Finland c Capital Goods KONBS.HE 25 August 2004
Company Update
Kone NEUTRAL Closing the circle HIGH RISK
EUR49.4 High/Low (12M) EUR51.3/40 ` We welcome Kone’s planned de-merger of its Elevators & Escalators and Sector view: Neutral Cargotec businesses as it makes strategic sense given the lack of operational synergies, and it opens up new possibilities in M&A. Nevertheless, we argue that the break-up does not really expose new values although it is still likely to be a positive catalyst in the short term.
` The de-merger increases the likelihood of Cargotec and KCI Konecranes joining forces. We regard such a link-up as very interesting in view of the synergy potential and expectations of a smooth integration. We believe that a merger between Cargotec and KCI would create value for shareholders in both companies and lead to pre-tax synergies of Research Miikka Kinnunen EUR25m. +358 9 6187 12 41 [email protected]
Key figures (EUR) 2003 2004e 2005e 2006e Other key figures Share price
52 Sales (m) 5,410 4,407 4,623 4,668 Avg. no. shares (m) 61.9 EBITA (m) 437 519 367 375 Market cap. (EURm) 3,159 51
Pre-tax profit (m) 416 514 370 381 EV (2004e) 3,170 50 Avg. daily vol. ('000) 80 EPS 4.77 5.1 4.28 4.41 49 Free float 56.9% EPS adj. 4.49 3.74 4.28 4.41 ROE adj. (2004e) 19.9% 48 Sales growth Y/Y 25% -19% 5% 1% NIBD / Equity (2004e) 17.3% 47
EPS adj. growth Y/Y 25% -17% 14% 3% 46 EBITA margin 8.1% 11.8% 7.9% 8.0% 45 FMAM J J A P/E 10.4 9.8 11.6 11.2 P/E adj. 11.0 13.2 11.6 11.2 Kone Hex Portfolio (Fi)
EV/EBITA 8.6 6.1 8.3 7.7 Source : JCF
P/BV 2.81 2.59 2.35 2.12 Dividend yield 4.0% 4.0% 4.0% 5.5% FCF yield 11.9% 5.1% 8.6% 9.7%
Source : Carnegie Research Please see disclosures at the back of this report
Carnegie Securities Research
Company Update Kone
Performance & valuation Price relative to market – 1Y Price relative to sector – 1Y 52 52
Neutral performance this year 50 50 48 48
46 46 44
44 42
42 40
40 38 ASONDJ FMAMJ J A ASONDJ FMAMJ J A Kone Kone Hex Portfolio (Fi) Capital Goods
Source: JCF Source: JCF Adj. EPS expectations – 2004e Adj. EPS expectations – 2005e No wide variation between our and 5.0 5.0
consensus estimates 4.8 4.9
4.8 4.6
4.7 4.4 4.6 4.2 4.5 4.0 4.4
3.8 4.3
3.6 4.2
3.4 4.1 ASONDJ FMAMJ JA ASONDJ FMAMJ JA Carnegie Carnegie Consensus Consensus
Source: Carnegie Research – JCF Source: Carnegie Research – JCF
We regard the valuation fair… Performance Valuation snapshot 1M 3M 12M YTD snapshot 2003 2004e 2005e 2006e Kone % 4.0 8.0 20.9 9.5 P/E 10.4 9.8 11.6 11.2 P/E adj. 11.0 13.2 11.6 11.2 Peer group % -3.0 1.2 8.5 1.4 Carnegie Capital Goods % -2.1 0.7 10.7 5.6 EV/EBITDA 6.9 5.2 6.7 6.2 Hex Portfolio % 2.7 3.5 10.4 1.8 EV/EBITA 8.66.18.37.7 MSCI Nordic % -0.4 1.4 19.9 -0.6 P/BV 2.81 2.59 2.35 2.12 P/BV ex. GW 15.38 6.43 5.06 4.11 MSCI Europe % -2.1 -0.3 18.3 -2.0 S&P 500 % -0.4 -2.5 -0.8 0.9 Dividend yield 4.0%4.0%4.0%5.5% MSCI World % -1.1 -2.3 1.8 0.6 FCF yield 11.9% 5.1% 8.6% 9.7%
Source: JCF Source: Carnegie Research
…also relative to Nordic peers P/E Adj. P/E bef.GW EV/EBITA EBITA Dividend Peer group Carnegie Consensus Carnegie Margin Yield comparison Rat. Curr. Price 04e 05e 04e 05e 04e 05e 05e 04e Assa Abloy N SEK 88.5 13.0 11.8 13.1 11.6 11.9 10.4 15.4% 1.5% Atlas Copco OP SEK 259.5 12.0 10.4 12.2 10.9 9.0 7.6 14.9% 3.5% KCI Konecranes N EUR 30.0 15.8 12.7 16.3 12.1 10.8 9.0 6.4% 3.7% Kone N EUR 49.4 13.2 11.6 12.9 11.6 6.1 8.3 7.9% 4.0% Metso N EUR 10.4 21.9 10.8 26.2 11.1 16.1 8.4 5.7% 2.9% Sandvik N SEK 247.5 14.0 12.7 13.7 12.4 10.7 9.2 14.6% 4.4% SKF N SEK 268.0 10.9 10.1 10.8 10.0 7.4 6.4 10.4% 3.7% Wärtsilä OP EUR 18.4 11.9 9.1 11.9 9.1 5.3 6.2 6.7% 4.1% Weighted avg. 13.0 11.2 9.1 8.2 11.1% 3.6% Unweighted avg. 13.1 11.2 9.9 8.4 9.2% 3.7%
Source: Carnegie Research
25 August 2004
2 Carnegie Securities Research
Company Update Kone
De-merger opens up new possibilities
We welcome Kone’s planned de-merger of its Elevators & Escalators and Cargotec businesses. After the successful turnaround of Cargotec, the proposal makes strategic sense given the lack of operational synergies, and it opens up new possibilities in M&A. Nevertheless, we argue that the break-up does not really expose new values although it is still likely to be a positive catalyst in the short term. Cargotec’s M&A opportunities appear to be limited as it already has a leading market position. However, we would regard a link-up between Cargotec and KCI Konecranes as very interesting in view of the synergy potential and expectations of a smooth integration. We believe that a merger between Cargotec and KCI would create value for shareholders in both companies and lead to pre-tax synergies of EUR25m. Elevators & Escalators is likely to continue pursuing its strategy of making small bolt-on acquisitions while keeping an eye on Toshiba Elevator and Building Systems. The new proposal and recap of the Partek deal Elevators & Escalators and Cargotec to be Kone’s board of directors has decided to begin preparations to split the company into two separated separate entities. According to the preliminary plan, the assets and liabilities of the parent company will be divided between two corporations. The first company will consist of the business operations of the current Kone Elevators & Escalators (KEE) and the second company will consist of the business operations of the current Kone Cargotec. Following the de-merger, Kone’s shareholders will receive shares in the new corporations in proportion to their existing shareholdings.
Good motivation for the de-merger Management stressed that “pure play/increased transparency” and “improved M&A capabilities” were the main motives behind the de-merger. Kone has played a significant role in the successful streamlining process of Cargotec’s manufacturing operations but the transfer of KEE’s service know-how to Cargotec has been a more cumbersome process than initially expected. Furthermore, KEE’s technology is mainly based on electro- mechanics while Cargotec uses hydraulics. This reduces the long term synergy potential. Therefore, the de-merger makes strategic sense given the lack of operational synergies between the two businesses. However: 1) the de-merger process will take up to one year; 2) free float is likely to remain limited as Mr Herlin intends to remain a large owner in both companies; 3) there will be two share classes in both companies; and 4) the two separate entities will each have a lower market cap than the current Kone.
The implicit acquisition cost of Cargotec is The table below illustrates the current cost of the Partek acquisition following the EUR524m divestments. The EV paid for the remaining operations in Cargotec (Kalmar and Hiab) is just EUR524m. This values Cargotec at an EV/Sales(04e) of only 0.3x and EV/EBITA(04e) of 5.3x, which is clearly below the fair valuation as shown later in this update. As Kone is once again nearly debt free, Kone’s shareholders have effectively obtained ownership of Cargotec for free. As we have said before, the Partek acquisition was a real blessing in disguise.
25 August 2004
Carnegie Securities Research 3
Company Update Kone
Partek acquisition cost revisited Price (EUR) # of shares (m) Total (EURm) Share offer 15 49 754 Option offer 0 1 0 Bond offer 1,919 0 32 Loan note offer 2,186 0 70
Total equity 856 Assumed net debt 689 Capital loan 100 EV original 1,645 Nordkalk disposed 12 Feb 2003 -270 Paroc disposed 12 Feb 2003 -75 Cellit disposed 15 April 2003 -12 Polar disposed in 1 October 2003 -24 EV 2003 1,264 Forest Machines disposed 31 December 2003 -120 Tractors disposed 5 January 2004 -600 Sisu Auto + Sisu Axles disposed 5 March 2004 -20 EV current 524 Source: Carnegie Research Valuation The break-up is not likely to reveal hidden Based on our SOTP calculation, Kone's fair EV is some EUR3.4bn, of which Cargotec's values share is some EUR940m. The SOTP value corresponds to EUR50.4 per share, which is very close to the current market valuation. Therefore, we argue that the break-up does not really expose new values as such but is still likely to be a positive catalyst in the short term.
Kone: Sum-of-the-parts valuation EURm % Item Valuation gauge (x) Peer companies used 2,552 81% Elevators & Escalators EV/EBITA(04e) = 10.5 Assa Abloy, Schindler, ThyssenKrupp, United Technologies 940 30% Cargotec EV/EBITA(04e) = 9.6 KCI Konecranes, Linde, Manitou, Palfinger -120 -4% Group common expenses DCF 3,373 107% Core units EV 101 3% Consolis stake (41%) EV/Sales(04e) 0.4 101 3% Holdings EV 3,474 110% Total EV -300 -10% Net debt FY(04) guidance -25 -1% Minorities DCF 3,149 100% Total Equity 50.4 Per share Source: Carnegie Research, JCF Quant
Fair relative valuation for Kone On current earnings-based valuation multiples, Kone is trading roughly on a par with its international peer group and other Nordic engineering companies. Hence, we conclude that Kone’s shares are fairly valued.
25 August 2004
4 Carnegie Securities Research
Company Update Kone
EV/EBITA adj EV/EBITA adj International valuation P/E Adj 04 P/E Adj 05 04 05 Assa Abloy 13.0 11.8 11.9 10.4 KCI Konecranes 15.8 12.7 10.8 9.0 Kone 13.2 11.6 9.6 8.3 Linde 13.5 11.9 10.0 8.0 Manitou 15.7 13.7 9.1 7.7 Palfinger 12.6 9.8 8.4 7.1 Schindler 11.7 9.7 6.5 4.8 ThyssenKrupp 10.0 9.3 9.4 8.2 United Technologies 17.1 15.6 11.5 9.9
Median (ex. Kone) 13.2 11.8 9.7 8.1 Average (ex. Kone) 13.7 11.8 9.7 8.1
Kone vs. median 0% -2% -1% 2% Kone vs. average -3% -2% -1% 2% Source: Carnegie Research, JCF Quant
Nordic valuation P/E Adj 04 P/E Adj 05 EV/EBITA adj 04 EV/EBITA adj 05
Assa Abloy 13.0 11.8 11.9 10.4 Atlas Copco 12.0 10.4 9.0 7.6 KCI Konecranes 15.8 12.7 10.8 9.0 Kone 13.2 11.6 9.6 8.3 Metso 21.9 10.8 14.7 8.4 Sandvik 14.0 12.7 10.8 9.3 SKF 10.9 10.1 7.4 6.4 Wärtsilä 11.9 9.1 9.6 6.2
Median (ex. Kone) 13.0 10.8 10.8 8.4 Average (ex. Kone) 14.2 11.1 10.6 8.2
Kone vs. median 2% 7% -11% -2% Kone vs. average -7% 4% -10% 1% Source: Carnegie Research M&A opportunities Cargotec Cargotec well positioned in current set-up Unsurprisingly, no major M&A plans have been announced for either of the two new units. We have argued in the past that Cargotec has been able to fully capitalise on the current upturn in demand with the current set-up, and our impression is that management is not eager to grow the business through acquisitions. As seen from the following tables, both Kalmar and Hiab offer a full product range without any notable gaps. Moreover, their sales and service networks are the most extensive in their respective industries and their brands are well recognised in the market place.
Kalmar already offers the broadest range of The EUR4bn+ container handling market is rather fragmented in terms of the number of products for container handling product types and the number of players. Kalmar already holds the leading position, with an overall market share of approximately 20%. It is the only company in the industry with a comprehensive product range. Italian Fantuzzi is closest to Kalmar in terms of the breadth of its product range. However, according to industry sources, Fantuzzi is in financial distress and is refocusing its operations away from the ship-to-shore (STS) crane business towards rubber-tyred equipment. CVS Ferrari, also based in Italy, is active in four equipment segments. Other players are active in more narrow niches. These include crane companies (e.g. KCI Konecranes and ZPMC), forklift truck and reach stacker
25 August 2004
Carnegie Securities Research 5
Company Update Kone
manufacturers (e.g. Hyster, Linde, SMV and Swetruck) and terminal tractors manufacturers (e.g. Capacity and Terberg).
Kalmar’s expansion mainly possible in All in all, there are no obvious targets for Kalmar from a product offering point of view. cranes, forklifts and service From the competition authorities’ point of view, expansion could be possible mainly within the RTG/RMG/STS crane and forklift truck and service segments where Kalmar’s global market share is less than 20%. In other segments, Kalmar is the clear market leader with a market share of about 50%.
Container handling Straddle Reach RTG/RMG STS Terminal Forklift competitors carriers stackers cranes cranes tractors trucks Service
Capacity x
CVS Ferrari x x x x
Fantuzzi x x x x x
Hyster x x
Kalmar x x x x x x x
KCI Konecranes x x x
Linde x x
SMV x x
Terberg x
ZPMC x x
Source: Kalmar
Net sales(03) of selected container handling players
800
700
600
500
400 EUR
300
200
100
0 Fantuzzi Kalmar KCI Konecranes* ZPMC
*Includes also EOT crane business Source: Carnegie Research
Hiab is also a leading player in load handling The competitive situation is very similar for Hiab. It is the leader in the EUR3bn load handling market with a global market share of more than 20%, and it has the broadest product offering in the industry. Palfinger of Austria is basically the only global competitor, which is also active in all product segments. All other competitors are specialised niche players with varying geographical reach.
Hiab has limited flexibility in M&A from the Again, there are no obvious targets for Hiab from a product offering point of view. From competition authorities’ point of view the competition authorities’ point of view, Hiab’s flexibility to expand through M&A also looks limited. A deal with Palfinger would quite certainly be blocked and there is a fair chance that an acquisition of a niche player could create dominating positions as well. We understand that Hiab is the keenest to expand within truck-mounted forklifts but M&A
25 August 2004
6 Carnegie Securities Research
Company Update Kone
does not seem to be the most obvious vehicle as the company – the inventor of the truck- mounted forklift – already commands a market share of more than 50%.
Load handling Loader Truck-mounted Forestry competitors cranes Demountables Tail lifts forklifts cranes
Chrisman x
D'hollandia, Bär, Dautel, MBB x
Effer x
Fassi x
Foresteri, Cranab x
Hiab x x x x x
Hyva x
Manitou x
Marrell x
Maxon x
Palfinger x x x x x
Stellar x
Source: Hiab
Net sales(03) of selected load handling players
800
700
600
500
400 EURm 300
200
100
0 Hiab Manitou* Palfinger
*Includes also other materials handling business Source: Carnegie Research Cargotec – KCI Konecranes link-up KCI-Cargotec would be an interesting One obvious question is whether Cargotec and KCI Konecranes should be merged combination in materials handling following Cargotec’s de-merger from Kone. In our view, a merger is possible and negotiations are likely in due course. This view is based on our belief that KCI will not make a major acquisition in the near term, which would complicate the evaluation of the current state of the business. In our view, such a union would greatly support Kalmar’s business on the service volume front and would also lead to some expansion of its product offering on the harbour cranes side. KCI’s Standard Lifting Equipment, the process cranes side of Special Cranes and services related to those activities – which we estimate to represent some 60% of KCI’s revenues – would be new to Cargotec. KCI would be a “close-to-home” partner for Cargotec in order to reduce the cultural difficulties in the way of smooth integration.
25 August 2004
Carnegie Securities Research 7
Company Update Kone
STS and RTG are the overlapping products More specifically, the overlapping products are STS and RTG cranes, which are estimated to represent some EUR100m (or 13–15%) of Kalmar’s and KCI’s sales depending on the year. Even though both Kalmar and KCI sell their STS cranes mainly to Europe, the STS crane business represents very much a niche operation for Kalmar with a high level of outsourcing. Hence, the link-up should not lead to significant overcapacity in STS crane manufacturing or hamper KCI’s current streamlining efforts in Special Cranes. The partnership would also be rather interesting from the point of view of RTG cranes: KCI’s RTGs are positioned at the high-end and they are mainly sold to North America while Kalmar’s RTG’s are cheaper and are mostly sold to Europe.
Good synergy potential The failed Partek-KCI Konecranes merger in 2002 suggested pre-tax synergies amounting to EUR45m with one-third sales related. In our view, the projected EUR15m sales synergies are still very much valid. Partek-KCI management estimated cross-selling opportunities in new equipment of EUR75m–125m annually. The proposed combination also targeted EUR50m additional sales within service, and EUR10m savings in overhead costs. However, we think that it would be difficult to reach the earlier proposed EUR20m savings in operational costs as the streamlining already put in place at both Cargotec and KCI during the past two years has mainly involved manufacturing operations, in the form of outsourcing and relocation of production. All in all, we calculate that EUR25m synergies could be justifiable in the case of Cargotec-KCI.
Partek + KCI Konecranes synergy potential in 2002 vs. current status, pre-tax Synergy source Synergy base Potential in 2002 Current potential Sales Service, scale benefits, cross selling EUR15m EUR15m Operational costs Sourcing, lean manuf., product develop. EUR20m EUR0m Overhead costs Management, admin., IT, financing EUR10m EUR10m Total EUR45m EUR25m Source: Partek, KCI, Carnegie Research
The separation of KEE and Cargotec The interesting point about the split-up of Kone Elevators & Escalators and Cargotec is enhances M&A capabilities that it enhances the capabilities for pure play mergers thanks to the transparent market valuation of the separated businesses. This increases the likelihood of Cargotec and KCI Konecranes joining forces. A merger would make sense for Cargotec’s shareholders as significant takeover premiums could be avoided and synergies could be split between Cargotec and KCI shareholders, which would create a win-win situation for both.
The following two tables illustrate the value creation potential for both Cargotec and KCI shareholders in the case of a merger. All calculations are made on an EV basis due to the lack of balance sheet data for Cargotec. Nevertheless, the outcome should not differ materially if we used equity values as the balance sheet structure of the two companies is expected to be roughly similar, i.e. close to debt free.
Cargotec is about twice the size of KCI in The first table below summarises the fair EV calculations for the Cargotec-KCI all aspects combination with and without the EUR25m pre-tax synergies. We end up with EVs of EUR979m and EUR475m for Cargotec and KCI, respectively. The EV estimates are based on peer group EV/EBITA(04e) multiples and DCF models. Cargotec is about twice the size of KCI in terms of both sales and earnings. Cargotec would represent about two- thirds of the combined entity in almost all respects. By adding the EUR220m worth of synergies, the EV of the combined operations would amount to close to EUR1.7bn.
25 August 2004
8 Carnegie Securities Research
Company Update Kone
Cargotec+KCI EV calculations Fair value % of total EURm EV/EBITA(04e) DCF Average Incl. synergies Excl. synergies Cargotec 940 1,017 979 58% 67% KCI Konecranes 459 490 475 28% 33% Total excl. synergies 1,400 1,508 1,454 87% 100% Synergies 239 200 220 13% Total incl. synergies 1,638 1,708 1,673 100% Source: Carnegie Research
A win-win situation for both Cargotec and If the entire EUR25m in pre-tax synergies were allocated to Cargotec’s shareholders, they KCI would receive a 72% stake in the merged entity and KCI would be valued close to its current market valuation of EUR30 per share. By contrast, KCI’s shares would be valued 50% higher at EUR45 and the company’s shareholders would obtain a 42% stake if all the synergies were allocated to them. The most likely situation is the sharing of the synergies between Cargotec’s and KCI’s shareholders according to net sales (and relative valuation, which is about the same). Then, Cargotec shareholders would receive a 67% stake and KCI’s shares would be valued at EUR35, which would create a win-win situation for both groups of shareholders.
Cargotec+KCI sensitivity to allocation of synergies % of synergies to % of total value incl. syn. KCI MV Cargotec KCI Cargotec KCI KCI EV KCI MV per share 100% 0% 72% 28% 475 428 29.9 67% 33% 67% 33% 547 500 34.9 0% 100% 58% 42% 695 648 45.3 Source: Carnegie Research
We have also made calculations of the price level in such an acquisition that would make sense for Cargotec’s shareholders. In the table below, we have calculated the potential EPS(05e) impact on Cargotec at various bid prices based on a 100% share offer. In our calculations, we have assumed Cargotec’s share price to be EUR13.3 per share based on Cargotec’s relative contribution in Kone’s SOTP valuation. Also, we have estimated Cargotec’s net profit in 2005 and EPS(05) based on Cargotec’s relative contribution in Kone’s total EBITA(05e). Without any synergies allocated to KCI’s shareholders, the acquisition would be EPS neutral only at EUR26 per KCI share as KCI’s relative valuation is about 10% above Kone’s valuation. If one-third of the EUR25m pre-tax synergies – in relation to sales as earlier – were given to KCI shareholders, Cargotec could pay up to EUR31 per KCI share. However, we would like to highlight that the outcome is very sensitive to the share price assumed for Cargotec.
25 August 2004
Carnegie Securities Research 9
Company Update Kone
Earnings impact calculation: 100% share offer for KCI Konecranes by Cargotec 0% of EUR25m (pre-tax) synergies to KCI 33% of EUR25m (pre-tax) synergies to KCI
New Old New Old KCI bid KCI mkt Cargotec+KCI Cargotec Cargotec Cargotec+KCI Cargotec Cargotec price cap Net Profit(05e) EPS(05e) EPS(05e) Difference Net Profit(05e) EPS(05e) EPS(05e) Difference 25.0 358 105 1.19 1.17 2% 111 1.25 1.17 7% 26.0 372 105 1.17 1.17 0% 111 1.24 1.17 6% 27.0 386 105 1.16 1.17 -1% 111 1.22 1.17 5% 28.0 401 105 1.14 1.17 -2% 111 1.21 1.17 4% 29.0 415 105 1.13 1.17 -3% 111 1.19 1.17 2% 30.0 429 105 1.12 1.17 -4% 111 1.18 1.17 1% 31.0 444 105 1.10 1.17 -5% 111 1.17 1.17 0% 32.0 458 105 1.09 1.17 -6% 111 1.15 1.17 -1% 33.0 472 105 1.08 1.17 -7% 111 1.14 1.17 -2% 34.0 486 105 1.07 1.17 -8% 111 1.13 1.17 -3% 35.0 501 105 1.06 1.17 -9% 111 1.12 1.17 -4% Source: Carnegie Research Elevators & Escalators Small bolt-on acquisitions expected to We expect small bolt-on acquisitions to continue to be made in elevators, escalators and continue in KEE automatic building door service. Kone conducted over 20 transactions in H1(04) with the majority of the targets generating EUR1m–5m in annual net sales. Kone’s latest acquisition was the elevator business of Bharat Bijlee Limited (BBL). BBL has a maintenance portfolio of about 5,000 units and sells around 800 new elevators annually. BBL's elevator business recorded net sales of nearly EUR12m last year.
Toshiba’s elevator business still the most As the elevator & escalator industry is already very consolidated, the most obvious larger obvious acquisition target opportunity would be to increase the stake in Toshiba Elevator and Building Systems Corp. The company already owns 19.9% – valued at EUR158m with an implicit valuation of EUR636m for the remaining 80.1% – but the deal seems to essentially boil down to the main owner’s, Toshiba Corporation, willingness to reduce the position further.
Market shares in elevator industry
Others Otis 22% 23%
Fujitec 2%
Toshiba 4% Schindler Hitachi 13% 7% Thyssen Kone Mitsubishi 11% 9% 9%
Source: Kone
25 August 2004
10 Carnegie Securities Research
Company Update Kone
Interim figures
Carnegie estimates 2003 2004 EURm Q1 Q2 Q3 Q4 Q1 Q2 Q3e Q4e 2003 2004e 2005e 2006e Net Sales 1,185 1,377 1,285 1,564 893 1,094 1,042 1,379 5,410 4,407 4,623 4,668 EBIT 72 112 103 150 219 90 78 133 437 519 367 375 EBIT margin (%) 6.1% 8.1% 8.0% 9.6% 24.5% 8.2% 7.5% 9.6% 8.1% 11.8% 7.9% 8.0% Net financials -9-10-7-3-51-3-2-28-9-11 PTP 64 104 98 150 214 92 76 132 416 514 370 381 Tax -15 -32 -25 -41 -82 -36 -30 -50 -113 -198 -104 -107 Tax rate (%) -24% -31% -25% -27% -38% -40% -39% -38% -27% -39% -28% -28% Net profit 48 71 73 109 132 55 46 80 300 313 264 271 EPS (EUR) 0.76 1.13 1.15 1.73 2.09 0.88 0.75 1.31 4.77 5.05 4.28 4.41 EPS adj. (EUR) 0.74 1.13 1.14 1.48 0.93 0.75 0.75 1.31 4.49 3.74 4.28 4.41 DPS (EUR) 2.00 2.00 2.00 2.70
Sales 2003 2004 EURm Q1 Q2 Q3 Q4 Q1 Q2 Q3e Q4e 2003 2004e 2005e 2006e Elevators & escalators 592 694 700 871 551 684 711 927 2,856 2,873 2,962 3,070 Europe 383 470 436 561 365 440 460 610 1,850 1,875 1,914 1,960 North America 150 152 168 213 123 151 156 214 682 644 667 693 Asia & Australia 58 70 93 95 62 91 93 101 315 346 372 408 Other areas 1233 1223 9999 Cargotec 328 360 311 365 342 409 331 451 1,364 1,534 1,661 1,598 Kalmar 178 197 144 231 188 227 165 277 749 857 934 867 Hiab 153 166 145 158 155 183 167 175 622 680 730 733 Group sales 1,185 1,377 1,285 1,564 893 1,094 1,042 1,379 5,410 4,407 4,623 4,668
EBIT 2003 2004 EURm Q1 Q2 Q3 Q4 Q1 Q2 Q3e Q4e 2003 2004e 2005e 2006e Elevators & escalators 48 70 76 96 30 42 65 106 290 244 276 288 Cargotec 17 26 13 21 22 31 16 29 77 98 103 99 Other 5 16 13 12 -3 -3 -3 -3 46 -12 -12 -12 Sale of businesses 2 0 1 21 170 19 0 0 25 189 0 0 Group EBIT 72 112 103 150 219 90 78 133 437 519 367 375
2003 2004 EBIT margin Q1 Q2 Q3 Q4 Q1 Q2 Q3e Q4e 2003 2004e 2005e 2006e Elevators & escalators 8.0% 10.1% 10.8% 11.1% 5.5% 6.2% 9.2% 11.4% 10.1% 8.5% 9.3% 9.4% Cargotec 5.2% 7.2% 4.1% 5.7% 6.4% 7.7% 4.8% 6.5% 5.6% 6.4% 6.2% 6.2% Group EBIT margin 6.1% 8.1% 8.0% 9.6% 24.5% 8.2% 7.5% 9.6% 8.1% 11.8% 7.9% 8.0%
2003 2004 Sales growth, Y/Y Q1 Q2 Q3 Q4 Q1 Q2 Q3e Q4e 2003 2004e 2005e 2006e Elevators & escalators -6% -7% 3% -4% -7% -1% 2% 6% -4% 1% 3% 4% Europe 3% 5% 8% -2% -5% -6% 5% 9% 3% 1% 2% 2% North America -24% -31% -16% -10% -18% 0% -7% 0% -20% -6% 4% 4% Asia & Australia 9% -2% 24% 3% 7% 29% 0% 7% 8% 10% 8% 9% Other areas -84% -76% -44% -67% 0% 50% -26% 4% -69% 1% 1% 1% Cargotec 2% -2% 4% 14% 7% 24% 102% 12% 8% -4% Kalmar -11% 9% 6% 15% 15% 20% 101% 14% 9% -7% Hiab 0% -3% 1% 10% 15% 10% 102% 9% 7% 1% Group sales growth 88% 84% -1% -6% -25% -21% -19% -12% 25% -19% 5% 1%
Order intake 2003 2004 EURm Q1 Q2 Q3 Q4 Q1 Q2 Q3e Q4e 2003 2004e 2005e 2006e Elevators & escalators 503 516 486 516 514 535 472 500 2,021 2,020 Cargotec 390 357 319 416 452 558 332 368 1,482 1,709 Kalmar 214 193 190 239 251 344 190 190 835 975 Hiab 180 167 129 177 202 215 144 180 653 740 Group order intake 1,155 1,161.3 1,039 1,203 965 1,092 804 868 4,558 3,729
25 August 2004
Carnegie Securities Research 11
Company Update Kone
Financial statements Profit & loss 1997 1998 1999 2000 2001 2002 2003 2004e 2005e 2006e Sales 2,066 2,082 2,412 2,602 2,816 4,342 5,410 4,407 4,623 4,668 COGS na na na na na na na na na na Gross profit na na na na na na na na na na Other income & costs -1,945 -1,920 -2,216 -2,335 -2,516 -3,926 -4,865 -3,800 -4,168 -4,204 EBITDA 121 162 196 267 300 416 545 608 456 464 Depreciation PPE -42 -36 -39 -38 -38 -66 -96 -77 -77 -77 Other amortisation 0 -5 -4 -5 -5 -10 -12 -12 -12 -12 EBITA 79 121 152 224 256 340 437 519 367 375 GW amortisation & Impairment -37 -37 -35 -38 -39 -65 0 0 0 0
EBIT 42 84 118 186 218 275 437 519 367 375 Net interest -15 -10 -8 -5 -3 -25 -30 -13 -5 -3 Other financial items 6-100203 4 4 4 Net financial items -9 -12 -8 -5 0 -25 -28 -9 -1 1 Share of earnings in ass. comp.1121167 4 4 4 EAFI 34 73 111 183 219 256 416 514 370 381 Other EO items 0000000 0 0 0 Pre-tax profit 34 73 111 183 219 256 416 514 370 381 Taxes -26 -41 -57 -77 -77 -96 -113 -198 -104 -107 Post-tax minorities interest 0 5 4 0 -1 -4 -3 -3 -3 -3 Net profit 8 37 58 106 141 157 300 313 264 271 Adj.Net profit 45 74 92 143 180 222 283 232 264 271
EO items 0000000000 Tax on EO items 0 0 0 0 0 0 -7 -107 0 0
Sales growth Y/Y 15.7% 0.8% 15.9% 7.9% 8.2% 54.2% 24.6% -18.5% 4.9% 1.0% EBITA growth Y/Y 14.1% 52.6% 26.0% 47.0% 14.5% 32.7% 28.5% 18.8% -29.3% 2.3% EBITDA margin 5.8% 7.8% 8.1% 10.3% 10.7% 9.6% 10.1% 13.8% 9.9% 9.9% EBITA margin 3.8% 5.8% 6.3% 8.6% 9.1% 7.8% 8.1% 11.8% 7.9% 8.0% Tax rate 77.3% 57.0% 51.6% 42.2% 35.0% 37.3% 27.2% 38.6% 28.0% 28.0%
Cash flow 1997 1998 1999 2000 2001 2002 2003 2004e 2005e 2006e
EBITDA 121 162 196 267 300 416 545 608 456 464 Net financial items -9 -12 -8 -5 0 -25 -28 -9 -1 1 Non cash adjustments 52 8 4 -15 15 8 40 -164 0 0 Change in NWC 23 -27 31 -15 30 196 -9 0 -32 -7 Paid taxes -26 -48 -60 -60 -90 -97 -113 -198 -104 -107 Operating cash flow (OCF) 160 83 163 171 255 497 436 236 319 352 CAPEX PPE -28 -54 -55 -46 -46 -93 -82 -85 -65 -65 CAPEX other intang. assets na na na na na na na na na na Net cash flow (NCF) 132 29 108 125 209 404 353 151 253 287 Other investments/Divestments 0 -5 4 -107 8 -1,402 192 603 0 0 Dividend paid -11 -11 -12 -20 -30 -47 -95 -127 -128 -129 Share issues & buybacks 0 0 0 -32 -26 158 0 -87 0 0 Other non-cash adjustments -9 -4 -83 105 -150 -464 13 40 1 1 Change in LT non-IB liabilities 0 0 0 0 0 0 0 0 0 0 Decrease in net IB debt 112 8 17 72 11 -1,350 463 580 127 159
Balance sheet 1997 1998 1999 2000 2001 2002 2003 2004e 2005e 2006e
Goodwill 411 342 335 415 417 1,063 912 726 726 726 Other fixed intangible assets 0 17 17 24 26 57 115 103 91 78 PPE 225 226 236 217 207 649 469 404 392 381 Shares & participations 11 12 12 44 71 234 197 199 202 205 Other fixed financial assets 0 0 0 0 0 0 211 177 177 177 Other fixed assets 0000000 0 0 0 Fixed assets 647 596 600 699 721 2,003 1,903 1,609 1,588 1,567 Inventories 140 156 160 154 112 530 482 353 370 373 Receivables 577 441 482 546 612 843 765 705 740 747 Other current assets 0 160 196 250 209 364 213 213 213 213 Cash & cash equivalents 132 101 142 182 453 420 407 393 409 410 Current assets 849 857 980 1,131 1,386 2,157 1,867 1,664 1,732 1,743 Total assets 1,496 1,453 1,580 1,829 2,107 4,160 3,771 3,273 3,320 3,311
Shareholders' equity 505 513 589 676 806 1,007 1,116 1,217 1,356 1,501 Minorities 1262112000 0 0 Sub-ordinated loans 0000020 0 0 0 Convertibles 0 0 0 0 0 101 0 0 0 0 Deferred tax 0 0 0 17 26 50 24 13 13 13 Other IB & Non IB provisions 175 171 191 195 221 247 146 170 170 170 LT IB debt 113 78 102 70 350 976 904 604 484 324 LT non-IB liabilities 0 0 0 0 0 0 0 0 0 0 LT liabilities 288 250 293 283 597 1,272 1,074 787 667 507 ST IB debt 30 26 27 27 7 596 505 176 185 187 Payables 660 130 127 150 152 386 380 397 416 420 Other ST non-IB liabilities 0 529 542 694 544 777 696 696 696 696 Current liabilities 691 685 696 870 703 1,758 1,581 1,269 1,297 1,303 Total liabilities 1,496 1,453 1,580 1,829 2,107 4,160 3,771 3,273 3,320 3,311
Source : Carnegie Research Source : Carnegie Research
25 August 2004
12 Carnegie Securities Research
Company Update Kone
Share data & key ratios Per share data (EUR) 1997 1998 1999 2000 2001 2002 2003 2004e 2005e 2006e Adj. no. of shares in issue YE (m) 60.46 60.46 60.46 60.46 58.41 61.81 62.99 61.93 61.63 61.63 Diluted no. of Shares YE (m) 60.46 61.04 60.46 60.46 60.46 63.46 63.46 63.90 64.41 64.41 EPS 0.13 0.60 0.95 1.75 2.42 2.54 4.77 5.1 4.28 4.41 EPS adj. 0.74 1.22 1.52 2.37 3.08 3.59 4.49 3.74 4.28 4.41 CEPS 1.41 1.89 2.22 3.06 3.80 4.72 6.4 6.4 5.7 5.8 DPS 0.19 0.21 0.33 0.50 0.73 1.50 2.00 2.00 2.00 2.70 BVPS 8.4 8.4 9.7 11.2 13.3 15.9 17.6 19.1 21.0 23.3 BVPS ex. GW 1.55 2.80 4.19 4.32 6.4 -0.88 3.21 7.7 9.8 12.0 NAVPS 8.4 8.4 9.7 11.2 13.3 15.9 17.6 19.1 21.0 23.3 NIBDPS 0.19 0.06 -0.22 -1.41 -1.58 19.8 12.5 3.30 1.31 -1.17
Valuation 1997 1998 1999 2000 2001 2002 2003 2004e 2005e 2006e P/E YE >50 18.2 17.1 14.2 11.5 11.3 9.5 9.8 11.6 11.2 P/E adj. YE 16.6 9.0 10.7 10.5 9.0 8.0 10.1 13.2 11.6 11.2 P/E average >50 21.1 14.6 12.2 11.1 11.7 7.8 9.8 11.6 11.2 P/E adj. average 15.9 10.4 9.1 9.0 8.7 8.3 8.3 13.2 11.6 11.2 P/CEPS YE 8.7 5.8 7.3 8.1 7.3 6.1 7.1 7.7 8.7 8.6 P/BV YE 1.47 1.31 1.67 2.22 2.08 1.80 2.58 2.59 2.35 2.12 P/BV ex. GW YE 7.92 3.92 3.89 5.75 4.31 neg. 14.11 6.43 5.06 4.11 Dividend yield YE 1.5% 1.9% 2.0% 2.0% 2.7% 5.2% 4.4% 4.0% 4.0% 5.5% Dividend Payout Ratio 146.4% 34.1% 35.0% 28.6% 30.4% 59.0% 42.0% 39.6% 46.7% 61.3% EV/EBIT YE 17.9 8.0 8.2 7.4 6.9 10.4 7.9 6.1 8.4 7.7 EV/EBITA YE 9.5 5.5 6.3 6.1 5.9 8.4 7.9 6.1 8.4 7.7 EV/EBITA adj. YE 9.5 5.5 6.3 6.1 5.9 8.4 8.4 9.6 8.4 7.7 EV/Sales YE 0.4 0.3 0.4 0.5 0.5 0.7 0.6 0.7 0.7 0.6 EV/EBITDA YE 6.3 4.1 4.9 5.1 5.0 6.9 6.4 5.2 6.7 6.3 Share price YE 12.3 11.0 16.3 24.8 27.7 28.6 45.3 49.7 Share price high 13.0 15.3 16.3 25.3 30.8 37.0 47.0 51.3 Share price low 10.7 9.43 10.8 16.3 22.0 24.2 26.8 45.5 Share price average 11.7 12.7 13.9 21.4 26.7 29.8 37.2 48.4
Margins 1997 1998 1999 2000 2001 2002 2003 2004e 2005e 2006e Gross margin na na na na na na na na na na EBITDA margin 5.8% 7.8% 8.1% 10.3% 10.7% 9.6% 10.1% 13.8% 9.9% 9.9% Adj. EBITDA margin 5.8% 7.8% 8.1% 10.3% 10.7% 9.6% 9.6% 9.5% 9.9% 9.9% EBITA margin 3.8% 5.8% 6.3% 8.6% 9.1% 7.8% 8.1% 11.8% 7.9% 8.0% Adj. EBITA margin 3.8% 5.8% 6.3% 8.6% 9.1% 7.8% 7.6% 7.5% 7.9% 8.0% Pre-tax margin 1.6% 3.5% 4.6% 7.0% 7.8% 5.9% 7.7% 11.7% 8.0% 8.2% Net margin 0.4% 1.8% 2.4% 4.1% 5.0% 3.6% 5.5% 7.1% 5.7% 5.8% Adj. net margin 2.2% 3.5% 3.8% 5.5% 6.4% 5.1% 5.2% 5.3% 5.7% 5.8%
Profitability 1997 1998 1999 2000 2001 2002 2003 2004e 2005e 2006e ROE 1.5% 7.2% 10.5% 16.7% 19.0% 17.3% 28.3% 26.8% 20.5% 19.0% Adj. ROE 9.0% 14.5% 16.7% 22.6% 24.3% 24.5% 26.6% 19.9% 20.5% 19.0% Adj. ROCE pre-tax 11.3% 15.6% 19.0% 25.2% 23.8% 17.3% 15.9% 15.2% 18.2% 18.4% Adj. ROIC aft-tax 2.5% 6.0% 6.8% 11.2% 13.7% 10.7% 11.7% 9.5% 13.9% 14.3% Adj. ROA pre-tax 6.3% 8.6% 10.7% 14.0% 14.5% 12.2% 11.4% 10.5% 12.1% 12.2% FCF yield 4.2% 0.9% 3.4% 4.0% 6.7% 13.7% 11.9% 5.1% 8.6% 9.7%
Capital eff./Solv. 1997 1998 1999 2000 2001 2002 2003 2004e 2005e 2006e Inventories / Sales 7.1% 7.1% 6.6% 6.0% 4.7% 7.4% 9.4% 8.0% 8.0% 8.0% Receivables / Sales 27.7% 24.4% 19.1% 19.7% 20.6% 16.8% 14.9% 16.0% 16.0% 16.0% Payables / Sales 32.0% 6.2% 5.3% 5.7% 5.4% 8.9% 7.0% 9.0% 9.0% 9.0% NWC / Sales 3.3% 12.6% 20.4% 20.5% 19.9% 18.0% 17.1% 17.3% 14.6% 14.9% Asset turnover 1.39 1.41 1.59 1.53 1.43 1.39 1.36 1.25 1.40 1.41 Sales / Capital invested 2.91 2.39 2.24 2.26 2.32 2.18 2.11 2.07 2.44 2.46 OCF / Capex 5.70 1.53 2.97 3.72 5.53 5.35 5.30 2.77 4.89 5.40 Capex / Sales 1.4% 2.6% 2.3% 1.8% 1.6% 2.1% 1.5% 1.9% 1.4% 1.4% Capex / Depreciation PPE 0.67 1.52 1.40 1.20 1.20 1.41 0.86 1.11 0.85 0.85 Dividend payout ratio 146.4% 34.1% 35.0% 28.6% 30.4% 59.0% 42.0% 39.6% 46.7% 61.3% Equity / Total assets 34.5% 35.7% 37.4% 37.0% 38.3% 24.7% 29.6% 37.2% 40.8% 45.3% Net IB debt / Equity 2.3% 0.7% -2.2% -12.6% -11.8% 122.1% 70.9% 17.3% 6.2% -5.0% Net IB debt / EBITDA 0.1 0.0 -0.1 -0.3 -0.3 3.0 1.5 0.3 0.2 -0.2 EBITDA / Net interest 7.9 15.6 24.2 54.5 107.2 16.6 18.0 45.6 90.4 183.3 EBITA / Net interest 5.2 11.6 18.8 45.7 91.6 13.6 14.5 39.0 72.8 148.2
Balance sheet data 1997 1998 1999 2000 2001 2002 2003 2004e 2005e 2006e Net IB debt 12 3 -13 -85 -96 1,254 791 211 84 -75 Net working capital (NWC) 57 467 515 550 572 988 867 661 693 700 Capital employed (CE) 835 795 911 986 1,411 2,998 2,695 2,181 2,208 2,195 Capital invested (CI) 693 1,051 1,103 1,205 1,222 2,757 2,362 1,894 1,903 1,886 Enterprise value YE (EV) 756 668 962 1,374 1,507 2,856 3,472 3,170 3,066 2,904
Source : Carnegie Research
25 August 2004
Carnegie Securities Research 13
Company Update Kone
Disclosures and disclaimers
The Carnegie Group Carnegie is an independent Nordic investment bank operating in Securities, Investment Banking and Asset Management & Private Banking. Carnegie provides a wide array of financial products and services to Nordic and international clients from offices in seven countries: Sweden, Denmark, Norway, Finland, Luxembourg, the UK and the US. Carnegie Investment Banking is the leading independent corporate finance advisor in the Nordic countries. Carnegie Asset Management and Private Banking provide financial services including asset management for selected institutions and private investors. The Carnegie Group was listed on the Stockholm Bourse on 1 June 2001.
Ratings and risk assessment structure Current rating system (as of 10 June 2003) Stock ratings Carnegie stock ratings are relative to Carnegie’s coverage universe on a Nordic sector basis. OP=Outperform The stock is expected to outperform the return on the Carnegie coverage universe of the Nordic Sector over the next 6 months. N=Neutral The stock is expected to perform in line with the return on the Carnegie coverage universe of the Nordic Sector over the next 6 months. U=Underperform The stock is expected to underperform the return on the Carnegie coverage universe of the Nordic Sector over the next 6 months. Sector view: Carnegie’s coverage universe on a Nordic sector basis is rated relative to the total Nordic market. Carnegie’s strategists, in co-operation with the sector heads, set the sector recommendations. Positive The sector is expected to outperform the return on the total Nordic market over the next 6 months. Neutral The sector is expected to perform in line with the return on the total Nordic market over the next 6 months. Negative The sector is expected to underperform the return on the total Nordic market over the next 6 months. Other ratings: NR=Not rated The investment rating, if any, has been suspended temporarily. UR=Under review The investment rating, if any, has been suspended temporarily. UB=Under Bid The investment rating, if any, has been suspended temporarily. Risk assessment: The risk assessment is based on the analyst’s evaluation of the company’s equity beta based on the business risk (asset beta) and financial risk (gearing). Low risk Estimated equity beta <0.75 Medium risk Estimated equity beta 0.75 to 1.25 High risk Estimated equity beta >1.25 Previous rating system: SB=Strong Buy The stock is expected to provide a return of greater than 20% over the next 6 months. B=Buy The stock is expected to provide a return of between 10% and 20% over the next 6 months. Acc=Accumulate The stock is expected to provide a return of between 5% and 10% over the next 6 months. R=Reduce The stock is expected to provide a return of between 0% and 5% over the next 6 months. S=Sell The stock is expected to provide a return of less than 0% over the next 6 months.
Price and company rating history (KONBS.HE) Price rel. to sector and company rating history (KONBS.HE) Old rating structure until 9 June 2003 New rating structure from 10 June 2003
40 118 116 35 114 30 112 25 110 108 20 106 15 104 09/06 18 / 0 9 24/07 02/04 102 10 / 0 6 24/06 10 B A B A 100 O N 5 98 Mar 00 Jun 00 Sep 00 Dec 00 Mar 01 Jun 01 Sep 01 Dec 01 Mar 02 Jun 02 Sep 02 Dec 02 Mar 03 Jun 03 May Jun 03 Jul 03 Aug Sep Oct Nov Dec Jan 04 Feb Mar Apr May Jun 04 Jul 04 Aug 03 03 03 03 03 03 04 04 04 04 04
Kone Kone rel. to Carnegie sector Capital Goods Hex Portfolio (Fi)
Source:Carnegie Research
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14 Carnegie Securities Research
Company Update Kone
Analyst certification The research analyst or analysts responsible for the content of this report certify that, not withstanding the existence of any such potential conflicts of interests referred to herein, the views expressed in this report accurately reflect our personal views about the companies and securities covered. We further certify that we have not been, nor are or will be, receiving direct or indirect compensation related to the specific recommendations or views contained in this report.
Potential conflict of interest As of 1 February 2003, Carnegie analysts and any connected persons are not ordinarily permitted to hold securities in the companies they cover.
As an integrated Nordic investment bank and asset management firm, Carnegie is a leading broker of Nordic stocks and has investment banking and other business relationships with a large number of the companies covered by its research department. Carnegie is constantly soliciting investment banking assignments. Therefore, any reader of this research report should assume that Carnegie is seeking or will seek investment banking or other business from the company or companies to which it refers. Thus, investors should assume that Carnegie expects to receive or intends to seek compensation from any company mentioned in this report within the next 3 months.
Disclaimer Carnegie offers stockbroking, investment banking and asset management services through companies based in the Nordic territories (Sweden, Denmark, Finland and Norway), Luxembourg and New York. Each company is regulated by the appropriate authority in the relevant territory and details of each company are available on request. Carnegie UK is the UK Branch of Carnegie Investment Bank AB, a company incorporated in Sweden with limited liability. Carnegie UK is regulated by the UK Financial Services Authority for the conduct of designated investment business in the UK. This report has been approved for the purposes of Section 21 of the Financial Services and Markets Act 2000 by Carnegie UK and issued by it in the UK. This report is issued in the US by Carnegie, Inc., a US registered broker-dealer.
This report is provided for informational purposes only and under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy any securities. The information in this report was obtained from various sources while all reasonable care has been taken to ensure that the information is true and not misleading, Carnegie does not guarantee its accuracy or completeness. Carnegie, its associated companies and any of their officers or directors may have a position, or otherwise be interested in, transactions in securities which are directly or indirectly the subject of this report. Carnegie, or its associated companies, may from time to time perform investment banking or other services for, or solicit investment banking or other business from, any company mentioned in this report.
This research report is prepared for general circulation and general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Past performance is not necessarily a guide to future performance. Carnegie and its associated companies accept no liability whatsoever for any direct or consequential loss arising from the use of this report or its contents. Investors in the US should be aware that investing in non-US securities entails certain risks. The securities of non-US issuers may not be registered with, nor be subject to, the current informational reporting and audit standards of the US Securities and Exchange Commission.
This report may not be reproduced, distributed or published by any recipient for any purpose. Copyright© 2002 Carnegie.
25 August 2004
Carnegie Securities Research 15
Kone Company Summary
Profit & loss 2002 2003 2004e 2005e 2006e Per share data 2002 2003 2004e 2005e 2006e
Sales 4,342 5,410 4,407 4,623 4,668 EPS 2.54 4.77 5.1 4.28 4.41 EBITDA 416 545 608 456 464 EPS adj. 3.59 4.49 3.74 4.28 4.41 EBITA 340 437 519 367 375 EPS adj. Growth 16.8% 24.8% -16.6% 14.4% 3.0% EBIT 275 437 519 367 375 CEPS 4.72 6.4 6.4 5.7 5.8 Pre-tax profit 256 416 514 370 381 DPS 1.50 2.00 2.00 2.00 2.70 Net profit 157 300 313 264 271 BVPS ex. GW -0.88 3.21 7.7 9.8 12.0 EO items 0 25 189 0 0 NIBDPS 19.8 12.5 3.30 1.31 -1.17
Balance sheet 2002 2003 2004e 2005e 2006e Ratios 2002 2003 2004e 2005e 2006e
Total assets 4,160 3,771 3,273 3,320 3,311 P/E 19.4 10.4 9.8 11.6 11.2 Shareholders' equity 1,007 1,116 1,217 1,356 1,501 P/E adj. 13.8 11.0 13.2 11.6 11.2 Goodwill 1,063 912 726 726 726 P/BVPS 3.1 2.8 2.6 2.3 2.1 Net IB debt 1,254 791 211 84 -75 P/BVPS ex. GW neg. 15.4 6.4 5.1 4.1 P/CEPS 10.5 7.8 7.7 8.7 8.6 Cash flow 2002 2003 2004e 2005e 2006e EV/Sales 1.0 0.7 0.7 0.7 0.6 EBITDA 416 545 608 456 464 EV/EBITDA 10.1 6.9 5.2 6.7 6.2 Operating cash flow 497 436 236 319 352 EV/EBITA 12.3 8.6 6.1 8.3 7.7 Net cash flow (NCF) 404 353 151 253 287 Dividend yield 3.0% 4.0% 4.0% 4.0% 5.5% Decrease in net IB debt -1,350 463 580 127 159 FCF yield 13.7% 11.9% 5.1% 8.6% 9.7%
Product areas Geogr. areas
Other Other Asia & Australia 6% 22% 9%
Elevators & North America Escalators Europe 21% 53% Cargotec 64% 25%
Source: Carnegie Research Source: Carnegie Research Company description Company miscellaneous Kone Elevators & Escalators sells, manufactures, installs, maintains and CEO Antti Herlin Keilasatama 3 modernizes elevators and escalators and services automatic building doors. It is CFO Aimo Rajahalme +358 204 751 a service company known worldwide as a technology leader with the most innovative products and services in the elevator and escalator industry. KONE IR Paul Lönnfors www.kone.com operates some 800 service centers in more than 40 countries. Main competitors Next report: n.a are Otis, Schindler and ThyssenKrupp. Kone Cargotec supplies products and services to facilitate moving and loading cargo. It comprises two business areas: Major shareholders Kalmar (container handling) and Hiab (load handling). Kone Cargotec has its own sales and service companies in 25 countries. Through the dealer network, Capital Votes Capital Votes products and services are available in more than 100 countries. Cargotec faces Antti Herlin 31.0% 66.4% Kone Foundation 3.1% 5.6% competition from KCI Konecranes, Fantuzzi Reggiane and Palfinger, for example. Toshiba Elevator and 4.8% 2.0% Finnish State Pension 0.9% 0.4% Kone Corporation 4.2% 1.8% Nominee registered 34.5% 14.7%
Carnegie Investment Bank AB Carnegie Inc. USA Tel +46 8 676 88 00 Fax +46 8 676 88 95 Tel +1 212 262 5800 Fax +1 212 265 3946 Carnegie ASA Carnegie Investment Bank AB, Finland Branch Tel +47 22 00 93 00 Fax +47 22 00 94 00 Tel +358 9 618 711 Fax +358 9 618 71 239 Carnegie Bank A/S Carnegie Investment Bank AB, UK Branch Tel +45 32 88 02 00 Fax +45 32 96 10 22 Tel +44 20 7216 4000 Fax +44 20 7417 9426
25 August 2004
Carnegie Securities Research