Annual Report 2002 Activity Report Schindler Contents 2 Key figures Statement of the Board of Directors 7 Satisfactory result before special project costs Innovation 2002 14 Schindler 700 – The Journey to the Top Market profile elevators and escalators 18 Europe 24 Americas 30 Asia/Pacific 36 EMIA 45 ALSO 48 Organization 50 Financial statements Group, Condensed 52 Financial statements Schindler Holding Ltd., Condensed 54 Information for shareholders Charts Schindler’s environmental performance 66 Systematic development of environmentally-friendly products 72 Important addresses Illustration concept The full-page illustrations show Schindler’s latest products in typical applications, while the smaller pictures in the text document note- worthy installations made during the 2002 reporting year. The back cover of the annual report is devoted to the work of young artists whose creativity enliven our business premises. Activity Report 2002 of the Board of Directors of Schindler Holding Ltd., CH-6052 Hergiswil NW, Switzerland, to the Ordinary General Meeting of March 24, 2003 75th Financial Year Schindler Stages of elevator installation at the Banque et Caisse d’Epargne de l’Etat; Luxembourg Key figures 2002 The financial results for 2002 are significantly affected by special costs of the R03 program, as explained on page 7 of the Financial Statements. In the interest of greater transparency and comparability, the key figures which follow are, where relevant, also shown excluding R03 project costs. Group 2001 2002 In million CHF ∆ % ∆ % local currency Operating revenue 8 327 7 888 –5.3 –0.1 EBITDA• Group 680 349 –48.7 EBITDA Elevators and Escalators in % 9.9 5.0 EBITDA ALSO in % 1.9 2.4 Profit before taxes 443 62 –86.0 Net profit 379 8 –97.9 Cash flow•• 555 430 –22.5 Orders received Elevators and Escalators 6 658 6 344 –4.7 +1.5 Orders received ALSO 1 768 1 685 –4.7 –3.8 Shareholders’ equity 1 329 1 067 –19.7 Personnel at year-end 41 524 39 918 –3.9 Key figures before charging R03 project costs 2001 2002 ∆ % In million CHF EBITDA• Group 680 665 –2.2 EBITDA Elevators and Escalators in % 9.9 10.1 Net profit before taxes 443 448 +1.1 • EBITDA: Operating profit plus depreciation/amortization •• Cash flow: Net profit before minority interests plus depreciation / amortization and change in provisions 2 Annual Report 2002 Schindler Group Dividends proposed by the Board of Directors of Schindler Holding Ltd. 2001 2002 Registered share CHF 50.–• CHF —.–•• Bearer participation certificate CHF 50.–• CHF —.–•• • Before 10 :1 split on June 11, 2002 •• The request not to pay a dividend was already announced at the last General Meeting on March 26, 2002, in association with the planned R03 project costs. Schindler Orders received EBITDA, EBIT, net profit In million CHF As % of operating revenue 6604 7695 8750 8 426 8029 EBITDA EBIT Net profit 9 000 9.0 8 000 • 7 000 7.5 6 000 6.0 • 5 000 4.5 4 000 • 3 000 3.0 2 000 1.5 1000 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 • Before R03 project costs You will find further key figures starting on page 54. 3 Annual Report 2002 Schindler Group Schindler 700: 10 meters / second Statement of the Board of Directors Satisfactory result before special project costs Special project costs and Operational performance before taxes for 2002 which was exchange rate effects burden Relative to 31.12.2001, the scope of forecast at the Annual Results financial performance for 2002 consolidation was expanded by ZAO Media Conference. The shortfall is The results for 2002 are substan- Schindler, Russia. The effect of this mainly due to higher R03 project tially affected by the special projects first-time consolidation on Group costs, and massive unforeseeable in the elevators and escalators busi- operating revenue and Group oper- losses on exchange. Before charg- ness which were announced in the ating profit was less than one per- ing R03 project costs, net profit spring under the name R03 (run rate cent. In the reporting year, the hold- before taxes was CHF 448 million, 03). The aim of these projects is ing in China-Schindler Elevator Co. which is 1.1% above the previous Schindler to invest earnings amounting to Ltd. was increased from 62.7% to year’s value. Consolidated net profit approximately one year’s net profit 92.8%. The remaining 7.2% are held after taxes and minority interests in increasing productivity, improving by Jardine Schindler (Pacific) N.V. and after charging R03 project costs geographical positioning, and in proj- was CHF 8 million. ects for expansion. This package Consolidated operating revenue fell of measures will lastingly strengthen by 5.3% from CHF 8327 million to At CHF 8 029 million, consolidated the elevators and escalators busi- CHF 7 888 million. In local currencies orders received were 4.7% below ness, and contribute to increasing (–0.1%), the previous year’s value the previous year’s amount of CHF the EBITDA margin to 14% in the was maintained. At the level of oper- 8 426 million. In local currency val- medium term, assuming all other ating revenue, there were exchange ues, there was an increase of 0.4%. conditions remain unchanged. rate losses of CHF 180 million ac- The consolidated order backlog at cruing from the US dollar, CHF 112 the end of 2002 was 13.7% lower At the level of consolidated profit million from the Brazilian real, CHF than the previous year’s value before taxes, the R03 project costs 75 million from the euro, and CHF (1.7% lower in local currencies) at incurred in the reporting period 75 million from other currencies. CHF 3 486 million. were CHF 386 million, which is at Net of exchange losses, the remain- the upper end of the planned range. ing decline in operating revenue Relative to the end of 2001, the was therefore attributable entirely total number of employees fell by In addition to costs for the R03 proj- to lower net sales by ALSO. 1 606, or 3.9%. In the elevators and ects, the financial results for the year escalators business, the number were burdened by massive currency Consolidated EBITDA dropped from employed declined by 3.4%, despite devaluations. Negative effects of CHF 680 million to CHF 349 million integration of approximately 500 exchange rates, especially in North after charging R03 project costs in employees in Russia. The total num- and South America, but also in the reporting year, and to CHF 665 ber of employees at ALSO dropped the euro area, reduced consolidated million before charging R03 project by 243, or 17.9%, mainly as a result operating revenue by a total of CHF costs. of changes in the Systems Business 442 million, and operating profit by Division. CHF 39 million. Shareholders’ equity Consolidated net profit before taxes decreased by CHF 188 million. but after charging R03 project costs was CHF 62 million, compared with CHF 443 million the previous year. This is approximately CHF 50 million less than the consolidated net profit Schindler 700: the wind-tunnel- tested aerody- namic fairing can be opened for maintenance work 7 Annual Report 2002 Schindler Group 1 Elevators and escalators planned rate. In Brazil, manufactur- business ing was concentrated into the mod- The results for the elevators and ern elevator and escalator plant at escalators business reflect the R03 Londrina, and an older factory at Rio special projects, as well as tougher de Janeiro was closed down. Other conditions in the marketplace. The production facilities were closed in R03 program comprises a total of Germany, France, Japan, Malaysia, more than 50 individual projects. Poland, and Turkey. In China, dupli- Of the projects initiated in the first cation and internal competition half of 2002, the merger in North between the group companies were America between Schindler and eliminated according to plan by Millar was completed. Besides cor- realignment of marketing activities responding costs, the merger has and the field organization. As well produced pro rata savings at the as this, shared services were intro- 2 duced into the product line manage- ment, IT, export, logistics, and train- EBITDA was CHF 313 million after ing areas. In Russia, Schindler has charging R03 project costs, and regained a foothold by purchasing CHF 629 million before R03 project the majority share in Liftremont, costs, which compares with CHF an elevator company active in the 654 million the previous year. The Moscow area, which it has renamed EBITDA margin fell from 9.9% in to ZAO Schindler and will progres- the previous year to 5.0% after R03 sively expand to participate in the project costs were charged. Before growth potential of the Russian charging R03 project costs, this value market. Events in Europe were dominated by complex preparations for the standardization of business 1 Schindler is supplying a total of 51 escalators and processes in line with best demon- 35 elevators for the Tren 3 strated practices, implementation Urbano urban rail transit of which will start in 2003. The im- system; Puerto Rico provements in profitability resulting 2 The International Confer- from the R03 program will become ence Center is served by 21 2004 2005 elevators and 16 escalators; visible in and . Shanghai, China Consolidated operating revenue fell 3 36-meter-long moving walk on the top deck of luxury by 5.6% from CHF 6601 million to cruise liner Star Princess CHF 6231 million. Expressed in local currencies, operating revenue rose by 0.7%. 8 Annual Report 2002 Schindler Group 1 increased to 10.1%, despite massive direct and indirect exchange rate effects of the Brazilian subsidiary.