular audits to
measure compliance with KONE’s policies, processes and
defined working methods. Corrective actions are taken if
deviations are identified. KONE also conducts process audits
to identify possible obstacles to workplace safety. If any are
found, the work in question is stopped until a safe method is
approved.
The management of safety risks arising from our work
activities is crucial, and therefore KONE has company-wide
standards to ensure that risks are identified, assessed, and
controlled. To support controlling the main risks in the
workplace and prevent incidents, we have nine KONE Core
Safety Principles in place. The principles are expected
behaviors common to all KONE employees, subcontractors,
and everyone we work with.
KONE safety programs are set to drive safety performance
improvement. One of the concepts, inspired by Lean
methodology, is Gemba. KONE leaders carry out regular
Gemba walks on different types of work environments to
observe and understand the reality, uncover opportunities for
continual improvement and to learn new ways to support
employees with focus on workplace safety. Another concept is
the Human Factors (HF) approach in safety management. We
are increasingly utilizing the HF Tool™ in incident
investigations to help expand the focus beyond technical
aspects and compliance also on how human factors
contribute to safety both positively and negatively. In 2023, we
also continued our Subcontractor Safety Development Audit
(SSDA) program focusing on reviewing the safety
management of subcontractor activities in KONE units.
Following a more thorough assessment of the current
situation, the program will proceed with an updated action
plan.
We constantly monitor our safety performance using
several indicators. As proactive indicators, we have set
targets for instance for the number of management workplace
visits and the number of customer and user safety promotion
events. In 2023, our Industrial Injury Frequency Rate (IIFR)
was 1.1 (1.4). Our target is to reach IIFR 0.6 by 2030 and
have zero fatalities. We are determined to continue reducing
the number of incidents and injuries and expect our years of
favorable safety progress to continue with strong efforts on
building a culture supportive of psychological and physical
safety.
To support learning from the past and avoid accidents in
the future, all employees at KONE are encouraged to actively
report safety occurrences and have access to our global
safety incident reporting tool, KONE Safety Solution (KSS). In
2023, the number of near misses recorded in KSS increased
by 4% (17%) compared to 2022. As the quantity of the
reported near misses is steadily on a good level, we continued
driving the quality, investigation and analysis of our near miss
and incident reports, as well as improving data utilization,
transparency, and sharing lessons learned. Monthly safety
performance follow-up was carried out in every area, in global
safety meetings, and by the Executive Board.
Dedicated communication campaigns and training support
health and safety awareness at KONE. In May 2023, all
KONE units participated in the global KONE Safety Week with
the theme of Speak up and act for safety, which stressed the
importance of empowering everyone to voice their safety
issues and report near misses, as well as to follow methods
and safe practices. During the week, various activities related
to safety were organized for both internal and external
stakeholders. A global year-end safety campaign was also
held to increase safety commitment and risk awareness. The
theme of the campaign, last-minute risk assessment (Stop
and Go), was a continuation of the Safety Week and urged
Board of Directors’ Report
21 KONE Annual Review 2023
everyone to evaluate risks and stop working in unsafe
conditions. Everyone at KONE is required to assess the safety
of the tasks at hand and has the duty and authority to stop
work if it is unsafe, to ask for support, or take the necessary
actions to continue the job safely. We will continue to promote
a culture where authority to stop work can be exercised
without fear of punishment.
All KONE employees are required to complete a general
safety training course covering our safety management
framework and KONE’s Health and Safety Policy. In 2023, we
organized a campaign where the training was assigned as a
refresher to every employee, and we achieved our goal of
80% completion rate in eight weeks. At the end of 2023 the
completion rate was 90%. Our employees also receive
additional health and safety training relevant to their work. In
addition, regular global toolbox talks were provided to ensure
consistent practices and help local safety units with materials
available for all KONE employees.
The safety of the people using elevators, escalators and
automatic building doors involves everyone from technology
and service providers to building owners and equipment
users. Therefore, we work closely with our customers to help
them operate our equipment safely, identify potential safety
hazards, and to deal with situations that could lead to safety
risks. We communicate actively about safety, organize safety-
related activities, and provide training and educational
resources to our customers and the public to help them use
the equipment in a safe way.
22 KONE Annual Review 2023
Board of Directors’ Report
Human rights, anti-corruption and
bribery
KONE has a Global Compliance team responsible for
developing, implementing, and maintaining an effective
compliance and ethics program for KONE. KONE’s Global
Compliance Committee, comprising four Executive Board
members, the Corporate Controller and VP, Global
Compliance oversees and advises on the program and meets
quarterly to discuss it. In addition, dedicated compliance
officers in China, the Americas and Middle East, Türkiye and
Africa region help implement KONE’s compliance program
regionally by supporting local management and regional
compliance committees, conducting risk assessments,
providing compliance training and conducting investigations
into allegations of employee misconduct as well as human
rights and corruption violations.
KONE’s Code of Conduct forms an integral part of our
company culture and is the foundation of our ethical business
practices. The Code sets out the responsible and ethical
conduct expected of KONE employees and companies and is
available in 33 languages on kone.com. The topics covered in
the Code of Conduct include conflicts of interest, corruption,
competition compliance, trade compliance, workplace well-
being, health and safety, environmental compliance, human
rights, privacy, fraud and theft, cybersecurity, intellectual
property and confidentiality, external communications, insider
trading and how to report violations of the Code. The Code
also emphasizes KONE’s non-retaliation policy: we do not
tolerate any form of retaliation against anyone who has made
a compliance report in good faith.
Regular online, video and face-to-face compliance training
is provided to employees and all employees are required to
complete at least one compliance training each year. In 2023,
we launched mandatory Anti-Bribery & Corruption (ABC) e-
learning for all KONE employees. 85% (over 53,000
completions) of all active KONE employees had completed
the training by year end. GiantKONE operatives will be trained
in 2024 when they have access to the new Learning
Management System in China.
All KONE employees are expected to understand and
abide by the Code of Conduct and to report any violations
using the channels available for this purpose. Our internal
reporting channels include reporting to management, HR,
Legal or Compliance. We also have a confidential reporting
channel for raising concerns, the Compliance Line, available
for our employees, suppliers, distributors and the public at all
times. It is operated by an independent third party and is
accessible (anonymously, where permitted by local law) via
phone and/or web in over 30 languages. Reports can be
submitted on a range of topics including fraud and theft,
fraudulent reporting, corruption, competition law, human
rights, harassment and discrimination, data protection and
confidentiality, environment and safety, trade compliance and
conflicts of interest. All reports are handled by a dedicated
impartial KONE Compliance team. Where required by local
law, we have also implemented entity-specific reporting
channels.
In 2023, we received a total of 190 (2022: 178) compliance
reports, of which 29% (2022: 32%) were received through the
Compliance Line. Of the total number of reports received in
2023, 27% (2022: 30%) were fraud/corruption related, 42%
(2022: 34%) were HR related (including harassment,
discrimination and bullying), 15% (2022: 14%) related to
conflicts of interest, and the remaining 16% (2022: 22%) fell
under various other categories. 195 cases were closed in
2023, some of which were reported in previous years. Of
these closed cases, 36% were either substantiated or partially
substantiated, and disciplinary actions in those cases ranged
from coaching discussions to termination of employment. 35
(2022: 26) employees were dismissed or resigned as a result
of compliance investigations.
KONE’s general Code of Conduct is complemented by our
Supplier and Distributor Codes of Conduct. Our Supplier Code
of Conduct is available in 30 languages and sets out the
ethical business practice requirements that we expect from
our suppliers. It covers areas such as legal compliance,
ethical conduct, our zero tolerance for bribery and corruption,
and the standards we require from our suppliers in terms of
labor and human rights, health and safety, and environmental
issues. KONE may terminate its contracts with suppliers for
failure to adhere to the Code.
KONE expects its suppliers to comply with the
requirements of the Supplier Code of Conduct in all their
dealings with KONE, as well as with their own employees and
suppliers, and third parties including government officials. All
our suppliers are expected to sign KONE’s Supplier Code of
Conduct. By the end of 2023, 86% (2022: 86%) of KONE’s
total spend with regular trade suppliers and installation
subcontractors was with parties who had signed KONE’s
Supplier Code of Conduct or equivalent. Our target for 2023
was 85%. Our 2024 target is 87%.
KONE’s Distributor Code of Conduct covers similar topics
as the Supplier Code of Conduct. It is available in seven
languages. As business partners, our distributors are
expected to comply with the requirements of the Code in all
their dealings with KONE, as well as in respect of their own
employees, customers and suppliers, and third parties
including government officials. We require all our distributors
to sign the Code. Starting from 2022, we track the share of
distributors who have signed the 2018 or 2021 version of the
Distributor Code of Conduct. By the end of 2023, 92% (42%)
of our distributors had signed either the 2021 (89%) or the
2018 (3%) version of the Distributor Code of Conduct.
All the above Codes of Conduct are available on
kone.com.
Anti-corruption and bribery
As a part of our anti-bribery program, we published a new
Anti-Bribery and Corruption (ABC) policy in 2023. The ABC
policy builds on the Code of Conduct to provide guidance to
employees on how to deal with risky ABC situations. It is
available both internally and externally on kone.com in over
30 languages. The policy states KONE's zero tolerance
towards bribery and corruption, explains prohibited
arrangements (including direct and indirect bribery, facilitation
payments, excessive gifts and hospitality, and inappropriate
donations and sponsorships), outlines third party risks,
describes KONE’s risk-based approach towards the
prevention of bribery and corruption, gives examples of
practical risk situations that employees should look out for,
and provides guidance on how to report any suspected
violations.
The policy was accompanied by mandatory ABC e-
learning for all employees. Two versions were issued
comprising different risk scenarios for staff and operatives,
respectively. Separate targeted training on gifts and corporate
hospitality continued during 2023. All new staff at KONE are
also required to complete the competition compliance policy
e-learning, which was updated in 2022.
Respect for human rights
We are committed to respecting and endorsing human rights
including those set out in the International Bill of Human
Board of Directors’ Report
23 KONE Annual Review 2023
Rights, United Nations Guiding Principles on Business and
Human Rights, basic labor rights as defined by the
International Labour Organization including the ILO
Declaration on Fundamental Principles and Rights at Work
and the OECD Guidelines for Multinational Enterprises. We
expect the same level of commitment from our business
partners throughout the value chain. Our commitment and
expectations are laid out in KONE’s Human Rights Policy and
other related policies, including KONE’s Supplier and
Distributor Codes of Conduct. Our Human Rights Policy is
available on kone.com and is reviewed annually.
KONE’s Global Compliance Committee is accountable for
human rights at KONE. Our human rights working group,
reporting to the Global Compliance Committee, continued its
work during 2023 to drive the human rights program forward
across KONE. The human rights program is discussed and
reviewed on a regular basis in the Global Compliance
Committee and the Sustainability Disclosure Board.
In 2023 the human rights working group focused on four
key areas of work:
1) Identifying and driving actions to meet regulatory
requirements
2) Updating KONE’s global human rights impact
assessment and initiating follow-up actions
3) Increasing human rights awareness for employees
and other stakeholders, and
4) Revising KONE’s supplier human rights assessment
program.
We review the working group’s focus areas annually to
ensure effective alignment with the objectives of our human
rights program.
Embedding human rights in KONE strategy,
policies and processes
We identify, assess and prioritize human rights impacts
throughout our business and aim to prevent and mitigate
those impacts on an on-going basis by embedding human
rights in our strategy, policies and processes. Our human
rights due diligence process consists of impact assessments,
third party due diligence, supplier screenings and internal
assessments and surveys. We continuously develop our
human rights due diligence program in order to identify and
address potential risks in our own operations and in our
supply and delivery chain.
We updated our global human rights impact assessment in
2023, with the help of an external consultancy, to reflect our
current operations and business environment and to detect
possible changes in our salient human rights. The
assessment found that our salient human rights remain the
same as in 2019: the health and safety of employees and
workers throughout the value chain, and respect for
individuals’ labor rights (prohibiting forced or child labor,
discrimination, harassment or bullying, and ensuring freedom
of association, collective bargaining, and appropriate working
conditions). Based on the findings of the assessment we
created a follow-up action plan with relevant internal
stakeholders to mitigate the human rights risks across our
own operations and value chain. In 2023 the follow-up action
plan focused on the high-risk areas; medium risk areas will be
addressed in 2024.
In order to identify and address potential risks in our
supply chain, we continued to carry out online and on-site
supplier human rights assessments. We also developed a
new process which will take effect from 2024, led by a
dedicated supplier sustainability team, in which on-site
supplier human rights assessments will be conducted by an
external third party.
In 2023 we extended the volume of third parties in our
compliance screening solution. The screening solution
continuously screens and monitors our relevant suppliers,
customers, and other relevant business partners and third
parties against international adverse media, sanctions and
watchlists.
We regularly communicate our human rights activities and
developments both internally within KONE and externally on
kone.com.
24 KONE Annual Review 2023
Board of Directors’ Report
EU Taxonomy disclosure
EU Taxonomy is a classification system for environmentally
sustainable economic activities. It is a framework to redirect
investments towards more sustainable activities through
technical screening criteria, environmental objectives, Do no
significant harm criteria (DNSH), and minimum social
safeguards. KONE discloses information according to the
Non-Financial Reporting Directive (NFRD) on the
environmentally sustainable economic activities as defined in
the EU Taxonomy.
At this stage, only economic activities with the most
significant need and potential to make substantial contribution
to climate change mitigation and adaptation have been
included within the scope of the Climate Delegated Act. The
majority of KONE’s business, i.e. the manufacturing, service
and modernization of elevators and escalators, does not
currently fall within the scope of the Taxonomy because it is
not among the most high-emitting industries. Nonetheless,
KONE has identified certain taxonomy-eligible and -aligned
activities within its business. We support more sustainable
urban environments and buildings with our energy-efficient
and innovative offering and the use of healthy, functional, and
sustainable materials. Furthermore, we have set ambitious
science-based targets for significant reductions in our
greenhouse gas (GHG) emissions by the year 2030.
Read more about KONE’s environmental sustainability in
the section ‘Non-financial information‘ of this report.
Assessment on taxonomy-eligible turnover
In 2023, EU published the new Taxonomy activities for the
four remaining environmental objectives. Companies are to
report only Taxonomy-eligibility for the first year, alignment is
to be reported from 2024 onwards. We have identified several
aspects in KONE’s business that fit into the new
environmental objectives.
The lifetime of elevators and escalators is typically long
and can be extended through service and modernization. Our
Service business supports the product usage through regular
maintenance, and Modernization offers solutions for
prolonging the product life cycle with upgrades in terms of
energy efficiency, safety, and visual appearance. The
description of the economic activity 5.1 ‘Repair, refurbishment
and remanufacturing’ entails repair and refurbishment of
goods that have been used for their intended purpose before
by a customer. KONE’s activity to partly modernize elevators
and escalators is considered to fit into the activity description
and is therefore reported as Taxonomy-eligible turnover.
KONE has an obligation to sell spare parts to third party
maintenance companies which are maintaining products
manufactured by KONE. This activity fits into the description
of the activity 5.2 ‘Sale of spare parts’ and its turnover is
reported as Taxonomy-eligible.
Activities 5.1 and 5.2 relate to products and spare parts
that are used in products manufactured by economic activities
classified under the NACE code C28.22 ‘Manufacture of lifting
and handling equipment’ and are therefore applicable to
KONE’s business.
Under ‘Information and Communication’ in the EU
Taxonomy, the description of the economic activity 4.1
‘Provision of IT/OT data-driven solutions’ was found to be
suitable for manufacturing of DX Class elevators, their service
as well as 24/7 Connected Service, and therefore their
turnover is reported as taxonomy-eligible. KONE’s DX Class
elevators are equipped with digital platform and API
connectivity to connect elevators with a new suite of solutions
and services that improve the user experience. KONE 24/7
offers intelligent predictive maintenance through a cloud
connection. It helps maximize the product safety by predicting
issues and act before a disruption occurs, thereby improving
the availability of the equipment and helping minimize the
equipment’s environmental footprint.
Activity 4.1 includes the turnover from manufacturing of
DX Class elevators with regenerative drive; other elevators
with regenerative drive are included in activity 3.6.
In addition to elevators and escalators, KONE’s offering
includes automatic building doors. Certain aspects of the door
business have been identified as Taxonomy-eligible. The
description of the economic activity 3.5 ‘Manufacture of
energy efficiency equipment for buildings’ includes NACE
code C25.12, which comprises the manufacture of metal
doors, windows and their frames, shutters and gates as well
as metal room partitions for floor attachment. KONE’s
turnover related to manufacture of sliding doors, swing doors,
revolving doors, turnstiles, overhead doors, roller shutters,
high speed doors, garage doors and gates falls within this
scope and is considered Taxonomy-eligible.
The installation, service, and repair of these door and gate
solutions is also considered Taxonomy-eligible based on the
description of activity 7.3 ‘Installation, maintenance and repair
of energy efficiency equipment’. The revenue related to
activities 3.5 and 7.3 is not material; thus Taxonomy-
alignment has not been pursued.
Assessment on taxonomy-aligned turnover
KONE strives to be the best partner for climate resilient and
sustainable buildings throughout their life cycle. Our
sustainable offering includes best-in-class energy-efficient
solutions and sustainable materials. One of KONE’s
pioneering eco-efficient solutions is regenerative drive. When
descending with a heavily loaded car or ascending with a
lightly loaded car, elevators equipped with a regenerative
drive can recover energy by converting the stored mechanical
energy into electrical energy in the motor, which acts as a
generator. Energy is pushed back into the electrical grid of the
building, where it can be used by other building appliances,
such as HVAC.
From EU Taxonomy, the economic activity 3.6
‘Manufacture of other low carbon technologies’ was found to
be best suited for manufacturing elevators with regenerative
drive. Below we have assessed the activity against the criteria
set out in EU Taxonomy regulation Annex I 2020/852.
To avoid double counting, KONE has re-categorized the
turnover from DX Class elevators manufactured with
regenerative drive from economic activity 3.6 to 4.1. This has
resulted in a slightly lower taxonomy-alignment for the activity
3.6. compared to 2022 disclosure.
Substantial contribution criteria
KONE has reviewed the substantial contribution criteria for
economic activity 3.6 and assessed to be aligned.
While the amount of regenerated energy of the
regenerative drive varies according to the building type, the
saving can potentially amount to 20-40% of the elevator
consumption in mid-rise buildings, thereby demonstrating
substantial lifecycle GHG emission savings compared to the
best performing alternative solution available on the market,
such as modern elevator drive technology without the ability to
feed electricity back to the building network. The best
available elevator technologies have been studied by EU
Commission in 2019 as part of the Ecodesign Directive
review. KONE has conducted third party verified lifecycle
assessments for its elevators which include carbon handprint
Board of Directors’ Report
25 KONE Annual Review 2023
data, as recommended in the elevator product category rules
and EU Commission’s general recommendations. The life
cycle GHG emission savings are calculated according to ISO
standards.
Do no significant harm criteria
Climate change adaptation
KONE has performed physical climate risk assessment as
part of KONE’s annual risk assessment process. KONE’s risk
and opportunity assessment includes Climate Change
Scenario Analysis based on International Panel for Climate
Change RCP scenarios to help to ensure that KONE’s
strategy is resilient to climate change in a range of possible
future states. In the first phase of the analysis, KONE focused
on the qualitative implications of climate-related risks and
opportunities in key strategic performance areas of KONE’s
operations: direct material purchases, manufacturing
operations, logistics and product and service design.
Conclusion from the analysis was that the physical climate
risks are not considered material. KONE has taken mitigating
actions to ensure continued operations globally and actively
develops business continuity management capabilities to
reduce the impact and likelihood of disruptions within its
supply chain.
Read more about KONE’s approach on climate change
adaptation in the section ‘Non-financial information’ of this
report.
Sustainable use and protection of water resources
Environmental impact assessments as part of ISO 14001
certification including water impact assessment have been
performed for all of KONE’s manufacturing units. Throughout
KONE’s global operations, water is mainly used for sanitary
purposes. KONE sources water mainly from municipal water
supplies, and wastewater is released into municipal
wastewater treatment systems that abide by local regulations.
Some of KONE’s manufacturing units use minor quantities
of water in their industrial processes, for example, in painting
and coating processes with closed loop water circulation, and
for cooling purposes. Manufacturing units monitor their water
consumption and wastewater discharge, perform the
necessary sampling, and report to the local authorities
according to the local regulation. Two manufacturing units
have their own wastewater treatment systems, with regular
third party monitoring and permits in place. Based on KONE’s
assessment, none of manufacturing units are located in areas
experiencing high levels of water stress, and activities are
continuously audited.
Pollution prevention and control
KONE has reviewed the criteria (a) to (e) for the DNSH to
pollution prevention and control in Appendix C and found to
be compliant. Criteria (f) requires that ‘the activity does not
lead to the manufacture, placing on the market or use of
substances, whether on their own, or in mixtures or in an
article, in a concentration above 0.1 % weight by weight (w/w),
and meeting the criteria laid down in Article 57 of Regulation
(EC) No 1907/2006 and that were identified in accordance
with Article 59 (1) of that Regulation for a period of at least
eighteen months, except if it is assessed and documented by
the operators that no other suitable alternative substances or
technologies are available on the market, and that they are
used under controlled conditions’.
KONE has systematic practices and code of conducts with
environmental annex requiring that the substances, materials,
components, parts, sub-assemblies, assemblies, products,
labels affixed to products or used in the manufacturing of the
products and their components comply with the regulation laid
out by EU Commission. KONE is constantly striving to limit
the amount of restricted substances in its products and aims
to use only articles which are sustainable from environmental,
technical and economical perspective.
Certain components used in KONE’s products contain
substances which are listed in the REACH Candidate list. As
lead is the most significant substance, KONE has done an
assessment by analyzing if the components containing lead
have suitable alternatives on the market and whether using
these alternatives is technically and economically feasible.
The assessment was conducted and documented by KONE’s
subject matter experts from product design and R&D
Sustainability teams. Based on the analysis conducted, KONE
is not aware of suitable alternative technologies on the market
that would be technically and/or economically feasible. The
use of lead is also essential from a safety perspective, as the
purpose of the elevator’s safety-relevant components such as
electrification and lead-acid battery is to ensure the safety of
the passengers when the elevator is in use, also during
possible power breaks.
Transition to a circular economy
KONE’s contribution to a circular economy focuses on
reducing the materials, energy and other resources used in
solutions and operations. KONE strives to optimize material
use, for example, through robotics and automation, product
design, recycling waste wherever possible, and reusing
packaging materials. KONE aims to maximize the positive
environmental impacts and minimize the adverse ones
throughout the life cycle of our solutions. This extends from
raw material extraction to end-of-life treatment such as
recycling the materials. Up to 90% of the materials in KONE’s
solutions can be recovered. Modernization solutions
contribute to the renovation and repurposing of buildings.
KONE’s products are fit for disassembly and can be reused
and recycled.
The current share of recycled content in KONE’s products
is relatively low, and we work closely with our suppliers to
increase the recycled content in metals, without compromising
the safety or quality of the equipment.
Protection and restoration of biodiversity
Environmental impact assessments as part of ISO 14001
certification have been performed for all of KONE’s
manufacturing units. All required mitigation and compensation
measures for protecting the environment are implemented
based on the local regulatory requirements and included in
KONE’s ISO 14001 certification and auditing processes.
KONE has conducted a screening on its manufacturing
units in 2023 and found that none of the sites are in or near
UNESCO Word Heritage sites, Nature 2000 or other
conservation parks or biodiversity sensitive areas. KONE also
uses this as a long-term (2030) and annual biodiversity target
for its operations.
Minimum social safeguards
Based on the reviewing of the Minimum Safeguards criteria on
human rights, bribery and corruption, taxation and fair
competition, which are laid out by the EU Platform on
Sustainable Finance, KONE has found to be aligned.
KONE’s Code of Conduct, Human Rights Policy, Anti-
Bribery and Corruption Policy and other related policies set
out the principles and standards expected from KONE
employees, KONE companies, suppliers, distributors and
other business partners. KONE is committed to respecting
and endorsing internationally recognized labor and human
26 KONE Annual Review 2023
Board of Directors’ Report
rights standards. KONE has a human rights due diligence
process, consisting of impact assessments, third party due
diligence, supplier screenings and internal assessments and
surveys.
Read more about human rights, bribery and anti-corruption
in the section ‘Non-financial information’ of this report.
Based on KONE’s assessment, KONE fulfils the criteria
set out for the economic activity 3.6. Consequently,
manufacturing of elevators with a regenerative drive is
reported as Taxonomy-aligned activity.
CapEx and OpEx
KONE’s vehicle fleet consists of about 18,000 vehicles. Based
on the description of activity 6.5 ‘Transport by motorbikes,
passenger cars and commercial vehicles‘, we have concluded
that the leasing costs of KONE’s entire vehicle fleet are
Taxonomy-eligible as related to category C ‘Purchase of
output from other companies’ Taxonomy-eligible economic
activities’. Taxonomy-alignment could not be determined due
to limited information on the fulfilment of DNSH criteria. We
did not identify any category A or B related capital
expenditure.
We did not identify any turnover-related or standalone
Taxonomy-eligible operational expenditure.
For OpEx, KONE has defined the total operational
expenditure (denominator), MEUR 198, based on the
methodology specified in the Taxonomy Regulation. It
includes research and development costs of KONE, in
addition to cost related to maintenance and repair of the
facilities and buildings, as well as short-term lease expenses.
27 KONE Annual Review 2023
Board of Directors’ Report
Proportion of turnover from products or services associated
with Taxonomy-aligned economic activities
Financial year N
2023
Substantial contribution criteria
DNSH criteria
Economic activities
Code
Turnover
Proportion of turnover, year
N
Climate change mitigation
Climate change adaptation
Water
Pollution
Circular economy
Biodiversity
Climate change mitigation
Climate change adaptation
Water
Pollution
Circular economy
Biodiversity
Minimum safeguards
Proportion of taxonomy
aligned (A.1) or eligible
(A.2) turnover, year N
-1
Category enabling activity
Category transitional
activity
MEUR
%
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1 Environmentally sustainable activities (taxonomy-aligned)
Manufacture of other low carbon technologies
3.6
1,110
10.1%
Y
N/EL
N/EL
N/EL
N/EL
N/EL
Y
Y
Y
Y
Y
Y
Y
14.1%
E
Turnover of environmentally sustainable activities
(taxonomy-aligned) (A.1)
1,110
10.1%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Y
Y
Y
Y
Y
Y
Y
14.1%
Of which Enabling
1,110
10.1%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Y
Y
Y
Y
Y
Y
Y
14.1%
E
Of which Transitional
A.2 Taxonomy-eligible but not environmentally sustainable
activities (not Taxonomy-aligned activities)
EL;
N/EL
EL;
N/EL
EL;
N/EL
EL;
N/EL
EL;
N/EL
EL;
N/EL
Manufacture of energy efficiency equipment for buildings
3.5
17
0.2%
EL
N/EL
N/EL
N/EL
N/EL
N/EL
0.2%
Provision of IT/OT data-driven solutions
4.1
2,713
24.8%
N/EL
N/EL
N/EL
N/EL
EL
N/EL
Repair, refurbishment and remanufacturing
5.1
940
8.6%
N/EL
N/EL
N/EL
N/EL
EL
N/EL
Sale of spare parts
5.2
11
0.1%
N/EL
N/EL
N/EL
N/EL
EL
N/EL
Installation, maintenance and repair of energy efficiency
equipment
7.3
61
0.6%
EL
N/EL
N/EL
N/EL
N/EL
N/EL
0.6%
Turnover of Taxonomy-eligible but not environmentally
sustainable activities (not Taxonomy-aligned activities)
(A.2)
3,743
34.2%
2.1%
0.0%
0.0%
0.0%
97.9%
0.0%
0.8%
A. Turnover of Taxonomy eligible activities (A.1 + A.2)
4,853
44.3%
24.5%
0.0%
0.0%
0.0%
75.5%
0.0%
14.9%
B. TAXONOMY-NON ELIGIBLE ACTIVITIES
Turnover of Taxonomy-non-eligible activities
6,099
55.7%
TOTAL
10,952
100.0%
EL = Eligible; N/EL = Non-eligible
Total turnover as per KONE group reported figures. KONE’s principles for defining turnover and capital expenditure can be found in sections 2.1., 4.3 and 4.4. in the Financial Statements.
Board of Directors’ Report
28 KONE Annual Review 2023
Proportion of CapEx from products or services associated
with Taxonomy-aligned economic activities
Financial year N
2023
Substantial contribution criteria
DNSH criteria
Economic activities
Code
CapEx
Proportion of CapEx, year
N
Climate change mitigation
Climate change adaptation
Water
Circular economy
Pollution
Biodiversity
Climate change mitigation
Climate change adaptation
Water
Circular economy
Pollution
Biodiversity
Minimum safeguards
Proportion of Taxonomy
aligned (A.1.) or eligible
(A.2.) CapEx, year N
-1
Category enabling activity
Category transitional
activity
MEUR
%
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1 Environmentally sustainable activities (taxonomy-aligned)
CapEx of environmentally sustainable activities
(taxonomy-aligned) (A.1)
Of which Enabling
Of which Transitional
A.2 Taxonomy-eligible but not environmentally sustainable
activities (not Taxonomy-aligned activities)
EL;
N/EL
EL;
N/EL
EL;
N/EL
EL;
N/EL
EL;
N/EL
EL;
N/EL
Transport by motorbikes, passenger cars and commercial
vehicles
6.5
89
17.4%
EL
N/EL
N/EL
N/EL
N/EL
N/EL
26.5%
CapEx of Taxonomy-eligible but not environmentally
sustainable activities (not Taxonomy-aligned activities)
(A.2)
89
17.4%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
26.5%
A. CapEx of Taxonomy eligible activities (A.1 + A.2)
89
17.4%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
26.5%
B. TAXONOMY-NON ELIGIBLE ACTIVITIES
CapEx of Taxonomy-non-eligible activities
424
82.6%
TOTAL
513
100.0%
EL = Eligible; N/EL = Non-eligible
Total CapEx as per KONE group reported figures. KONE’s principles for defining turnover and capital expenditure can be found in sections 2.1., 4.3 and 4.4. in the Financial Statements.
29 KONE Annual Review 2023
Board of Directors’ Report
Proportion of OpEx from products or services associated with
Taxonomy-aligned economic activities
Financial year N
2023
Substantial contribution criteria
DNSH
Economic activities
Code
OpEx
Proportion of OpEx, year
N
Climate change mitigation
Climate change adaptation
Water
Pollution
Circular economy
Biodiversity
Climate change mitigation
Climate change adaptation
Water
Pollution
Circular economy
Biodiversity
Minimum safeguards
Proportion of Taxonomy
aligned (A.1) or eligible
(A.2) OpEx, year N
-1
Category enabling activity
Category transitional
activity
MEUR
%
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y; N;
N/EL
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1 Environmentally sustainable activities (taxonomy-aligned)
OpEx of environmentally sustainable activities
(taxonomy-aligned) (A.1)
Of which Enabling
Of which Transitional
A.2 Taxonomy-eligible but not environmentally sustainable
activities (not Taxonomy-aligned activities)
EL;
N/EL
EL;
N/EL
EL;
N/EL
EL;
N/EL
EL;
N/EL
EL;
N/EL
OpEx of Taxonomy-eligible but not environmentally
sustainable activities (not Taxonomy-aligned activities)
(A.2)
0
0.0%
A. OpEx of Taxonomy eligible activities (A.1+ A.2)
0
0.0%
B. TAXONOMY-NON ELIGIBLE ACTIVITIES
OpEx of Taxonomy-non-eligible activities
198
100.0%
TOTAL
198
100.0%
EL = Eligible; N/EL = Non-eligible
30 KONE Annual Review 2023
Board of Directors’ Report
Taxonomy eligibility and alignment per environmental
objective
CCM = Climate Change Mitigation
CCA = Climate Change Adaptation
WTR = Water and Marine Resources
CE = Circular Economy
PPC = Pollution Prevention and Control
BIO = Biodiversity and Ecosystems
Proportion of turnover/Total turnover
Proportion of CapEx/Total CapEx
Proportion of OpEx/Total OpEx
Taxonomy-aligned per
objective
Taxonomy-eligible per
objective
Taxonomy-aligned per
objective
Taxonomy-eligible per
objective
Taxonomy-aligned per
objective
Taxonomy-eligible per
objective
CCM
10.1%
10.8%
CCM
0.0%
17.4%
CCM
0.0%
0.0%
CCA
0.0%
0.0%
CCA
0.0%
0.0%
CCA
0.0%
0.0%
WTR
0.0%
0.0%
WTR
0.0%
0.0%
WTR
0.0%
0.0%
CE
0.0%
33.5%
CE
0.0%
0.0%
CE
0.0%
0.0%
PPC
0.0%
0.0%
PPC
0.0%
0.0%
PPC
0.0%
0.0%
BIO
0.0%
0.0%
BIO
0.0%
0.0%
BIO
0.0%
0.0%
31 KONE Annual Review 2023
Board of Directors’ Report
Changes in the Executive Board
KONE’s new operating model came into effect on July 1,
2023, resulting in changes to the Executive Board. Led by
President and CEO Henrik Ehrnrooth, the Executive Board
comprised of the following members: Joe Bao (Executive Vice
President (EVP), Greater China), Axel Berkling (EVP,
Strategy & Transformation), Hugues Delval (EVP, Commercial
& Operations), Johannes Frände (EVP, Legal), Samer Halabi
(EVP, Asia-Pacific, Middle East and Africa), Ilkka Hara (Chief
Financial Officer), Mikko Korte (EVP, Supply Chain), Karla
Lindahl (EVP, Europe), Tomio Pihkala (EVP, Technology &
Innovation), Ken Schmid (EVP, Americas) and Susanne
Skippari (EVP, People & Communications).
In conjunction with this change, Tricia Weener, Executive
Vice President, Marketing & Communications and Maciej
Kranz, Executive Vice President, Technology & Innovation
stepped down from their roles as Executive Board members
on July 1, 2023.
On October 25, 2023, KONE announced that Philippe
Delorme had been appointed President and CEO as of
January 1, 2024, following a release published on October 2,
2023, about Henrik Ehrnrooth’s intention to step down from
the role of President and CEO. Henrik Ehrnrooth will continue
as Executive Advisor until the end of March 2024 to support
the transition and induction of the new CEO.
On October 11, 2023, KONE announced that Axel Berkling
had been appointed Executive Vice President, Commercial &
Operations. In the role, Axel succeeded Hugues Delval, who
decided to leave KONE on October 12, 2023, to pursue other
opportunities. Axel continued to also lead the Strategy &
Transformation organization until the appointment of a
successor. On December 19, 2023, KONE announced that
Nicolas Alchal, Managing Director for KONE Middle East,
Türkiye, and Africa, had been appointed Executive Vice
President, Strategy & Transformation as of Jan 1, 2025.
Before starting in this role in the beginning of 2025, Nicolas
will act as an interim Executive Vice President for Europe
Area, from March 1, 2024, onwards, when the current position
holder, Karla Lindahl, starts her maternity leave. Karla will
return to the position of Executive Vice President, Europe in
early 2025. On the same date, Kaori Uehigashi was named
interim Executive Vice President for Strategy &
Transformation organization as of January 4, 2024, and she
will act in this position until the end of 2024. Kaori is currently
Managing Director and Partner at Boston Consulting Group
(BCG) and has most recently acted as the Managing Partner
for BCG in Finland. Both Nicolas and Kaori will report to
Philippe Delorme, President and CEO of KONE as of January
1, 2024.
As of January 1, 2024 KONE’s Executive Board consisted
of the following members: Philippe Delorme (the President
and CEO), Joe Bao (EVP, Greater China), Axel Berkling
(EVP, Commercial & Operations), Johannes Frände (Legal
Counsel), Samer Halabi (EVP, Asia-Pacific, Middle East and
Africa), Ilkka Hara (Chief Financial Officer), Mikko Korte (EVP,
Supply Chain), Karla Lindahl (EVP, Europe), Tomio Pihkala
(EVP, Chief Technology Officer), Ken Schmid (EVP,
Americas), Susanne Skippari (EVP, People &
Communications) and Kaori Uehigashi (interim EVP, Strategy
& Transformation).
Other events
In 2007, a decision was issued by the European Commission
concerning alleged local anticompetitive practices before early
2004 in Germany, Luxembourg, Belgium and the Netherlands
by leading elevator and escalator companies, including
KONE’s local subsidiaries. Also, the Austrian Cartel Court
issued in 2007 a decision concerning anti-competitive
practices that had taken place before mid-2004 in local
Austrian markets by leading elevator and escalator
companies, including KONE’s local subsidiary. As previously
announced by KONE, a number of civil damage claims by
certain companies and public entities relating to the two 2007
decisions, are pending in related countries. The claims have
been made against various companies concerned by the
decisions, including certain KONE companies. All claims are
independent and are progressing procedurally at different
stages. The total capital amount claimed jointly and severally
from all of the defendants together was EUR 64 million at the
end of December 2023 (December 31, 2022: EUR 81 million).
The total capital amount claimed decreased due to a
settlement during the fourth quarter. KONE’s position is that
the claims are without merit. No provision has been made.
32 KONE Annual Review 2023
Board of Directors’ Report
Most significant risks
KONE is exposed to risks that may arise from its operations or
changes in the operating environment. The most significant
risk factors described below can potentially have an adverse
effect on KONE’s business operations and financial position
and, as a result, on the value of the company. Other risks,
which are currently either unknown or considered immaterial
to KONE may, however, become material in the future.
Strategic risks
The demand for KONE’s products and services and the
competitive environment are impacted by the general
economic cycles and especially the level of activity within the
construction industry. Volatile inflation and high interest rates
have weakened the economic outlook and construction
markets especially in Europe and in the US, which represents
a risk to KONE’s business and profitability. KONE aims to
mitigate these risks with more dynamic pricing strategies and
contract models as well as ongoing actions to improve
productivity and lower product costs.
As China accounts for approximately a quarter of KONE’s
sales, a sustained market decline in the Chinese construction
sector represents a risk for KONE’s financial performance.
Low consumer confidence and continued liquidity constraints
among Chinese property developers were holding back the
recovery of the construction industry during 2023. KONE’s
customer portfolio is well diversified, which limits individual
customer risks.
Geopolitical risks, business environment unpredictability
and disruptions in global supply chains may impact KONE’s
main markets and expose KONE to business disruptions and
profitability risks. In addition to the level of market demand,
the competitiveness of KONE’s offering is a key driver for
growth and profitability. A failure to anticipate or address
changes in customer requirements and in competitors’
offerings, ecosystems and business models or in the
regulatory environment could result in a deterioration of the
competitiveness of KONE’s offering. Furthermore, structural
changes in the competitive landscape of the elevator and
escalator industry, such as increased competition and
customer consolidation in China, could affect market
dynamics and KONE’s market share.
Operational risks
Empowered employees with relevant competencies and skills
are key to the successful execution of our strategy. With
business models and ways of working changing in the
elevator and escalator industry, KONE needs new
organizational capabilities, as well as new competencies and
talent on the individual employee level in the field of, for
example, digitalization. At the same time, the competition over
talent, such as skilled field workforce, is increasing. Securing
the needed resources and their competence management is
critical. A failure to develop and retain the required capabilities
or obtain them through recruitment could have an adverse
impact on KONE’s growth and profitability.
The majority of components used in KONE’s supply chain
are sourced from external suppliers, a significant number of
which are located in China. KONE also subcontracts a
significant amount of installation activity, outsources certain
business support processes and works with partners in e.g.
digital services and logistics. This exposes KONE to supply
chain and logistics constraints, risks related to component and
subcontracted labor availability and cost as well as to
continuity risk in partnerships. A failure to secure the needed
materials, components or resources, or quality issues within
these, could cause business disruptions, rescheduling of
orders and cost increases. Labor availability constraints may
also impact progress at construction sites. In 2023, KONE
continued to use its global supply network to manage supply
chain disruptions as well as uncertainties in the global
material markets and logistics.
As one of the leading companies in the industry, KONE
has a strong brand and reputation. Issues that impact the
company’s reputation or brand could have an effect on
KONE’s business and financial performance. Such
reputational risks could materialize in the case of e.g. safety,
cybersecurity or non-compliance incidents, major delivery
issues or product or service quality issues.
Hazard, security and incidental risks
KONE’s business activities are dependent on the
uninterrupted operation, quality and reliability of its
manufacturing facilities, sourcing channels, operational
service solutions and logistics processes. The operations of
KONE, its suppliers and customers utilize information
technology extensively and KONE’s business is dependent on
the quality, integrity, availability and confidentiality of
information. Thus, KONE is exposed to IT disruption and
cybersecurity risks, as operational information systems and
products may be vulnerable to interruption, loss or
manipulation of data, or malfunctions which can result in
disruptions in processes and equipment availability.
Geopolitical tensions, for instance those related to the war in
Ukraine, may lead to cyber, hybrid and even conventional
attacks causing local and global digital disturbances that may
impact KONE, our customers and our suppliers.
A breach of sensitive employee or customer data may
result in significant penalties as well as reputational damage.
Such incidents could be caused by, including but not limited
to, cyber-crime, cyber-attacks, ransomware, information theft,
fraud, or inadvertent actions from our employees and vendors.
Physical damage caused by fire, extreme weather
conditions, natural catastrophes or terrorism, among other
things, could also cause business interruption for KONE or its
suppliers.
Financial risks
The majority of KONE’s sales and result are denominated in
currencies other than the euro, which exposes KONE to risks
arising from foreign exchange rate fluctuations. KONE is also
exposed to counterparty risks related to financial institutions,
through the significant amounts of liquid funds deposited with
financial institutions, in the form of financial investments and
in derivatives. Additionally, KONE is exposed to risks related
to liquidity and payment discipline of its customers, which may
impact cash flow or lead to credit losses, especially in China.
In 2023, the bad debt provisions increased somewhat, mainly
in China. Significant changes in local financial or taxation
regulation could also have an impact on KONE’s financial
performance, liquidity, and cash flow. For further information
on financial risks, please refer to notes 2.4, 3.2 and 5.3 in the
Financial Statements for 2023.
33 KONE Annual Review 2023
Board of Directors’ Report
Risks
Mitigation actions
Weakening of the global economic environment
KONE strives to continuously develop its competitiveness in all regions and businesses. KONE has a wide geographic presence, global manufacturing
capabilities and supply network, as well as a balanced business portfolio with a high share of Service business.
Geopolitical tensions impacting the competitiveness of
KONE’s supply chain, leading to increased costs or
causing potential disruptions
KONE actively monitors the development of the applicable and relevant regulations, policies and trade rules, prepares for alternative scenarios and
evaluates the competitiveness and viability of KONE’s supply chain and sourcing channels. KONE is taking actions to mitigate the impact of tariffs, for
example by applying for tariff exemptions when applicable. KONE also applies increased scrutiny over business operations that may be affected by
international trade restrictions or other geopolitical actions.
Changes in the competitive or customer landscape,
customer requirements or competitors’ offerings
impacting KONE’s competitiveness
KONE aims to be the industry leader with its competitive offering by investing in research and development and by taking an open innovation approach.
KONE also closely follows emerging industry and market trends and actively monitors opportunities for industry consolidation.
Increasing material, fuel and/or logistics costs
weakening KONE’s profitability
KONE aims to offset cost increases by improving the margin of orders received and adopting dynamic pricing and contract models which allow KONE to
pass on increased supply costs. Improving pricing, securing productivity gains and lowering product costs remains high on KONE’s agenda.
A failure to secure and develop the needed
organizational capabilities and competencies
KONE continuously evaluates the skills and competences required for the execution of the selected strategy and develops and/or acquires these from
internal talent pools or externally. KONE also has extensive training programs in place to develop and retain critical talents.
Risks related to component and subcontracted labor
availability
KONE’s sourcing processes aim to identify critical suppliers and supply categories and implement alternative sources, long-term agreements, last-buy
options and other measures to ensure the availability of the supply. KONE has also developed multinational subcontractor pools to ensure subcontractor
capacity on a regional level. Subcontractors’ competences and capabilities are monitored and developed continuously, similarly as with own employees.
The semiconductor market is monitored and the risk of shortages managed with dual sourcing and active involvement of supply chain partners among other
actions.
Product integrity, safety or quality issues as well as
issues with reputation
To mitigate product risks, KONE has strict quality control processes for product design, supply, manufacturing, installation and service. In addition, KONE
aims for transparent and reliable communication to prevent reputational risks and to manage potential incidents. KONE also has stringent corporate
governance principles in place.
Interruptions to KONE’s or its suppliers’ operations
KONE actively develops business continuity management capabilities to reduce the impact and likelihood of disruptions within its supply chain. Furthermore,
KONE monitors the operations, business continuity management capabilities, financial strength and cybersecurity of its key suppliers. In addition, KONE
aims to secure the availability of alternative sourcing channels for critical components and services. KONE also has a global property damage and business
interruption insurance program in place.
KONE’s global supply chain helps mitigate the risk of interruptions. KONE has 10 manufacturing facilities in 7 countries, multiple distribution centers and a
large supplier network across the globe, which helps to mitigate the impacts from potential disruptions in individual locations or countries.
IT system interruptions and cybersecurity risks
KONE’s cybersecurity management system is certified according to ISO 27001. KONE’s security policies define controls to safeguard premises, information
and information systems which are both in development and in operation. The controls apply to both KONE’s internal IT systems and customer-facing digital
services. KONE works with third-party security service providers and trusted technology partners to manage the risks and to detect cybersecurity incidents
and to respond and recover in a timely manner. KONE conducts tests, reviews and exercises to identify areas of risk and to ensure the appropriate
preparedness. The company continues to invest in its cybersecurity capabilities based on these findings. KONE also has a global cyber insurance program
in place.
Financial risks
KONE applies centralized risk management in accordance with the KONE Treasury Policy. More information on financial risk management can be found in
notes 2.4, 3.2 and 5.3 of KONE’s Financial Statements 2023.
Risk management
34 KONE Annual Review 2023
Board of Directors’ Report
Risks and risk management related to the
reporting of non-financial information
The assessment and analysis of KONE’s most significant
risks also covers non-financial risks. In line with the
requirements of the Finnish Accounting Act, KONE has
identified the most significant non-financial risks regardless of
their materiality for KONE. In addition, KONE applies the
guidelines of the Task Force on Climate-Related Financial
Disclosures (TCFD) on the reporting of climate-related risks.
The typical effect of the non-financial risks materializing
would be reputational damage to KONE or a negative impact
on the surrounding society, the environment or individuals. In
addition to the risk mitigation actions described below, KONE
aims for transparent and reliable communication to prevent
reputational risks and enable proactive management and
learning from incidents, should they occur.
Climate and environmental risks
We see that climate and environmental risks may have a
negative impact on our business in the short to medium term.
While the impact is not necessarily significant in the near
term, we expect climate risks, in particular, to increase in
relevance and potential impact. Overall, we identify, assess
and manage climate and environmental risks as an integral
part of our company-wide business risk management process
and ISO 14001 environmental management system. Certain
KONE functions and locations, e.g. the Supply Chain function
or selected operational sites, conduct detailed climate and
environmental risk assessments according to relevant
business requirements.
Climate and environmental risks are classified as transition
risks and physical risks to KONE, as well as risks of KONE’s
business activities having negative impacts on the climate.
Among the most relevant climate-related risks for KONE are
acute physical risks, extreme weather events such as
tornadoes, hurricanes, hailstorms and thunderstorms, which
may cause disruptions in the delivery chain or interruptions in
our own manufacturing, installation or maintenance activities.
Similarly, chronic physical risks, such as heavy rain and
floods, or extreme heat waves and droughts, may disrupt
these activities or logistics routes. KONE’s products are also
exposed to physical risks and possible damages due to
changing climate conditions and extreme weather events.
To mitigate physical risks, KONE needs to be able to
transfer procurement from its own or its supplier’s
manufacturing unit or distribution center to another location in
order to back up supply chain and logistics routes in case of
disruptive events. We actively develop our business continuity
with regards to component availability and interruptions to our
own or suppliers’ operations. We use, for example, dedicated
location-based software tools to regularly monitor our supply
chain locations for risks related to extreme weather events
such as fires, floods or hurricanes. In terms of our product
development, we apply design specifications and specific
procedures that aim to ensure product resilience even in
harsh and changing environmental conditions. Rigorous
environmental testing is a part of KONE’s product
development to ensure that our products sustain exceptional
and changing weather conditions, such as temperature
variations and moisture.
Among KONE’s most relevant transition risks are potential
shifts in the supply and demand for low carbon materials,
electricity and fuel, which may increase operating costs in the
short to medium term. KONE's solutions are designed for long
life-cycle use and our Service and Modernization solutions
enable low lifetime energy consumption and greenhouse gas
emissions. However, the risk of not being able to provide
competitive technological improvements or innovations that
support the transition to a low-carbon, energy-efficient
economy may impact customers’ demand for KONE’s
solutions and services and thereby KONE’s business
detrimentally. On the other hand, moving to more expensive
low carbon technology may negatively impact profitability in
the short to medium term, should a significant number of
customers prefer low-cost solutions. Emerging climate-related
regulation may also impact our operations. For example, the
need to transition towards more sustainable mobility solutions
is evident for KONE’s current service and benefit vehicle fleet.
The majority of KONE's energy consumption in our own
operations comes from fuel consumption from fleet activities.
To mitigate market transition risks, KONE evaluates
plausible scenarios for market supply and demand, as well as
the impact of emerging regulation in our high-level business
plans. KONE is an active member in relevant industry forums
and research consortiums and proactively monitors the
regulatory landscape. To mitigate technology transition risk,
KONE bases its innovation work on the needs of our
customers and equipment users. All in all, KONE sees the
transition towards sustainable solutions as a source of
innovation and competitive edge rather than a threat. As part
of KONE’s climate pledge, we have set ambitious greenhouse
gas reduction targets for our offering and operations and aim
to have carbon neutral operations by 2030. The pledge will
guide our work for more climate-friendly products, services
and ways of working, and we actively collaborate with our
suppliers and partners to achieve our targets.
Climate change scenario analysis
In 2022, KONE expanded its risk and opportunity assessment
to include Climate Change Scenario Analysis, as
recommended by TCFD, to help ensure that our strategy is
resilient to climate change in a range of possible future states.
In the first phase of the analysis, we focused on the qualitative
implications of climate-related risks and opportunities in key
strategic performance areas of our operations: direct material
purchases, manufacturing operations, logistics and product
and service design.
The scenarios used in KONE’s Climate Change Scenario
Analysis are Shared Socio-economic Pathways (SSPs) SSP1,
SSP2 and SSP3. The SSPs have been created by an
international team of climate scientists, economists and
energy system modelers. SSP scenarios characterize
possible future development pathways, making assumptions
on changes in socio-economic factors, together with
assumptions about the ambition level for mitigating climate
change. These are translated into respective scenarios of
greenhouse gas emissions by the International Panel for
Climate Change (RCP scenarios). The resulting climate
change projections describe a range of plausible future
climates and mean temperatures, from a pessimistic high-
carbon scenario (4 °C warming pathway) to a middle of the
road scenario (2.7 °C warming pathway), further to a low-
carbon scenario (1.5 °C warming pathway) that meets the
ambitions of the 2015 Paris Agreement.
KONE is committed to the 1.5 °C pathway. In this
scenario, climate change mitigating actions are strong, and
the Paris Climate Agreement goals are met. Regulations are
ambitious, globally consistent, and aiming at a low-carbon
economy. The demand for sustainable and climate resilient
solutions, a full transformation to renewable energy and
electrification as well as the focus on energy efficiency create
opportunities for KONE. Even in the 1.5°C scenario, physical
changes may cause occasional disruptions to KONE factories
and supply chain.
In the 2.7 °C scenario, insufficient actions to stop climate
change will, in the longer term, lead to major changes
globally, causing disruptions in the availability of certain raw
35 KONE Annual Review 2023
Board of Directors’ Report
materials and increased price volatility. Global supply chains
and logistic routes may face notable disruptions, affecting
KONE’s business.
In the 4°C scenario emissions continue to rise, transition to
low-carbon economy is disorganized, economic growth is
preferred over climate action and overconsumption of
resources continues. Climate policies are fragmented, carbon
markets non-integrated, and carbon leakage increases due to
large differences in carbon regulations between countries.
The demand for sustainable and climate resilient solutions
grows in advanced economies, whereas in developing
markets customers may not be willing to pay for such
solutions. Extreme weather conditions increase disruptions in
supply chains and logistic routes, which may lead to
significant logistic cost increases.
Differences between the three scenarios are expected to
emerge more towards 2050 as extreme weather events and
chronic changes become more intense, especially in the 4°C
scenario. In the 1.5°C scenario, transitional impacts, such as
regulations, are more notable, and in the 4°C scenario
physical impacts, such as storms, floods and drought,
dominate.
In 2023, we continued the dialogue by and between
KONE’s internal stakeholders regarding, among others, the
resilience of our supply chain and logistics, energy-efficient
choices in the full scope of our business activities, R&D
investment into low-carbon life cycle products, and the
offering of services to support our customers in the changing
climate conditions. We will further integrate these deliverables
into our strategic planning in 2024.
Social and employee related risks
Safety is a top priority at KONE, and potential safety incidents
are among the most significant social and employee related
risks. Unhealthy working conditions or compromises on
workplace safety, exposing KONE’s own or our sub-
contractors’ employees, could damage KONE’s reputation
and employee relations. Incidents are mitigated through, for
example, extensive training and safety awareness increasing
activities, consistent safety management practices,
standardized maintenance and installation methods and
regular process audits. We also identify and assess risks
related to any type of bullying, harassment, equal employment
practices, working conditions and any form of discrimination.
We address such risks by having adequate policies and
processes in place and by training our managers and
employees. We offer our employees and third parties
channels for reporting misconduct and there is zero tolerance
for this type of behavior. Overall, we see a safe workplace
with an inclusive and caring culture as an opportunity to
improve employee wellbeing, engagement, and productivity,
and at the same time increase KONE’s attractiveness as an
employer and business partner.
Both safety and quality are a priority in product design,
supply, manufacturing, installation and service and they
involve strict quality controls. We also acknowledge that our
activities, such as major repairs in public infrastructure may
affect the daily life of many people. We follow globally
implemented principles in how to manage potential incidents
and implement improvements.
Human rights related risks
KONE’s human rights program is reviewed on a regular basis
by our Global Compliance Committee and a cross-functional
human rights working group drives forward the program,
focusing in 2023 on regulatory requirements, updating our
global human rights impact assessment, increasing
awareness about human rights among employees and other
stakeholders, and revising our supplier human rights
assessment program.
Our updated human rights impact assessment found that
KONE’s salient human rights continue to be the health and
safety of employees and workers throughout the value chain,
and respect for individuals’ labor rights (prohibiting forced or
child labor, discrimination, harassment or bullying, and
ensuring freedom of association, collective bargaining, and
appropriate working conditions). A follow-up action plan was
developed in 2023 to mitigate the highest risks; medium risk
areas will be addressed in 2024.
All our suppliers and installation subcontractors are
expected to sign KONE’s Supplier Code of Conduct, which
sets out our ethical business practice requirements, including
the standards we require in terms of labor and human rights.
We carry out online and on-site supplier human rights
assessments in order to identify and address potential risks in
our supply chain. KONE introduced a Human Rights Policy in
2022, which sets out our commitment to respect human rights
and explains how we identify, assess, prioritize and mitigate
human rights impacts throughout our business operations.
Anti-corruption and bribery related risks
KONE requires its employees and partners to adhere to high
ethical standards and to comply with its Code of Conduct,
Distributor Code of Conduct and Supplier Code of Conduct.
These codes cover numerous compliance topics, including
competition law, trade sanctions compliance, labor and
human rights issues, as well as prohibiting corruption and
bribery. In 2023 we also launched a new Anti-
Bribery&Corruption policy and e-learning for all employees.
Unethical business practices among KONE’s employees
or various stakeholders could cause reputational damage for
KONE as well as a possible financial impact. The risks of such
behaviors and practices materializing are included in the
scope of KONE’s regular audit programs. KONE utilizes a
screening solution, which monitors third party entities against
sanctions, watch lists and adverse media attention, including
corruption and human rights issues. Processes under our
Global Delegation of Authority policy help to mitigate the risk
of unauthorized payments, donations and sponsorships. The
most important action for internal mitigation continues to be
the development of KONE’s corporate culture through training
and awareness building. Ethics & Compliance KPIs and
actions have been integrated into our Sustainability strategy.
All employees are required to complete at least one annual
training on ethics & compliance, and supplier and distributor
Code of Conduct sign-up rates are tracked annually. We see
that ethical business practices provide a competitive edge,
protect business relationships with stakeholders and help to
build a strong reputation.
36 KONE Annual Review 2023
Board of Directors’ Report
Decisions of the Annual General
Meeting
KONE Corporation's Annual General Meeting was held in
Helsinki on February 28, 2023.
The meeting approved the financial statements,
considered the Remuneration Report for governing bodies
and discharged the responsible parties from liability for the
financial period January 1-December 31, 2022.
The number of Members of the Board of Directors was
confirmed as nine. Re-elected as Members of the Board were
Matti Alahuhta, Susan Duinhoven, Antti Herlin, Iiris Herlin,
Jussi Herlin, Ravi Kant and Krishna Mikkilineni. Marika
Fredriksson and Marcela Manubens were elected as new
Members to the Board of Directors.
At its meeting held after the General Meeting on February
28, 2023, the Board of Directors of KONE Corporation elected
from among its members Antti Herlin as its Chairman and
Jussi Herlin as Vice Chair.
Susan Duinhoven was elected as Chair and Matti
Alahuhta, Marika Fredriksson and Jussi Herlin as members of
the Audit Committee. Susan Duinhoven, Matti Alahuhta and
Marika Fredriksson are independent of both the company and
of significant shareholders.
Jussi Herlin was elected as Chair and Matti Alahuhta, Antti
Herlin and Ravi Kant as members of the Nomination and
Compensation Committee. Matti Alahuhta and Ravi Kant are
independent of both the company and of significant
shareholders.
The General Meeting confirmed an annual compensation
of EUR 220,000 for the Chairman of the Board, EUR 125,000
for the Vice Chair and EUR 110,000 for Board Members. Of
the annual remuneration, 40 percent will be paid in class B
shares of KONE Corporation and the rest in cash. In addition,
the General Meeting confirmed a separate annual
compensation to the members of the board committees: Chair
of the Audit Committee: EUR 20,000 and members of the
Audit Committee: EUR 10,000, and Chair of the Nomination
and Compensation Committee: EUR 20,000 and members of
the Nomination and Compensation Committee: EUR 10,000.
The annual compensation of the members of the board
committees is paid in cash. In addition, it was resolved that
compensation is not paid to a Board Member who is
employed by the company.
The General Meeting approved the authorization for the
Board of Directors to repurchase KONE's own shares.
Altogether no more than 52,930,000 shares may be
repurchased, of which no more than 7,620,000 may be class
A shares and 45,310,000 class B shares. The authorization
will be valid until the conclusion of the following annual
general meeting, however, at the latest until 30 June 2024.
Furthermore, the General Meeting authorized the Board of
Directors to decide on the issuance of shares as well as the
issuance of options and other special rights entitling to shares
referred to in Chapter 10, Section 1 of the Limited Liability
Companies Act. The number of shares to be issued based on
this authorization shall not exceed 7,620,000 class A shares
and 45,310,000 class B shares. The Board of Directors
decides on all the conditions of the issuance of shares and of
special rights entitling to shares. The authorization concerns
both the issuance of new shares as well as the transfer of
treasury shares. The issuance of shares and of special rights
entitling to shares may be carried out in deviation from the
shareholders' pre-emptive rights (directed issue). The
authorization will be valid until the conclusion of the following
annual general meeting, however, at the latest until 30 June
2024.
The General Meeting decided to amend the Articles of
Association by updating the article concerning the line of
business of the company (2§) and changing the article
concerning the general meeting (10§) so that the general
meeting can be held completely without a meeting venue as a
so-called remote meeting.
The audit firm Ernst & Young Oy was nominated as the
auditor for the term 2023.
37 KONE Annual Review 2023
Board of Directors’ Report
Share-based incentive plans
KONE has two separate share-based incentive plans, one
performance share plan and one restricted share plan.
The performance share plan emphasizes profitable growth
and sustainability. It consists of annually commencing
individual share plans, each with a three-year rolling
performance period. The plans vest and are delivered in one
portion after the three years, based on accumulated outcomes
for the three-year performance period. If the participant's
employment or service relationship with KONE Group
terminates before the end of the performance period, the
participant, as a rule, forfeits the share award without
compensation. The number of shares earned by participants
under the share-based incentive plans are determined on
gross basis with deduction for taxes made when applicable
before delivery of the shares to the participants. The
arrangements initiated in previous years included both cash
and equity settled arrangements. Current arrangements are
equity settled only.
The target group and targets within the plan as well as
possible rewards are decided upon annually by the Board. As
part of the long-term incentive plan for the top management, a
long-term target for their ownership has been set. For the
Executive Board members, the long-term ownership target is
that the members have an ownership of KONE shares
corresponding to at least five years’ annual base salary. For
other selected top management positions, the ownership
target is at least two years’ base salary.
The 2023 long-term incentive plan is targeted to
approximately 570 top leaders, including the President and
CEO, members of the Executive Board and selected key
personnel of KONE Group. The performance criteria applied
to the 2023 performance plan are based on annual growth in
sales and adjusted EBIT margin (jointly 80%), and
improvements in sustainability (20%). The sustainability
performance condition is a combination of reductions in
carbon footprint, diversity and inclusion as well as safety
related targets.
The restricted share plan serves as a complementary
long-term share plan to be used as a commitment instrument
for retention and recruitment purposes for top management
(excluding the President and CEO) and other selected key
employees. The restricted share plan does not have a
performance condition. The plan has a commitment period up
to three years, after which the share awards will be paid to the
participant, provided that their employment or service
relationship with KONE Group is in force at the time of
payment.
38 KONE Annual Review 2023
Board of Directors’ Report
At the end of December 2023, the Group had 12,159,159
class B shares in its possession. The shares in the Group’s
possession represent 2.7% of the total number of class B
shares. This corresponds to 1.0% of the total voting rights.
In addition to the Nasdaq Helsinki Ltd., KONE’s class B share
is traded also on various alternative trading platforms.
The number of registered shareholders was 110,592 at the
beginning of the review period and 110,750 at its end. The
number of private households holding shares totaled 105,553
at the end of the period, which corresponds to approximately
12.4% of the listed B shares. At the end of December 2023, a
total of 51.4% of the B shares were owned by nominee-
registered and non-Finnish investors.
Shares and share capital
Share capital and market capitalization*
Dec 31, 2023
Dec 31, 2022
Number of class B shares
453,187,148
453,187,148
Number of class A shares
76,208,712
76,208,712
Total shares
529,395,860
529,395,860
Treasury shares
12,159,159
12,306,640
Share capital, EUR
66,174,483
66,174,483
Market capitalization, MEUR*
23,358
24,975
*Market capitalization is calculated on the basis of both the listed B shares and the unlisted A shares excluding treasury shares. Class A shares are valued at the
closing price of the class B shares at the end of the reporting period.
Shares in KONE's possession
1–12/2023
Treasury shares at the beginning of the period
12,306,640
Changes in treasury shares during the period
-147,481
Treasury shares at the end of the period
12,159,159
Shares traded on Nasdaq Helsinki
1–12/2023
1–12/2022
Shares traded on the Nasdaq Helsinki Ltd., million
145.3
236.7
Average daily trading volume
579,003
935,595
Volume-weighted average share price
EUR
45.79
46.56
Highest share notation
EUR
53.34
64.12
Lowest share notation
EUR
37.20
36.72
Share notation at the end of the period
EUR
45.16
48.30
39 KONE Annual Review 2023
Board of Directors’ Report
Market outlook 2024
We have a positive market outlook for nine of our twelve end-
markets.
Activity is expected to decline slightly both in North
America and in Europe. In China, the New Building Solutions
market is expected to decline clearly. In Asia-Pacific, Middle
East and Africa activity is expected to grow clearly.
Modernization markets are expected to grow in all regions
supported by an aging equipment base as well as the focus
on sustainability and adaptability of buildings.
Service markets are expected to grow slightly in the more
mature markets and grow clearly in Asia-Pacific, Middle East
and Africa and in China.
Business outlook 2024
KONE expects its sales to be stable or to grow slightly at
comparable exchange rates in 2024. The improvement in
adjusted EBIT margin is expected to continue in 2024, albeit
with less tailwinds than in 2023.
Key drivers for sales growth are positive outlook for
Service and Modernization and the strong order book.
Declining New Building Solutions market in China, and
continued uncertainty in Europe and North America are
headwinds.
The key profitability drivers are sales growth in Service
and Modernization, better pricing coming through in deliveries
and savings from the operating model renewal. Persistent
cost inflation and decision to slightly increase investments in
R&D and IT are expected to impact profitability negatively.
The Board’s proposal for the distribution of profit
The parent company’s distributable profits on December 31,
2023 is EUR 3,006,869,325.52 of which the net income for the
financial year is EUR 1,996,263,298.83.
The Board of Directors proposes to the Annual General
Meeting that a dividend of EUR 1.7475 be paid on the
outstanding 76,208,712 class A shares and EUR 1.75 on the
outstanding 441,027,989 class B shares, resulting in a total
amount of proposed dividend of EUR 904,973,704.97. The
Board of Directors further proposes that the remaining
distributable profits, EUR 2,101,895,620.55 be retained and
carried forward.
The Board proposes that the dividends be payable from
March 11, 2024. All the shares existing on the dividend record
date are entitled to dividend for the year 2023 except for the
own shares held by the parent company.
Annual General Meeting 2024
KONE Corporation’s Annual General Meeting will be held on
Thursday February 29, 2024 at 11.00 a.m. at Messukeskus
Siipi, Rautatieläisenkatu 3, in Helsinki, Finland.
Helsinki, January 25, 2024
KONE Corporation’s Board of Directors
Market outlook 2024
North America
Europe
Asia-Pacific, Middle
East and Africa
China
New Building Solutions
in units
-
-
++
--
Service
in units
+
+
++
++
Modernization
in monetary value
+
++
+++
+++
--- Significant decline (>10%), -- Clear decline (5–10%), - Slight decline (<5%), Stable,
+ Slight growth (<5%), ++ Clear growth (5–10%), +++ Significant growth (>10%)
40 KONE Annual Review 2023
Board of Directors’ report | Shares and shareholders
KONE share
KONE has two classes of shares: A and B. Only B-class
shares are listed on the Nasdaq Helsinki Ltd. Trading of the
KONE class B shares started on January 2, 1967.
Voting rights
Each KONE class A share is assigned one vote, as is each
block of 10 class B shares, with the provision that each
shareholder is entitled to at least one vote.
Dividend policy
KONE has not adopted a specific dividend policy. In the case
of a dividend distribution, the dividend paid on the class B
share is higher than that on the class A share.
The difference between the dividends is at minimum one (1)
percent and at maximum two-and-a-half (2.5) percent,
calculated from the accounting par value of the share. The
accounting par value of the share is EUR 0.125.
Closing price (EUR)
December 31, 2023
45.16
December 31, 2022
48.30
Change
-6.5%
Market capitalization
on December 31, 2023
EUR 23,358 million
Share notations (EUR)
High
53.34
Low
37.20
Volume-weighted
average price
45.79
KONE Corporation’s share capital consists of
the following:
Number of
shares
Par value,
EUR
Class A
76,208,712
9,526,089
Class B
453,187,148
56,648,394
Total
529,395,860
66,174,483
Dividend proposal
EUR 1.75
per class B share
KONE class B dividend per share, 2005–2023, EUR
◼ Dividend ◼ Extraordinary dividend *) Board’s proposal for the 2023 dividend
0.00
0.50
1.00
1.50
2.00
2.50
Shares and shareholders
KONE class B
shares
Trading code, Nasdaq Helsinki
Ltd.
KNEBV
ISIN code
FI0009013403
Accounting par value
EUR 0.125
41 KONE Annual Review 2023
Board of Directors’ report | Shares and shareholders
KONE class B share price development Jan 1, 2013–Dec 31, 2023,
EUR
KONE class B share OMX Helsinki Cap Index
Shareholders
0
10
20
30
40
50
60
70
80
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Class A shares, %
⚫ 92.6% Companies
⚫ 7.4% Non-profit organizations
Class B shares, %
⚫ 51.4% Foreign / nominee registered shareholders *)
⚫ 14.5% Companies
⚫ 13.3% Financial institutions and insurance companies
⚫ 12.4% Individuals
⚫ 4.4% Public institutions
⚫ 4.0% Non-profit organizations
*) Includes foreign-owned shares registered by Finnish nominees
Shareholdings on Dec 31, 2023 by number of shares
Number of shares
Number of
owners
Percentage of
owners
Number of
shares
Percentage of
shares
1 - 10
23,957
21.6 %
130,449
0.0 %
11 - 100
49,865
45.0 %
2,224,834
0.4 %
101 - 1,000
29,688
26.8 %
10,070,219
1.9 %
1,001 - 10,000
6,476
5.8 %
17,327,909
3.3 %
10,001 - 100,000
671
0.6 %
16,538,154
3.1 %
100,001 -
93
0.1 %
483,062,031
91.3 %
Total
110,750
100.0 %
529,353,596
100.0 %
Shares which have not been transferred to the paperless
book entry system
42,264
0.0 %
Total
529,395,860
100.0 %
42 KONE Annual Review 2023
Board of Directors’ report | Shares and shareholders
Major shareholders on Dec 31, 2023
More information on the shareholdings of
KONE’s Board of Directors and Executive
Board on Dec 31, 2023 and changes in
shareholding during Jan 1 – Dec 31, 2023 are
available on page 129
A-series
B-series
Total
% of shares
% of votes
1
Herlin Antti
70,561,608
53,060,154
123,621,762
23.4 %
62.4 %
Holding Manutas Oy
1)
54,284,592
42,805,254
97,089,846
18.3 %
48.2 %
Security Trading Oy
2)
16,277,016
8,560,303
24,837,319
4.7 %
14.1 %
Herlin Antti
0
1,694,597
1,694,597
0.3 %
0.1 %
2
Polttina Oy
0
17,271,928
17,271,928
3.3 %
1.4 %
3
Wipunen Varainhallinta Oy
0
16,350,000
16,350,000
3.1 %
1.3 %
4
KONE Foundation
5,647,104
9,859,632
15,506,736
2.9 %
5.5 %
5
Heikintorppa Oy
0
10,100,000
10,100,000
1.9 %
0.8 %
6
Ilmarinen mutual pension insurance company
0
7,032,192
7,032,192
1.3 %
0.6 %
7
Varma mutual pension insurance company
0
6,301,222
6,301,222
1.2 %
0.5 %
8
Riikantorppa Oy
0
5,500,000
5,500,000
1.0 %
0.5 %
9
Blåberg Olli
0
5,300,000
5,300,000
1.0 %
0.4 %
10
Elo mutual pension insurance company
0
3,647,000
3,647,000
0.7 %
0.3 %
10 largest shareholders total
76,208,712
134,422,128
210,630,840
39.8 %
73.8 %
Foreign / nominee registered shareholders
3)
0
232,769,759
232,769,759
44.0 %
19.2 %
Repurchased own shares
0
12,159,159
12,159,159
2.3 %
1.0 %
Others
0
73,836,102
73,836,102
13.9 %
6.1 %
Total
76,208,712
453,187,148
529,395,860
100.0 %
100.0 %
The list of ten major shareholders includes the major shareholders with a Finnish book-entry account.
1)
Antti Herlin’s ownership of Holding Manutas represents 1.1% of the shares and 12.8% of the voting rights. Together with the ownership of Security Trading Oy in
which he exercises controlling power, his ownership represents 51.0% of the shares and 62.7% of the voting rights.
2)
Antti Herlin’s ownership of Security Trading Oy represents 56.4% of the shares and 57.5% of the voting rights. Together with the ownership of his children,
Antti Herlin’s ownership in Security Trading Oy represents 99.9% of the shares and 99.8% of the voting rights.
3)
Foreign ownership including foreign-owned shares registered by Finnish nominees.
43 KONE Annual Review 2023
Board of Directors’ report | Shares and shareholders
2023
2022
2021
2020
2019
Basic earnings per share, EUR
1.79
1.50
1.96
1.81
1.80
Diluted earnings per share, EUR
1.79
1.49
1.96
1.81
1.80
Equity per share, EUR
5.32
5.49
6.13
6.12
6.13
Dividend per class B share, EUR ¹⁾
1.75
1.75
2.10
2.25
1.70
Dividend per class A share, EUR ¹⁾
1.7475
1.7475
2.0950
2.2450
1.6975
Dividend per earnings, class B share, %
97.8
117.0
107.3
124.0
94.2
Dividend per earnings, class A share, %
97.6
116.8
107.0
123.7
94.1
Effective dividend yield, class B share, %
3.88
3.6
3.3
3.4
2.9
Price per earnings, class B share
25.23
32.29
32.20
36.63
32.31
Market value of class B share, average, EUR
45.79
46.56
65.44
62.07
49.82
Market value of class B share at end of period, EUR
45.16
48.30
63.04
66.46
58.28
Market capitalization at the end of period, MEUR ²⁾
23,358
24,975
32,652
34,452
30,180
Number of class A shares at the end of period, (1,000s)
76,209
76,209
76,209
76,209
76,209
Weighted average number of class A shares, (1,000s)
76,209
76,209
76,209
76,209
76,209
Number of class B shares at the end of period, (1,000s) ²⁾
453,187
453,187
441,754
442,181
441,634
Weighted average number of class B shares, (1,000s) ³⁾
441,008
441,632
441,847
442,055
440,897
Weighted average number of shares, (1,000s) ³⁾
517,595
517,841
518,055
518,264
517,105
¹⁾ Board's proposal.
²⁾ Reduced by the number of repurchased own shares. Class A shares are valued at the closing price of the class B shares.
³⁾ Adjusted for share issue and share option and share-based incentive plan dilution, and reduced by the number of repurchased own shares
Key figures per share, Jan 1–Dec 31, 2023
Board of Directors’ report | Key figures and financial development
44 KONE Annual Review 2023
Key figures and financial development
Consolidated statement of income, Jan 1–Dec 31
2023
2022
2021
2020
2019
Sales, MEUR
10,952
10,907
10,514
9,939
9,982
- sales outside Finland, MEUR
10,736
10,698
10,342
9,745
9,783
Operating income, MEUR
1,200
1,031
1,295
1,213
1,192
- as percentage of sales, %
11.0
9.5
12.3
12.2
11.9
Adjusted EBIT, MEUR ¹⁾
1,248
1,077
1,310
1,251
1,237
- as percentage of sales, % ¹⁾
11.4
9.9
12.5
12.6
12.4
Income before taxes, MEUR
1,206
1,028
1,321
1,224
1,218
- as percentage of sales, %
11.0
9.4
12.6
12.3
12.2
Net income, MEUR
932
784
1,023
947
939
Consolidated statement of financial position, MEUR
Dec 31, 2023
Dec 31, 2022
Dec 31, 2021
Dec 31, 2020
Dec 31, 2019
Non-current assets
2,967
2,781
2,798
2,666
2,811
Current assets
5,764
6,309
6,922
6,126
5,802
Total equity
2,786
2,867
3,199
3,197
3,193
Non-current liabilities
658
643
717
522
760
Provisions
197
177
152
155
127
Current liabilities
5,090
5,404
5,652
4,918
4,533
Total assets
8,731
9,090
9,720
8,792
8,613
Interest-bearing net debt
-1,013
-1,309
-2,164
-1,954
-1,553
Assets employed ²⁾
1,773
1,557
1,035
1,243
1,640
Net working capital ²⁾
-861
-904
-1,468
-1,160
-856
¹⁾ Excluding items impacting comparability such as significant restructuring costs and income and expenses incurred outside normal course of business of KONE,
such as impact from sale of operations in Russia.
²⁾ Items included are presented on page 43.
Board of Directors’ report | Key figures and financial development
45 KONE Annual Review 2023
Alternative performance measure
KONE presents adjusted EBIT as an alternative performance
measure to enhance comparability of business performance
between reporting periods. In 2023, items affecting
comparability included EUR 58 million costs recognized on
restructuring measures and a positive effect of EUR 8 million
recognized on completion of the sale of operations in Russia.
In the comparison period, items affecting comparability
included a charge for the impairment of assets and
recognition of provisions for commitments in Russia and
Ukraine as well as restructuring costs. In 2021 and in earlier
periods, items affecting comparability related to restructuring
measures.
Other data, Jan 1–Dec 31
2023
2022
2021
2020
2019
Orders received, MEUR
8,578
9,131
8,853
8,185
8,400
Order book, MEUR
8,716
9,026
8,564
7,729
8,052
Cash flow from operations before financing items and taxes,
MEUR
1,485
755
1,829
1,908
1,550
Capital expenditure excl. acquisitions, MEUR
322
209
217
201
200
- as percentage of sales, %
2.9
1.9
2.1
2.0
2.0
Expenditure on research and development, MEUR
185
188
189
180
171
- as percentage of sales, %
1.7
1.7
1.8
1.8
1.7
Average number of employees
63,164
63,186
61,698
60,376
58,369
Number of employees at end of reporting period
63,536
63,277
62,720
61,380
59,825
Employee costs
3,656
3,533
3,222
3,043
3,048
Key ratios, %, Jan 1–Dec 31
2023
2022
2021
2020
2019
Return on equity
33.0
25.9
32.0
29.7
30.1
Return on capital employed
27.8
22.4
26.8
25.0
25.1
Equity ratio
40.9
40.3
41.2
45.5
46.5
Gearing
-36.4
-45.7
-67.6
-61.1
-48.6
Alternative performance measure, Jan 1–Dec 31
2023
2022
2021
2020
2019
Operating income (EBIT), MEUR
1,200
1,031
1,295
1,213
1,192
Operating income margin (EBIT margin), %
11.0
9.5
12.3
12.2
11.9
Items impacting comparability, MEUR
48
45
15
38
45
Adjusted EBIT, MEUR
1,248
1,077
1,310
1,251
1,237
Adjusted EBIT margin %
11.4
9.9
12.5
12.6
12.4
Board of Directors’ report | Definitions and calculation of key figures
46 KONE Annual Review 2023
Definitions and calculation of key figures
Basic earnings/share
=
Net income attributable to the shareholders of the
parent company
Share issue and conversion-adjusted weighted
average number of shares - own shares
Equity/share
=
Total shareholders’ equity
Number of shares (issue adjusted) - own shares
Dividend/share
=
Dividend payable for the reporting period
Share issue and conversion-adjusted weighted
average number of shares - own shares
Dividend/earnings (%)
=
100 x
Dividend/share
Earnings/share
Effective dividend yield
(%)
=
100 x
Dividend/share
Price of class B shares at end of reporting period
Price/earnings
=
Price of class B shares at end of reporting period
Earnings/share
Average price
=
Total EUR value of all class B shares traded
Average number of class B shares traded during the
reporting period
Market value of all
outstanding shares
=
The number of shares ¹⁾ (A + B) at end of reporting
period x the price of class B shares at end of reporting
period
¹⁾ Excluding own shares. Class A shares are valued at the closing price of the class B shares.
Shares traded
=
Number of class B shares traded during the
reporting period
Shares traded (%)
=
100 x
Number of class B shares traded
Weighted average number of class B shares
Average number of
employees
=
The average employee count at the end of each
calendar month during the reporting period
Return on equity (%)
=
100 x
Net income
Total equity (average during the reporting period)
Return on capital
employed (%)
=
100 x
Net income + financing expenses
Equity + interest-bearing-debt (average during the
reporting period)
Equity ratio (%)
=
100 x
Total equity
Total assets - advance payments received and
deferred revenue
Gearing (%)
=
100 x
Interest-bearing net debt
Total equity
Assets employed
=
Net working capital + goodwill + intangible assets +
tangible assets + investments in associated
companies + shares and other non-current financial
assets
47 KONE Annual Review 2023
Consolidated financial statements | Consolidated statement of income
Consolidated statement of income
Jan 1–Dec 31, | Jan 1–Dec 31, | ||||
MEUR | Note | 2023 | % | 2022 | % |
Sales | 2.1 | ||||
Costs, expenses and depreciation | 2.2, 2.3 | - | - | ||
Operating income | 11.0 | 9.5 | |||
Financing income | 2.5 | ||||
Financing expenses | 2.5 | - | - | ||
Income before taxes | 11.0 | 9.4 | |||
Taxes | 2.6 | - | - | ||
Net income | 8.5 | 7.2 | |||
Net income attributable to: | |||||
Shareholders of the parent company | |||||
Non-controlling interests | |||||
Total | |||||
Earnings per share for profit attributable to the shareholders of the parent | |||||
company, EUR | 2.7 | ||||
Basic earnings per share, EUR | |||||
Diluted earnings per share, EUR |
Consolidated statement of comprehensive
income
Jan 1–Dec 31, | Jan 1–Dec 31, | ||
MEUR | Note | 2023 | 2022 |
Net income | |||
Other comprehensive income, net of tax: | 2.8 | ||
Translation differences | - | ||
Hedging of foreign subsidiaries | - | ||
Cash flow hedges | - | ||
Items that may be subsequently | |||
reclassified to statement of income | - | - | |
Changes in fair value | - | - | |
Remeasurements of employee benefits | - | ||
Items that will not be reclassified to statement of income | - | ||
Total other comprehensive income, net of tax | - | ||
Total comprehensive income | |||
Total comprehensive income | |||
attributable to: | |||
Shareholders of the parent company | |||
Non-controlling interests | |||
Total |
Consolidated financial statements
48 KONE Annual Review 2023
Consolidated financial statements | Consolidated statement of financial position
Assets, MEUR | Note | Dec 31, 2023 | Dec 31, 2022 | |
Non-current assets | ||||
Goodwill | 4.2 | |||
Other intangible assets | 4.3 | |||
Tangible assets | 4.4 | |||
Non-current loans receivable | I | 5.3, 5.4 | ||
Shares and other non-current financial assets | 5.3, | 5.5 | ||
Employee benefit assets | I | 5.3, 5.7 | ||
Deferred tax assets | II | 3.6 | ||
Total non-current assets | ||||
Current assets | ||||
Inventories | II | 3.1 | ||
Accounts receivable | II | 3.2, 5.3 | ||
Deferred assets | II | 3.3, 5.3 | ||
Income tax receivables | II | |||
Current deposits and loan receivables | I | 5.3, 5.5 | ||
Cash and cash equivalents | I | 5.3 | ||
Total current assets | ||||
Total assets |
Equity and liabilities, MEUR | Note | Dec 31, 2023 | Dec 31, 2022 | |
Equity attributable to the equity holders | ||||
of the parent | ||||
Share capital | 5.2 | |||
Share premium account | ||||
Paid-up unrestricted equity reserve | ||||
Fair value and hedge reserves | - | |||
Translation differences | ||||
Remeasurements of employee benefits | - | - | ||
Retained earnings | ||||
Total shareholders' equity | ||||
Non-controlling interests | ||||
Total equity | ||||
Non-current liabilities | ||||
Loans and other interest-bearing liabilities | I | 5.3 | ||
Employee benefit liabilities | I | 5.3, 5.7 | ||
Deferred tax liabilities | II | 3.6 | ||
Total non-current liabilities | ||||
Provisions | II | 3.5 | ||
Current liabilities | ||||
Loans and other interest-bearing liabilities | I | 5.3 | ||
Advance payments received and deferred | ||||
revenue | II | 3.2 | ||
Accounts payable | II | 5.3 | ||
Accruals | II | 3.4, 5.3 | ||
Income tax payables | II | |||
Total current liabilities | ||||
Total equity and liabilities |
Items designated " I " comprise interest-bearing net debt.
Items designated " II " comprise net working capital.
Consolidated statement of financial position
49 KONE Annual Review 2023
Consolidated financial statements | Consolidated statement of changes in equity
Consolidated statement of changes in equity | |||||||||||
Attributable to the equity holders of the parent | |||||||||||
Share | Paid-up | ||||||||||
Share | premium unrestricted equity | Fair value and | Translation | Remeasurements of | Own | Retained Non-controlling | Total | ||||
MEUR | Note | capital | account | reserve | other reserves | differences | employee benefits | shares | earnings | interests | equity |
Jan 1, 2023 | - | - | |||||||||
Net income for the period | |||||||||||
Other comprehensive income: | 2.8 | ||||||||||
Translation differences | - | - | |||||||||
Hedging of foreign subsidiaries | |||||||||||
Cash flow hedges | - | - | |||||||||
Changes in fair value | - | - | |||||||||
Remeasurements of employee benefits | - | - | - | ||||||||
Transactions with shareholders and non- controlling interests: | 5.2 | ||||||||||
Profit distribution | - | - | |||||||||
Purchase of own shares | |||||||||||
Change in non-controlling interests | - | - | |||||||||
Share-based compensation * | - | ||||||||||
Dec 31, 2023 | - | - | - | ||||||||
* As at 1 January, 2023 the cumulative effect arising from recognition of share based payment rewards has been reclassified from paid-up unrestricted equity to retained earnings to improve presentation. | |||||||||||
50 KONE Annual Review 2023
Consolidated financial statements | Consolidated statement of changes in equity
Attributable to the equity holders of the parent | |||||||||||
Share | Paid-up | ||||||||||
Share | premium unrestricted equity | Fair value and | Translation | Remeasurements of | Own | Retained Non-controlling | Total | ||||
MEUR | Note | capital | account | reserve | other reserves | differences | employee benefits | shares | earnings | interests | equity |
Jan 1, 2022 | - | - | |||||||||
Net income for the period | |||||||||||
Other comprehensive income: | 2.8 | ||||||||||
Translation differences | |||||||||||
Hedging of foreign subsidiaries | - | - | |||||||||
Cash flow hedges | |||||||||||
Changes in fair value | - | - | |||||||||
Remeasurements of employee benefits | |||||||||||
Transactions with shareholders and non- controlling interests: | 5.2 | ||||||||||
Profit distribution | - | - | |||||||||
Purchase of own shares | - | - | |||||||||
Change in non-controlling interests | - | - | - | ||||||||
Share-based compensation | - | ||||||||||
Dec 31, 2022 | - | - | |||||||||
51 KONE Annual Review 2023
Consolidated financial statements | Consolidated statement of cash flows
MEUR | Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 |
Cash receipts from customers | ||
Cash paid to suppliers and employees | - | - |
Cash flow from operations before financing items and taxes | ||
Interest received | ||
Interest paid | - | - |
Dividends received and capital repayments | ||
Other financing items | - | |
Income taxes paid | - | - |
Cash flow from operating activities | ||
Capital expenditure | - | - |
Proceeds from sales of fixed assets | ||
Acquisitions, net of cash | - | - |
Proceeds from sales of subsidiary shares | - | |
Cash flow from investing activities | - | - |
Cash flow after investing activities | ||
Purchase of own shares | - | |
Profit distribution | - | - |
Change in deposits and loan receivables, net | ||
Change of current creditors | - | - |
Change in non-current liabilities | - | - |
Changes in non-controlling interests | - | - |
Cash flow from financing activities | - | - |
Change in cash and cash equivalents | - | |
Cash and cash equivalents at beginning of period | ||
Translation difference | - | - |
Cash and cash equivalents at end of period |
The impact of changes in exchange rates has been eliminated in the statement of cash flows by translating
the opening balance sheet with the closing rates of the period.
Reconciliation of operating income to cash flow from operations before financing items and | ||
taxes | ||
MEUR | Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 |
Operating income | ||
Change in working capital before financing items and taxes | - | |
Depreciation and amortization | ||
Cash flow from operations before financing items and taxes |
Change in interest-bearing net debt | ||
MEUR | Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 |
Interest-bearing net debt at beginning of period | - | - |
Interest-bearing net debt at end of period | - | - |
Change in interest-bearing net debt |
Consolidated statement of cash flows
52 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Basis of preparation
Consolidated financial statements | Notes to the consolidated financial statements | Basis of preparation
Notes to the consolidated |
financial statements |
1
Consolidated financial statements | Notes to the consolidated financial statements | Basis of preparation
53 KONE Annual Review 2023
54 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Basis of preparation
55 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Financial performance
In this section
This section comprises the following notes providing
insights into KONE’s financial performance:
2.1 Sales
2.2 Costs and expenses
2.3 Depreciation and amortization
2.4 Foreign exchange sensitivity
2.5 Financing income and expenses
2.6 Income taxes
2.7 Earnings per share
2.8 Other comprehensive income
Financial targets
KONE has defined long-term financial targets for its
financial performance as follows:
• KONE has not defined a time frame for the
achievement of these financial targets.
• Given the capital and asset structure of KONE, the
aim is not to maximize the EBIT margin in the short
term, but rather to grow the absolute EBIT in an
optimal way over the long term and as a result
maintain a strong return on capital employed.
• The relative EBIT margin target is relevant in
ensuring that growth is profitable and that pricing,
quality and productivity improve continuously.
Growth:
Faster than market growth
Profitability:
To reach an EBIT margin of 16%
Cash flow:
Improved working capital rotation
Financial performance
Consolidated financial statements | Notes to the consolidated financial statements | Financial performance
Sales
10,952 MEUR
EBIT
1,200 MEUR
2
56 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Financial performance
Jan 1–Dec 31, | Jan 1–Dec 31, | |||
MEUR | 2023 | % | 2022 | % |
EMEA ¹⁾ | 4,490.2 | 41 | 4,237.7 | 39 |
Americas | 2,470.2 | 23 | 2,239.8 | 21 |
Asia-Pacific | 3,991.9 | 36 | 4,429.2 | 41 |
Total | 10,952.3 | 10,906.7 |
~26
19
7
6
4
3 3 3
2 2
1. China
2. USA
3. Germany
4. France
5. Great Britain
6. Italy
7. Australia
8. India
9. Finland
10. Canada
57 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Financial performance
Costs and expenses, MEUR | Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 |
Direct materials, supplies and subcontracting | 4,168.4 | 4,458.2 |
Wages, salaries, and other employment expenses including pensions (note 5.7) | 3,656.1 | 3,533.4 |
Other production costs | 885.9 | 874.1 |
Selling, administrative and other expenses | 774.0 | 750.1 |
Items impacting comparability | 48.3 | 45.4 |
Depreciation and amortization (note 2.3) | 269.4 | 259.3 |
Costs, expenses, depreciation and amortization | 9,802.2 | 9,920.5 |
Other income ¹⁾ | 50.0 | 45.0 |
Total costs, expenses, depreciation and amortization | 9,752.2 | 9,875.5 |
Research and development costs, MEUR | Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 |
R&D costs included in total costs | 185.0 | 187.8 |
As percentage of sales, % | 1.7 | 1.7 |
Auditors´ fees, MEUR | Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 |
To member firms of Ernst & Young network | 3.9 | 3.8 |
Auditors´ statements | - | - |
Tax services | 0.6 | 0.1 |
Other services | 0.7 | 0.2 |
Total | 5.2 | 4.1 |
Consolidated financial statements | Notes to the consolidated financial statements | Financial performance
58 KONE Annual Review 2023
Depreciation and amortization, MEUR | Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 |
Intangible assets | ||
Customer related intangibles | 47.0 | 39.5 |
Other | 10.3 | 10.0 |
Buildings | 80.7 | 78.8 |
Machinery and equipment | 131.4 | 131.0 |
Total | 269.4 | 259.3 |
Consolidated financial statements | Notes to the consolidated financial statements | Financial performance
59 KONE Annual Review 2023
EUR
CNY
USD
Other
A change of 10% in the annual average foreign exchange | |
rates | |
Impact on sales | Impact on operating income |
(EBIT) | |
Higher impact on | |
7.4% change in | operating income as |
consolidated sales in | compared to sales and |
euros | some impact on relative |
operating income |
60 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Financial performance
equity.
Exposure | Exposure | Exposure | ||||||||||||
against EUR | against USD | against CNY | ||||||||||||
MEUR | HKD USD | GBP SEK CNY | JPY | Others | Total | CNY CAD | Others | Total | SGD Others | Total | ||||
Exposure Dec 31, 2023 | -441 | -72 | -90 | -79 | 73 | 95 | -10 | -523 | 88 | -94 | -10 | -17 | -55 | -178 |
Exposure Dec 31, 2022 | -221 | -102 | -68 | -60 | 60 | 119 | 23 | -249 | 108 | -96 | -29 | -17 | -44 |
Chinese Yuan | CNY | 7.6589 | 7.8509 | 7.0836 | 7.3582 |
US Dollar | USD | 1.0816 | 1.1050 | 1.0563 | 1.0666 |
British Pound | GBP | 0.8702 | 0.8691 | 0.8537 | 0.8869 |
Indian Rupee | INR | 89.3371 | 91.9045 | 82.8319 | 88.1710 |
Australian Dollar | AUD | 1.6297 | 1.6263 | 1.5189 | 1.5693 |
Consolidated financial statements | Notes to the consolidated financial statements | Financial performance
Financing income and expenses, MEUR | Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 |
Dividend income ¹⁾ | 5.4 | - |
Interest income | ||
Change in fair value of interest ²⁾ | 19.4 | 2.9 |
Interest income on foreign exchange rate derivatives | 2.2 | 26.1 |
Interest income on loan receivables and financial assets | 17.9 | 17.4 |
Other financing income | 0.2 | 0.2 |
Exchange rate gains ³⁾ | 4.8 | 4.6 |
Financing income | 50.0 | 51.2 |
Interest expenses | ||
Change in fair value of interest ²⁾ | - | -6.0 |
Interest expenses on other financial liabilities ⁴⁾ | -25.3 | -16.8 |
Other financing expenses ⁵⁾ | -5.5 | -6.5 |
Exchange rate losses ³⁾ | -13.1 | -24.6 |
Financing expenses | -43.9 | -53.9 |
Total | 6.1 | -2.7 |
61 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Financial performance
62 KONE Annual Review 2023
Taxes in the statement of income, MEUR | Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 |
Tax expense for current year | 314.3 | 272.2 |
Change in deferred tax assets and liabilities | -45.4 | -33.8 |
Tax expense for previous years | 5.7 | 5.5 |
Total | 274.6 | 244.0 |
Reconciliation of income before taxes with total income taxes in the statement of | ||
income, MEUR | Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 |
Income before taxes | 1,206.1 | 1,028.4 |
Tax calculated at the domestic corporation tax rate (20%) | 241.2 | 205.7 |
Effect of different tax rates in foreign subsidiaries | 6.5 | 6.9 |
Permanent differences | 3.9 | 6.5 |
Taxes from previous years and reassessment of deferred tax assets | -3.5 | 6.4 |
Remeasurement of deferred taxes - changes in corporate tax rates | - | 0.6 |
Deferred tax liability on undistributed earnings | 23.6 | 18.3 |
Other | 2.9 | -0.4 |
Total | 274.6 | 244.0 |
Effective tax rate, % ¹⁾ | 22.8 | 23.7 |
Tax rate of parent company, % | 20.0 | 20.0 |
1) The effective tax rate from the operations for the financial year 2022 was 22.6% excluding prior year taxes and one-time items on Russia. |
Consolidated financial statements | Notes to the consolidated financial statements | Financial performance
63 KONE Annual Review 2023
Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 | |
Net income attributable to the shareholders of the parent company, MEUR | 925.8 | 774.5 |
Weighted average number of shares (1,000 shares) | 517,217 | 517,841 |
Basic earnings per share, EUR | 1.79 | 1.50 |
Dilution effect of share-based incentive plans (1,000 shares) | 378 | 323 |
Weighted average number of shares, dilution adjusted (1,000 shares) | 517,595 | 518,164 |
Diluted earnings per share, EUR | 1.79 | 1.49 |
Consolidated financial statements | Notes to the consolidated financial statements | Financial performance
64 KONE Annual Review 2023
2.8 Other comprehensive income
Disclosure of components of other comprehensive income (MEUR) | Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 |
Translation differences | -96.2 | 5.1 |
Hedging of foreign subsidiaries | 15.9 | -21.2 |
Changes in fair value | -23.8 | -20.8 |
Remeasurements of employee benefits | -17.2 | 27.4 |
Cash flow hedges: | ||
Gains/losses incurred during the year | -12.7 | 6.4 |
Reclassifications included in profit or loss | -7.4 | -5.8 |
Cash flow hedges, net | -20.1 | 0.6 |
Income tax relating to components of other comprehensive income | 2.0 | 16.9 |
Total other comprehensive income, net of tax | -139.5 | 8.0 |
Disclosure of tax effects relating to components | Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 | ||||
of other comprehensive income (MEUR) | Gross Tax expense/ | Net-of-tax | Gross Tax expense/ | Net-of-tax | ||
amount | benefit | amount | amount | benefit | amount | |
Translation differences | -96.2 | - | -96.2 | 5.1 | - | 5.1 |
Hedging of foreign subsidiaries | 15.9 | - | 15.9 | -21.2 | - | -21.2 |
Cash flow hedges | -20.1 | 2.0 | -18.1 | 0.6 | 1.9 | 2.5 |
Items that may be subsequently reclassified | ||||||
to statement of income | -100.5 | 2.0 | -98.4 | -15.5 | 1.9 | -13.6 |
Changes in fair value | -23.8 | - | -23.8 | -20.8 | - | -20.8 |
Remeasurements of employee benefits | -17.2 | 0.0 | -17.2 | 27.4 | 15.0 | 42.4 |
Items that will not be reclassified to statement of income | -41.0 | 0.0 | -41.0 | 6.6 | 15.0 | 21.6 |
Total other comprehensive income, net of tax | -141.5 | 2.0 | -139.5 | -8.9 | 16.9 | 8.0 |
65 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Net working capital
KONE’s net working capital
• Our business model enables us to operate with negative
net working capital
• KONE operates with advance payments across
businesses and geographies
Net working capital, MEUR
Dec 31, 2023
Dec 31, 2022
Inventories
820.9
843.6
Advance payments received and
deferred revenue
-1,915.7
-1,973.8
Accounts receivable
2,495.1
2,668.1
Deferred assets and income tax
receivables
759.7
826.9
Accruals and income tax payables
-2,131.1
-2,181.2
Provisions
-196.9
-177.4
Accounts payable
-927.0
-1,132.8
Net deferred tax assets/liabilities
233.9
222.7
Total
-861.2
-903.9
In this section
This section comprises the following notes, describing
components of KONE’s net working capital:
3.1 Inventories
3.2 Accounts receivable and contract assets and liabilities
3.3 Deferred assets
3.4 Accruals
3.5 Provisions
3.6 Deferred tax assets and liabilities
Consolidated financial statements | Notes to the consolidated financial statements | Net working capital
Net working
capital -861
MEUR
3
Net working capital
*) Cash flow from operations before financing items and taxes
Cash flow*
1,485 MEUR
Consolidated financial statements | Notes to the consolidated financial statements | Net working capital
66 KONE Annual Review 2023
Inventories, MEUR | Dec 31, 2023 | Dec 31, 2022 |
Raw materials, supplies and finished goods | 360.7 | 409.9 |
Work in progress | 441.5 | 411.1 |
Advance payments | 18.7 | 22.6 |
Total | 820.9 |
67 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Net working capital
MEUR | Dec 31, 2023 | Dec 31, 2022 |
Accounts receivable | 2,495.1 | 2,668.1 |
Accrued income on maintenance contracts (note 3.3) | 35.1 | 36.6 |
Unbilled contract revenue (note 3.3) | 337.7 | 365.1 |
Assets related to contracts with customers | 2,867.9 | 3,069.8 |
Deferred income on maintenance contracts (note 3.4) | 433.3 | 452.2 |
Advance payments received and deferred revenue | 1,915.7 | 1,973.8 |
Liabilities related to contracts with customers | 2,349.0 | 2,426.0 |
Consolidated financial statements | Notes to the consolidated financial statements | Net working capital
68 KONE Annual Review 2023
Aging structure of the accounts receivable after recognition of impairment, MEUR *⁾ | Dec 31, 2023 | Dec 31, 2022 |
Not past due and less than one month due receivables | 1,796.5 | 2,018.3 |
Past due 1–3 months | 303.6 | 314.4 |
Past due 3–6 months | 176.0 | 161.1 |
Past due > 6 months | 219.0 | 174.3 |
Accounts receivable in the consolidated statement of financial position | 2,495.1 | 2,668.1 |
69 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Net working capital
Accruals, MEUR | Dec 31, 2023 | Dec 31, 2022 |
Accrued interests | 1.7 | 1.0 |
Deferred income on maintenance contracts (note 3.2) | 433.3 | 452.2 |
Late cost accruals ¹⁾ | 261.3 | 302.3 |
Accrued salaries, wages and employment costs | 583.8 | 570.0 |
Share-based payments | - | 9.9 |
Derivative liabilities (note 5.3) | 28.5 | 32.6 |
Value added tax liabilities | 100.5 | 86.1 |
Accruals on acquisitions | 29.1 | 17.0 |
Other accruals | 555.3 | 581.2 |
Total | 1,993.4 | 2,052.2 |
¹ ⁾ Includes accrual for invoices still pending to be received on completed new building and modernization contracts. |
Deferred assets, MEUR | Dec 31, 2023 | Dec 31, 2022 |
Deferred interests | 2.4 | 3.0 |
Accrued income on maintenance contracts (note 3.2) | 35.1 | 36.6 |
Unbilled contract revenue (note 3.2) | 337.7 | 365.1 |
Derivative assets (note 5.3) | 11.5 | 27.2 |
Value added tax assets | 72.5 | 84.9 |
Prepaid expenses and other receivables | 181.8 | 192.5 |
Total | 641.0 | 709.3 |
Consolidated financial statements | Notes to the consolidated financial statements | Net working capital
70 KONE Annual Review 2023
Provision for | Provision | |||||
Provision | Provision | business | for loss | Other | ||
Jan 1–Dec 31, 2023, MEUR | for warranty | for claims | restructuring | contracts | provisions | Total |
Total provisions at beginning of period | 64.8 | 8.4 | 14.9 | 46.2 | 43.0 | 177.4 |
Translation differences | -2.1 | -0.4 | -0.2 | -1.9 | -1.0 | -5.6 |
Increase | 27.9 | 2.5 | 30.8 | 41.1 | 21.1 | 123.3 |
Provisions used | -15.8 | -1.5 | -15.9 | -28.0 | -5.5 | -66.6 |
Reversal of provisions | -1.5 | -1.2 | -3.3 | -9.3 | -17.7 | -33.0 |
Companies acquired | 0.6 | 0.4 | - | 0.2 | 0.2 | 1.4 |
Total provisions at end of period | 74.0 | 8.2 | 26.4 | 48.3 | 40.0 | 196.9 |
Non-current liabilities | Current liabilities | Total | |
Distribution of provisions as of Dec 31, 2023 | 46.5 |
150.4
196.9
Provision for | Provision | |||||
Provision | Provision | business | for loss | Other | ||
Jan 1–Dec 31, 2022, MEUR | for warranty | for claims | restructuring | contracts | provisions | Total |
Total provisions at beginning of period | 58.8 | 7.4 | 16.0 | 31.4 | 38.6 | 152.3 |
Translation differences | -0.6 | 0.0 | 0.2 | -0.3 | 0.1 | -0.7 |
Increase | 19.9 | 4.2 | 10.9 | 32.7 | 38.0 | 105.7 |
Provisions used | -11.8 | -1.3 | -10.7 | -13.9 | -8.5 | -46.1 |
Reversal of provisions | -1.5 | -2.0 | -1.5 | -3.7 | -25.8 | -34.4 |
Companies acquired | - | - | - | - | 0.6 | 0.6 |
Total provisions at end of period | 64.8 | 8.4 | 14.9 | 46.2 | 43.0 | 177.4 |
Non-current liabilities | Current liabilities | Total | |
Distribution of provisions as of Dec 31, 2022 | 44.8 | 132.6 | 177.4 |
Consolidated financial statements | Notes to the consolidated financial statements | Net working capital
71 KONE Annual Review 2023
Deferred tax assets, MEUR | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 |
Tax losses carried forward | 1.2 | 1.1 | 1.7 |
Provisions and accruals | 297.3 | 270.2 | 267.8 |
Post retirement obligations | 9.2 | 15.9 | 28.6 |
Inventory | 30.0 | 23.9 | 23.5 |
Property, plant and equipment | 13.3 | 13.2 | 16.0 |
Other temporary differences | 87.3 | 90.0 | 42.8 |
Offset against deferred tax liabilities | -118.1 | -106.7 | -111.3 |
Total | 320.2 | 307.5 | 269.1 |
Total at beginning of period | 307.5 | 269.1 | |
Translation differences | -16.7 | -4.4 | |
Change in statement of income | 21.2 | 25.9 | |
Charged or credited to equity | 2.0 | 16.9 | |
Acquisitions, divestments and other | 6.1 | 0.1 | |
Total at end of period | 320.2 | 307.5 |
Deferred tax liabilities, MEUR | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 |
Property, plant and equipment | 22.7 | 21.5 | 29.3 |
Goodwill and intangible assets | 88.1 | 85.3 | 72.2 |
Other temporary differences | 93.6 | 84.7 | 96.7 |
Offset against deferred tax assets | -118.1 | -106.7 | -111.3 |
Total | 86.3 | 84.8 | 86.9 |
Total at beginning of period | 84.8 | 86.9 | |
Translation difference | 5.0 | 2.5 | |
Change in statement of income | -24.2 | -7.9 | |
Acquisitions, divestments and other | 20.8 | 3.3 | |
Total at end of period | 86.3 | 84.8 | |
Net deferred tax assets and liabilities | 233.9 | 222.7 |
72 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Acquisitions and capital expenditure
Acquisitions and capital expenditure
• KONE’s business is capital light and labor-intensive in
nature, particularly in Service. On the New Building
Solutions side, we cooperate with many component
suppliers. As a result, the level of tangible and intangible
assets is relatively low in the business.
• Capital expenditure on leases consists mainly of
maintenance vehicles and office and warehouse facilities.
• Capital expenditure is mainly related to R&D, IT,
manufacturing, and service operations.
• KONE’s acquisitions in 2023 predominantly consisted of
service-related acquisitions in Europe. Additionally,
KONE acquired a distributor in the Middle East.
In this section
This section comprises the following notes, which
describe acquisitions and capital expenditure at KONE:
4.1 Acquisitions and divestments
4.2 Goodwill
4.3 Intangible assets
4.4 Tangible assets
Acquisitions and capital
expenditure
Consolidated financial statements | Notes to the consolidated financial statements | Acquisitions and capital expenditure
Acquisitions and
capex
513 MEUR
4
Number of
acquisitions
25
KONE´s capital expenditure 2.9% of sales in
2023
Consolidated financial statements | Notes to the consolidated financial statements | Acquisitions and capital expenditure
73 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Acquisitions and capital expenditure
Assets and liabilities of the acquired businesses, MEUR | Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 |
Customer related intangibles | 109.0 | 26.2 |
Other intangible assets | 0.1 | 0.0 |
Tangible assets | 7.7 | 0.4 |
Deferred tax assets | 6.1 | 0.1 |
Inventories | 7.9 | 1.5 |
Accounts receivables and other assets | 20.2 | 2.6 |
Cash and cash equivalents | 8.7 | 2.4 |
Total assets | 159.7 | 33.1 |
Employee benefit liabilities | 0.7 | 0.2 |
Interest-bearing loans | 4.9 | 2.5 |
Provisions | 1.4 | 0.6 |
Deferred tax liabilities | 20.8 | 3.3 |
Other liabilities | 23.6 | 2.2 |
Total liabilities | 51.3 | 8.9 |
Net assets | 108.4 | 24.2 |
Acquisition cost paid in cash | 168.5 | 19.1 |
Contingent and deferred consideration | 21.8 | 9.1 |
Acquisition cost at date of acquisitions | 190.3 | 28.1 |
Goodwill | 82.0 | 4.0 |
Changes in the acquisition cost occurring after the acquisition date and recognized in the statement of income totaled EUR 0.6
(0.7) million.
74 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Acquisitions and capital expenditure
75 KONE Annual Review 2023
Discount rates used | Discount rates used | |||||
Goodwill, MEUR | Dec 31, 2023 | % | (pre-tax), % | Dec 31, 2022 | % | (pre-tax), % |
EMEA | 888.7 | 60 | 8.17 | 809.5 | 57 | 8.23 |
Americas | 356.3 | 24 | 10.22 | 368.1 | 26 | 10.05 |
Asia-Pacific | 224.0 | 15 | 9.81 | 237.1 | 17 | 10.17 |
Total | 1,469.0 | 1,414.7 |
Goodwill reconciliation | ||
Goodwill, MEUR | Dec 31, 2023 | Dec 31, 2022 |
Opening net book value | 1,414.7 | 1,405.2 |
Translation differences | -27.6 | 8.2 |
Increase | - | 3.5 |
Decrease | - | -6.1 |
Companies acquired (note 4.1) | 82.0 | 4.0 |
Closing net book value | 1,469.0 | 1,414.7 |
Consolidated financial statements | Notes to the consolidated financial statements | Acquisitions and capital expenditure
76 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Acquisitions and capital expenditure
77 KONE Annual Review 2023
Jan 1–Dec 31, 2023 | |||
Customer related | |||
Intangible assets, MEUR | intangibles | Other | Total |
Opening gross acquisition cost | 501.6 | 256.2 | 757.8 |
Opening accumulated amortization and impairment | -325.4 | -224.2 | -549.6 |
Opening net book value | 176.3 | 31.9 | 208.2 |
Opening net book value | 176.3 | 31.9 | 208.2 |
Translation differences | -1.2 | -1.2 | -2.4 |
Increase | 3.8 | 26.5 | 30.3 |
Decrease | -0.4 | -0.4 | -0.8 |
Reclassifications | - | 0.1 | 0.1 |
Companies acquired (note 4.1) | 109.0 | 0.1 | 109.1 |
Amortization | -47.0 | -10.3 | -57.3 |
Closing net book value | 240.6 | 46.6 | 287.2 |
Closing gross acquisition cost | 612.9 | 279.1 | 892.0 |
Closing accumulated amortization and impairment | -372.3 | -232.5 | -604.8 |
Closing net book value | 240.6 |
46.6
287.2
Jan 1–Dec 31, 2022 | |||
Intangible assets, MEUR | Maintenance contracts | Other | Total |
Opening gross acquisition cost | 471.6 | 260.1 | 731.7 |
Opening accumulated amortization and impairment | -285.9 | -229.0 | -514.9 |
Opening net book value | 185.8 | 31.1 | 216.9 |
Opening net book value | 185.8 | 31.1 | 216.9 |
Translation differences | 0.3 | -0.5 | -0.2 |
Increase | 3.7 | 10.9 | 14.6 |
Decrease | -0.2 | 0.0 | -0.2 |
Reclassifications | - | 0.4 | 0.4 |
Companies acquired (note 4.1) | 26.2 | 0.0 | 26.2 |
Amortization | -39.5 | -10.0 | -49.5 |
Closing net book value | 176.3 | 31.9 | 208.2 |
Closing gross acquisition cost | 501.6 | 256.2 | 757.8 |
Closing accumulated amortization and impairment | -325.4 | -224.2 | -549.6 |
Consolidated financial statements | Notes to the consolidated financial statements | Acquisitions and capital expenditure
Jan 1–Dec 31, 2023 | ||||||||
Tangible assets, MEUR | ||||||||
Opening gross acquisition cost | 5.9 | 336.7 | 403.6 | 714.2 | 249.5 | 25.3 | 1.6 | 1,736.9 |
Opening accumulated depreciation | - | -164.6 | -212.8 | -515.9 | -126.7 | - | - | -1,020.0 |
Opening net book value | 5.9 | 172.1 | 190.8 | 198.3 | 122.8 | 25.3 | 1.6 | 716.8 |
Opening net book value | 5.9 | 172.1 | 190.8 | 198.3 | 122.8 | 25.3 | 1.6 | 716.8 |
Translation differences | 0.0 | -5.7 | -4.7 | -5.9 | -2.1 | -0.6 | -0.3 | -19.2 |
Increase | - | 16.7 | 72.0 | 68.6 | 89.1 | 45.4 | 4.0 | 295.9 |
Decrease | 0.0 | -0.8 | -4.0 | -1.6 | 0.0 | -2.7 | -0.2 | -9.2 |
Reclassifications | - | 10.3 | 0.0 | 8.6 | 0.0 | -16.9 | -2.0 | 0.0 |
Companies acquired (note 4.1) | - | 0.0 | 4.0 | 2.3 | 0.9 | - | 0.4 | 7.7 |
Depreciation | - | -15.0 | -65.7 | -66.7 | -64.7 | - | - | -212.1 |
Closing net book value | 5.9 | 177.8 | 192.3 | 203.5 | 146.0 | 50.5 | 3.6 | 779.7 |
Closing gross acquisition cost | 5.9 | 350.9 | 435.6 | 750.8 | 280.4 | 50.5 | 3.6 | 1,877.8 |
Closing accumulated depreciation | - | -173.1 | -243.3 | -547.3 | -134.3 | - | - | -1,098.1 |
Closing net book value | 5.9 | 177.8 | 192.3 | 203.5 | 146.0 | 50.5 | 3.6 | 779.7 |
78 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Acquisitions and capital expenditure
Jan 1–Dec 31, 2022 | ||||||||
Tangible assets, MEUR | ||||||||
Opening gross acquisition cost | 6.7 | 333.3 | 365.5 | 664.4 | 232.2 | 11.5 | 3.5 | 1,617.1 |
Opening accumulated depreciation | - | -152.2 | -154.1 | -464.5 | -109.6 | - | - | -880.4 |
Opening net book value | 6.7 | 181.1 | 211.4 | 199.9 | 122.6 | 11.5 | 3.5 | 736.7 |
Opening net book value | 6.7 | 181.1 | 211.4 | 199.9 | 122.6 | 11.5 | 3.5 | 736.7 |
Translation differences | 0.0 | -1.6 | 1.9 | -0.5 | 0.8 | -0.4 | 0.0 | 0.2 |
Increase | - | 7.0 | 44.5 | 58.9 | 62.9 | 23.3 | 1.6 | 198.4 |
Decrease | -0.8 | -2.1 | -3.4 | -1.5 | -0.8 | -0.1 | - | -8.7 |
Reclassifications | - | 2.7 | 0.0 | 9.3 | 0.0 | -8.9 | -3.6 | -0.4 |
Companies acquired (note 4.1) | - | - | - | 0.2 | 0.2 | - | - | 0.4 |
Depreciation | 0.0 | -15.0 | -63.8 | -68.1 | -62.9 | - | - | -209.8 |
Closing net book value | 5.9 | 172.1 | 190.8 | 198.3 | 122.8 | 25.3 | 1.6 | 716.8 |
Closing gross acquisition cost | 5.9 | 336.7 | 403.6 | 714.2 | 249.5 | 25.3 | 1.6 | 1,736.9 |
Closing accumulated depreciation | - | -164.6 | -212.8 | -515.9 | -126.7 | - | - | -1,020.0 |
Closing net book value | 5.9 | 172.1 | 190.8 | 198.3 | 122.8 | 25.3 | 1.6 | 716.8 |
79 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
80 KONE Annual Review 2023
Capital structure
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
Interest-bearing
net debt
-1,013 MEUR
Equity per
share
5.32 EUR
5
In this section
This section comprises the following notes, which
describe the capital structure of KONE:
5.1 Capital management
5.2 Shareholders’ equity
5.3 Financial risks and instruments
5.4 Shares and other non-current financial assets
5.5 Deposits and loans receivable
5.6 Commitments
5.7 Employee benefits
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
Capital management, MEUR | 2023 | 2022 | 2021 | 2020 | 2019 |
Assets employed | |||||
Goodwill and shares | 1,567 | 1,536 | 1,550 | 1,470 | 1,506 |
Other non-current assets ¹⁾ | 1,067 | 925 | 954 | 933 | 990 |
Net working capital | -861 | -904 | -1,468 | -1,160 | -856 |
Total assets employed | 1,773 | 1,557 | 1,035 | 1,243 | 1,640 |
Capital | |||||
Equity | 2,786 | 2,867 | 3,199 | 3,197 | 3,193 |
Interest-bearing net debt | -1,013 | -1,309 | -2,164 | -1,954 | -1,553 |
Total capital | 1,773 | 1,557 | 1,035 | 1,243 | 1,640 |
Gearing | -36.4% | -45.7% | -67.6% | -61.1% | -48.6% |
Equity ratio | 40.9% | 40.3% | 41.2% | 45.5% | 46.5% |
MEUR | Dec 31, 2023 | Dec 31, 2022 |
USA | 501.2 | 477.0 |
China | 434.7 | 466.4 |
Germany | 329.3 | 212.8 |
Spain | 258.9 | 244.1 |
France | 198.0 | 201.5 |
Finland | 194.6 | 167.2 |
Other | 1,050.1 | 1,012.4 |
Total | 2,966.8 | 2,781.3 |
81 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
82 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
Own shares
Number of shares | Acquisition cost, MEUR | |
Jan 1, 2023 | 12,306,640 | 236.6 |
Distributed to the share-based incentive plan, January | -121,084 | -5.3 |
Distributed to the share-based incentive plan, April | -7,912 | -0.3 |
Distributed to the share-based incentive plan, June | -18,485 | -0.8 |
Dec 31, 2023 | 12,159,159 | 230.2 |
Jan 1, 2022 | 11,433,525 | 198.6 |
Distributed to the share-based incentive plan, February | -218,091 | -12.1 |
Returned from the share-based incentive plan, February | 9,518 | 0.4 |
Distributed as the annual compensation of the Board, April | -7,664 | -0.5 |
Returned from the share-based incentive plan, April | 1,269 | 0.0 |
Returned from the share-based incentive plan, July | 2,468 | 0.1 |
Purchase, November | 150,000 | 6.3 |
Purchase, November | 120,000 | 5.3 |
Purchase, November | 100,000 | 4.4 |
Purchase, November | 50,000 | 2.2 |
Purchase, November | 130,000 | 5.9 |
Purchase, November | 130,000 | 6.0 |
Purchase, November | 150,000 | 7.4 |
Purchase, November | 150,000 | 7.5 |
Purchase, November | 103,500 | 5.0 |
Returned from the share-based incentive plan, December | 2,115 | 0.1 |
Dec 31, 2022 | 12,306,640 | 236.6 |
83 KONE Annual Review 2023
84 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
Reconciliation of own shares, Dec 31, 2023 | |||
KONE Corporation and Group total | Quantity | Acquisition cost | Average price |
Dec 31, 2022 | 12,306,640 | 236,636,393.03 | 19.23 |
January 27, 2023 | -121,084 | -5,300,177.74 | 43.77 |
April 27, 2023 | -7,912 | -330,947.48 | 41.83 |
June 19, 2023 | -18,485 | -773,200.73 | 41.83 |
Dec 31, 2023 | 12,159,159 | 230,232,067.08 | 18.93 |
85 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
86 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
Maturity analysis of financial liabilities and interest payments | ||||||||
Dec 31, 2023 | Dec 31, 2022 | |||||||
MEUR | < 1 year | 1-5 years | > 5 years | Total | < 1 year | 1-5 years | > 5 years | Total |
Interest-bearing debt | ||||||||
Loans | - | -200.0 | -0.4 | -200.4 | - | -200.0 | - | -200.0 |
Lease liabilities | -110.9 | -206.1 | -32.2 | -349.1 | -106.1 | -186.3 | -31.6 | -324.0 |
Current loans and other liabilities | -2.2 | - | - | -2.2 | - | - | - | - |
Used bank overdraft limits | -0.8 | - | - | -0.8 | -8.6 | - | - | -8.6 |
Option liabilities from acquisitions | - | -2.3 | - | -2.3 | - | -1.3 | - | -1.3 |
Employee benefit liabilities | - | - | -132.9 | -132.9 | - | - | -140.0 | -140.0 |
Non-interest-bearing debt | ||||||||
Accounts payable | -927.0 | - | - | -927.0 | -1,132.8 | - | - | -1,132.8 |
Derivatives | ||||||||
Capital inflow | 3,118.0 | 164.3 | - | 3,282.3 | 2,856.0 | 118.4 | 0.4 | 2,974.8 |
Capital outflow | -3,135.0 | -168.8 | - | -3,303.8 | -2,866.6 | -117.6 | -0.4 | -2,984.6 |
Interest payments | -12.1 | -17.5 | -3.2 | -32.8 | -7.8 | -11.9 | -0.5 | -20.2 |
Net outflow | -1,070.0 | -430.4 | -168.7 | -1,669.1 | -1,265.8 | -398.7 | -172.1 | -1,836.6 |
Dec 31, 2023 | Dec 31, 2022 | |||
| Derivative | ||||
Fair values of derivative financial instruments, MEUR | Derivative assets | liabilities | Fair value, net | Fair value, net |
Foreign exchange derivatives | ||||
In cash flow hedge accounting | 5.2 | -18.4 | -13.2 | 6.2 |
In net investment hedge accounting | 0.6 | -0.5 | 0.0 | -0.8 |
Other foreign exchange hedges | 5.8 | -9.6 | -3.9 | -11.0 |
Total | 11.5 | -28.5 | -17.0 | -5.4 |
Nominal values of derivative financial instruments, MEUR | Dec 31, 2023 | Dec 31, 2022 |
Foreign exchange derivatives | ||
In cash flow hedge accounting | 1,114.3 | 1,009.7 |
In net investment hedge accounting | 437.9 | 224.0 |
Other foreign exchange hedges | 1,730.2 | 1,741.2 |
Total | 3,282.3 | 2,974.8 |
87 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
| Measured at fair | ||||||
| Measured at | value through | |||||
| fair value | Measured at | other | ||||
| through profit | amortized | comprehensive | Total book | |||
Dec 31, 2023 | Notes | or loss | cost | income | value | |
Non-current assets | ||||||
Shares and other non-current financial assets | 5.4 | 97.9 | 97.9 | |||
Non-current loans receivable | I | 5.5 | 3.5 | 3.5 | ||
Current assets | ||||||
Accounts receivable | 2,495.1 | 2,495.1 | ||||
Derivative assets | 5.7 | 5.8 | 11.5 | |||
Current deposits and loans receivable | I | 5.5 | 972.0 | 291.9 | 1,263.9 | |
Cash and cash equivalents | I | 424.5 | 424.5 | |||
Total financial assets | 977.7 | 3,215.0 | 103.7 | 4,296.4 | ||
Non-current liabilities ¹⁾ | ||||||
Loans | I | 200.4 | 200.4 | |||
Current liabilities | ||||||
Other interest-bearing liabilities ²⁾ | I | 3.0 | 3.0 | |||
Option liabilities from acquisitions | I | 2.3 | 2.3 | |||
Accounts payable | 927.0 | 927.0 | ||||
Derivative liabilities | 9.6 | 19.0 | 28.6 | |||
Total financial liabilities | 11.9 | 1,130.5 | 19.0 | 1,161.3 | ||
¹ ⁾ Excluding non-current lease liabilities of EUR 238.3 million. | ||||||
² ⁾ Excluding current lease liabilities of EUR 110.9 million. |
88 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
| Measured at fair | ||||||
| Measured at | value through | |||||
| fair value | Measured at | other | ||||
| through profit | amortized | comprehensive | Total book | |||
Dec 31, 2022 | Notes | or loss | cost | income | value | |
Non-current assets | ||||||
Shares and other non-current financial assets | I | 5.4 | 121.7 | 121.7 | ||
Non-current loans receivable | I | 5.5 | 2.5 | 2.5 | ||
Current assets | ||||||
Accounts receivable | 2,668.1 | 2,668.1 | ||||
Derivative assets | 6.4 | 20.8 | 27.2 | |||
Current deposits and loans receivable | I | 5.5 | 820.8 | 654.1 | 1,474.9 | |
Cash and cash equivalents | I | 495.5 | 495.5 | |||
Total financial assets | 827.2 | 3,820.2 | 142.5 | 4,790.0 | ||
Non-current liabilities ¹⁾ | ||||||
Loans | I | 200.0 | 200.0 | |||
Current liabilities | ||||||
Other interest-bearing liabilities ²⁾ | I | 8.6 | 8.6 | |||
Option liabilities from acquisitions | I | 1.3 | 1.3 | |||
Accounts payable | 1,132.8 | 1,132.8 | ||||
Derivative liabilities | 17.3 | 15.4 | 32.7 | |||
Total financial liabilities | 18.7 | 1,341.4 | 15.4 | 1,375.4 | ||
¹ ⁾ Excluding non-current lease liabilities of EUR 217.9 million. | ||||||
² ⁾ Excluding current liabilities of EUR 106.1 million. |
89 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
90 KONE Annual Review 2023
5.5 Deposits and loan receivable
The fair values of deposits and loans receivable are not
materially different from their carrying amounts. Current
deposits mature within one year and consist of EUR 972.0
(820.8) million and EUR 291.2 (649.3) million of interest rate
funds and short-term bank deposits, respectively.
Deposits and loans receivable, MEUR | Dec 31, 2023 | Dec 31, 2022 |
Non-current loans receivable | 3.5 | 2.5 |
Current loans receivable | 0.6 | 4.8 |
Current short-term deposits | 1,263.2 | 1,470.1 |
Total | 1,267.4 | 1,477.4 |
91 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
92 KONE Annual Review 2023
Other post-employment | ||||||||
Defined benefit plan liability | benefit liability | Fair value of plan assets | Net defined benefit balance | |||||
MEUR | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2023 | Dec 31, 2022 |
Balance at beginning of period | 519.2 | 714.5 | 8.9 | 7.1 | 398.2 | 550.2 | 130.0 | 171.4 |
Current service costs | 17.3 | 20.5 | 0.2 | 0.2 | - | - | 17.4 | 20.7 |
Interest expense | 23.3 | 14.3 | 0.4 | 0.2 | - | - | 23.6 | 14.5 |
Interest income | - | - | - | - | 18.7 | 11.6 | -18.7 | -11.6 |
Other | -3.8 | -1.5 | - | - | -3.0 | -2.9 | -0.8 | 1.5 |
Components of defined benefit costs recognized | 36.8 | 33.4 | 0.5 | 0.4 | 15.7 | 8.7 | 21.6 | 25.1 |
in the consolidated statements of income | ||||||||
Return on plan assets, excluding interest income | - | - | - | - | 5.0 | -151.4 | -5.0 | 151.4 |
Remeasurements | 12.2 | -184.0 | -1.1 | 1.6 | - | - | 11.1 | -182.4 |
Remeasurements recognized in the consolidated | 12.2 | -184.0 | -1.1 | 1.6 | 5.0 | -151.4 | 6.1 | -31.1 |
statements of comprehensive income | ||||||||
Employer contributions | - | - | - | - | 26.0 | 29.0 | -26.0 | -29.0 |
Plan participants’ contributions | 2.0 | 1.9 | 0.2 | 0.2 | 2.2 | 2.2 | - | - |
Benefits paid | -35.0 | -46.7 | -0.8 | -0.8 | -28.9 | -39.1 | -6.9 | -8.4 |
Settlement payments | -0.3 | - | - | - | - | - | -0.3 | - |
Business combinations, disposals and other | 0.7 | 0.2 | - | - | - | - | 0.7 | 0.2 |
Foreign currency translation effects | -0.7 | 0.0 | -0.3 | 0.4 | 0.4 | -1.4 | -1.3 | 1.8 |
Other reconciling items | -33.2 | -44.6 | -0.9 | -0.1 | -0.2 | -9.3 | -33.9 | -35.4 |
Balance at end of period | 535.1 | 519.2 | 7.5 | 8.9 | 418.7 | 398.2 | 123.9 | 130.0 |
Present value of unfunded obligations | 86.1 | 84.2 | 7.5 | 8.9 | - | - | 93.6 | 93.2 |
Present value of funded obligations | 449.0 | 435.0 | - | - | - | - | 449.0 | 435.0 |
Fair value of benefit plans' assets | - | - | - | - | 418.7 | 398.2 | -418.7 | -398.2 |
Total | 535.1 | 519.2 | 7.5 | 8.9 | 418.7 | 398.2 | 123.9 |
130.0
93 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Capital structure
Fair values of major classes of plan assets, MEUR | Dec 31, 2023 | Dec 31, 2022 |
Fair value of plan assets with a quoted market price | 388.6 | 369.3 |
Other | 30.1 | 28.9 |
Total | 418.7 |
398.2
Amounts recognized in the statement of income, | ||
MEUR | Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 |
Defined contribution pension plans | 323.5 | 313.0 |
Defined benefit pension plans | 21.1 | 24.7 |
Other post-employment benefits | 0.5 | 0.4 |
Total | 345.0 |
.
338.1
Defined benefit plans: assumptions used in calculating | Dec 31, 2023 | Dec 31, 2022 | ||
benefit obligations | Europe | USA | Europe | USA |
Discount rate, % | 3.20 | 4.85 | 4.33 | 5.03 |
Future salary increase, % | 2.4 | 4.0 | 2.6 | 4.0 |
Future pension increase, % | 0.6 | - | 1.4 | 0.0 |
Sensitivity of the defined benefit obligation to changes | Impact on defined benefit obligation | |
in actuarial assumptions | Dec 31, 2023 | Dec 31, 2022 |
Discount rate, +0.25 percentage points | -2.5% | -2.5% |
Discount rate, -0.25 percentage points | 2.7% | 2.7% |
Future pension increase, +0.25 percentage points | 1.0% | 1.2% |
Future pension increase, -0.25 percentage points | -1.0% | -1.2% |
94 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Others
In this section
This section comprises the following notes concerning
rewards and related parties to KONE:
6.1 Management remuneration
6.2 Share-based payments
6.3 Related party transactions
6
Others
Consolidated financial statements | Notes to the consolidated financial statements | Others
95 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Others
separate agreement regarding early retirement has been Statutory pension cost for the year 2023 was EUR 20,600. No |
made. Nomination and Compensation Committee and may not exceed 75 percent of the annual salary. The members of the Executive Board are included in the long-term share-based incentive plan for the top management. Additional information concerning long-term share-based incentive plan of the Executive Board is disclosed in note 6.2 Share-based payments. No separate agreement regarding early retirement has been made for the members of the Executive Board. The prior to retirement is a maximum of 15 months’ salary, which percent of the recipient’s annual base salary. In 2023, Jussi Herlin’s base salary and benefits were EUR 126,457. There was no bonus payout in 2023 as the performance criteria for 2022, tied to the Group’s financial performance, were not met. The Executive Vice Chair’s retirement age and pension are determined in accordance with Finland’s Pensions Act. |
The carrying value of the pension liability for Board |
Member Matti Alahuhta (served as President & CEO until March 31, 2014) included in the balance sheet is EUR 4.6 compensation for the termination of the employment contract The Vice Chair of the Board, Jussi Herlin has a separate employment contract for his role as Executive Vice Chair of |
million at the end of 2023 and the yearly pension paid to him by KONE in 2023 was EUR 295,651. includes the salary for a six-month term of notice. the Board at KONE. The employment-based compensation for Jussi Herlin consists of a base salary, benefits and an annual |
The compensation for the President and CEO Henrik bonus determined by the Board based on the Corporation’s | ||
Ehrnrooth consists of a base salary, benefits and an annual | ||
key targets. The annual bonus may not exceed 150 percent of benefits totaled to EUR 762,741. He also received a bonus of | ||
his annual salary. In 2023, Henrik Ehrnrooth’s base salary and EUR 465,675, which was earned in 2022. The performance | ||
criteria applied to this annual short-term incentive was based | ||
on KONE’s financial and strategic performance as well as | ||
individual performance. In addition, Henrik Ehrnrooth is the Group’s top management. Additional information | ||
included in the long-term share-based incentive plan (LTI) for concerning long-term share-based incentive plan of the | ||
President and CEO is disclosed in note 6.2 Share-based determined in accordance with Finland’s Pensions Act. | ||
payments. Henrik Ehrnrooth’s retirement age and pension are Statutory pension cost for the year 2023 was EUR 200,109. | ||
There has not been any separate agreement regarding early | ||
retirement. His employment contract includes an entitlement salary for a six-month term of notice in case of termination | bonus decided by the Board on the basis of the Group’s financial result. The annual bonus may not exceed 100 | |
to an equivalent of 18 months’ salary, which includes the before retirement. Henrik Ehrnrooth decided to step down | ||
from his role as the President and CEO of KONE as of | ||
December 31, 2023. A separate exit agreement replaces the contractual notice of termination and severance payments. The compensation for the members of the Executive Board (excl. President and CEO) comprises a base salary, benefits and an annual bonus, based on KONE’s financial targets and strategic performance, as well as individual performance. The bonus amount is determined by the |
Consolidated financial statements | Notes to the consolidated financial statements | Others
96 KONE Annual Review 2023
Compensation paid to the President and CEO and to the members of the Executive Board | ||||
Jan 1–Dec 31, 2023 | Jan 1–Dec 31, 2022 | |||
The President & | The members of the | The members of the | ||
EUR, thousand | CEO ¹⁾ | Executive Board ¹⁾ | The President & CEO | Executive Board |
Base salary and benefits | 762.7 | 6,382.8 | 763.9 | 5,106.3 |
Annual short-term incentive ²⁾ | 465.7 | 1,987.8 | 835.4 | 2,248.8 |
Long-term incentive plan ³⁾ | - | 2,076.2 | - | 36.0 |
Total compensation | 1,228.4 | 10,446.7 | 1,599.3 | 7,391.2 |
The President and | The Executive Board | ||||
Performance | Vesting date | CEO - Maximum | - Maximum earning | ||
based long-term | Performance | pursuant to the | earning opportunity | opportunity (number | |
incentive plan | Period | plan rules | Performance Criteria | (number of shares) ⁴⁾ | of shares) ⁴⁾ ⁵⁾ |
January 2021 - | Adjusted EBIT Margin % and | ||||
LTI 2021 ⁶⁾ | December 2023 | January 2024 | Sales Growth | 53,541 | 235,578 |
Sustainability | |||||
January 2022 - | Adjusted EBIT Margin % and | ||||
LTI 2022 ⁷⁾ | December 2024 | January 2025 | Sales Growth | 58,243 | 250,445 |
Sustainability | |||||
Adjusted EBIT Margin % and | |||||
LTI 2023 ⁸⁾ | January 2023 - | January 2026 | Sales Growth | 74,642 | 296,081 |
December 2025 | |||||
Sustainability |
Consolidated financial statements | Notes to the consolidated financial statements | Others
97 KONE Annual Review 2023
Consolidated financial statements | Notes to the consolidated financial statements | Others
98 KONE Annual Review 2023
6.3 Related party transactions
KONE’s related parties comprise its subsidiaries as well as
the Board of Directors, the President & CEO, and the
Executive Board including any companies controlled or
significantly influenced by them. The Corporate Controlling
function evaluates and monitors transactions between the
Group and its related parties to ensure that any conflicts of
interest are taken into account appropriately in KONE’s
decision making process.
Except for management remuneration there have not been
any material transactions between KONE and its members of
the Board of Directors, the President & CEO, the Executive
Board including any companies controlled or significantly
influenced by them. Information concerning management
remuneration is disclosed in note 6.1 and shares held by the
members of the Board of Directors, the President & CEO, the
Executive Board is disclosed on page 129. KONE’s
subsidiaries are disclosed on pages 114-116.
Consolidated financial statements | Parent company financial statements | Parent company statement of income
99 KONE Annual Review 2023
Parent company statement of income
EUR
Note
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
Sales
1
709,021,837.20
593,741,411.36
Other operating income
2
36,889,574.39
26,965,034.76
Materials and services
-488,951.11
-1,093,910.93
Personnel expenses
3
-134,907,238.89
-143,337,927.51
Depreciation and amortization
4
-14,846,087.30
-14,532,852.67
Other operating expenses
-395,792,547.08
-367,618,687.27
Operating income
199,876,587.21
94,123,067.74
Financing income and expenses
6
1,843,565,052.71
1,614,683,110.85
Income before appropriations and taxes
2,043,441,639.92
1,708,806,178.59
Appropriations
7
264,380.90
2,569,592.64
Income taxes
-35,573,529.68
-24,043,190.36
Deferred taxes
-11,869,192.31
19,620,138.38
Net income
1,996,263,298.83
1,706,952,719.25
Consolidated financial statements | Parent company financial statements | Parent company statement of financial position
100 KONE Annual Review 2023
Assets, EUR
Note
Dec 31, 2023
Dec 31, 2022
Non-current assets
Intangible assets
8
33,370,511.66
17,741,097.62
Tangible assets
9
40,972,570.21
39,297,950.85
Investments
Subsidiary shares
10
3,749,867,304.70
2,049,869,305.70
Other shares
11
2,001,818.47
2,002,366.43
3,751,869,123.17
2,051,871,672.13
Total non-current assets
3,826,212,205.04
2,108,910,720.60
Current assets
Non-current receivables
12
Loans receivable
208,208,242.27
309,099,768.53
208,208,242.27
309,099,768.53
Current receivables
13
Accounts receivable
36,217,979.44
82,812,950.27
Loans receivable
502,522,143.43
1,026,181,242.70
Deferred tax assets
7,767,344.20
19,636,536.51
Other receivables
4,506,623.92
6,908,396.93
Deferred assets
209,037,676.32
173,782,768.28
760,051,767.31
1,309,321,894.69
Financial investments
970,155,522.23
1,113,727,135.66
Cash and cash equivalents
113,183,568.81
116,926,521.92
Total current assets
2,051,599,100.62
2,849,075,320.80
Total assets
5,877,811,305.66
4,957,986,041.40
Equity and liabilities, EUR
Note
Dec 31, 2023
Dec 31, 2022
Equity
Share capital
66,174,482.53
66,174,482.53
Share premium account
100,328,064.58
100,328,064.58
Other reserves
Paid-up unrestricted equity reserve
220,089,095.16
219,679,615.94
Retained earnings
802,025,209.03
-
Net income
1,996,263,298.83
1,706,952,719.25
Total equity
14
3,184,880,150.13
2,093,134,882.30
Cumulative accelerated depreciation
8,168,062.66
8,432,443.56
Appropriations
8,168,062.66
8,432,443.56
Provisions
2,374,945.72
3,071,522.75
Liabilities
Non-current liabilities
15
Loans
244,116,651.99
299,390,065.18
244,116,651.99
299,390,065.18
Current liabilities
16
Accounts payable
97,317,018.02
86,155,463.23
Loans
2,197,980,076.36
2,244,490,091.12
Other liabilities
3,671,303.56
7,653,093.31
Accruals
139,303,097.22
215,658,479.95
2,438,271,495.16
2,553,957,127.61
Total liabilities
2,682,388,147.15
2,853,347,192.79
Total equity and liabilities
5,877,811,305.66
4,957,986,041.40
Parent company statement of financial position
101 KONE Annual Review 2023
Consolidated financial statements | Parent company financial statements | Parent company cash flow statement
EUR
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
Cash receipts from customers
691,025,848.66
660,646,667.42
Cash receipts from other operative income
36,889,574.39
26,965,034.76
Cash paid to suppliers and employees
-568,075,393.54
-461,773,746.53
Financing items
1,822,386,551.96
1,657,079,116.06
Taxes paid
-28,405,593.63
-4,944,806.24
Other financing items
11,186,054.53
12,208,165.03
Cash flow from operating activities
1,965,007,042.37
1,890,180,430.50
Capital expenditure
-32,141,448.70
-16,490,271.01
Proceeds from sales of fixed assets
-
270,000.00
Subsidiary investments
-1,200,000,000.00
-3,000.00
Proceeds from sales and decreases of subsidiary shares
-
655,696.91
Cash flow from investing activities
-1,232,141,448.70
-15,567,574.10
Purchase of own shares
-
-50,029,847.58
Net change in short-term debt
-46,510,014.76
-886,305,024.17
Net change in long-term debt
-55,273,413.19
-207,668,793.22
Profit distribution
-904,927,510.22
-1,087,777,863.24
Group contributions received
1,500,000.00
31,500,000.00
Other financing items
268,602,391.39
260,142,090.78
Cash flow from financing activities
-736,608,546.78
-1,940,139,437.43
Change in cash and cash equivalents
-3,742,953.11
-65,526,581.03
Cash and cash equivalents, Jan 1
116,926,521.92
182,453,102.95
Cash and cash equivalents, Dec 31
113,183,568.81
116,926,521.92
Change in cash and cash equivalents
-3,742,953.11
-65,526,581.03
Reconciliation of net income to the cash flow from operating
activities, EUR
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
Net income
1,996,263,298.83
1,706,952,719.25
Depreciation and amortization
14,846,087.30
14,532,852.67
Other adjustments
-4,368,680.74
3,201,068.28
Income before change in working capital
2,006,740,705.39
1,724,686,640.20
Change in receivables
24,113,028.11
132,071,008.77
Change in liabilities
-65,846,691.13
33,422,781.53
Cash flow from operating activities
1,965,007,042.37
1,890,180,430.50
Parent company cash flow statement
Consolidated financial statements | Parent company financial statements | Notes to the parent company financial statements
102 KONE Annual Review 2023
The parent company financial statements have been prepared
according to the Finnish Accounting Standards. Financial
statements have been prepared for the period of 12 months
between January 1 and December 31, 2023.
Foreign currency transactions and translation
Transactions in foreign currencies are recorded at the rate of
exchange prevailing on the date of the individual transaction.
Foreign currency denominated receivables and liabilities are
translated using the period end exchange rates.
Foreign exchange gains and losses associated with loans,
deposits and other statement of financial position items are
included under financing income and expenses.
Loan receivables and financial investments
Loan receivables are initially recognized at nominal values
and subsequently measured at amortized cost. Management
estimates that the fair values of the loan receivables do not
materially differ from the carrying values at the statement of
financial position dates.
Financial investments in commercial papers, short-term
bank deposits, interest rate funds and other money market
instruments 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.
Derivative instruments
Derivative financial instruments are used to hedge currency
and the interest rate risks. Derivatives are measured at fair
value in accordance with Accounting Act 5:2a §. The fair
values of foreign exchange forward contracts are estimated by
discounting the future cash flows of the contracts with the
relevant market interest rate yield curves on the valuation date
and by calculating the difference between the discounted
values as at the forward contract date and balance sheet date
in euros. Currency options are valued as of each reporting
date by using the Garman & Kohlhagen option valuation
model. The fair values of derivative financial instruments are
presented in note 18.
Changes in the fair values of foreign exchange derivatives
are recognized in financing income and expenses if the
hedged item is a loan receivable, deposit or a financial asset
or liability denominated in a foreign currency.
Revenue recognition
Revenues related to the utilization of intangible property rights
are recognized as sales on an accrual basis, according to the
existing contracts. The sales of services are recognized as
sales when the services have been rendered or when the
work has been completed.
Research and development cost
Research and development costs are typically expensed as
they incur, because the future economic benefits of new
products and development of existing products and services
can only be proven after their successful introduction to the
market. In 2023 development costs specific to two programs
have been capitalized.
Pensions
An external pension insurance company manages the parent
company statutory pension plan. Contributions to the pension
plan are charged directly to the statement of income in the
year to which these contributions relate.
Leases
Leasing payments are charged to the statement of income on
a straight-line basis over the leasing term. Remaining future
leasing liabilities from existing contracts are presented in note
17.
Taxes
Tax expense includes taxes based on taxable income for the
period, together with tax adjustments for previous periods and
changes in deferred taxes. Deferred taxes are provided for
temporary differences arising between the tax basis of assets
and liabilities and their book values in financial reporting and
measured with enacted tax rates.
Deferred tax liabilities arising from temporary differences
are fully recognized with prudency, whereas the deferred tax
assets are recognized only to the extent of the probable future
tax benefit.
Non-current assets
Intangible assets and property, plant and equipment are
stated at the cost less accumulated depreciation and
amortization. Depreciation and amortization are recorded on a
straight-line basis over the economic useful lives of the assets
as follows:
Buildings 5–40 years
Machinery and equipment 4–10 years
Other long-term expenditure 4–10 years
Land is not depreciated.
Investments in subsidiaries and other companies are
measured at cost, or fair value in case the fair value is less
than cost.
Provisions
Future outflows of cash, which the parent company has
committed to that are not expected to contribute future
revenues and unavoidable losses, which are probable, are
recognized in provisions. Parent company provisions consist
of warranty provisions.
Notes to the parent company financial statements
Accounting principles
103 KONE Annual Review 2023
Consolidated financial statements | Parent company financial statements | Notes to the parent company financial statements
Financial risk management
Parent company business activities are exposed to financial
risks such as foreign exchange risks, interest rate risks,
liquidity risks and credit risks. These financial risks are
managed in accordance with the KONE Treasury Policy.
Parent company financials risks are not significantly different
from the Group’s financials risks, see notes 2.4 and 5.3 to the
Group level financial statements.
Cash and cash equivalents
Cash and cash equivalents include cash-in-hand and bank
account balances. Used bank overdrafts are included in other
current liabilities.
Share-based payments
Share-based incentive plans of KONE consist of a
performance share plan and restricted share plan. The
performance share plan is targeted to the President and CEO,
members of the Executive Board and other top management
as well as other selected key personnel of KONE Group. The
restricted share plan serves as a complementary long-term
share plan to be used as a commitment instrument for
retention and recruitment purposes for top management
(excluding the President and CEO) and other selected key
persons. Pursuant to the share ownership plans, the reward to
the management is either settled with KONE class B shares,
or as a combination of KONE class B shares and cash when
the criteria set in the terms and conditions of the plan are met.
Number of shares earned by participants under the share-
based incentive plans are determined on gross basis with
deduction for taxes made when applicable before delivery of
the shares to the participants. The shares to be transferred as
part of the plans are obtained in public trading. The acquisition
of shares is recognized as an increase of own shares,
reducing equity, and transfer of shares as decrease in own
shares and retained earnings within equity.
The fair value of the share-based payments settled with
cash has been determined so that it covers taxes and social
security costs that are incurred. The cost arising from cash
settled part of share-based payment rewards is recognized as
an expense.
104 KONE Annual Review 2023
Consolidated financial statements | Parent company financial statements | Notes to the parent company financial statements
Notes to the statement of income
1. Sales
2. Other operating income
EUR 1,000
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
Subsidies received
5,393.3
6,271.8
Recharged energy
1,298.3
1,281.8
Service charges
808.6
840.8
Others
29,389.4
18,570.6
Total
36,889.6
26,965.0
3. Personnel expenses
EUR 1,000
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
Wages and salaries
111,299.2
118,711.9
Pension costs
20,338.6
21,169.8
Other employment expenses
3,269.4
3,456.2
Total
134,907.2
143,337.9
Sales primarily comprises of sales to subsidiaries, amounting to 709,021.8 (593,741.4) thousand euros, which relates to revenues for
the utilization of intellectual property rights.
In 2023, the salaries and fees paid to the President & CEO and to the Board of Directors were together 2,414.9 (2,697.1) thousand
euros. Average number of staff employed by the parent company was 1,239 during the financial year (1,279)
Consolidated financial statements | Parent company financial statements | Notes to the parent company financial statements
105 KONE Annual Review 2023
4. Depreciation and amortization
EUR 1,000
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
Intangible rights
344.8
292.4
Other long-term expenditure
6,583.7
5,965.8
Buildings
1,374.6
1,357.7
Machinery and equipment
6,543.1
6,916.9
Total
14,846.1
14,532.9
5. Auditors’ fees
EUR 1,000
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
Audit
953.6
833.4
Tax advisory services
49.4
-
Other services
390.8
58.7
Total
1,393.8
892.1
6. Financing income and expenses
EUR 1,000
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
Dividend income from subsidiaries
1,852,180.9
1,672,908.6
Other dividends received
1.1
0.9
Interest income from subsidiaries
46,414.3
11,759.6
Interest income from others
27,414.0
29,475.3
Interest expenses to subsidiaries
-99,661.5
-53,789.9
Interest expenses to others
-1,533.7
-5,518.8
Other financing income and expenses
18,749.9
-40,152.6
Total
1,843,565.1
1,614,683.1
7. Appropriations
EUR 1,000
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
Cumulative accelerated depreciation charge
264.4
1,069.6
Group contributions received
-
1,500.0
Total
264.4
2,569.6
106 KONE Annual Review 2023
Consolidated financial statements | Parent company financial statements | Notes to the parent company financial statements
8. Intangible assets
Jan 1–Dec 31, 2023, EUR 1, 000
Intangible rights
Other long-term
expenditure
Advance payments
Total
Opening gross acquisition cost
5,468.1
120,118.9
1,747.1
127,334.1
Opening accumulated amortization and impairment
-4,691.1
-104,689.8
-212.1
-109,593.0
Opening net book value
777.0
15,429.2
1,534.9
17,741.1
Opening net book value
777.0
15,429.2
1,534.9
17,741.1
Increase
549.7
8,123.9
13,884.2
22,557.9
Decrease
-
-
-
-
Reclassifications
-
1,052.3
-1,052.3
-
Amortization
-344.8
-6,583.7
-
-6,928.5
Closing net book value
981.9
18,021.7
14,366.9
33,370.5
Closing gross acquisition cost
6,017.8
129,017.6
14,579.1
149,614.4
Closing accumulated amortization and impairment
-5,035.9
-110,995.9
-212.1
-116,243.9
Closing net book value
981.9
18,021.7
14,366.9
33,370.5
Jan 1–Dec 31, 2022, EUR 1, 000
Intangible rights
Other long-term
expenditure
Advance payments
Total
Opening gross acquisition cost
5,216.9
126,282.0
-
131,498.9
Opening accumulated amortization and impairment
-4,398.7
-110,983.7
-
-115,382.4
Opening net book value
818.2
15,298.4
-
16,116.5
Opening net book value
818.2
15,298.4
-
16,116.5
Increase
251.2
6,106.1
1,747.1
8,104.4
Decrease
-
-9.5
-212.1
-221.6
Reclassifications
-
-
-
-
Amortization
-292.4
-5,965.8
-
-6,258.2
Closing net book value
777.0
15,429.2
1,534.9
17,741.1
Closing gross acquisition cost
5,468.1
120,118.9
1,747.1
127,334.1
Closing accumulated amortization and impairment
-4,691.1
-104,689.8
-212.1
-109,593.0
Closing net book value
777.0
15,429.2
1,534.9
17,741.1
Notes to the statement of financial position
Consolidated financial statements | Parent company financial statements | Notes to the parent company financial statements
107 KONE Annual Review 2023
9. Tangible assets
Jan 1–Dec 31, 2022, EUR 1, 000
Land
Buildings
Machinery &
equipment
Fixed assets
under
construction
Total
Opening gross acquisition cost
182.3
31,472.5
57,689.5
237.9
89,582.2
Opening accumulated amortization and impairment
-
-12,358.1
-37,045.4
-
-49,403.5
Opening net book value
182.3
19,114.3
20,644.1
237.9
40,178.7
Opening net book value
182.3
19,114.3
20,644.1
237.9
40,178.7
Increase
-
85.5
4,722.1
3,581.4
8,388.9
Decrease
-
-
-338.7
-656.4
-995.0
Reclassifications
-
183.2
-
-183.2
-
Depreciation
-
-1,357.7
-6,915.8
-
-8,273.5
Closing net book value
182.3
18,025.3
18,111.7
2,979.7
39,299.0
Closing gross acquisition cost
182.3
31,741.1
60,853.4
3,636.1
96,412.9
Closing accumulated amortization and impairment
-
-13,715.8
-42,741.7
-656.4
-57,113.9
Closing net book value
182.3
18,025.3
18,111.7
2,979.7
39,299.0
Jan 1–Dec 31, 2023, EUR 1, 000
Land
Buildings
Machinery &
equipment
Fixed assets
under
construction
Total
Opening gross acquisition cost
182.3
31,741.1
60,853.4
3,636.1
96,412.9
Opening accumulated amortization and impairment
-
-13,715.8
-42,741.7
-656.4
-57,113.9
Opening net book value
182.3
18,025.3
18,111.7
2,979.7
39,299.0
Opening net book value
182.3
18,025.3
18,111.7
2,979.7
39,299.0
Increase
-
868.8
3,369.0
5,370.5
9,608.3
Decrease
-
-
-16.0
-16.9
-32.9
Reclassifications
-
54.4
1,203.6
-1,258.0
-
Depreciation
-
-1,374.6
-6,526.2
-
-7,900.8
Closing net book value
182.3
17,574.0
16,142.0
7,075.3
40,973.6
Closing gross acquisition cost
182.3
32,664.3
64,687.4
7,731.7
105,265.7
Closing accumulated amortization and impairment
-
-15,090.3
-48,545.3
-656.4
-64,292.0
Closing net book value
182.3
17,574.0
16,142.0
7,075.3
40,973.6
108 KONE Annual Review 2023
Consolidated financial statements | Parent company financial statements | Notes to the parent company financial statements
10. Subsidiary shares
11. Other shares
12. Non-current receivables
EUR 1,000
Dec 31, 2023
Dec 31, 2022
Acquisition cost, Jan 1
2,049,869.3
2,050,333.5
Increase
1,700,000.0
2.0
Decrease
-2.0
-466.2
Net book value, Dec 31
3,749,867.3
2,049,869.3
EUR 1,000
Dec 31, 2023
Dec 31, 2022
Acquisition cost, Jan 1
2,002.4
2,460.8
Increase
-
1.0
Decrease
-0.5
-459.5
Net book value, Dec 31
2,001.8
2,002.4
EUR 1,000
Dec 31, 2023
Dec 31, 2022
Loans receivable from subsidiaries
206,014.3
307,009.4
Loans receivable from externals
2,193.9
2,090.3
Long-term receivables
208,208.2
309,099.8
Consolidated financial statements | Parent company financial statements | Notes to the parent company financial statements
109 KONE Annual Review 2023
13. Current receivables
Receivables from subsidiaries, EUR 1,000
Dec 31, 2023
Dec 31, 2022
Accounts receivables
31,197.4
81,366.4
Loans receivable
502,522.1
1,026,181.2
Deferred assets
145,629.9
91,257.5
Total
679,349.4
1,198,805.1
Receivables from externals, EUR 1,000
Dec 31, 2023
Dec 31, 2022
Accounts receivables
5,020.6
1,446.6
Others
4,506.6
6,908.4
Deferred assets
63,407.8
82,525.3
Total
72,935.0
90,880.3
Deferred tax assets
7,767.3
19,636.5
Total short-term receivables
760,051.8
1,309,321.9
Deferred assets, EUR 1,000
Dec 31, 2023
Dec 31, 2022
Derivative assets
24,423.8
31,468.8
Deferred income taxes
15,903.8
23,038.8
Unbilled revenue
129,468.5
79,630.6
Group contributions
-
1,500.0
Others
39,241.6
38,144.6
Total
209,037.7
173,782.8
110 KONE Annual Review 2023
Consolidated financial statements | Parent company financial statements | Notes to the parent company financial statements
14. Equity and changes in equity
EUR 1,000
Share
capital
Share
premium
account
Paid-up
unrestricted
equity reserve
Own shares
Retained
earnings
Net income for
the period
Total
Book value Jan 1, 2023
66,174.5
100,328.1
219,679.6
-210,983.3
1,917,936.0
2,093,134.9
Profit distribution
-904,927.5
-904,927.5
Purchase of own shares
-
Share-based compensation
409.5
409.5
Net income for the period
1,996,263.3
1,996,263.3
Net book value Dec 31, 2023
66,174.5
100,328.1
220,089.1
-210,983.3
1,013,008.5
1,996,263.3
3,184,880.2
Non-restricted equity includes the paid-up unrestricted equity reserve, retained earnings deducted by own shares and the profit for the
financial year. The non-restricted equity was EUR 3,018,377,603.02 (1,926,632,335.19) at the end of the period. Distributable profit
deducted by activated development costs was EUR 3,006,869,325.51.
EUR 1,000
Share
capital
Share
premium
account
Paid-up
unrestricted
equity reserve
Own shares
Retained
earnings
Net income for
the period
Total
Book value Jan 1, 2022
66,174.5
100,328.1
244,987.6
-198,574.5
1,310,729.1
1,523,644.8
Profit distribution
-1,087,777.9
-1,087,777.9
Purchase of own shares
-25,653.1
-24,376.8
-50,029.8
Share-based compensation
345.1
11,968.0
-11,968.0
345.1
Net income for the period
1,706,952.7
1,706,952.7
Net book value Dec 31, 2022
66,174.5
100,328.1
219,679.6
-210,983.3
210,983.3
1,706,952.7
2,093,134.9
Consolidated financial statements | Parent company financial statements | Notes to the parent company financial statements
111 KONE Annual Review 2023
15. Non-current liabilities
Liabilities to subsidiaries, EUR 1,000
Dec 31, 2023
Dec 31, 2022
Liabilities falling due in 1–5 years
44,116.7
99,390.1
Total
44,116.7
99,390.1
Liabilities to externals, EUR 1,000
Dec 31, 2023
Dec 31, 2022
Liabilities falling due in 1–5 years
200,000.0
200,000.0
Total
200,000.0
200,000.0
Total non-current liabilities
244,116.7
299,390.1
112 KONE Annual Review 2023
Consolidated financial statements | Parent company financial statements | Notes to the parent company financial statements
16. Current liabilities
Liabilities to subsidiaries, EUR 1,000
Dec 31, 2023
Dec 31, 2022
Accounts payable
31,662.5
30,097.2
Loans
2,197,980.1
2,244,490.1
Accruals
50,604.7
123,306.5
Total
2,280,247.3
2,397,893.8
Liabilities to externals, EUR 1,000
Dec 31, 2023
Dec 31, 2022
Accounts payable
65,654.6
56,058.2
Other liabilities
3,671.3
7,653.1
Accruals
88,698.3
92,352.0
Total
158,024.2
156,063.3
Total current liabilities
2,438,271.5
2,553,957.1
Accruals, EUR 1,000
Dec 31, 2023
Dec 31, 2022
Accrued wages, salaries and employment costs
38,413.4
37,638.9
Derivative liabilities
28,673.5
43,282.5
Others
72,216.2
134,737.2
Total
139,303.1
215,658.5
Consolidated financial statements | Parent company financial statements | Notes to the parent company financial statements
113 KONE Annual Review 2023
17. Commitments
18. Derivatives
EUR 1,000
Dec 31, 2023
Dec 31, 2022
Guarantees
For subsidiaries
3,474,182.0
2,884,500.6
For others
63.1
77.5
Leasing commitments
Due next year
7,324.7
6,327.6
Due over a year
13,631.2
12,366.8
Other commitments
966.0
1,222.9
Total
3,496,167.0
2,904,495.5
Fair values of derivative instruments, EUR 1,000
Dec 31, 2023
Dec 31, 2022
Foreign exchange forward contracts with external parties
-14,333.8
-4,219.3
Foreign exchange forward contracts with subsidiaries
10,084.0
-7,594.3
Total
-4,249.7
-11,813.6
Nominal values of derivative instruments, EUR 1,000
Dec 31, 2023
Dec 31, 2022
Foreign exchange forward contracts with external parties
2,976,926.6
2,623,189.9
Foreign exchange forward contracts with subsidiaries
840,595.2
672,433.3
Total
3,817,521.8
3,295,623.2
Derivative contracts are entered for hedging purposes in line with KONE Treasury policy and are recognized at fair value. Derivatives
are classified as financial assets at fair value through profit or loss. The majority of the foreign exchange derivatives mature within a
year. The fair values of the foreign exchange derivatives are measured based on the price information derived from the active markets
and commonly used valuation methods.
More information about financial risks management is described in the notes 2.4 and 5.3 to the consolidated financial statements.
Consolidated financial statements | Parent company financial statements | Subsidiaries
1)
Shareholding % | |||
Country/Region | Company | Group | Parent |
Andorra | KONE Ascensors i Escales, S.A. | 100 | company |
Australia | KONE Elevators Employee Benefits Pty Limited | 100 | |
KONE Elevators Pty Limited | 100 | ||
KONE Holdings (Australia) Limited | 100 | ||
Austria | KONE AG | 100 | 100 |
Bahrain | KONE Bahrain W.L.L. | 0 | |
KONE Elevators W.L.L. | 49 | ||
Belgium | KONE Belgium S.A. | 100 | 100 |
Bosnia and Herzegovina | KONE d.o.o. Sarajevo | 100 | |
Bulgaria | KONE EOOD | 100 | 100 |
Canada | KONE Inc. | 100 | 49 |
China mainland | Giant Kone Elevator Co., Ltd. | 100 | 40 |
KONE Elevator (Shanghai) Co., Ltd. | 100 | ||
KONE Elevators Co., Ltd. | 100 | ||
Kunshan KONE Industrial Machinery Co., Ltd. | 100 | 100 | |
Croatia | KONE d.o.o. | 100 | 100 |
Cyprus | KONE Elevators Cyprus Limited | 100 | 100 |
Czech Republic | KONE, a.s. | 100 | 100 |
KONE Industrial – koncern s.r.o. | 100 | 100 | |
Denmark | KONE A/S | 100 | 100 |
Egypt | KONE LLC | 100 | |
Estonia | AS KONE | 100 | 100 |
Finland | Finescal Oy | 100 | 100 |
KONE Digital Services Oy | 100 | 100 | |
KONE Export Oy | 100 | ||
KONE Hissit Oy | 100 | 100 | |
KONE Industrial Oy | 100 | 100 | |
France | 2STP S.A.S. | 100 |
Shareholding % | |||
Country/Region | Company | Group | Parent |
| company | |||
Ascenseurs Portes Automatiques Arnaud S.A.S. | 100 | ||
Ascenseurs Soulier S.N.C. | 100 | ||
ATS-ATPE S.A.S. | 100 | ||
Automatismes du Mont Blanc S.A.S. | 100 | ||
Delta Ascenseurs S.A.S. | 100 | ||
KONE ATS S.A.S. | 100 | ||
KONE Développement S.N.C. | 100 | ||
KONE Holding France S.A.S. | 100 | 100 | |
KONE S.A. | 100 | ||
Liftman S.A.S. | 100 | ||
Prokodis S.A.S. | 100 | ||
R.M.D. S.A.S. | 100 | ||
Technique & Mecanique des Elevateurs S.A.S. | 100 | ||
Germany | Alois Kasper GmbH | 100 | |
Aufzugstechnik Rhein Ruhr GmbH | 100 | ||
KONE Automatiktüren GmbH | 100 | ||
| KONE Escalator Supply Service Center Europe | 100 | ||
| GmbH | |||
KONE Garant Aufzug GmbH | 100 | ||
KONE GmbH | 100 | 100 | |
KONE Montage GmbH | 100 | ||
KONE Servicezentrale GmbH | 100 | ||
SK-Fördertechnik GmbH | 100 | ||
Dresdner Aufzugsdienst GmbH | 100 | ||
ATB Aufzugtechnik Berlin GmbH | 100 | ||
ATH Beteiligungs-GmbH | 100 | ||
ATH Aufzugstechnik Heilbronn GmbH & Co. KG | 100 | ||
Matthias Schernikau GmbH | 100 | ||
Greece | KONE S.A. | 100 |
114 KONE Annual Review 2023
Consolidated financial statements | Parent company financial statements | Subsidiaries
115 KONE Annual Review 2023
Shareholding % | |||
Country/Region | Company | Group | Parent |
company | |||
Hong Kong SAR KONE Elevator (HK) Limited | 100 | ||
Shan On Engineering Company Limited | 100 | ||
Hungary | KONE Felvonó Kft. | 100 | 100 |
Iceland | KONE ehf | 100 | 100 |
India | KONE Elevator India Private Limited | 100 | 100 |
Indonesia | PT KONE Indo Elevator | 100 | 1 |
PT. Mitra Indo Utama | 0 | ||
Ireland | Ennis Lifts Limited | 100 | |
KONE (Ireland) Limited | 100 | ||
Israel | KONE LTD | 100 | 100 |
Italy | Ascensori & Ascensori S.r.l. | 64 | |
Cerqueti Servizi S.r.l. | 100 | ||
Cofam S.r.l. | 100 | ||
CRON.UP S.r.l. | 80 | ||
Elevant Servizi S.r.l. | 70 | ||
Elevatori Bari S.r.l. | 89 | ||
Elevators S.r.l. | 60 | ||
Euroservice Merano S.r.l. | 90 | ||
Ferrara Ascensori S.r.l. | 60 | ||
Gianfranceschi Ascensori S.r.l. | 97 | ||
GSB Ascensori S.r.l. | 65 | ||
KONE Industrial S.p.A. | 100 | 100 | |
KONE S.p.A. | 100 | 27 | |
L.A.M. Lombarda Ascensori Montacarichi S.r.l. | 70 | ||
Mingot S.r.l. | 100 | ||
Nettuno S.r.l. | 75 | ||
Neulift S.p.A. | 100 | ||
Neulift Service Molise S.r.l. | 51 | ||
Neulift Service Triveneto S.r.l. | 100 | ||
Rimma S.r.l. | 60 | ||
Slimpa S.p.A. | 100 | ||
Tecnocram S.r.l. | 84 | ||
Tosca Ascensori S.r.l. | 67 | ||
Shareholding % | |||
Country/Region | Company | Group | Parent |
company | |||
Unilift S.r.l. | 79 | ||
VITALI Ascensori srl | 100 | ||
Kazakhstan | KONE Kazakhstan LLP | 100 | |
Kenya | KONE Kenya Limited | 49 | |
Kuwait | Al Sabriyah Elevators & Escalators Company W.L.L | 49 | |
Latvia | SIA KONE Lifti Latvija | 100 | 1 |
Lithuania | UAB KONE | 100 | 100 |
Luxembourg | KONE Luxembourg Sàrl | 100 | |
Macedonia | KONE Makedonija Dooel Skopje | 100 | |
Malaysia | KONE Elevator (M) Sdn. Bhd. | 30 | 30 |
Mexico | KONE Industrial, S.A. de C.V. | 100 | |
KONE Mexico, S.A. de C.V. | 100 | 0 | |
Monaco | S.A.M. KONE | 100 | |
Montenegro | KONE d.o.o. Podgorica | 100 | |
Morocco | KONE Elevators and Escalators Sàrl AU | 100 | 100 |
Netherlands | Hissi B.V. | 100 | |
KONE B.V. | 100 | ||
KONE Deursystemen B.V. | 100 | ||
KONE Finance Holding B.V. | 100 | ||
KONE Holland B.V. | 100 | 100 | |
KONE Nederland Holding B.V. | 100 | ||
New Zealand | KONE Elevators (NZ) Limited | 100 | 100 |
Norway | KONE Aksjeselskap | 100 | 100 |
KONE Rulletrapper AS | 100 | 100 | |
Oman | KONE Assarain LLC | 70 | |
Philippines | Elevators Philippines Construction, Inc. | 40 | |
KPI Elevators, Inc. | 100 | ||
Poland | KONE Sp.z o.o. | 100 | 100 |
Portugal | KONE Portugal - Elevadores, Lda. | 100 | 1 |
AMVUP-Elevadores Unipessoal Lda | 100 | ||
DIGILEVA,Ascensores Unipessoal LDA | 100 | ||
Qatar | KONE Elevators W.L.L. | 49 | 49 |
Romania | KONE Ascensorul S.A. | 100 | 100 |
Consolidated financial statements | Parent company financial statements | Subsidiaries
Shareholding % | |||
Country/Region | Company | Group | Parent |
| company | |||
Saudi Arabia | KONE Areeco Limited | 50 | 10 |
KONE Regional Headquarters LLC | 100 | ||
Serbia | KONE d.o.o. Beograd-Novi Beograd | 100 | |
Singapore | KONE Pte Ltd | 100 | |
Slovak Republic KONE Business Services, s.r.o. | 100 | 100 | |
KONE s.r.o. | 100 | 100 | |
Slovenia | KONE d.o.o. | 100 | 100 |
South Africa | Addo Private Equity Fund 2 (Pty) Ltd | 100 | |
KONE Elevators South Africa (Pty) Ltd | 100 | ||
United Elevators (Pty) Ltd | 100 | ||
Spain | Ascensores Muguerza, S.A.U. | 100 | |
KONE Elevadores, S.A. | 100 | 100 | |
Técnicas Autocontrol, S.L.U. | 100 | ||
Movilidad, Puertas y Servicios postventa S.L. | 100 | ||
ABI ELEVADORES BIMENES S.L. | 100 | ||
Ascensores Bidasoa S.L. | 100 | ||
Inmape Ascensores, S.L. | 100 | ||
Sweden | KONE AB | 100 | |
Switzerland | KONE (Schweiz) AG | 100 | 100 |
| Kang-En Taiwan Elevator Technology Service Co., | |||
Taiwan, China | Ltd | 100 | |
KONE Elevators Taiwan Co., Ltd | 100 | ||
Shareholding % | |||
Country/Region | Company | Group | Parent |
| company | |||
Thailand | KONE Public Company Limited | 84 | |
Thai Elevators and Escalators Company Limited | 74 | ||
Thai Elevators Holding Company Limited | 49 | ||
Tunisia | KONE Elevators & Escalators Assembly | 100 | |
KONE Elevators & Escalators Sarl | 100 | ||
Türkiye | KONE Asansör Sanayi ve Ticaret A.S. | 100 | |
Uganda | KONE Uganda Limited | 100 | |
Ukraine | KONE Lifts LLC | 100 | |
| United Arab | KONE (Middle East) LLC | 49 | 49 |
| Emirates | |||
United Kingdom Consult Lift Services Ltd | 100 | ||
KONE Pension Trustees Ltd. | 100 | ||
KONE Plc | 100 | 100 | |
KONE (NI) Limited | 100 | ||
USA | ENOK Electrical Company, LLC | 100 | |
KONE Holdings, Inc. | 100 | ||
KONE Inc. | 100 | ||
Marine Elevators LLC | 100 | ||
Vietnam | KONE Vietnam Limited Liability Company | 100 | |
1) | Includes all companies where parent company KONE Oyj has control. Additional information included in note | ||
116 KONE Annual Review 2023
Dividend proposal, signatures for the Board of Directors’ report and financial statements and auditor’s note
117 KONE Annual Review 2023
Dividend proposal
The parent company’s distributable profits on December
31, 2023 is EUR 3,006,869,325.52 of which the net income
for the financial year is EUR 1,996,263,298.83.
The Board of Directors proposes to the Annual General
Meeting that a dividend of EUR 1.7475 be paid on the
outstanding 76,208,712 class A shares and EUR 1.75 on
the outstanding 441,027,989 class B shares, resulting in a
total amount of proposed dividend of EUR 904,973,704.97.
The Board of Directors further proposes that the remaining
distributable profits, EUR 2,101,895,620.55 be retained and
carried forward.
The Board proposes that the dividend payment date is
March 11, 2024.
Dividend proposal, signatures for the Board of Directors´ report and Financial statements and
Auditor´s note
Signatures for the Financial statements and Board of Directors’ report
Helsinki, January 25, 2024
Antti Herlin Marika Fredriksson
Jussi Herlin Iiris Herlin
Matti Alahuhta Ravi Kant
Susan Duinhoven Marcela Manubens
Philippe Delorme, Krishna Mikkilineni
President & CEO
The Auditor’s Note
Our auditor´s report has been issued today.
Helsinki, January 25, 2024
Ernst & Young Oy
Authorized Public Accountants
Heikki Ilkka
Authorized Public Accountant
Auditor’s report
118 KONE Annual Review 2023
Auditors’s report
To the Annual General Meeting of KONE Oyj
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of KONE Oyj (business identity code 1927400-1) for
the year ended 31 December, 2023. The financial statements comprise the consolidated
statement of financial position, statement of income, statement of comprehensive income,
statement of changes in equity, statement of cash flows and notes, including material
accounting policy information, as well as the parent company’s statement of financial position,
statement of income, cash flow statement and notes.
In our opinion
• the consolidated financial statements give a true and fair view of the group’s financial
position, financial performance and cash flows in accordance with IFRS Accounting
Standards as adopted by the EU.
• the financial statements give a true and fair view of the parent company’s financial
performance and financial position in accordance with the laws and regulations governing
the preparation of financial statements in Finland and comply with statutory requirements.
Our opinion is consistent with the additional report submitted to the Audit Committee.
Basis for Opinion
We conducted our audit in accordance with good auditing practice in Finland. Our
responsibilities under good auditing practice are further described in the Auditor’s
Responsibilities for the Audit of Financial Statements section of our report.
We are independent of the parent company and of the group companies in accordance with
the ethical requirements that are applicable in Finland and are relevant to our audit, and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
In our best knowledge and understanding, the non-audit services that we have provided to the
parent company and group companies are in compliance with laws and regulations applicable
in Finland regarding these services, and we have not provided any prohibited non-audit
services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we
have provided have been disclosed in note 2.2 to the consolidated financial statements and
note 5 to the parent company financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the financial statements of the current period. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of
the financial statements section of our report, including in relation to these matters.
Accordingly, our audit included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the financial statements. The results of
our audit procedures, including the procedures performed to address the matters below,
provide the basis for our audit opinion on the accompanying financial statements.
We have also addressed the risk of management override of internal controls. This includes
consideration of whether there was evidence of management bias that represented a risk of
material misstatement due to fraud.
119 KONE Annual Review 2023
Auditor’s report
Key Audit Matter
How our audit addressed the Key Audit Matter
Revenue recognition of new equipment and modernization sales and related accruals
The accounting principles and disclosures about revenue recognition of new equipment and
modernization sales and related accruals are included in notes 1 and 2.1.
In accordance with its accounting principles KONE applies the percentage of completion (PoC)
method for recognizing revenue over time from new equipment and modernization contracts.
The percentage of completion is based on the cost-to-cost method. In year 2023, approximately
62 percent of the KONE´s sales of 11,0 billion euro were recognized under the PoC method.
The recognition of revenue by applying PoC method and the estimation of the outcome of
projects require significant management judgement in estimating the cost-to-complete. We
assessed the risk to mainly relate to the stage of completion of projects, which were incomplete
at 31 December 2023.
The Group makes several types of accruals related to risks associated with revenue recognition
by applying PoC method. These accruals require high level of management judgment.
Based on above, revenue recognition based on PoC method, including related accruals, was a
key audit matter. Revenue recognition based on PoC method was also a significant risk of
material misstatement referred to in EU Regulation No 537/2014, point (c) of Article 10(2).
Our audit procedures to address the risk of material misstatement in respect of the revenue
recognition from new equipment and modernization projects, included, among others:
• Assessment of the Group’s accounting policies over revenue recognition over time and
recognition of project related accruals;
• Gaining an understanding of the revenue recognition process including related accruals;
• Inspecting on a sample basis the project documentation such as contracts and other
written communication;
• Testing on a sample basis the percentage of completion and accrual calculations and the
inputs of estimates in the calculations, as well as comparing the estimates to actuals;
• Analytical procedures;
• Evaluation of financial development and current status by
o analyzing the changes in assumptions relating to estimated revenues, costs, and
related accruals and receipts of project payments, and
o discussions with different levels of the organization including project level and
financial organization; and
• Performing inquiries with management with regards to any significant events or legal
matters that could affect the project estimates and provisions;
• Assessing the Group’s disclosures in respect of revenue recognition and related accruals.
Valuation of accounts receivable
The accounting principles and disclosures relating to accounts receivable are included in notes
1 and 3.2.
Valuation of accounts receivable was a key audit matter due to the significance of the account
balance and because valuation requires management to make significant judgments especially
due to uncertainties related to Chinese real estate market. Valuation of accounts receivable
requires management to evaluate the probability of the recoverability of receivables and to
record an impairment loss for doubtful accounts over the portion for which payment is unlikely.
As of balance sheet date 31 December 2023, the carrying value of accounts receivable
amounted to 2,495.1 million euros.
The carrying value of account receivable shown in the balance sheet as of 31 December 2023
is a result of gross receivables deducted by reserve of expected credit losses which is based on
management’s judgment and amounting to 363.1 million euros as of 31 December 2023.
We performed, among others, the following audit procedures:
• we evaluated the valuation methods applied on valuation of accounts receivable as well as
performed quarterly analyses of overdue and undue gross receivable balance
development and corresponding movement in expected credit loss reserve during the year.
• we sent receivable balance confirmation requests to counterparties and compared trade
receivable balances to subsequent cash receipts.
• we analysed management’s estimates of expected credit losses of the most significant
aged and overdue receivables considering historical payment patterns as well as recent
communications with the counterparties and dunning procedures.
• we considered the appropriateness of the Group’s disclosures in respect of trade
receivables.
Auditor’s report
120 KONE Annual Review 2023
Responsibilities of the Board of Directors and the Managing Director for the Financial Statements
The Board of Directors and the Managing Director are responsible for the preparation of
consolidated financial statements that give a true and fair view in accordance with IFRS
Accoounting Standards as adopted by the EU, and of financial statements that give a true and
fair view in accordance with the laws and regulations governing the preparation of financial
statements in Finland and comply with statutory requirements. The Board of Directors and the
Managing Director are also responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and the Managing Director are
responsible for assessing the parent company’s and the group’s ability to continue as going
concern, disclosing, as applicable, matters relating to going concern and using the going
concern basis of accounting. The financial statements are prepared using the going concern
basis of accounting unless there is an intention to liquidate the parent company or the group
or cease operations, or there is no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance on whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with good auditing practice will
always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of the financial
statements.
As part of an audit in accordance with good auditing practice, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for
our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the parent company’s or the group’s
internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s
use of the going concern basis of accounting and based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the parent company’s or the group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events
or conditions may cause the parent company or the group to cease to continue as a
going concern.
• Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the underlying
transactions and events so that the financial statements give a true and fair view.
• Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance
of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those
matters that were of most significance in the audit of the financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s
report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Auditor’s report
121 KONE Annual Review 2023
Other Reporting Requirements
Information on our audit engagement
We were first appointed as auditors by the Annual General Meeting with effect from 2 March
2021, and our appointment represents a total period of uninterrupted engagement of 3 years.
Other Information
The Board of Directors and the Managing Director are responsible for the other information.
The other information comprises the report of the Board of Directors and the information
included in the Annual Report, but does not include the financial statements and our auditor’s
report thereon. We have obtained the report of the Board of Directors prior to the date of this
auditor’s report, and the Annual Report is expected to be made available to us after that date.
Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. With respect to report of the Board of Directors,
our responsibility also includes considering whether the report of the Board of Directors has
been prepared in accordance with the applicable laws and regulations.
In our opinion, the information in the report of the Board of Directors is consistent with the
information in the financial statements and the report of the Board of Directors has been
prepared in accordance with the applicable laws and regulations.
If, based on the work we have performed on the other information that we obtained prior to the
date of this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Helsinki, 25 January, 2024
Ernst & Young Oy
Authorized Public Accountant Firm
Heikki Ilkka
Authorized Public Accountant
122 KONE Annual Review 2023
Auditor’s ESEF assurance report
Independent Auditor’s Report on KONE Oyj’s ESEF Consolidated Financial Statements
To the Board of Directors of KONE Oyj
We have performed a reasonable assurance engagement on the iXBRL tagging of the
consolidated financial statements included in the digital files KONE-2023-12-31-fi.zip of
KONE Oyj (business identity code 1927400-1) for the financial year 1.1.-31.12.2023 to
ensure that the financial statements are marked/tagged with iXBRL in
accordance with the requirements of Article 4 of EU Commission Delegated Regulation (EU)
2018/815 (ESEF RTS).
Responsibilities of the Board of Directors and Managing Director
The Board of Directors and Managing Director are responsible for the preparation of the
Report of Board of Directors and financial statements (ESEF financial statements) that comply
with the ESEF RTS. This responsibility includes:
• preparation of ESEF financial statements in accordance with Article 3 of ESEF RTS
• tagging the consolidated financial statements included within the ESEF financial
statements by using the iXBRL mark ups in accordance with Article 4 of ESEF RTS
• ensuring consistency between ESEF financial statements and audited financial
statements
The Board of Directors and Managing Director are also responsible for such internal control
as they determine is necessary to enable the preparation of ESEF financial statements in
accordance the requirements of ESEF RTS.
Auditor’s Independence and Quality Control
We are independent of the company in accordance with the ethical requirements that are
applicable in Finland and are relevant to the engagement we have performed, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
The auditor applies International Standard on Quality Control (ISQC) 1 and therefore
maintains a comprehensive quality control system including documented policies and
procedures regarding compliance with ethical requirements, professional standards and
applicable legal and regulatory requirements.
Auditor’s Responsibilities
In accordance with the Engagement Letter we will express an opinion on whether the
electronic tagging of the consolidated financial statements complies in all material respects
with the Article 4 of ESEF RTS. We have conducted a reasonable assurance engagement in
accordance with International Standard on Assurance Engagements ISAE 3000.
The engagement includes procedures to obtain evidence on:
• whether the tagging of the primary financial statements in the consolidated financial
statements complies in all material respects with Article 4 of the ESEF RTS
• whether the tagging of the notes to the financial statements and the entity identifier
information in the consolidated financial statements complies in all material respects with
Article 4 of the ESEF RTS
• whether the ESEF-financial statements are consistent with the audited financial
statements
The nature, timing and extent of the procedures selected depend on the auditor’s judgement
including the assessment of risk of material departures from requirements sets out in the
ESEF RTS, whether due to fraud or error.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our statement.
Auditor’s ESEF assurance report
123 KONE Annual Review 2023
Opinion
In our opinion the tagging of the consolidated financial statement included in the ESEF
financial statements of KONE Oyj for the year ended 31.12.2023 complies in all material
respects with the requirements of ESEF RTS.
Our audit opinion on the consolidated financial statements of KONE Oyj for the year ended
31.12.2023 is included in our Independent Auditor’s Report 25.1.2024. In this report, we do
not express an audit opinion or any other assurance on the consolidated financial statements.
Helsinki, 25 January, 2024
Ernst & Young Oy
Authorized Public Accountant Firm
Heikki Ilkka
Authorized Public Accountant
Corporate governance statement
124 KONE Annual Review 2023
KONE’s general governance principles
The duties and responsibilities of KONE Corporation’s various
governing bodies are determined by Finnish law and KONE’s
corporate governance principles. KONE complies with the
Finnish Corporate Governance Code 2020 published by the
Securities Market Association, with the exception of
recommendations 17 (Independence of the company of the
members of the remuneration committee) and 18
(Independence of the company of the members of the
nomination committee). These exceptions are due to the
company’s ownership structure. The company’s largest
shareholder, Antti Herlin, controls 62 percent of the
company’s voting rights and 23 percent of its shares. The
significant entrepreneurial risk associated with ownership is
considered to justify the main shareholder serving as the
Chairman of the Board of Directors and a member of the
Board’s Nomination and Compensation Committee and, in
this capacity, overseeing shareholders’ interests. The Code in
its entirety is available on the Internet at www.cgfinland.fi.
KONE’s administrative bodies and officers with the
greatest decision-making power are the General Meeting of
Shareholders, the Board of Directors of KONE Corporation,
the Chairman of the Board and the President and CEO. At the
Annual General Meeting of Shareholders, the shareholders
approve the consolidated financial statements, decide on the
distribution of profits, select the members of the Board of
Directors and the auditors and determine their compensation.
KONE Corporation’s Annual General Meeting is convened
by the Board of Directors. According to the Articles of
Association, the Annual General Meeting of Shareholders
shall be held within three months of the closing of the financial
year on a date decided by the Board of Directors.
Board of Directors
Duties and responsibilities
The Board of Directors’ duties and responsibilities are defined
primarily by the Articles of Association and the Finnish Limited
Liability Companies’ Act. The Board’s duties include:
• compiling of the Board of Directors’ report, interim reports
and financial statements
• ensuring the proper organization and surveillance of the
accounting and asset management
• preparation of proposals for the General Meeting and the
convocation of the General Meetings
• approval and confirmation of strategic guidelines and the
principles of risk management
• ratification of annual budget and plans
• possible appointment of a full-time Chairman of the
Board, executive Vice Chair of the Board and a President
and CEO, and decisions on the terms and conditions of
their employment
• decisions on the company’s corporate structure
• decisions on major acquisitions and investments
• decisions on other matters falling under the Board’s
responsibility by law
The Board has created rules of procedure stipulating the
duties of the Board, its Chairman and its Committees. The
Board of Directors holds seven regular meetings a year and
additional meetings as required. The Board of Directors
reviews its own performance and procedures once a year.
Members of the Board
The Annual General Meeting elects five to ten members and
no more than three deputy members to the Board of Directors
for one year at a time in accordance with KONE Corporation’s
Articles of Association. The Board of Directors elects a
Chairman and Vice Chair among its members. The proposals
for Board members are prepared by the Nomination and
Compensation Committee under the steering of the Chairman
of the Board. During the preparation and in the proposal to the
General Meeting of Shareholders, attention is paid to the
board candidates’ broad and mutually complementary
background, experience, expertise, age, gender and views of
both KONE’s business and other businesses so that the
diversity of the board supports KONE’s business and its future
in the best available way. The independence of the members
of the Board is assessed in line with the independence criteria
of the Finnish Corporate Governance Code.
Committees
The Board of Directors has appointed two committees
consisting of its members: the Audit Committee and the
Nomination and Compensation Committee. The Board has
confirmed rules of procedure for both Committees. The
Secretary to the Board acts as the Secretary of both
Committees.
The Audit Committee monitors the Group’s financial
situation and supervises reporting related to the financial
statements and interim reports. The Audit Committee monitors
and assesses the adequacy and appropriateness of KONE’s
internal control and risk management, as well as the
adherence to rules and regulations. It also deals with the
Corporation’s internal audit plans and reports. The Head of
Assurance reports the internal audit results to the Committee.
The Audit Committee also monitors and evaluates how
agreements and other transactions between the company and
its related parties meet the requirements relating to ordinary
business operations and general market terms and monitors
and oversees the financial statement and financial reporting
process. In addition, the Audit Committee processes the
description of the main features of the internal control and risk
management systems pertaining to the financial reporting
process included in the company’s corporate governance
statement.
The Audit Committee evaluates the auditing of the Group’s
companies and the appropriateness of the related
arrangements and auditing services and considers the
auditors’ reports. Furthermore, the Committee formulates a
proposal to the Annual General Meeting regarding the
auditors to be selected for the Corporation.
The Nomination and Compensation Committee prepares
proposals to be made to the Annual General Meeting
Corporate governance statement
125 KONE Annual Review 2023
Corporate governance statement
regarding the nomination of Board members and their
compensation, makes decisions regarding senior
management appointments and compensation and oversees
the succession planning of senior management, including the
President and CEO. The Committee also decides on the
compensation systems to be used, and prepares the
remuneration policy and remuneration report for the
company’s governing bodies.
Management
Chairman of the Board, Executive Vice Chair of the
Board and the President and CEO
KONE Corporation’s Board of Directors appoints the
Chairman of the Board, the possible executive Vice Chair of
the Board and the President and CEO. The Board determines
the terms and conditions of employment of the executive Vice
Chair of the Board and the President and CEO, and these are
defined in their respective written contracts. The Chairman of
the Board and the Vice Chair of the Board prepare matters to
be considered by the Board together with the President and
CEO and the corporate staff. The Chairman of the Board, the
Vice Chair of the Board and the President and CEO are
responsible for the execution of the targets, plans, strategies
and goals set by the Board of Directors within the KONE
Group. The President and CEO is responsible for operational
leadership within the scope of the strategic plans, budgets,
operational plans, guidelines and orders approved by KONE
Corporation’s Board of Directors. The President and CEO
presents operational matters to the Board and is responsible
for implementing the decisions of the Board.
Executive Board
The Executive Board supports the President and CEO in
executing the corporate strategy. The Executive Board follows
business developments, initiates actions and defines
operating principles and methods in accordance with
guidelines handed down by the Board of Directors and the
President and CEO. The Executive Board holds regular
monthly meetings and additional meetings as required.
Risk management, internal control, related party
transactions and audit
KONE Corporation’s Board of Directors has ratified the
principles of risk management, internal control and internal
auditing to be followed within the Group.
Risk management
The aim of risk management at KONE is to identify the risks
and uncertainties related to the achievement of KONE’s
objectives, assess the likelihood and magnitude of the risks
and opportunities and to identify necessary actions to mitigate
the negative impacts of identified risks.
KONE’s Global Risk Management function develops,
coordinates and facilitates systematic risk management
integrated into KONE’s core business processes and
decision-making. KONE’s business units are responsible for
identifying, assessing and managing risks that can threaten
the achievement of their business objectives as part of
KONE’s strategic planning and budgeting processes.
Key risks are reported to the Global Risk Management
function, which consolidates the risk information to the
Executive Board. Executive Board members for Areas and
global functions are owners of the key risks and opportunities
relevant to the objectives of their organization. The Executive
Board reviews and approves the Risk Management Policy and
approves KONE’s risk tolerance. KONE’s Board of Directors
approves the risk management principles of KONE and is
responsible for monitoring and evaluating the effectiveness of
KONE’s risk management systems. The Board of Directors
also reviews key risks and risk treatment action plans and
acts, when necessary, on key risks reported to the Board.
Internal control
The aim of KONE’s internal control environment is to ensure
that the Group’s operations are efficient and profitable, risks
and opportunities are managed to an acceptable level and
that the financial and operational reporting is reliable and in
compliance with the applicable regulations, policies and
practices.
The Board’s Audit Committee monitors the efficiency and
functioning of the internal control environment. The
management is responsible for establishing and maintaining
adequate internal controls and for monitoring their
effectiveness as part of operative management. The
management is supported by a dedicated Internal Controls
function, responsible for facilitating and coordinating the
internal control design, implementation and monitoring across
the organization.
KONE’s internal control framework is built and based on
corporate values, the KONE Code of Conduct, a culture of
honesty and high ethical standards. The framework is
supported by a dedicated leadership, training programs, a
positive and diligent corporate culture and working
environment as well as by attracting and promoting dedicated
and competent employees. Global and local policies and
principles are key part of the internal control framework.
KONE’s internal controls are designed to manage relevant
operational, financial, and compliance risks as part of KONE’s
processes and employee job roles. Internal controls are
supported by global and local policies and principles that are
continuously maintained by incorporating changes and
developments from the business operations and information
systems.
KONE’s business units are responsible for implementing
the control framework and for monitoring adherence to the
globally and locally agreed policies and principles. KONE’s
Global Finance has the oversight responsibility of the overall
framework.
Internal control procedures over financial reporting
Correct financial reporting in KONE’s internal control
framework means that its financial statements give a true and
fair view of the financial performance of the operations and
the financial position of the Group and that such statements
do not include intentional or unintentional misstatements or
omissions both in respect of the figures and level of
disclosure.
Corporate-wide financial management and control of
operations is coordinated by the Global Finance function and
implemented by a network of subsidiary and business entity
Controllers within KONE.
KONE’s monthly business planning and financial reporting
process represents a key control procedure within KONE in
ensuring the effectiveness and efficiency of operations. This
More information
The most significant risks and uncertainties related to
KONE’s business are described in the Board of
Directors’ Report. Financial risk management is
described in note 2.4 and 5.3.
Corporate governance statement
126 KONE Annual Review 2023
process includes in-depth analyses of deviations between
actual performance, budgets, prior year performance and
latest forecasts for the business on multiple levels of the
organization. The process covers financial information as well
as other key performance indicators that measure the
operational performance on a business unit and corporate
level. The process is designed to ensure that any deviations
from plans in terms of financial or operating performance and
financial management policies are identified, communicated
and reacted upon efficiently, in a harmonized and timely
manner. KONE’s financial statements are based on this
management reporting process.
Financial control tasks are built into the business
processes of KONE as well as into the management’s
ongoing business supervision and monitoring. KONE has
established Financial Control Models for the New Building
Solutions, Service and Modernization as well as for treasury
and tax matters. The models have been defined to ensure that
the financial control covers the relevant tasks in an efficient
and timely manner.
The interpretation, application and monitoring of the
compliance of accounting standards is centralized in the
Global Finance function, which maintains, under the
supervision of the Audit Committee, the KONE Accounting
Standards. Reporting and forecasting contents are defined in
the KONE Accounting and Reporting Instructions. These
standards and instructions are maintained and updated
centrally by the Global Finance function and applied uniformly
throughout KONE.
KONE has a global enterprise resource planning (ERP)
system which is built to reflect the KONE Accounting
Standards and the KONE Accounting and Reporting
Instructions. KONE applies a controlled change management
process ensuring that no changes to the financial reporting
logic of the ERP system can be made without approval from
the Global Finance function. Automatic interfaces between
different systems are principally applied in the period-end
financial reporting process of KONE. Transactional processing
is increasingly automated and centralized in dedicated shared
service centers.
Effective internal control over record to report processes,
from business processes and systems to the financial
statements, is important in ensuring the correctness of
financial reporting. This is driven by the identification of key
data elements of the business and the quality of the data to
ensure correct financial reporting and forecasting ability.
Internal audit
The Corporation has an internal audit function, which is
separate from the management. The KONE Assurance
function is responsible for auditing both the internal control
system and the management of business risks. It reports its
findings to the Audit Committee. The Head of Assurance
reports to the Vice Chair of the Board.
Kristian Snäll serves as the Head of Assurance.
Related party transactions
KONE evaluates and monitors related party transactions
between the company and its related parties. KONE maintains
a list of related parties. KONE’s related parties comprise its
subsidiaries as well as the Board of Directors, the President
and CEO, the Executive Board including any companies
controlled or significantly influenced by them. KONE’s Board
of Directors has approved guidelines for how to recognize,
handle, approve, monitor and report related party
transactions. According to the guidelines, the Corporate
Controlling function follows and monitors related party
transactions as part of KONE’s normal reporting and control
procedures and reports related party transactions to the Audit
Committee annually.
KONE’s Board of Directors decides on any related party
transactions which are not considered normal business
activities or differ from market terms. KONE reports relevant
and material related party transactions annually in the notes of
consolidated financial statements.
External audit
The objective of a statutory audit is to express an opinion on
whether the consolidated financial statements give a true and
fair view of the financial position, financial performance and
cash flows of the Group, as well as whether the parent
company’s financial statements give a true and fair view of the
parent company’s financial performance and financial
position. Statutory audit also encompasses the audit of the
accounting and governance in the company. The auditor
considers whether the information in the Board of Directors’
report is consistent with the information in the financial
statements and the report of the Board of Directors has been
prepared in accordance with the applicable legal
requirements.
According to the Articles of Association, the company must
have a minimum of one and a maximum of three Auditors.
The Auditors must be authorized public accountants or
authorized public accounting firms. The Auditor is elected at
the Annual General Meeting for a term that ends at the
conclusion of the Annual General Meeting following the start
of the term of the Auditor.
Insiders
KONE Corporation adheres to the insider guidelines of the
Nasdaq Helsinki Ltd, which have been supplemented with
internal insider guidelines approved by the Board of Directors.
In compliance with the Market Abuse Regulation, the person
discharging managerial responsibilities in KONE Corporation
(managers) include the members and deputy members of the
Board of Directors, the President and CEO and the members
of the Executive Board. Managers are permitted to trade in
KONE shares and other financial instruments of KONE during
a six-week period after the release of interim reports and
financial statements releases. KONE does not maintain a list
of permanent insiders. KONE has resolved to maintain an
insider list with respect to each quarter and year-end financial
reporting. The company also maintains other project-specific
insider lists when necessary. Project-specific insiders are
prohibited from trading with financial instruments of KONE
until the termination of the project. The person in charge of
KONE’s insider matters is the Secretary to the Board of
Directors.
Corporate governance in 2023
Annual General Meeting
The Annual General Meeting was held in Helsinki, Finland on
February 28, 2023.
Board of Directors and committees
The Annual General Meeting elected nine members to
KONE’s Board of Directors: Antti Herlin (Chairman), Jussi
Herlin (Executive Vice Chair), Matti Alahuhta, Susan
Duinhoven, Marika Fredriksson, Iiris Herlin, Ravi Kant,
Marcela Manubens and Krishna Mikkilineni. Of the Board
members, five are male and four are female.
Of the Board members, Matti Alahuhta, Susan Duinhoven,
Marika Fredriksson, Iiris Herlin, Ravi Kant, Marcela Manubens
and Krishna Mikkilineni are independent of the Corporation.
With the exception of Antti Herlin, Iiris Herlin and Jussi Herlin,
127 KONE Annual Review 2023
Corporate governance statement
the other Board members are independent of the
Corporation’s significant shareholders.
The Board of Directors convened eight times in 2023 in
addition to which one Board decision was made without
holding a meeting (per capsulam). The average participation
rate of the Board members in the meetings was 99%.
Johannes Frände, Executive Vice President, General
Counsel, serves as Secretary to the Board and to its
Committees.
Audit committee
The Board of Directors’ Audit Committee comprises Susan
Duinhoven (Chair, independent member), Matti Alahuhta
(independent member), Marika Fredriksson (independent
member) and Jussi Herlin.
The Audit Committee held three meetings in 2023. The
average participation rate of the Audit Committee members in
the meetings was 100%.
Nomination and compensation committee
The Nomination and Compensation Committee comprises
Jussi Herlin (Chair), Matti Alahuhta (independent member),
Antti Herlin and Ravi Kant (independent member).
The Nomination and Compensation Committee held six
meetings in 2023. The average participation rate of the
Nomination and Compensation Committee members in the
meetings was 100%.
Compensation and other benefits of the Board of
Directors
The Annual General Meeting of KONE Corporation in
February 2023 confirmed the fees of the members of the
Board as follows (annual fees):
• Chairman of the Board: EUR 220,000
• Vice Chair: EUR 125,000
• Member: EUR 110,000
Of the remuneration, 40 percent was paid in class B shares of
KONE Corporation and the rest in cash.
In addition, the Annual General Meeting in February 2023
confirmed a separate annual compensation to the members of
the board committees:
• Chairman of the Audit Committee: EUR 20,000
• Members of the Audit Committee: EUR 10,000
• Chairman of the Nomination and Compensation
Committee: EUR 20,000
• Members of the Nomination and Compensation
Committee: EUR 10,000
The annual compensation of the members of the Board
Committees is paid in cash. Annual board fees and annual
compensation to the members of the Board committees are
not paid to a board member who is employed by the company
with a separate employment contract. Board members’ travel
expenses are reimbursed in accordance with the company’s
travel expense policy.
Compensation and other benefits of the Vice Chair
The Vice Chair of the Board, Jussi Herlin has a separate
employment contract for his role as Executive Vice Chair of
the Board at KONE. The employment-based compensation for
Jussi Herlin consists of a base salary and an annual bonus
decided by the Board on the basis of the Group’s financial
result. The annual bonus may not exceed 100 percent of the
recipient’s annual base salary. In 2023, Jussi Herlin’s base
salary and benefits were EUR 126,457. There was no bonus
payout in 2023 as the performance criteria for 2022, tied to
the Group’s financial performance, were not met. Jussi
Herlin’s holdings of shares are presented in the table on page
129. The Executive Vice Chair’s retirement age and pension
are determined in accordance with Finland’s Pensions Act. No
separate agreement regarding early retirement has been
made.
President and CEO
Henrik Ehrnrooth served as KONE Corporation’s President
and CEO until December 31, 2023. On October 25, 2023,
KONE announced that Philippe Delorme had been appointed
President and CEO of KONE Corporation as of January 1,
2024. Henrik Ehrnrooth will continue as Executive Advisor of
KONE until the end of March 2024 to support the transition
and induction of the new President and CEO.
Number of Board and Committee meetings in 2023 and participant attendance:
Board
Audit Committee
Nomination and
Compensation Committee
Antti Herlin
8/8
6/6
Jussi Herlin
8/8
3/3
6/6
Matti Alahuhta
8/8
3/3
6/6
Susan Duinhoven
7/8
3/3
Marika Fredriksson*
7/7
2/2
Iiris Herlin
8/8
Ravi Kant
8/8
1/1
3/3
Marcela Manubens*
7/7
Krishna Mikkilineni
8/8
Jennifer Xin-Zhe Li*
1/1
3/3
*Jennifer Xin-Zhe Li served as Board member until February 28, 2023. Marika Fredriksson and Marcela Manubens were elected to the Board
on February 28, 2023.
More information
This statement is available on the company’s web
pages at www.kone.com and it has been given
separately of the Board of Directors’ report.
Corporate governance statement
128 KONE Annual Review 2023
Compensation and other benefits of the President
and CEO
The compensation for President and CEO Henrik Ehrnrooth
consists of a base salary, benefits and an annual bonus
determined by the Board on the basis of the Corporation’s key
targets. The annual bonus may not exceed 150 percent of the
recipient’s annual salary.
In 2023 Henrik Ehrnrooth’s annual base salary and
benefits were EUR 762,741. He also received a bonus of EUR
465,675, which was earned in 2022. The performance criteria
applied to this annual-short term incentive was based on
financial, strategic and individual performance.
Henrik Ehrnrooth is included in the long-term share-based
incentive plan (LTI) for the Group’s top management.
Additional information concerning long-term share-based
incentive plan for the President and CEO is disclosed in the
adjacent table.
The performance criteria applied to the 2021, 2022 and
2023 long-term incentive plans are based on annual sales
growth, adjusted EBIT margin (jointly 80%) and improvements
in sustainability (20%). The sustainability performance
condition is a combination of reductions in carbon footprint, as
well as diversity and inclusion and safety related targets.
Henrik Ehrnrooth’s holdings of shares are presented in the
table on the next page.
Henrik Ehrnrooth’s retirement age and pension are
determined in accordance with Finland’s Pensions Act. There
has not been any separate agreement regarding early
retirement. His employment contract includes an entitlement
to an equivalent of 18 months’ salary, which includes the
salary for a six-month term of notice in case of termination
before retirement. Henrik Ehrnrooth decided to step down
from his role as the President and CEO of KONE as of
December 31, 2023. A separate exit agreement replaces the
contractual notice of termination and severance payments.
Executive Board
At the end of 2023, KONE’s Executive Board consisted of the
President and CEO and ten members. Henrik Ehrnrooth
served as President and CEO until December 31, 2023. The
other members of the Executive Board are Joe Bao, Axel
Berkling, Johannes Frände, Samer Halabi, Ilkka Hara, Mikko
Korte, Karla Lindahl, Tomio Pihkala, Ken Schmid and
Susanne Skippari. Hugues Delval served as an executive
board member until October 12, 2023. Maciej Kranz and
Compensation paid to the President and CEO and to the members of the Executive Board
EUR, thousand
Jan 1–Dec 31, 2023
Jan 1–Dec 31, 2022
The President &
CEO ¹⁾
The members of the
Executive Board ¹⁾
The President & CEO
The members of the
Executive Board
Base salary and benefits
762.7
6,382.8
763.9
5,106.3
Annual short-term incentive ²⁾
465.7
1,987.8
835.4
2,248.8
Long-term incentive plan ³⁾
-
2,076.2
-
36.0
Total compensation
1,228.4
10,446.7
1,599.3
7,391.2
Performance based long-term incentive plan for the President and CEO and the Executive Board as of December 31, 2023
Performance
based long-term
incentive plan
Performance
Period
Vesting date
pursuant to the
plan rules
Performance Criteria
The President and
CEO - Maximum
earning opportunity
(number of shares) ⁴⁾
The Executive Board
- Maximum earning
opportunity (number
of shares) ⁴⁾ ⁵⁾
LTI 2021 ⁶⁾
January 2021 -
December 2023
January 2024
Adjusted EBIT Margin % and
Sales Growth
53,541
235,578
Sustainability
LTI 2022 ⁷⁾
January 2022 -
December 2024
January 2025
Adjusted EBIT Margin % and
Sales Growth
58,243
250,445
Sustainability
LTI 2023 ⁸⁾
January 2023 -
December 2025
January 2026
Adjusted EBIT Margin % and
Sales Growth
74,642
296,081
Sustainability
1)
Holdings of the shares are presented in the table on page 129.
2)
Short-term incentive paid in 2023 (2022) was earned in 2022 (2021).
3)
Henrik Ehrnrooth, the President and CEO, did not receive a share payment in 2022 and 2023 due to the long-term incentive structure changing to a three-year
performance period in 2021. Based on the exit agreement, the reward from LTI 2021, LTI 2022 and LTI 2023 will be paid in January 2024 to Henrik Ehrnrooth
based on a separate Board of Directors’ decision. Additionally, the Board of Directors has granted Henrik Ehrnrooth an additional incentive of up to 50,000 KONE
class B shares, payable by the end of 2024 based on the achievement of specific performance metrics. The early payment of LTI 2022 and LTI 2023 together
with the additional share-based incentive replaces the contractual notice of termination and severance payments.
4)
The maximum number of KONE class B shares available for earning (gross before deduction for applicable taxes).
5)
KONE has delivered a total of 18,485 KONE class B shares to the two members of the Executive Board included in KONE's share-based incentive program.
6)
The final outcome and any potential share awards under the long-term incentive plan for the year 2021 will be confirmed in January 2024,
depending on the performance during the years 2021, 2022 and 2023.
7)
The final outcome and any potential share awards under the long-term incentive plan for the year 2022 will be confirmed in January 2025, depending on the
performance during the years 2022, 2023 and 2024.
8)
The final outcome and any potential share awards under the long-term incentive plan for the year 2023 will be confirmed in January 2026, depending on the
performance during the years 2023, 2024 and 2025.
129 KONE Annual Review 2023
Corporate governance statement
Tricia Weener served as Executive Board members until June
30, 2023.
Compensation and other benefits of the Executive
Board (excl. President and CEO)
The compensation for the members of the Executive Board
comprises a base salary, benefits and an annual bonus,
based on KONE’s financial targets and strategic performance,
as well as individual performance. The bonus amount is
determined by the Nomination and Compensation Committee
and may not exceed 75 percent of the annual salary.
The members of the Executive Board are included in the
long-term share-based incentive plan (LTI) for top
management. Additional information concerning long-term
share-based incentive plan of the Executive Board is
disclosed in the table on the previous page. No separate
agreement regarding early retirement has been made for the
members of the Executive Board. The compensation for the
termination of the employment contract prior to retirement is a
maximum of 15 months’ salary, which includes the salary for a
six-month term of notice.
The Executive Board members’ holdings of shares are
presented in the table on the adjacent table.
Auditing
KONE Corporation’s Auditor is audit firm Ernst & Young Oy.
The auditor-in-charge is Heikki Ilkka. The fees paid to Ernst &
Young Oy during 2023 were EUR 1.0 million for auditing and
EUR 0.4 million for tax and other services.
Insiders
The shareholding of the members of the Board of Directors,
the Management of KONE and the corporations under their
control amounted to 125,412,101 shares on December 31,
2023, which represents 23.7 % of total shares and 62.6 % of
voting rights. Antti Herlin’s ownership is 123,621,762 shares
and 75,867,624 votes. The individual holdings of the members
of the Board of Directors and Management of KONE, and the
changes occurred in them during the financial year, are
presented on the adjacent table.
Related party transactions
Except for management remuneration, there have not been
any material transactions between KONE and its members of
the Board of Directors, the President & CEO or the members
of the Executive Board including any companies controlled or
significantly influenced by them.
Shareholdings of KONE Board and Management on Dec 31, 2023 and changes in shareholding during the period Jan
1–Dec 31, 2023
Class A shares
Change
Class B shares
Change
Alahuhta Matti
756,754
+879
Bao Joe
0
0
Berkling Axel
68,974
0
Duinhoven Susan
3,641
+879
Ehrnrooth Henrik
385,014
0
Fredriksson Marika
879
+879
Frände Johannes
1,479
+176
Halabi Samer
32,111
0
Hara Ilkka
55,289
-40
Herlin Antti
70,561,608
-
53,060,154
+1,879,546
Herlin Iiris
137,801
+879
Herlin Jussi
105,467
-4,200
Kant Ravi
4,954
+879
Korte Mikko
60,756
-6,500
Lindahl Karla
9,939
0
Manubens Marcela
879
+879
Mikkilineni Krishna
1,837
+879
Pihkala Tomio
113,658
0
Schmid Ken
24,516
0
Skippari Susanne
26,391
0
The shares owned by companies in which a Board or Management member exercises controlling power are also included in these shareholdings.
Corporate governance statement
130 KONE Annual Review 2023
Antti Herlin
Chairman of the Board
b. 1956, D.Sc. (Econ.) h.c., D.Arts h.c., D.Sc. (Tech) h.c.
Member of the Board since 1991.
Has served as Chairman of the Board since 2003. Previously
served as Executive Chairman of the Board of KONE 2006–
2021, as CEO of KONE 1996–2006, and as Deputy Chairman
1996–2003.
Current key positions of trust are Chairman of the Board of
Security Trading Oy, Chairman of the Board of Holding
Manutas Oy, and Chairman of the Board of the Tiina and Antti
Herlin Foundation.
Jussi Herlin
Vice Chair of the Board
b. 1984, M.Sc. (Econ)
Member of the Board since 2012.
Serves as Executive Vice Chair of the Board of KONE since
2021 and Vice Chair of the Board since 2014. Previously
served as Senior Business Analyst and Strategy Development
Manager at KONE 2016–2020, as Consultant at Accenture
2012–2014, and as Deputy Member of the Board of KONE
Corporation 2007–2012.
Current key positions of trust are Member of the Board of
Security Trading Oy, Member of the Board of Holding
Manutas Oy, Member of the Board of Technology Industries
of Finland, Member of the Board of the Finnish Foundation for
Share Promotion and Member of the Board of the KONE
Centennial Foundation.
Matti Alahuhta
b. 1952, D. Sc. (Tech.), D.Sc. (Tech.) h.c.
Member of the Board since 2003.
Previously served as President and CEO of KONE 2006–
2014, as President of KONE 2005–2006, as Executive Vice
President of Nokia Corporation 2004, as President of Nokia
Mobile Phones 1998–2003, and as President of Nokia
Telecommunications 1993–1998.
Current key positions of trust are Chairman of the Board of
DevCo Partners Corporation and Member of the Board of
Volvo Group (publicly listed company).
Susan Duinhoven
b. 1965, Ph.D. (Physical Chemistry), B. Sc. (Physical
Chemistry)
Member of the Board since 2020.
Served as President and CEO of Sanoma Corporation
(publicly listed company) from 2015 till January 1, 2024.
Previously served as CEO of Koninklijke Wegener N.V. 2013–
2015, as CEO of Western Europe / CEO Netherlands at
Thomas Cook Group Plc 2010–2013, as Managing Director of
Benelux & New Acquisitions Europe at Reader's Digest 2008–
2010, and as CEO at De Gule Sider A/S 2005–2007. Started
her career at Unilever in 1988.
Marika Fredriksson
b. 1963, M.Sc. (Econ.)
Member of the Board since 2023.
Previously served as CFO and Group Executive Vice
President of Vestas Wind Systems A/S 2013–2022, CFO of
Gambro AB 2009–2012, CFO of Autoliv Inc. 2008–2009, and
has held various positions, including CFO and Senior Vice
President Finance and Strategy at Volvo Construction
Equipment Corporation 1996–2008.
Current key positions of trust are member of the board of A.P.
Møller - Maersk A/S (publicly listed company), member of the
board of AB Industrivärden (publicly listed company), member
of the board of Sandvik AB (publicly listed company), member
of the board of Ecolean AB, chairman of the board of emagine
Consulting, and advisory board member of Axcel.
Iiris Herlin
b. 1989, M.Soc.Sc., Bachelor of Natural Resources
Member of the Board since 2015.
Previously served as Deputy Member of the Board 2013–
2014.
Current key positions of trust are Member of the Board of
Security Trading Oy and Member of the Board of the Tiina
and Antti Herlin Foundation.
Ravi Kant
b. 1944, B.Tech. (Hons.), M.Sc., D.Sc. (Hon)
Member of the Board since 2014.
Previously served in different positions at Tata Motors 1999–
2014 (as Managing Director and CEO 2005–2009 and after
that as the Vice Chairman of the Board of Directors until
2014). Prior to that, he served as Director, Consumer
Electronics at Philips India, as Director (Marketing) at LML
Ltd., and as Vice President (Marketing) at Titan Watches Ltd.
Current key positions of trust are Member of the Board of
Hawkins Cookers Ltd (publicly listed company), Chairman of
the Board of Karkinos Healthcare and Chairman of the
Advisory Board of both MedTherapy India and Akhandjyoti
Eye Hospital.
Marcela Manubens
b. 1958, MBA, Masters on Business Administration, Certified
Public Accountant
Member of the Board since 2023.
Founder and principal of Roxbury Global LLC, Executive
Advisory on Sustainable Business. Previously served as
Global Vice President for Integrated Social Sustainability
2016–2021 and Global Vice President for Social Impact
2013–2016 at Unilever PLC, United Kingdom and as
Corporate Social Responsibility Officer and different positions
at PVH Corp., USA 1991–2012.
Current key positions of trust are Member of the Responsible
Investment and Business Advisory Board at Sierra Global
Management, Member of the Advisory Board at Geneva
Center for Business and Human Rights, Geneva School of
Economics and Management, Adjunct Professor at Glasgow
Caledonian New York College - Master of Science on
Business for Social Impact and Sustainability and faculty
member of The Competent Boards.
Board of Directors
131 KONE Annual Review 2023
Corporate governance statement
Krishna Mikkilineni
b. 1959, Ph.D. (Electrical and Computer Engineering),
B.Tech. (Electronics and Communications Engineering).
Member of the Board since 2022.
Previously served in different positions at Honeywell
International Inc. both in the U.S.A. and India 1985–2019
(latest positions were Chief Technology Officer, Chief
Information Officer, Chief of Integrated Supply Chain &
Customer Service globally across the Honeywell Corporation).
Prior to that, he was President of Honeywell Technology
Solutions.
Current key positions of trust are Senior Advisor for various
start-ups, General Partner in a Venture Capital fund, and
Member of the Board of a Private Equity firm. He actively
manages a private philanthropic foundation focused on
education and elderly care.
Jennifer Xin-Zhe Li served as a Board member until February
28, 2023. Marika Fredriksson and Marcela Manubens were
elected to the Board on February 28, 2023.
More information
As of July 3, 2016, the trades of KONE Board and
Management are published as stock exchange
releases.
Corporate governance statement
132 KONE Annual Review 2023
Executive Board
Henrik Ehrnrooth
President and CEO (until Dec 31, 2023)
b. 1969, M.Sc. (Econ.)
President and CEO of KONE since 2014. Member of the
Executive Board and employed by KONE since 2009.
Previously served at KONE as Chief Financial Officer 2009–
2014. Prior to joining KONE, he worked at Goldman Sachs
1998–2009 (most recently as Managing Director in the
Investment Banking Division) and at UBS in various roles
1994–1998.
Current key positions of trust: Board Chair of UPM-Kymmene
Corporation, Member of the Foundation Board of the
International Institute of Management Development (IMD,
Switzerland), and Member of the European Round Table for
Industry (ERT).
Joe Bao
Greater China
b. 1982, B.A. (Management Information Systems)
Member of the Executive Board and employed by KONE as of
October 2022.
Previously served as President of Microsoft China 2021-2022,
as well as in various leadership roles in the areas of sales,
marketing, and strategy at both Microsoft Corporate
headquarters and the Greater China Region 2004-2021.
Current key positions of trust: member of the Board of
Governors of the American Chamber of Commerce in China
and Chairman of FinnCham Shanghai.
Axel Berkling
Commercial & Operations
Strategy & Transformation (interim)
b. 1967, M.Sc. (Econ.)
Member of the Executive Board since 2016. Employed by
KONE since 1998.
Previously served at KONE as Executive Vice President,
Central and North Europe 2021-2023, as Executive Vice
President, Asia-Pacific 2016–2021, as Managing Director,
KONE Germany 2012–2016, and in various regional
commercial roles (including Service Director in Germany)
2007–2012. Prior to joining KONE, he served at Nass Magnet
GmbH as Managing Director 1996–1998 and at Arthur
Andersen in different roles 1992–1995.
Johannes Frände
General Counsel
b. 1979, LL.M., M.Sc. (Computer Science)
Member of the Executive Board since 2021. Secretary to the
KONE Board of Directors since 2022. Employed by KONE
since 2012.
Previously served as Head of Legal for KONE's Service
Business and KONE's Technology and Innovation unit 2017–
2021 and as Senior Legal Counsel 2012–2016. Prior to joining
KONE, he worked as an attorney at Roschier Attorneys Ltd.
2005–2007 and 2009–2012 and at Debevoise & Plimpton LLP
2008–2009.
Samer Halabi
Asia-Pacific, Middle East and Africa
b. 1970, M.Sc. (Mechanical Engineering)
Member of the Executive Board since 2021. Employed by
KONE since 2001.
Previously served at KONE as Regional Managing Director,
KONE Middle East and Africa 2010–2021, as Managing
Director, KONE Qatar 2007–2010, as Managing Director,
KONE Distributor Business 2004–2007, and in various other
leadership roles in the Middle East and Africa region 2001–
2004.
Ilkka Hara
Chief Financial Officer
b. 1975, M.Sc. (Econ.)
Member of the Executive Board and employed by KONE
since 2016.
Previously served at Microsoft Phones as General Manager
and Chief Financial Officer 2014–2016, and at Nokia in
various leadership roles 2004–2014. Prior to this, he worked
at ABN AMRO 2003–2004 and at Morgan Stanley 2001–
2003.
Current key positions of trust: Member of the Board of
Directors at Hartili Oy.
Mikko Korte
Supply Chain
b. 1968. M.Sc. (Eng)
Member of the Executive Board since 2016. Employed by
KONE since 1995.
Previously served at KONE as Executive Vice President,
Operations Development 2016–2023, Head of New
Equipment Business, KONE Americas 2013–2015, as
Managing Director, KONE Finland and Baltics 2011–2013, as
Service Director, KONE Central and North Europe 2007–
2011, as Service Business Director, KONE Scandinavia
2004–2007, and as Service Operations Manager, KONE
Finland 1999–2004.
Karla Lindahl
Europe
b. 1981, LL.M., M.A. (EC Competition Law)
Member of the Executive Board since April 2022. Employed
by KONE since 2004.
Previously served at KONE as Executive Vice President,
South Europe and Mediterranean 2022-2023, as Managing
Director, KONE Finland and Baltics 2017-2022, as Vice
President, Strategy Development and Market Intelligence
2016-2017, as Vice President, Strategy Development and
Investor Relations 2014-2016, as Director, Investor Relations
2010-2014, as Legal Counsel 2005-2010, and as Assistant
Legal Counsel 2004-2005.
Current key position of trust: Member of the Board of NKT
A/S.
Tomio Pihkala
Chief Technology Officer
b. 1975, M.Sc. (Mechanical Engineering)
Member of the Executive Board since 2013. Employed by
KONE since 2001.
Previously served at KONE as Executive Vice President, New
Equipment Business 2019-2023, as Executive Vice President,
133 KONE Annual Review 2023
Corporate governance statement
Chief Technology Officer 2015–2019, as Executive Vice
President, Operations Development 2013–2015, as Vice
President, Technology Finland 2011–2013, as Director,
Service Equipment Business, KONE China 2009–2010, and
as Director, Product Strategy and Marketing, KONE China
2007–2008.
Current key positions of trust: Member of the Board of
Toshiba Elevator and Building Systems Corporation, and
Member of the Board of Vexve Armatury Group.
Ken Schmid
Americas
b. 1963, B.A. (History), MBA (Business Administration)
Member of the Executive Board since 2020. Employed by
KONE since 1986 (Montgomery Elevator Company until
1994).
Previously served at KONE as Senior Vice President,
Finance, KONE Americas 2005–2020, as Senior Vice
President, Global Information Services 2003–2005, as Senior
Vice President, Chief Information Officer, KONE Americas
1998–2003, as Vice President, Quality 1995–1998, and in
various new equipment sales roles in multiple branch offices.
Current key positions of trust: Member of the Board of
National Elevator Industry, Inc. (NEII), and Member of the
Board of Advisory Board to Invest in Finland, USA.
Susanne Skippari
People & Communications
b. 1974, M.Sc. (Econ.)
Member of the Executive Board since 2017. Employed by
KONE since 2007.
Previously served at KONE as Executive Vice President,
Human Resources 2017-2023, Head of Human Resources,
New Equipment Business 2015–2017, as Head of Talent
Management 2007–2008 and 2011–2015, and as Area
Human Resources Director, Europe, Middle East and Africa
2009–2011. Prior to joining KONE, she served at Nokia in
various Human Resources roles in Finland and in Argentina
1999–2006.
Key position of trust: Member of the Board of Uponor
Corporation 2022-2023.
Maciej Kranz served as Executive Vice President, Chief
Technology Officer and Tricia Weener as Executive Vice
President, Marketing and Communications until June 30,
2023.
On October 25, 2023, KONE announced that Philippe
Delorme had been appointed President and CEO as of
January 1, 2024, following a release published on October 2,
2023, about Henrik Ehrnrooth’s intention to step down from
the role of President and CEO. Henrik Ehrnrooth will continue
as Executive Advisor until the end of March 2024 to support
the transition and induction of the new CEO.
Axel Berkling was appointed Executive Vice President,
Commercial & Operations as of October 12, 2023, succeeding
Hugues Delval who served as Executive Vice President,
Commercial & Operations until October 12, 2023. Axel
continued to also lead the Strategy & Transformation
organization until the end of 2023. Kaori Uehigashi was
appointed interim Executive Vice President for Strategy &
Transformation organization as of January 4, 2024, and she
will act in this position until the end of 2024. Nicolas Alchal,
Managing Director for KONE Middle East, Türkiye, and Africa,
was appointed Executive Vice President, Strategy &
Transformation as of Jan 1, 2025. Before starting in this role
in the beginning of 2025, Nicolas will act as an interim
Executive Vice President for Europe Area, from March 1,
2024, onwards, when the current position holder, Karla
Lindahl, starts her maternity leave. Karla will return to the
position of Executive Vice President, Europe in early 2025.
As of January 1, 2024 KONE’s Executive Board consisted
of the following members: Philippe Delorme (the President
and CEO), Joe Bao (EVP, Greater China), Axel Berkling
(EVP, Commercial & Operations), Johannes Frände (Legal
Counsel), Samer Halabi (EVP, Asia-Pacific, Middle East and
Africa), Ilkka Hara (Chief Financial Officer), Mikko Korte (EVP,
Supply Chain), Karla Lindahl (EVP, Europe), Tomio Pihkala
(EVP, Chief Technology Officer), Ken Schmid (EVP,
Americas), Susanne Skippari (EVP, People &
Communications) and Kaori Uehigashi (interim EVP, Strategy
& Transformation).
More information
Shareholdings of KONE Corporation’s public
insiders are available on page 129
134 KONE Annual Review 2023
Corporate governance statement
Annual General Meeting
KONE Corporation’s Annual General Meeting will be held on
Thursday February 29, 2024 at 11.00 a.m. at Messukeskus
Siipi, Rautatieläisenkatu 3, in Helsinki, Finland.
Further instructions and schedules for shareholders can
be found on KONE’s website at kone.com and in the Notice to
the General meeting.
At general meetings, each KONE class A share is
assigned one vote, as is each block of 10 class B shares, with
the provision that each shareholder is entitled to at least one
vote.
Payment of dividends
The Board of Directors proposes to the Annual General
Meeting that for the financial year 2023 a dividend of EUR
1.7475 be paid for each class A share and a dividend of EUR
1.75 be paid for each class B share. All shares existing on the
dividend record date, March 4, 2024 are entitled to the
dividend. The dividend is proposed to be paid on March 11,
2024.
Listing of KONE securities
KONE Corporation has two classes of shares: the listed class
B shares and the non-listed class A shares. The KONE class
B shares are listed on the Nasdaq Helsinki Ltd. and are
registered at Euroclear Finland Ltd.
More information
The Board of Directors’ proposal for the distribution of
profit, page 117
Shares and shareholders, page 40
Information for shareholders
Corporate governance statement
135 KONE Annual Review 2023
Investor relations
Investor relations policy
KONE strives to offer liquid shares that present an attractive
investment alternative to domestic and foreign investors. The
primary task of KONE’s Investor Relations is to ensure that
the market has correct and sufficient information at its
disposal in order to determine the value of the KONE share at
all times. The aim of KONE’s written communications, such as
the financial statements and interim reports, the sustainability
report, stock exchange and press releases, the internet pages
as well as that of all other communication with investors and
analysts is to accomplish this task.
In all of its communications, KONE complies with the
requirements for listed companies as defined by EU
legislation, the Finnish Securities Markets Act, the rules of the
Nasdaq Helsinki Ltd. and any other applicable regulation
concerning prompt and simultaneous disclosure of
information.
Silent period
KONE observes a period of silence prior to releasing its
financial results. This means that there are no discussions
regarding financial issues with the capital markets or the
financial media during the three-week period preceding the
publication of interim results and the four-week period
preceding the publication of the annual financial statements.
This applies to meetings, telephone conversations and other
means of communication.
Contact information
Sanna Kaje
Vice President, Investor Relations
Tel. +358 (0)204 75 4705
KONE’s financial reporting schedule 2024
Financial Statement Bulletin and Financial Statements for 2023
Friday, January 26, 2024
Interim Report for January 1–March 31, 2024
Wednesday, April 24, 2024
Half-year Financial Report for January 1–June 30, 2024
Friday, July 19, 2024
Interim Report for January 1–September 30, 2024
Thursday, October 24, 2024
KONE will publish its Sustainability Report for the year 2023 during the second quarter of 2024.
136 KONE Annual Review 2023
This report contains forward-looking statements that are
based on the current expectations, known factors, decisions
and plans of the management of KONE. Although the
management believes that the expectations reflected in such
forward-looking statements are reasonable, no assurance can
be given that such expectations will prove to be correct.
Accordingly, results could differ materially from those implied
in the forward-looking statements as a result of, among other
factors, changes in economic, market and competitive
conditions, changes in the regulatory environment and other
government actions as well as fluctuations in exchange rates.
KONE Corporation
Corporate Offices
Tel. +358 (0)204 751
www.kone.com
For further information please contact:
Sanna Kaje
Vice President, Investor Relations
Tel. +358 (0)204 75 0031