KONE Oyj — Call Transcript 2025

Good morning, everybody, and welcome to KONE's fourth quarter earnings call. My name is Natalia Valtasaari. I'm head of investor relations here at KONE, and I'm very pleased to be joined by our CEO, Philippe Delorme, and our CFO, Ilkka Hara. So, as usual, Philippe will start by talking through the highlights of the year and about our strategic developments, and then Ilkka will continue going through the markets and the financials. With that, Philippe, please. Thank you, Natalia, and welcome back on board the IR team. So, let me start. We have a technical glitch to start with, which we'll be solving in a moment. Thank you. Very good. I couldn't see our slides anymore. That was slightly complicated to talk to you about our story, though we know it very well. So, a very good morning, everyone. I'm very pleased to be here today presenting our results for 2024. So, let me start again, as usual, by summarizing the highlights, this time focusing on the full year 2024. It goes without saying that one of our most important achievements last year was the launch of our new strategy, Rise. And I'm really pleased that we've gotten off to such a fantastic start in terms of strategy execution. Another key highlight was the excellent momentum that we had in service and modernization throughout 2024. Together, these two businesses account for 90% of our profit. So, the strong sales growth we've seen makes KONE a more resilient company than ever. From a geographical perspective, we saw good order growth in the Americas, Europe, Asia-Pacific, Middle East, and Africa. In China, as mentioned before, the construction markets have been under significant pressure, and this has impacted our new building solutions business, while the service and modernization continue to make good progress there. As you know, profitable growth is very high on our agenda. So, it has been very good to see that our disciplined approach to driving financial performance has resulted in the eighth consecutive quarters of profitability improvement. So, based on KONE's performance, the board is proposing to the annual general meeting a dividend of EUR 1.80 per B-class shares, which represents a dividend yield of 3.8%. Now, let's have a look at all of this in more detail in the context of Q4. So, in terms of orders received, we had a solid quarter. Outside China, order growth was over 10%, and it was especially good to see modernization order growing nicely in all areas. The headwinds in China continued, which was visible in both orders and sales. Orders received declined by over 20% in China and sales by nearly 15%. Despite this, our overall sales increased by 5.1% at comparable currencies. Here, of course, the highlight was again our double-digit growth in both service and modernization. This gave us a more favorable business mix, which was a key driver of the 20 basis points improvement of our Adjusted EBIT margin. And finally, as usual, cash generation in the fourth quarter was very strong. As we discussed in previous quarters, cash flow has been an area of particular focus this year, and it was very good to see this paying off very well. So, all in all, I would say that we had a great finish of the year. Now, probably my favorite page, which is customer references with you. So, starting with services this time, where we recently won a contract to maintain the elevators at the InterContinental Hotel in Madrid. I actually had the opportunity to sit down with the hotel manager last week, and it was great to hear that he highlighted our reputation and our digital offering as the key reason they opted to partner with us. Second reference is the Henry B. González Convention Center modernization in San Antonio, Texas. We've been maintaining the elevators and escalators at this site since 2012 and have completed another modernization project for the same customer a few years back. So, this is a great example of how important long-standing customer relationships are for winning in modernization. And finally, and I find this one really exciting, New Building Solutions will be supplying our next-generation high-rise technology to the world's tallest residential-only building in Dubai. Actually, if we look at the top 10 tallest buildings currently under construction, 5 out of 10, I repeat, 5 out of 10 are going to feature KONE's equipment. And I think it's something we can be very proud about in terms of our leadership in the most demanding application. Hopefully, this slide should look quite familiar to you by now, but let me just take a short moment to remind you about our ambition, which is very simply to lead the industry by being the number one choice for our employees and our customers, by leading in innovation, leading in innovation and sustainability, and by leading in growth and profitability. Since its launch, I've visited many KONE locations all over the world, and it has been really great to see how well this ambition resonates with our employees and also with our customers and other external stakeholders. There is a lot of excitement in the air. Despite being early days, we have excellent progress to report in each of our four strategic shifts. In digital, approximately 35% of our service base is now connected, and we've done really well in rolling out solutions for smarter service operation to new countries. In modernization, we are focused on enhancing our offering, particularly within partial modernization, and continue to work on industrializing our value proposition. We have also successfully accelerated the sales of our regenerative drive, which helps customers to cut carbon by reducing the energy generated when the elevator brakes. We haven't talked so much about new residential before, so let me share an example with you, which I really find exciting. We've recently launched the renewed MonoSpace 100 DX in Europe to improve our positioning in the low-rise residential market, which is a very important segment. It leverages our global supply chain operations to improve cost competitiveness without compromising, of course, on quality and reliability. And I'm especially proud of the speed with which we were able to bring this solution to the market with only six months from initial decision to deployment, and I'm glad that we really see a good commercial traction here. Now, moving on to my last slide, sustainability, we made great progress toward our sustainability target in most areas last year. I would like to especially highlight the reduction in Scope 3 emissions, which accelerated visibly last year. A big driver of this improvement was the increased share of regenerative drive sales, which I mentioned actually in the previous slides. I was also happy to see over a two percentage point improvement in the share of women at director level, our key diversity metric. Unfortunately, we didn't make progress towards our safety target, and this is something we'll be paying special attention to in 2025. Then, a new development to share with you as of this year, we'll start to measure our performance with the KONE Sustainability Index. It builds on many familiar elements with the addition of cybersecurity, which is very important. This is really about simplifying how we track and report performance to create better clarity on how we are progressing vis-à-vis our ambitions. I'm glad now to hand over to Ilkka, who will go through the market development and financial. Ilkka, the floor is yours. Thanks. Thank you, Philippe, and warm welcome on my behalf to this fourth quarter result webcast. Let's start by taking a look at how our markets have developed during the past few months. Market trends in the fourth quarter were quite similar to what we've seen previously in the year. In the new building solutions, as already mentioned by Philippe, the construction market in China continued to be very difficult, declining again significantly in the fourth quarter. In the other regions, activity was more stable or growing. In services and modernization, the market environment was very positive, and we saw growth in all areas. From a geographical perspective, Asia-Pacific, Middle East, and Africa continues to stand out with a strong demand in all businesses. Let me next go through our financials in a bit more detail, and I have some good news to be shared. Starting with our orders received, we were very pleased to see, again, orders growing in three of our four areas. Overall, our orders received grew by 2.6% at the comparable currencies in the fourth quarter. Modernization grew at a healthy pace, while new building solutions came down slightly due to the significant decline in the market in China. Our margin of orders received was slightly down year on year, with a decline in China and a more stable development in the rest of the world. Then to sales. We had a very good end to the year. Our sales grew overall by 5.1% at the comparable currencies in the quarter. From a business perspective, new building solutions declined by 2.9%. This was very much driven by China, where delivery volumes continued to be low. On the positive side, services sales grew by a staggering 10.5%. A key driver was the growth of our service base, which now stands at well over 1.7 million units. Pricing and value-added services also contributed to our sales growth. In modernization, sales started to reflect the strong orders received in previous quarters and grew at a very good rate of 12.8%. Geographically, our sales in Greater China decreased by 14.8%. The order book rotation continues to be slow, which, of course, relates to the challenging market conditions, but we also continued to manage deliveries tightly to secure cash flow. Outside of China, we grew our sales by over 10% at the comparable currencies. This is a very good outcome in the quarter. Then moving to adjusted EBIT and profitability. Our adjusted EBIT margins continued to develop positively, and in this quarter, we improved 20 basis points year on year. This took our adjusted EBIT to EUR 387 million. Our operating income was 333 million euros in the quarter. The difference here mainly relates to restructuring costs booked in China, where we have taken more meaningful actions to adjust to the weak market conditions. Looking at the profitability improvement more closely, the main driver continues to be a favorable business mix. We also did see contribution from improved margins in the modernization business. On the negative side, the inflation was a challenge, but as in previous quarters, the biggest headwind for us was the margin decline in China. So overall, as highlighted by Philippe, it is really good to see the consistent profitability improvement, and we have actions in place to secure continued progress going forward towards our midterm targets. Finally, to our cash flow. So let me start by saying that while one quarter is a short time to measure cash flow, our cash generation in the fourth quarter was a particular highlight for me. Cash flow increased to EUR 534 million in the quarter, mainly driven by working capital and also the profit improvement. We actually saw quite a broad-based improvement in various working capital items, but I was especially pleased to see collections contributing positively, as this has been a particular focus area for us. The strong end to the year brought the full year cash flow to a healthy level of EUR 1,589 million. Let's then look at how we're thinking about year 25. Starting with market perspective, demand trends are overall very much in line with what we saw in the fourth quarter. We continue to see interesting opportunities in all parts of the world, with stable or positive outlook in 11 of our 12 end markets. Modernization markets are expected to remain very active, and we expect services markets to continue to grow in all regions. In the new building solutions markets, we expect conditions in China to remain difficult. Elsewhere, we expect stable development in Europe and a slight growth in North America. And in Asia-Pacific, Middle East, and Africa, we continue to see very good opportunities also in 2025. Then to our business outlook. We're entering the year with a healthy order book, and we expect strong growth to continue in both services and in modernization. Also, the ramp-up of our performance initiatives will also start to contribute to our performance. China continues to be the main headwind. Here, as said, markets remain under pressure, and we will be delivering orders which were booked at the lower margins. So with this in mind, our guidance for 2025 is for sales to grow slightly at the comparable currencies, and we expect profitability improvement to continue. This puts us on track to meeting our midterm financial targets. Let me now hand back over to Philippe to close the presentation before going into the Q&A. Thank you, Ilkka. So before summarizing, let me take a moment to talk about what we are prioritizing this year so that we can deliver on our strategic ambitions. First of all, I firmly believe, and I think I've said it many times, that innovations have a very important role to play in how we succeed with our strategy. We want to be quick in bringing new solutions to the market, and we need to ensure that we focus and align our resources and efforts on our new strategy, and I guess our priorities are very clear. In service, we will push for higher connectivity and a more rapid rollout of digital services solutions to drive customer value and productivity. And in modernization, we'll continue industrializing our offering and developing our sales approach. Bearing in mind the market conditions in China, cash flow is our number one priority, and we also continue to pursue growth opportunities in service and modernization to drive a more balanced business mix in that part of the world, and finally, we'll be more focused than ever on what we can do to secure continuous profitability improvement. Here, our initiatives to drive sales and operational excellence and improve procurement efficiency are very key, so to wrap it up, we have again demonstrated our business resilience in 2024 with great progress on many fronts. We've gotten off to a great start in executing our new strategy, RISE, and maintaining momentum here is key. We see very exciting opportunities in service and modernization. These are our main profit pools, and we are fully focused on securing growth in these businesses. Finally, we have clear priorities heading into 2025, and our guidance shows that we are on track to delivering on our midterm targets. I would like to thank again all the teams at KONE who've shown again an outstanding commitment. I would like to thank you all for your attention and propose that we now move to your questions. Thank you. Ladies and gentlemen, if you would like to ask a question, please press *1 on your telephone keypad. Thank you. We will now take our first question from Daniela Costa of Goldman Sachs. Your line is open. Please go ahead. Hi, good morning, everyone. Thank you so much for taking my question. I have one question and then sort of just a follow-up on the clarification on the accounting. But my question relates to the margin guidance for it to be up. And can you help us understand the various moving parts in terms of how do you still model in that China OE positive next year? How much of the improvement is a mechanical mix impact versus tailwinds from the actions that you're implementing and which ones are the critical ones? And then just on the R&D write-off that you did, what have you discontinued? Sort of can you elaborate basically exactly on what that was and how we should think about maybe as you restructure the business, further actions like that? Yeah. Maybe on the China part, and Philippe, you can also talk about what we're aiming to do there. So we, in the fourth quarter in China, focused our business in line with the market and the new strategy moving to service and modernization-focused business. And as a result, we saw the restructuring costs hitting our fourth quarter as the measures were being taken then. And we do expect those to contribute positively, but as already said, so we also do see the NBS business continuing to decline in the fourth quarter. So it's more towards aligning our business to the market reality we see as a result. I'll come back to the second question if you want to comment on China. Oh, I think, I mean, China priority is very clear. Cash first. Cash first. And we believe actually we have made further progress in Q4 to be even more disciplined in cash and in the end really pick the customers that we believe are going to pay us going forward because there was cash tension, especially in Q3 in the market margin. And we are very intentional to, in new construction, picking the customers where we think we have the best margin upside or margin capabilities in the full life cycle and pivoting our business to, as much as we can, a bigger share of modernization and service. And that leads to adapting our forces because it's a significant change in the way we are dealing with our business in China. Then on your second part of the question, Daniela, on so the restructuring part of it, the majority was related to China, but also the global teams were impacted as well. And there we were looking to align our global teams towards the new strategy we laid out in our Capital Markets Day. And as a result of that, in the fourth quarter, we had restructuring done and restructuring costs, including the development teams. So it's all restructuring costs, but it's two different parts of the organization that were impacted. And as a result, then we had EUR 54 million of restructuring charges for the fourth quarter. Just on the first question, on the answer, just to make sure I understood, you're saying that China OE is still profitable or just at a cash level? No, it is profitable both in P&L as well as actually, as you saw in the cash flow, also China contributed positively to a very good development in the fourth quarter. Got it. Thank you very much. Thank you. Thank you. And we will now take our next question from Andre Kukhnin of UBS. Your line is open. Please go ahead. Good morning. Thank you very much for taking my questions. I'll just go one at a time and maybe follow up on the margin drivers for 2025. Firstly, on the restructuring, could you give us an idea of what amount of savings can we expect from that EUR 50 million of restructuring? Is it kind of more of a traditional one-to-one? And related to that, are there any other measures? Kind of if you're trying to bucket this in terms of what's being done on footprint, on sales, on procurement, could you give us some idea of the sizes of those initiatives and what they can contribute in 2025? So mainly, if I look at the restructuring, so China was about restructuring to the market reality. As said, we expect China margins still in 2025 to be somewhat under pressure given the difficult market, but we're aligning the teams to the market reality as such, and then in the rest of the world, we are taking measures to align the teams to the new strategy, and then on top of that, as we talked about, we have performance improvement initiatives, especially related to procurement, as well as then sales and operational excellence, so how are we organized on the lowest level of KONE to be able to deliver the best possible delivery organization towards our customers, and what I said earlier is still valid. We expect the performance initiatives to have more impact towards the end of the year, but still continue to ramp up all throughout towards our midterm targets with an increasing speed towards the end of the period. With the measures that we took now in the fourth quarter, we have included those to our guidance, and we expect in China, as I said to Daniela already, that there continues to be a margin pressure in China, but these are measures to counter that. There are some benefits for the costs, but not that some benefits for the global teams that are visible in the 25 as well. And if we take a broader perspective, I guess you've noticed the margin bridge we've shared in the capital market day, which is a guiding principle for us, so it remains. So I think we were showing the different blocks and the size of the different blocks. What I can say is that both on procurement and sales and operational excellence, we've been extremely diligent, precise, and disciplined on working on this to ramp up our measures. I see the opportunity, though things take time to materialize, but we are very diligent and precise in executing this. But we see in total so both the service and modernization mix continuing to improve in 2025, contributing positively. We will see some benefit in the margin bridge already for the performance initiatives towards the end of the year. And of course, we are very focused to then also see positive contribution from fixed cost leverage of the business. Very helpful. Thank you. If I may just once on cadence of first half, second half, would you expect the margin to show further improvement in the first half already, or should we think about second half primarily? So if you think about what I said about the whole period all the way to the midterm targets, we are continuing to accelerate our margin improvement, but definitely we aim to improve margins quarter by quarter throughout the year. Right. And is the service margin itself improving as well in 2025 as a stand alone? I guess we have not guided that closely each of the dimensions more given the total number. As we said in the CMD, the measures we're taking on digitalizing the service business are actually something where we see good opportunities to drive margin improvement going forward. One, clearly, number one is that customers actually visibly it will differentiate us. Then secondly, we also are driving with digital productivity improvements. Actually, as we are now ramping up country by country the digital offering, we see that materializing, but it will take some time to see that in the P&L as it will. First, you need to implement, then you need to learn the new way of working, and then you start to be able to reap up the benefits from a profitability and productivity point of view. We are working on our pricing. Yeah. The bottom line is in service, and that's where we really have the highest attention. We work on one side to be smarter in our pricing, on the other side to get more productive with digital technology. Yeah. Really helpful. Thank you very much for your time. Thank you. Thank you. Thank you. Ladies and gentlemen, kindly be reminded that to limit yourself to one question and one follow-up, thank you. We will now move on to our next question from John Kim of Deutsche Bank. Hilary Sørensen, please go ahead. Thank you. Good morning. Could we unpack the slight margin decline in the Q4 order intake? It'd be helpful to understand whether this is still the weight of Chinese NBS or whether you're seeing any sort of evolution on margins in the modernization, again, looking at China? So in China, the modernization margins, as I've said earlier, that is the highest margin business for us. It's still a smaller part of the business and the fastest growing business. And we actually see good development, good opportunities going forward in the modernization, especially the partial modernization part of it is a very compelling part of it. But let's see, right now it looks quite good. Okay, helpful. And can you comment on service margins, price inflation versus underlying weight for this year? So our service margins were more stable in 2024. And yes, labor inflation was there. And also, as normally, we escalate the prices based on that. But more stable development in the service margins. And really, to me, the key focus there is that we are able to grow it fast. And now with more than 10% growth in services, to me, it is a fantastic number to be able to get the double-digit growth in services. A number on which we've been extremely consistent in the past quarters. We had many questions in CMD, but when you look back in the past three, four quarters and what we've delivered again, I mean, 10.5% in Q4, very, very consistent gross delivery. Yeah. Well done. Thank you. Thank you. Thank you. And we will now take our next question from Vladimir Sergievski of Barclays. Hilary Sørensen, please go ahead. Yeah, good morning. Thanks very much for taking my two questions. I'll start on the adjustment to EBITDA and apologies for laboring the point. On my numbers, it looks like this was the highest quarterly adjustment KONE has ever had. In particular, I'm interested in this EUR 18 million development cost adjustment. Can you explain what those exactly are and how the accounting worked on those EUR 18 million? And have you done similar development cost adjustments before? Can you just summarize again? The line is bad. So on your actual question, I was losing one out of the three words on this end. Absolutely. And apologies. So EUR 18 million cost adjustment, what exactly that was related to? How the accounting worked? And have you done similar EUR 18 million development cost adjustments before? All of the costs, the EUR 54 million, are related to restructuring. Both China was the biggest part, the EUR 30-plus million, and the rest were related to global teams, including our development teams, to align the actions towards the strategy and how we want to deliver. On the development part, these are costs related to fourth quarter, which we then discontinued the activities, and they were part of restructuring costs. If we take maybe a broader perspective, I mean, we've talked a lot about innovation, but I think reflecting back on 2024, there is one thing on which I'm very proud, which is we've very strongly realigned our innovation engines to what are the clear priorities of the company, and we've pushed speed. Like this example of the Mono 100, six months to develop a new innovation to market that, frankly, the market was expecting for many years. So yes, we made choices, and we decided to stop some things. I feel very strong with it. I think KONE, with this, is a more agile company, a more nimble company, and a more focused company. I feel very good with that. Thank you very much. That's very clear. Last question. Would you expect any additional adjustment for 2025 or restructuring cost at this point or not? Of course, we continue to evaluate both the market as well as how we deliver our strategy, but I do not expect right now any restructuring costs that are meaningful in 2025. Super. Thank you. Thank you. Thank you. And we will now move on to our next Klas Bergelind of citi. Hilary Sørensen, please go ahead. Thank you. Hi, Philippe and Ilkka, Klas at Citi. First, on the composition of service growth, it seems like organic units grew mid-single digit still, and then the ISPs again added another one and a half, and that leaves 4% price mix, which is higher than I thought, especially as you probably have a negative geographical mix there out of China still. Can we try and break that down a little bit? What I'm trying to gauge really is if digital and 24/7 contributed more this time to the organic growth in services. Thank you. I see you've seen on the penetration, so we continue to penetrate quite nicely with our connectivity. But I think this time I would call out more the overall services contributing to the value. So yes, 24/7 and the added value is there, but I think we saw broad-based services positive development, and especially the Western market standing out, both Europe as well as more broadly. And those have been standing out in terms of growth in the fourth quarter. It doesn't mean that 24/7 didn't, but I wouldn't call that out as a main driver for that. But if I would single one point that explains our growth in service, I would say our people. And the fact that on the ground every day, we try to differentiate by being committed with our customers, and the word of mouth actually helps us a lot. Example in Madrid, why did we take that contract? Because of our reputation, because of our people, and then technology. But it's hard to copy a culture. I think we have a culture of commitment with our customers, and they see it. And it's about experience. When you take an elevator, you want to be safe. And our people take it very seriously. And I think that's a big part of the explanation of why we are growing faster than others. Thank you. My second one is on the margin development. First, on modernization, Filippo, you improved this margin from COVID levels by four percentage points. That was the message at the capital markets day. What about the quarter? Let's see if you're going to answer this, but roughly year over year in the quarter, just to get a feeling for the magnitude. And also, if I can just confirm that you said that you intend to improve the mod margin further in 2025, but with the service margin likely to be stable and for that to come further out. And I'm obviously talking beyond the restructuring in China. I'm talking about the sort of ex-China business, if you like. Maybe I clarify first on what I've said. So far, I have not said on service margins going forward anything. I commented 24. But then looking forward with digitalization and so forth, of course, we expect the margins to improve in the longer term. And on the service performance, I was more highlighting the fact that as long as we continue to grow service and modernization as fast as we are doing, of course, that provides us a mix positive contribution to profitability. And in modernization, all I would say that I continue to be very happy with the steady growth of the profitability of the business as we're scaling it up. Let's see, it is a function, of course, the speed we can scale up, but also it is one where how we deliver to our customers is critical in terms of how we can differentiate and command a pricing premium and impacting then the margins. But I have to say that the modernization team has done a good job. On that slide that I'm showing here, there is one word which is very important, which is industrialize our approach. Largely speaking, this industry is taking modernization as an artisan business because every case is different, and where I think there is a lot of opportunities on making it modular and simple so that actually it's simple and fast for our customers, and it's simple and fast for our people, and by doing this, which takes actually a lot of innovation, we should increase our margin. Just final thing. The reason why I'm asking is I get the mixed shift, Ilkka. The reason why I'm asking is that you improved the modernization margin this quarter again. And I think for some people, there was this feeling that all of the self-help would be quite back-loaded. And that is why I'm asking whether there is a chance to improve the mod margin in absolute terms. I get the mixed shift also in 25. Is there a possibility? Definitely, there's a possibility. Okay. You've gone very far. Thank you. Thank you. And we'll now take our next question from Miguel Borrega of BNP Paribas. Hilary Sørensen, please go ahead. Hi, good morning, everyone. I've got two questions. The first one on maintenance grew 9.5% in 2024. I believe you said previously that you would expect a similar development in 2025, so I'm wondering if you could shed some light on the moving parts regarding portfolio growth, scope, pricing, and mix. Correct me if I'm wrong, but I think in 2024, you said 5% portfolio growth, 2% scope, 3% price offset by 1% mix, so with inflation coming down, you think you can maintain that level of pricing? Well, I guess what we've said about services is that we aim to grow that over cycle towards our midterm targets closer to 10%. And I'll stick to that target, and hopefully, that is consistently then also our target and ambition for every year. And we continue to see good opportunities in growing units. Of course, with NBS market now being more difficult in the last years, we've been seeing modernization contributing positively to the units. And so far, we've been growing quite nicely the units as well. And then market for acquisitions, these small maintenance companies, continues to be very active. We have a good pipeline. So the aim is to be able to continue to add also from there. But of course, it's a smaller part of the growth. It's a disciplined approach. Yes, with a smaller part of the growth formula as such. And then, yes, we do aim to also increase the value both from pricing, but also continuing to drive, for example, spare parts and so forth positively. So we don't guide that in detail individual businesses, but I think the recipe from 2024 is not that different for 2025 or 2026 going forward. And yes, we do see opportunities to improve pricing even though the inflation is down. It's part of the sales and operational excellence work we're doing. Thank you. That's very clear and then just to follow up on the service margin, as you mentioned, in 2024 was stable despite the 10% growth. Usually, labor is offset by price, and you mentioned productivity and value-added services, so in other words, what prevented your margins from growing in 2024, and why should it be any different in 2025? Thank you very much. Many of the things we're aiming to deliver to our customers with digital will actually be the key way to improve the profitability. And of course, we do have right now a mixed negative shift with still fast growth in China contributing negatively to the profitability. So that's one negative on that side. But it is something where the scaling and getting the profitability up, not only growing, but improving profitability is at the heart of the strategy. So we expect that to be better going forward. And on pricing, I think we are working in much more detail on understanding where there is a pricing, where there is more value and therefore more price. And we think we can do better. We've started to clarify a couple of stuff in 2024, and hopefully, this starts to impact our 2025 level of profit in service. Did we lose the line? No, Michael is still on. Okay, good. While you're mute. We had 10 seconds of, "oh my God, we are by ourselves. Right. Since there are no further response from Miguel, let me just move on to our next question from Benjamin Heelan of Bank of America. Hilary Sørensen, please go ahead. Yeah, thank you. Morning, guys. I just wanted to have a quick follow-up on some of the margin commentary for 25. So you talked about the backlog margins being down slightly in 2024. Do you have a view on where that will end up in 2025? Are you going to be able to offset cost inflation, etc., in 2024? Just to kind of order margin, how can we think about that progressing over the next 12 months? And then just a quick one on the market outlook. You've talked about a more positive outlook in North America. I think one of your competitors last night said something similar. So can you talk a little bit about what you're actually seeing on the ground? Are you starting to see the orders improve? Is it more just kind of qualified leads? Just help us understand a little bit what you're actually seeing on the kind of day-to-day in the North American business. Thank you. I'll start, and then maybe you comment on the market, but I would say that we still have double-digit growth in orders in the Americas, so it's quite a good market and has been for the full year, but on the order margins, trying to be clear and concise on your question, so commenting on orders booked in fourth quarter and the margins we expect those to have when we deliver them going forward, so in China, our margins are down for those orders, and the margins we're booking for China are below the ones we're delivering, so there is clearly a margin pressure in China, in the rest of the world, the margins are more stable, and there's a slight positive, so the orders we're booking are slightly positive towards the ones we're delivering, so a slight tailwind there, so that's on the orders margin. And we do expect with that comment to continue to drive actually very good product cost reductions. And in 2024, we had historically high product cost reductions, especially in China. But of course, the pricing environment has been quite tough there as well. And the goal for 2025, we continue to see good opportunities to drive overall the product cost down with the actions we're taking as such. But maybe on America, you want to comment? Yeah. I mean, the momentum in Americas is building. It's been always very dynamic in modernization, a bit less in service, but positive. We've seen and we're expecting H2 to be better from a new construction standpoint, and it was. And we see month after month, more optimism, more construction, even in new construction. So it's a great market to operate. We have a great team. We actually have a great business momentum on our three business lines. I'm very impressed by the work we're doing, especially in modernization, where our growth is really fantastic. So we're optimistic about Americas. Okay, very clear. Thank you. Thank you. And we'll now take our next question from Panu Laitinmäki of Danske Bank. Your line is open. Please go ahead. Hi, thanks. I have a question on the sales mix in China, so how much roughly was new equipment out of sales in 2024 and then modernization and services? Two-thirds new equipment and one-third modernization and services. The same rule applies there, two-thirds services, one-third modernization. That's the mix. Like Philippe said, we expect that to continue to move in favor of modernization and services, where we see good growth opportunities going forward. Okay, thanks. And then just to clarify, when you talk about margin decline and further pressure on margin in China, does that only apply to new equipment or also on service and modernization? That is mainly an NBS comment. Okay, thank you. Thank you. And we'll now take our next question from Tomi Railo of DNB. Your line is open. Please go ahead. Hello, it's Tomi from DNB. Can you just comment a little bit on the lowered outlook for China's service from the third quarter, clear growth to fourth quarter, slight growth? We are seeing the impact of the slower NBS market in earlier quarters and years impacting the growth in services. So less units being added to the service base and therefore the growth we expect for the market to be now a slight growth rather than a clear growth. So no big drama there and as such. Makes sense. Thank you, and just maybe on the continued comment that 90% of the profits come from services and modernization. Was that different in the fourth quarter alone or was there kind of a deviation compared to the full year and fourth quarter? Not that different. I think the message is very clear that that's where we make our money. Thank you. Thank you, and we will now take our last question from Mikael Doepel of Nordea. Your line is open. Please go ahead. Thank you. Thank you. And hello, everybody. Just a question on China, really. So if you look back at 2024, we saw quite significant volume pressure in the new equipment business there, and we also saw quite significant pricing pressure as well. If I remember correctly, being down double digits. I'm wondering what kind of a delta you expect on the pricing side for new equipment in 2025 in China. And also, if you expect to see any mix change in your business there, please. First, our outlook for the market was significantly down in units. We seldom, or I don't see that you can comment forward-looking pricing, but let's put it, the competitive nature of the market is expected to continue in China, and we continue to see our business mix from this two-thirds, one-third to continue to be moving towards closer to the market, and the market value for China is 50-50, roughly, in terms of new equipment versus modernization and services, so the mix shift towards service and modernization continues in our business, also looking forward. I repeat our China priorities. Number one, cash. Number two, margin. Number three, pivot to, let's say, 50-50 directionally. That means that really in NBS and modernization, we are much more intentional and structured in the customers we want to go after to protect our cash and protect our margin. The market is a market. We've clearly decided in the course of 2024 to adapt the way we're dealing with our business in China. Actually, we see better output out of this. Now, it's still a tough market from the new construction standpoint, but I really see our teams being very focused on where there is the biggest or the best compromise volume margin cash opportunity. Okay, that's very clear. If you just can squeeze in a final one on the margins, which you, I mean, you managed to improve your group margins by 30 basis points last year, and you expect to continue to improve this year. We talked a bit about the, well, let's puts and takes for the year and how things are going to develop. But would you say that this is a good ballpark in terms of what to expect in terms of the improvement for this year, given what you have previously said, that it's going to be a bit more back-end loaded to get to your targets? I will leave some work for you guys as well. We will definitely, as I said, we aim to continue the improvement of our margins going forward, and that's the goal. Good. Thank you very much. Okay, thank you, Philippe. Thank you, Ilkka. And thanks to everyone who joined us, listening in and participating with the questions. Great to see active dialogue as usual. If you do have any follow-ups, please feel free to reach out to me or the team. We're happy to help. And I guess we've come to the end of our session then. So thanks and have a great day. Thank you so much. Bye.

Speaker 12: Good morning, everybody, and welcome to KONE's fourth quarter earnings call. My name is Natalia Valtasaari. I'm head of investor relations here at KONE, and I'm very pleased to be joined by our CEO, Philippe Delorme, and our CFO, Ilkka Hara. So, as usual, Philippe will start by talking through the highlights of the year and about our strategic developments, and then Ilkka will continue going through the markets and the financials. With that, Philippe, please. Good morning, everybody, and welcome to KONE's fourth quarter earnings call. good morning everybody and welcome to kone's fourth quarter earnings call My name is Natalia Valtasaari. my name is natalia valtasaari I'm head of investor relations here at KONE, and I'm very pleased to be joined by our CEO, Philippe Delorme , and our CFO, Ilkka Hara. i'm head of investor relations here at kone and i'm very pleased to be joined by our ceo philippe delorme and our cfo ilkka hara So, as usual, Philippe will start by talking through the highlights of the year and about our strategic developments, and then Ilkka will continue going through the markets and the financials. so as usual philippe will start by talking through the highlights of the year and about our strategic developments and then ilkka will continue going through the markets and the financials With that, Philippe, please. with that philippe please

Speaker 1: Thank you, Natalia, and welcome back on board the IR team. So, let me start. We have a technical glitch to start with, which we'll be solving in a moment. Thank you. Very good. I couldn't see our slides anymore. That was slightly complicated to talk to you about our story, though we know it very well. So, a very good morning, everyone. I'm very pleased to be here today presenting our results for 2024. So, let me start again, as usual, by summarizing the highlights, this time focusing on the full year 2024. It goes without saying that one of our most important achievements last year was the launch of our new strategy, Rise. And I'm really pleased that we've gotten off to such a fantastic start in terms of strategy execution. Another key highlight was the excellent momentum that we had in service and modernization throughout 2024. Thank you, Natalia, and welcome back on board the IR team. thank you natalia and welcome back on board the ir team So, let me start. so let me start We have a technical glitch to start with, which we'll be solving in a moment. we have a technical glitch to start with which we'll be solving in a moment Thank you. thank you Very good. very good I couldn't see our slides anymore. i couldn't see our slides anymore That was slightly complicated to talk to you about our story, though we know it very well. that was slightly complicated to talk to you about our story though we know it very well So, a very good morning, everyone. so a very good morning everyone I'm very pleased to be here today presenting our results for 2024. i'm very pleased to be here today presenting our results for 2024 So, let me start again, as usual, by summarizing the highlights, this time focusing on the full year 2024. so let me start again as usual by summarizing the highlights this time focusing on the full year 2024 It goes without saying that one of our most important achievements last year was the launch of our new strategy, Rise. it goes without saying that one of our most important achievements last year was the launch of our new strategy rise And I'm really pleased that we've gotten off to such a fantastic start in terms of strategy execution. and i'm really pleased that we've gotten off to such a fantastic start in terms of strategy execution Another key highlight was the excellent momentum that we had in service and modernization throughout 2024. another key highlight was the excellent momentum that we had in service and modernization throughout 2024 Together, these two businesses account for 90% of our profit. So, the strong sales growth we've seen makes KONE a more resilient company than ever. From a geographical perspective, we saw good order growth in the Americas, Europe, Asia-Pacific, Middle East, and Africa. In China, as mentioned before, the construction markets have been under significant pressure, and this has impacted our new building solutions business, while the service and modernization continue to make good progress there. As you know, profitable growth is very high on our agenda. So, it has been very good to see that our disciplined approach to driving financial performance has resulted in the eighth consecutive quarters of profitability improvement. So, based on KONE's performance, the board is proposing to the annual general meeting a dividend of EUR 1.80 per B-class shares, which represents a dividend yield of 3.8%. Together, these two businesses account for 90% of our profit. together these two businesses account for 90% of our profit So, the strong sales growth we've seen makes KONE a more resilient company than ever. so the strong sales growth we've seen makes kone a more resilient company than ever From a geographical perspective, we saw good order growth in the Americas, Europe, Asia-Pacific, Middle East, and Africa. from a geographical perspective we saw good order growth in the americas europe asia-pacific middle east and africa In China, as mentioned before, the construction markets have been under significant pressure, and this has impacted our new building solutions business, while the service and modernization continue to make good progress there. in china as mentioned before the construction markets have been under significant pressure and this has impacted our new building solutions business while the service and modernization continue to make good progress there As you know, profitable growth is very high on our agenda. as you know profitable growth is very high on our agenda So, it has been very good to see that our disciplined approach to driving financial performance has resulted in the eighth consecutive quarters of profitability improvement. so it has been very good to see that our disciplined approach to driving financial performance has resulted in the eighth consecutive quarters of profitability improvement So, based on KONE's performance, the board is proposing to the annual general meeting a dividend of EUR 1.80 per B-class shares, which represents a dividend yield of 3.8%. so based on kone's performance the board is proposing to the annual general meeting a dividend of eur 1.80 per b-class shares which represents a dividend yield of 3.8% Now, let's have a look at all of this in more detail in the context of Q4. So, in terms of orders received, we had a solid quarter. Outside China, order growth was over 10%, and it was especially good to see modernization order growing nicely in all areas. The headwinds in China continued, which was visible in both orders and sales. Orders received declined by over 20% in China and sales by nearly 15%. Despite this, our overall sales increased by 5.1% at comparable currencies. Here, of course, the highlight was again our double-digit growth in both service and modernization. This gave us a more favorable business mix, which was a key driver of the 20 basis points improvement of our Adjusted EBIT margin. And finally, as usual, cash generation in the fourth quarter was very strong. Now, let's have a look at all of this in more detail in the context of Q4. now let's have a look at all of this in more detail in the context of q4 So, in terms of orders received, we had a solid quarter. so in terms of orders received we had a solid quarter Outside China, order growth was over 10%, and it was especially good to see modernization order growing nicely in all areas. outside china order growth was over 10% and it was especially good to see modernization order growing nicely in all areas The headwinds in China continued, which was visible in both orders and sales. the headwinds in china continued which was visible in both orders and sales Orders received declined by over 20% in China and sales by nearly 15%. orders received declined by over 20% in china and sales by nearly 15% Despite this, our overall sales increased by 5.1% at comparable currencies. despite this our overall sales increased by 5.1% at comparable currencies Here, of course, the highlight was again our double-digit growth in both service and modernization. here of course the highlight was again our double-digit growth in both service and modernization This gave us a more favorable business mix, which was a key driver of the 20 basis points improvement of our Adjusted EBIT margin. this gave us a more favorable business mix which was a key driver of the 20 basis points improvement of our adjusted ebit margin And finally, as usual, cash generation in the fourth quarter was very strong. and finally as usual cash generation in the fourth quarter was very strong As we discussed in previous quarters, cash flow has been an area of particular focus this year, and it was very good to see this paying off very well. So, all in all, I would say that we had a great finish of the year. Now, probably my favorite page, which is customer references with you. So, starting with services this time, where we recently won a contract to maintain the elevators at the InterContinental Hotel in Madrid. I actually had the opportunity to sit down with the hotel manager last week, and it was great to hear that he highlighted our reputation and our digital offering as the key reason they opted to partner with us. Second reference is the Henry B. González Convention Center modernization in San Antonio, Texas. As we discussed in previous quarters, cash flow has been an area of particular focus this year, and it was very good to see this paying off very well. as we discussed in previous quarters cash flow has been an area of particular focus this year and it was very good to see this paying off very well So, all in all, I would say that we had a great finish of the year. so all in all i would say that we had a great finish of the year Now, probably my favorite page, which is customer references with you. now probably my favorite page which is customer references with you So, starting with services this time, where we recently won a contract to maintain the elevators at the InterContinental Hotel in Madrid. so starting with services this time where we recently won a contract to maintain the elevators at the intercontinental hotel in madrid I actually had the opportunity to sit down with the hotel manager last week, and it was great to hear that he highlighted our reputation and our digital offering as the key reason they opted to partner with us. i actually had the opportunity to sit down with the hotel manager last week and it was great to hear that he highlighted our reputation and our digital offering as the key reason they opted to partner with us Second reference is the Henry B. second reference is the henry b González Convention Center modernization in San Antonio, Texas. gonzález convention center modernization in san antonio texas We've been maintaining the elevators and escalators at this site since 2012 and have completed another modernization project for the same customer a few years back. So, this is a great example of how important long-standing customer relationships are for winning in modernization. And finally, and I find this one really exciting, New Building Solutions will be supplying our next-generation high-rise technology to the world's tallest residential-only building in Dubai. Actually, if we look at the top 10 tallest buildings currently under construction, 5 out of 10, I repeat, 5 out of 10 are going to feature KONE's equipment. And I think it's something we can be very proud about in terms of our leadership in the most demanding application. We've been maintaining the elevators and escalators at this site since 2012 and have completed another modernization project for the same customer a few years back. we've been maintaining the elevators and escalators at this site since 2012 and have completed another modernization project for the same customer a few years back So, this is a great example of how important long-standing customer relationships are for winning in modernization. so this is a great example of how important long-standing customer relationships are for winning in modernization And finally, and I find this one really exciting, New Building Solutions will be supplying our next-generation high-rise technology to the world's tallest residential-only building in Dubai. and finally and i find this one really exciting new building solutions will be supplying our next-generation high-rise technology to the world's tallest residential-only building in dubai Actually, if we look at the top 10 tallest buildings currently under construction, 5 out of 10, I repeat, 5 out of 10 are going to feature KONE's equipment. actually if we look at the top 10 tallest buildings currently under construction 5 out of 10 i repeat 5 out of 10 are going to feature kone's equipment And I think it's something we can be very proud about in terms of our leadership in the most demanding application. and i think it's something we can be very proud about in terms of our leadership in the most demanding application Hopefully, this slide should look quite familiar to you by now, but let me just take a short moment to remind you about our ambition, which is very simply to lead the industry by being the number one choice for our employees and our customers, by leading in innovation, leading in innovation and sustainability, and by leading in growth and profitability. Since its launch, I've visited many KONE locations all over the world, and it has been really great to see how well this ambition resonates with our employees and also with our customers and other external stakeholders. There is a lot of excitement in the air. Despite being early days, we have excellent progress to report in each of our four strategic shifts. Hopefully, this slide should look quite familiar to you by now, but let me just take a short moment to remind you about our ambition, which is very simply to lead the industry by being the number one choice for our employees and our customers, by leading in innovation, leading in innovation and sustainability, and by leading in growth and profitability. hopefully this slide should look quite familiar to you by now but let me just take a short moment to remind you about our ambition which is very simply to lead the industry by being the number one choice for our employees and our customers by leading in innovation leading in innovation and sustainability and by leading in growth and profitability Since its launch, I've visited many KONE locations all over the world, and it has been really great to see how well this ambition resonates with our employees and also with our customers and other external stakeholders. since its launch i've visited many kone locations all over the world and it has been really great to see how well this ambition resonates with our employees and also with our customers and other external stakeholders There is a lot of excitement in the air. there is a lot of excitement in the air Despite being early days, we have excellent progress to report in each of our four strategic shifts. despite being early days we have excellent progress to report in each of our four strategic shifts In digital, approximately 35% of our service base is now connected, and we've done really well in rolling out solutions for smarter service operation to new countries. In modernization, we are focused on enhancing our offering, particularly within partial modernization, and continue to work on industrializing our value proposition. We have also successfully accelerated the sales of our regenerative drive, which helps customers to cut carbon by reducing the energy generated when the elevator brakes. We haven't talked so much about new residential before, so let me share an example with you, which I really find exciting. We've recently launched the renewed MonoSpace 100 DX in Europe to improve our positioning in the low-rise residential market, which is a very important segment. It leverages our global supply chain operations to improve cost competitiveness without compromising, of course, on quality and reliability. In digital, approximately 35% of our service base is now connected, and we've done really well in rolling out solutions for smarter service operation to new countries. in digital approximately 35% of our service base is now connected and we've done really well in rolling out solutions for smarter service operation to new countries In modernization, we are focused on enhancing our offering, particularly within partial modernization, and continue to work on industrializing our value proposition. in modernization we are focused on enhancing our offering particularly within partial modernization and continue to work on industrializing our value proposition We have also successfully accelerated the sales of our regenerative drive, which helps customers to cut carbon by reducing the energy generated when the elevator brakes. we have also successfully accelerated the sales of our regenerative drive which helps customers to cut carbon by reducing the energy generated when the elevator brakes We haven't talked so much about new residential before, so let me share an example with you, which I really find exciting. we haven't talked so much about new residential before so let me share an example with you which i really find exciting We've recently launched the renewed MonoSpace 100 DX in Europe to improve our positioning in the low-rise residential market, which is a very important segment. we've recently launched the renewed monospace 100 dx in europe to improve our positioning in the low-rise residential market which is a very important segment It leverages our global supply chain operations to improve cost competitiveness without compromising, of course, on quality and reliability. it leverages our global supply chain operations to improve cost competitiveness without compromising of course on quality and reliability And I'm especially proud of the speed with which we were able to bring this solution to the market with only six months from initial decision to deployment, and I'm glad that we really see a good commercial traction here. Now, moving on to my last slide, sustainability, we made great progress toward our sustainability target in most areas last year. I would like to especially highlight the reduction in Scope 3 emissions, which accelerated visibly last year. A big driver of this improvement was the increased share of regenerative drive sales, which I mentioned actually in the previous slides. I was also happy to see over a two percentage point improvement in the share of women at director level, our key diversity metric. Unfortunately, we didn't make progress towards our safety target, and this is something we'll be paying special attention to in 2025. And I'm especially proud of the speed with which we were able to bring this solution to the market with only six months from initial decision to deployment, and I'm glad that we really see a good commercial traction here. and i'm especially proud of the speed with which we were able to bring this solution to the market with only six months from initial decision to deployment and i'm glad that we really see a good commercial traction here Now, moving on to my last slide, sustainability, we made great progress toward our sustainability target in most areas last year. now moving on to my last slide sustainability we made great progress toward our sustainability target in most areas last year I would like to especially highlight the reduction in Scope 3 emissions, which accelerated visibly last year. i would like to especially highlight the reduction in scope 3 emissions which accelerated visibly last year A big driver of this improvement was the increased share of regenerative drive sales, which I mentioned actually in the previous slides. a big driver of this improvement was the increased share of regenerative drive sales which i mentioned actually in the previous slides I was also happy to see over a two percentage point improvement in the share of women at director level, our key diversity metric. i was also happy to see over a two percentage point improvement in the share of women at director level our key diversity metric Unfortunately, we didn't make progress towards our safety target, and this is something we'll be paying special attention to in 2025. unfortunately we didn't make progress towards our safety target and this is something we'll be paying special attention to in 2025 Then, a new development to share with you as of this year, we'll start to measure our performance with the KONE Sustainability Index. It builds on many familiar elements with the addition of cybersecurity, which is very important. This is really about simplifying how we track and report performance to create better clarity on how we are progressing vis-à-vis our ambitions. I'm glad now to hand over to Ilkka, who will go through the market development and financial. Ilkka, the floor is yours. Then, a new development to share with you as of this year, we'll start to measure our performance with the KONE Sustainability Index. then a new development to share with you as of this year we'll start to measure our performance with the kone sustainability index It builds on many familiar elements with the addition of cybersecurity, which is very important. it builds on many familiar elements with the addition of cybersecurity which is very important This is really about simplifying how we track and report performance to create better clarity on how we are progressing vis-à-vis our ambitions. this is really about simplifying how we track and report performance to create better clarity on how we are progressing vis-à-vis our ambitions I'm glad now to hand over to Ilkka, who will go through the market development and financial. i'm glad now to hand over to ilkka who will go through the market development and financial Ilkka, the floor is yours. ilkka the floor is yours

Speaker 2: Thanks. Thank you, Philippe, and warm welcome on my behalf to this fourth quarter result webcast. Let's start by taking a look at how our markets have developed during the past few months. Market trends in the fourth quarter were quite similar to what we've seen previously in the year. In the new building solutions, as already mentioned by Philippe, the construction market in China continued to be very difficult, declining again significantly in the fourth quarter. In the other regions, activity was more stable or growing. In services and modernization, the market environment was very positive, and we saw growth in all areas. From a geographical perspective, Asia-Pacific, Middle East, and Africa continues to stand out with a strong demand in all businesses. Let me next go through our financials in a bit more detail, and I have some good news to be shared. Thanks. thanks Thank you, Philippe, and warm welcome on my behalf to this fourth quarter result webcast. thank you philippe and warm welcome on my behalf to this fourth quarter result webcast Let's start by taking a look at how our markets have developed during the past few months. let's start by taking a look at how our markets have developed during the past few months Market trends in the fourth quarter were quite similar to what we've seen previously in the year. market trends in the fourth quarter were quite similar to what we've seen previously in the year In the new building solutions, as already mentioned by Philippe, the construction market in China continued to be very difficult, declining again significantly in the fourth quarter. in the new building solutions as already mentioned by philippe the construction market in china continued to be very difficult declining again significantly in the fourth quarter In the other regions, activity was more stable or growing. in the other regions activity was more stable or growing In services and modernization, the market environment was very positive, and we saw growth in all areas. in services and modernization the market environment was very positive and we saw growth in all areas From a geographical perspective, Asia-Pacific, Middle East, and Africa continues to stand out with a strong demand in all businesses. from a geographical perspective asia-pacific middle east and africa continues to stand out with a strong demand in all businesses Let me next go through our financials in a bit more detail, and I have some good news to be shared. let me next go through our financials in a bit more detail and i have some good news to be shared Starting with our orders received, we were very pleased to see, again, orders growing in three of our four areas. Overall, our orders received grew by 2.6% at the comparable currencies in the fourth quarter. Modernization grew at a healthy pace, while new building solutions came down slightly due to the significant decline in the market in China. Our margin of orders received was slightly down year on year, with a decline in China and a more stable development in the rest of the world. Then to sales. We had a very good end to the year. Our sales grew overall by 5.1% at the comparable currencies in the quarter. From a business perspective, new building solutions declined by 2.9%. This was very much driven by China, where delivery volumes continued to be low. On the positive side, services sales grew by a staggering 10.5%. Starting with our orders received, we were very pleased to see, again, orders growing in three of our four areas. starting with our orders received we were very pleased to see again orders growing in three of our four areas Overall, our orders received grew by 2.6% at the comparable currencies in the fourth quarter. overall our orders received grew by 2.6% at the comparable currencies in the fourth quarter Modernization grew at a healthy pace, while new building solutions came down slightly due to the significant decline in the market in China. modernization grew at a healthy pace while new building solutions came down slightly due to the significant decline in the market in china Our margin of orders received was slightly down year on year, with a decline in China and a more stable development in the rest of the world. our margin of orders received was slightly down year on year with a decline in china and a more stable development in the rest of the world Then to sales. then to sales We had a very good end to the year. we had a very good end to the year Our sales grew overall by 5.1% at the comparable currencies in the quarter. our sales grew overall by 5.1% at the comparable currencies in the quarter From a business perspective, new building solutions declined by 2.9%. from a business perspective new building solutions declined by 2.9% This was very much driven by China, where delivery volumes continued to be low. this was very much driven by china where delivery volumes continued to be low On the positive side, services sales grew by a staggering 10.5%. on the positive side services sales grew by a staggering 10.5% A key driver was the growth of our service base, which now stands at well over 1.7 million units. Pricing and value-added services also contributed to our sales growth. In modernization, sales started to reflect the strong orders received in previous quarters and grew at a very good rate of 12.8%. Geographically, our sales in Greater China decreased by 14.8%. The order book rotation continues to be slow, which, of course, relates to the challenging market conditions, but we also continued to manage deliveries tightly to secure cash flow. Outside of China, we grew our sales by over 10% at the comparable currencies. This is a very good outcome in the quarter. Then moving to adjusted EBIT and profitability. Our adjusted EBIT margins continued to develop positively, and in this quarter, we improved 20 basis points year on year. This took our adjusted EBIT to EUR 387 million. A key driver was the growth of our service base, which now stands at well over 1.7 million units. a key driver was the growth of our service base which now stands at well over 1.7 million units Pricing and value-added services also contributed to our sales growth. pricing and value-added services also contributed to our sales growth In modernization, sales started to reflect the strong orders received in previous quarters and grew at a very good rate of 12.8%. in modernization sales started to reflect the strong orders received in previous quarters and grew at a very good rate of 12.8% Geographically, our sales in Greater China decreased by 14.8%. geographically our sales in greater china decreased by 14.8% The order book rotation continues to be slow, which, of course, relates to the challenging market conditions, but we also continued to manage deliveries tightly to secure cash flow. the order book rotation continues to be slow which of course relates to the challenging market conditions but we also continued to manage deliveries tightly to secure cash flow Outside of China, we grew our sales by over 10% at the comparable currencies. outside of china we grew our sales by over 10% at the comparable currencies This is a very good outcome in the quarter. this is a very good outcome in the quarter Then moving to adjusted EBIT and profitability. then moving to adjusted ebit and profitability Our adjusted EBIT margins continued to develop positively, and in this quarter, we improved 20 basis points year on year. our adjusted ebit margins continued to develop positively and in this quarter we improved 20 basis points year on year This took our adjusted EBIT to EUR 387 million. this took our adjusted ebit to eur 387 million Our operating income was 333 million euros in the quarter. The difference here mainly relates to restructuring costs booked in China, where we have taken more meaningful actions to adjust to the weak market conditions. Looking at the profitability improvement more closely, the main driver continues to be a favorable business mix. We also did see contribution from improved margins in the modernization business. On the negative side, the inflation was a challenge, but as in previous quarters, the biggest headwind for us was the margin decline in China. So overall, as highlighted by Philippe, it is really good to see the consistent profitability improvement, and we have actions in place to secure continued progress going forward towards our midterm targets. Finally, to our cash flow. Our operating income was 333 million euros in the quarter. our operating income was 333 million euros in the quarter The difference here mainly relates to restructuring costs booked in China, where we have taken more meaningful actions to adjust to the weak market conditions. the difference here mainly relates to restructuring costs booked in china where we have taken more meaningful actions to adjust to the weak market conditions Looking at the profitability improvement more closely, the main driver continues to be a favorable business mix. looking at the profitability improvement more closely the main driver continues to be a favorable business mix We also did see contribution from improved margins in the modernization business. we also did see contribution from improved margins in the modernization business On the negative side, the inflation was a challenge, but as in previous quarters, the biggest headwind for us was the margin decline in China. on the negative side the inflation was a challenge but as in previous quarters the biggest headwind for us was the margin decline in china So overall, as highlighted by Philippe, it is really good to see the consistent profitability improvement, and we have actions in place to secure continued progress going forward towards our midterm targets. so overall as highlighted by philippe it is really good to see the consistent profitability improvement and we have actions in place to secure continued progress going forward towards our midterm targets Finally, to our cash flow. finally to our cash flow So let me start by saying that while one quarter is a short time to measure cash flow, our cash generation in the fourth quarter was a particular highlight for me. Cash flow increased to EUR 534 million in the quarter, mainly driven by working capital and also the profit improvement. We actually saw quite a broad-based improvement in various working capital items, but I was especially pleased to see collections contributing positively, as this has been a particular focus area for us. The strong end to the year brought the full year cash flow to a healthy level of EUR 1,589 million. Let's then look at how we're thinking about year 25. Starting with market perspective, demand trends are overall very much in line with what we saw in the fourth quarter. So let me start by saying that while one quarter is a short time to measure cash flow, our cash generation in the fourth quarter was a particular highlight for me. so let me start by saying that while one quarter is a short time to measure cash flow our cash generation in the fourth quarter was a particular highlight for me Cash flow increased to EUR 534 million in the quarter, mainly driven by working capital and also the profit improvement. cash flow increased to eur 534 million in the quarter mainly driven by working capital and also the profit improvement We actually saw quite a broad-based improvement in various working capital items, but I was especially pleased to see collections contributing positively, as this has been a particular focus area for us. we actually saw quite a broad-based improvement in various working capital items but i was especially pleased to see collections contributing positively as this has been a particular focus area for us The strong end to the year brought the full year cash flow to a healthy level of EUR 1,589 million. the strong end to the year brought the full year cash flow to a healthy level of eur 1,589 million Let's then look at how we're thinking about year 25. let's then look at how we're thinking about year 25 Starting with market perspective, demand trends are overall very much in line with what we saw in the fourth quarter. starting with market perspective demand trends are overall very much in line with what we saw in the fourth quarter We continue to see interesting opportunities in all parts of the world, with stable or positive outlook in 11 of our 12 end markets. Modernization markets are expected to remain very active, and we expect services markets to continue to grow in all regions. In the new building solutions markets, we expect conditions in China to remain difficult. Elsewhere, we expect stable development in Europe and a slight growth in North America. And in Asia-Pacific, Middle East, and Africa, we continue to see very good opportunities also in 2025. Then to our business outlook. We're entering the year with a healthy order book, and we expect strong growth to continue in both services and in modernization. Also, the ramp-up of our performance initiatives will also start to contribute to our performance. China continues to be the main headwind. We continue to see interesting opportunities in all parts of the world, with stable or positive outlook in 11 of our 12 end markets. we continue to see interesting opportunities in all parts of the world with stable or positive outlook in 11 of our 12 end markets Modernization markets are expected to remain very active, and we expect services markets to continue to grow in all regions. modernization markets are expected to remain very active and we expect services markets to continue to grow in all regions In the new building solutions markets, we expect conditions in China to remain difficult. in the new building solutions markets we expect conditions in china to remain difficult Elsewhere, we expect stable development in Europe and a slight growth in North America. elsewhere we expect stable development in europe and a slight growth in north america And in Asia-Pacific, Middle East, and Africa, we continue to see very good opportunities also in 2025. and in asia-pacific middle east and africa we continue to see very good opportunities also in 2025 Then to our business outlook. then to our business outlook We're entering the year with a healthy order book, and we expect strong growth to continue in both services and in modernization. we're entering the year with a healthy order book and we expect strong growth to continue in both services and in modernization Also, the ramp-up of our performance initiatives will also start to contribute to our performance. also the ramp-up of our performance initiatives will also start to contribute to our performance China continues to be the main headwind. china continues to be the main headwind Here, as said, markets remain under pressure, and we will be delivering orders which were booked at the lower margins. So with this in mind, our guidance for 2025 is for sales to grow slightly at the comparable currencies, and we expect profitability improvement to continue. This puts us on track to meeting our midterm financial targets. Let me now hand back over to Philippe to close the presentation before going into the Q&A. Here, as said, markets remain under pressure, and we will be delivering orders which were booked at the lower margins. here as said markets remain under pressure and we will be delivering orders which were booked at the lower margins So with this in mind, our guidance for 2025 is for sales to grow slightly at the comparable currencies, and we expect profitability improvement to continue. so with this in mind our guidance for 2025 is for sales to grow slightly at the comparable currencies and we expect profitability improvement to continue This puts us on track to meeting our midterm financial targets. this puts us on track to meeting our midterm financial targets Let me now hand back over to Philippe to close the presentation before going into the Q&A. let me now hand back over to philippe to close the presentation before going into the q&a

Speaker 1: Thank you, Ilkka. So before summarizing, let me take a moment to talk about what we are prioritizing this year so that we can deliver on our strategic ambitions. First of all, I firmly believe, and I think I've said it many times, that innovations have a very important role to play in how we succeed with our strategy. We want to be quick in bringing new solutions to the market, and we need to ensure that we focus and align our resources and efforts on our new strategy, and I guess our priorities are very clear. In service, we will push for higher connectivity and a more rapid rollout of digital services solutions to drive customer value and productivity. And in modernization, we'll continue industrializing our offering and developing our sales approach. Thank you, Ilkka. thank you ilkka So before summarizing, let me take a moment to talk about what we are prioritizing this year so that we can deliver on our strategic ambitions. so before summarizing let me take a moment to talk about what we are prioritizing this year so that we can deliver on our strategic ambitions First of all, I firmly believe, and I think I've said it many times, that innovations have a very important role to play in how we succeed with our strategy. first of all i firmly believe and i think i've said it many times that innovations have a very important role to play in how we succeed with our strategy We want to be quick in bringing new solutions to the market, and we need to ensure that we focus and align our resources and efforts on our new strategy, and I guess our priorities are very clear. we want to be quick in bringing new solutions to the market and we need to ensure that we focus and align our resources and efforts on our new strategy and i guess our priorities are very clear In service, we will push for higher connectivity and a more rapid rollout of digital services solutions to drive customer value and productivity. in service we will push for higher connectivity and a more rapid rollout of digital services solutions to drive customer value and productivity And in modernization, we'll continue industrializing our offering and developing our sales approach. and in modernization we'll continue industrializing our offering and developing our sales approach Bearing in mind the market conditions in China, cash flow is our number one priority, and we also continue to pursue growth opportunities in service and modernization to drive a more balanced business mix in that part of the world, and finally, we'll be more focused than ever on what we can do to secure continuous profitability improvement. Here, our initiatives to drive sales and operational excellence and improve procurement efficiency are very key, so to wrap it up, we have again demonstrated our business resilience in 2024 with great progress on many fronts. We've gotten off to a great start in executing our new strategy, RISE, and maintaining momentum here is key. We see very exciting opportunities in service and modernization. These are our main profit pools, and we are fully focused on securing growth in these businesses. Bearing in mind the market conditions in China, cash flow is our number one priority, and we also continue to pursue growth opportunities in service and modernization to drive a more balanced business mix in that part of the world, and finally, we'll be more focused than ever on what we can do to secure continuous profitability improvement. bearing in mind the market conditions in china cash flow is our number one priority and we also continue to pursue growth opportunities in service and modernization to drive a more balanced business mix in that part of the world and finally we'll be more focused than ever on what we can do to secure continuous profitability improvement Here, our initiatives to drive sales and operational excellence and improve procurement efficiency are very key, so to wrap it up, we have again demonstrated our business resilience in 2024 with great progress on many fronts. here our initiatives to drive sales and operational excellence and improve procurement efficiency are very key so to wrap it up we have again demonstrated our business resilience in 2024 with great progress on many fronts We've gotten off to a great start in executing our new strategy, RISE, and maintaining momentum here is key. we've gotten off to a great start in executing our new strategy rise and maintaining momentum here is key We see very exciting opportunities in service and modernization. we see very exciting opportunities in service and modernization These are our main profit pools, and we are fully focused on securing growth in these businesses. these are our main profit pools and we are fully focused on securing growth in these businesses Finally, we have clear priorities heading into 2025, and our guidance shows that we are on track to delivering on our midterm targets. I would like to thank again all the teams at KONE who've shown again an outstanding commitment. I would like to thank you all for your attention and propose that we now move to your questions. Finally, we have clear priorities heading into 2025, and our guidance shows that we are on track to delivering on our midterm targets. finally we have clear priorities heading into 2025 and our guidance shows that we are on track to delivering on our midterm targets I would like to thank again all the teams at KONE who've shown again an outstanding commitment. i would like to thank again all the teams at kone who've shown again an outstanding commitment I would like to thank you all for your attention and propose that we now move to your questions. i would like to thank you all for your attention and propose that we now move to your questions

Speaker 13: Thank you. Ladies and gentlemen, if you would like to ask a question, please press 1 on your telephone keypad. Thank you. We will now take our first question from Daniela Costa of Goldman Sachs. Your line is open. Please go ahead. Thank you. thank you Ladies and gentlemen, if you would like to ask a question, please press 1 on your telephone keypad. ladies and gentlemen if you would like to ask a question please press *1 on your telephone keypad Thank you. thank you We will now take our first question from Daniela Costa of Goldman Sachs. we will now take our first question from daniela costa of goldman sachs Your line is open. your line is open Please go ahead. please go ahead

Speaker 10: Hi, good morning, everyone. Thank you so much for taking my question. I have one question and then sort of just a follow-up on the clarification on the accounting. But my question relates to the margin guidance for it to be up. And can you help us understand the various moving parts in terms of how do you still model in that China OE positive next year? How much of the improvement is a mechanical mix impact versus tailwinds from the actions that you're implementing and which ones are the critical ones? And then just on the R&D write-off that you did, what have you discontinued? Sort of can you elaborate basically exactly on what that was and how we should think about maybe as you restructure the business, further actions like that? Hi, good morning, everyone. hi good morning everyone Thank you so much for taking my question. thank you so much for taking my question I have one question and then sort of just a follow-up on the clarification on the accounting. i have one question and then sort of just a follow-up on the clarification on the accounting But my question relates to the margin guidance for it to be up. but my question relates to the margin guidance for it to be up And can you help us understand the various moving parts in terms of how do you still model in that China OE positive next year? and can you help us understand the various moving parts in terms of how do you still model in that china oe positive next year How much of the improvement is a mechanical mix impact versus tailwinds from the actions that you're implementing and which ones are the critical ones? how much of the improvement is a mechanical mix impact versus tailwinds from the actions that you're implementing and which ones are the critical ones And then just on the R&D write-off that you did, what have you discontinued? and then just on the r&d write-off that you did what have you discontinued Sort of can you elaborate basically exactly on what that was and how we should think about maybe as you restructure the business, further actions like that? sort of can you elaborate basically exactly on what that was and how we should think about maybe as you restructure the business further actions like that

Speaker 2: Yeah. Maybe on the China part, and Philippe, you can also talk about what we're aiming to do there. So we, in the fourth quarter in China, focused our business in line with the market and the new strategy moving to service and modernization-focused business. And as a result, we saw the restructuring costs hitting our fourth quarter as the measures were being taken then. And we do expect those to contribute positively, but as already said, so we also do see the NBS business continuing to decline in the fourth quarter. So it's more towards aligning our business to the market reality we see as a result. I'll come back to the second question if you want to comment on China. Yeah. yeah Maybe on the China part, and Philippe, you can also talk about what we're aiming to do there. maybe on the china part and philippe you can also talk about what we're aiming to do there So we, in the fourth quarter in China, focused our business in line with the market and the new strategy moving to service and modernization-focused business. so we in the fourth quarter in china focused our business in line with the market and the new strategy moving to service and modernization-focused business And as a result, we saw the restructuring costs hitting our fourth quarter as the measures were being taken then. and as a result we saw the restructuring costs hitting our fourth quarter as the measures were being taken then And we do expect those to contribute positively, but as already said, so we also do see the NBS business continuing to decline in the fourth quarter. and we do expect those to contribute positively but as already said so we also do see the nbs business continuing to decline in the fourth quarter So it's more towards aligning our business to the market reality we see as a result. so it's more towards aligning our business to the market reality we see as a result I'll come back to the second question if you want to comment on China. i'll come back to the second question if you want to comment on china

Speaker 1: Oh, I think, I mean, China priority is very clear. Cash first. Cash first. And we believe actually we have made further progress in Q4 to be even more disciplined in cash and in the end really pick the customers that we believe are going to pay us going forward because there was cash tension, especially in Q3 in the market margin. And we are very intentional to, in new construction, picking the customers where we think we have the best margin upside or margin capabilities in the full life cycle and pivoting our business to, as much as we can, a bigger share of modernization and service. And that leads to adapting our forces because it's a significant change in the way we are dealing with our business in China. Oh, I think, I mean, China priority is very clear. oh i think i mean china priority is very clear Cash first. cash first Cash first. cash first And we believe actually we have made further progress in Q4 to be even more disciplined in cash and in the end really pick the customers that we believe are going to pay us going forward because there was cash tension, especially in Q3 in the market margin. and we believe actually we have made further progress in q4 to be even more disciplined in cash and in the end really pick the customers that we believe are going to pay us going forward because there was cash tension especially in q3 in the market margin And we are very intentional to, in new construction, picking the customers where we think we have the best margin upside or margin capabilities in the full life cycle and pivoting our business to, as much as we can, a bigger share of modernization and service. and we are very intentional to in new construction picking the customers where we think we have the best margin upside or margin capabilities in the full life cycle and pivoting our business to as much as we can a bigger share of modernization and service And that leads to adapting our forces because it's a significant change in the way we are dealing with our business in China. and that leads to adapting our forces because it's a significant change in the way we are dealing with our business in china

Speaker 2: Then on your second part of the question, Daniela, on so the restructuring part of it, the majority was related to China, but also the global teams were impacted as well. And there we were looking to align our global teams towards the new strategy we laid out in our Capital Markets Day. And as a result of that, in the fourth quarter, we had restructuring done and restructuring costs, including the development teams. So it's all restructuring costs, but it's two different parts of the organization that were impacted. And as a result, then we had EUR 54 million of restructuring charges for the fourth quarter. Then on your second part of the question, Daniela, on so the restructuring part of it, the majority was related to China, but also the global teams were impacted as well. then on your second part of the question daniela on so the restructuring part of it the majority was related to china but also the global teams were impacted as well And there we were looking to align our global teams towards the new strategy we laid out in our Capital Markets Day. and there we were looking to align our global teams towards the new strategy we laid out in our capital markets day And as a result of that, in the fourth quarter, we had restructuring done and restructuring costs, including the development teams. and as a result of that in the fourth quarter we had restructuring done and restructuring costs including the development teams So it's all restructuring costs, but it's two different parts of the organization that were impacted. so it's all restructuring costs but it's two different parts of the organization that were impacted And as a result, then we had EUR 54 million of restructuring charges for the fourth quarter. and as a result then we had eur 54 million of restructuring charges for the fourth quarter

Speaker 10: Just on the first question, on the answer, just to make sure I understood, you're saying that China OE is still profitable or just at a cash level? Just on the first question, on the answer, just to make sure I understood, you're saying that China OE is still profitable or just at a cash level? just on the first question on the answer just to make sure i understood you're saying that china oe is still profitable or just at a cash level

Speaker 2: No, it is profitable both in P&L as well as actually, as you saw in the cash flow, also China contributed positively to a very good development in the fourth quarter. No, it is profitable both in P&L as well as actually, as you saw in the cash flow, also China contributed positively to a very good development in the fourth quarter. no it is profitable both in p&l as well as actually as you saw in the cash flow also china contributed positively to a very good development in the fourth quarter

Speaker 10: Got it. Thank you very much. Got it. got it Thank you very much. thank you very much

Speaker 2: Thank you. Thank you. thank you

Speaker 1: Thank you. Thank you. thank you

Speaker 13: And we will now take our next question from Andre Kukhnin of UBS. Your line is open. Please go ahead. And we will now take our next question from Andre Kukhnin of UBS. and we will now take our next question from andre kukhnin of ubs Your line is open. your line is open Please go ahead. please go ahead

Speaker 11: Good morning. Thank you very much for taking my questions. I'll just go one at a time and maybe follow up on the margin drivers for 2025. Firstly, on the restructuring, could you give us an idea of what amount of savings can we expect from that EUR 50 million of restructuring? Is it kind of more of a traditional one-to-one? And related to that, are there any other measures? Kind of if you're trying to bucket this in terms of what's being done on footprint, on sales, on procurement, could you give us some idea of the sizes of those initiatives and what they can contribute in 2025? Good morning. good morning Thank you very much for taking my questions. thank you very much for taking my questions I'll just go one at a time and maybe follow up on the margin drivers for 2025. i'll just go one at a time and maybe follow up on the margin drivers for 2025 Firstly, on the restructuring, could you give us an idea of what amount of savings can we expect from that EUR 50 million of restructuring? firstly on the restructuring could you give us an idea of what amount of savings can we expect from that eur 50 million of restructuring Is it kind of more of a traditional one-to-one? is it kind of more of a traditional one-to-one And related to that, are there any other measures? and related to that are there any other measures Kind of if you're trying to bucket this in terms of what's being done on footprint, on sales, on procurement, could you give us some idea of the sizes of those initiatives and what they can contribute in 2025? kind of if you're trying to bucket this in terms of what's being done on footprint on sales on procurement could you give us some idea of the sizes of those initiatives and what they can contribute in 2025

Speaker 2: So mainly, if I look at the restructuring, so China was about restructuring to the market reality. As said, we expect China margins still in 2025 to be somewhat under pressure given the difficult market, but we're aligning the teams to the market reality as such, and then in the rest of the world, we are taking measures to align the teams to the new strategy, and then on top of that, as we talked about, we have performance improvement initiatives, especially related to procurement, as well as then sales and operational excellence, so how are we organized on the lowest level of KONE to be able to deliver the best possible delivery organization towards our customers, and what I said earlier is still valid. So mainly, if I look at the restructuring, so China was about restructuring to the market reality. so mainly if i look at the restructuring so china was about restructuring to the market reality As said, we expect China margins still in 2025 to be somewhat under pressure given the difficult market, but we're aligning the teams to the market reality as such, and then in the rest of the world, we are taking measures to align the teams to the new strategy, and then on top of that, as we talked about, we have performance improvement initiatives, especially related to procurement, as well as then sales and operational excellence, so how are we organized on the lowest level of KONE to be able to deliver the best possible delivery organization towards our customers, and what I said earlier is still valid. as said we expect china margins still in 2025 to be somewhat under pressure given the difficult market but we're aligning the teams to the market reality as such and then in the rest of the world we are taking measures to align the teams to the new strategy and then on top of that as we talked about we have performance improvement initiatives especially related to procurement as well as then sales and operational excellence so how are we organized on the lowest level of kone to be able to deliver the best possible delivery organization towards our customers and what i said earlier is still valid We expect the performance initiatives to have more impact towards the end of the year, but still continue to ramp up all throughout towards our midterm targets with an increasing speed towards the end of the period. With the measures that we took now in the fourth quarter, we have included those to our guidance, and we expect in China, as I said to Daniela already, that there continues to be a margin pressure in China, but these are measures to counter that. There are some benefits for the costs, but not that some benefits for the global teams that are visible in the 25 as well. We expect the performance initiatives to have more impact towards the end of the year, but still continue to ramp up all throughout towards our midterm targets with an increasing speed towards the end of the period. we expect the performance initiatives to have more impact towards the end of the year but still continue to ramp up all throughout towards our midterm targets with an increasing speed towards the end of the period With the measures that we took now in the fourth quarter, we have included those to our guidance, and we expect in China, as I said to Daniela already, that there continues to be a margin pressure in China, but these are measures to counter that. with the measures that we took now in the fourth quarter, we have included those to our guidance and we expect in china as i said to daniela already that there continues to be a margin pressure in china but these are measures to counter that There are some benefits for the costs, but not that some benefits for the global teams that are visible in the 25 as well. there are some benefits for the costs but not that some benefits for the global teams that are visible in the 25 as well

Speaker 1: And if we take a broader perspective, I guess you've noticed the margin bridge we've shared in the capital market day, which is a guiding principle for us, so it remains. So I think we were showing the different blocks and the size of the different blocks. What I can say is that both on procurement and sales and operational excellence, we've been extremely diligent, precise, and disciplined on working on this to ramp up our measures. I see the opportunity, though things take time to materialize, but we are very diligent and precise in executing this. And if we take a broader perspective, I guess you've noticed the margin bridge we've shared in the capital market day, which is a guiding principle for us, so it remains. and if we take a broader perspective i guess you've noticed the margin bridge we've shared in the capital market day which is a guiding principle for us so it remains So I think we were showing the different blocks and the size of the different blocks. so i think we were showing the different blocks and the size of the different blocks What I can say is that both on procurement and sales and operational excellence, we've been extremely diligent, precise, and disciplined on working on this to ramp up our measures. what i can say is that both on procurement and sales and operational excellence we've been extremely diligent precise and disciplined on working on this to ramp up our measures I see the opportunity, though things take time to materialize, but we are very diligent and precise in executing this. i see the opportunity though things take time to materialize but we are very diligent and precise in executing this

Speaker 2: But we see in total so both the service and modernization mix continuing to improve in 2025, contributing positively. We will see some benefit in the margin bridge already for the performance initiatives towards the end of the year. And of course, we are very focused to then also see positive contribution from fixed cost leverage of the business. But we see in total so both the service and modernization mix continuing to improve in 2025, contributing positively. but we see in total so both the service and modernization mix continuing to improve in 2025 contributing positively We will see some benefit in the margin bridge already for the performance initiatives towards the end of the year. we will see some benefit in the margin bridge already for the performance initiatives towards the end of the year And of course, we are very focused to then also see positive contribution from fixed cost leverage of the business. and of course we are very focused to then also see positive contribution from fixed cost leverage of the business

Speaker 11: Very helpful. Thank you. If I may just once on cadence of first half, second half, would you expect the margin to show further improvement in the first half already, or should we think about second half primarily? Very helpful. very helpful Thank you. thank you If I may just once on cadence of first half, second half, would you expect the margin to show further improvement in the first half already, or should we think about second half primarily? if i may just once on cadence of first half second half would you expect the margin to show further improvement in the first half already or should we think about second half primarily

Speaker 2: So if you think about what I said about the whole period all the way to the midterm targets, we are continuing to accelerate our margin improvement, but definitely we aim to improve margins quarter by quarter throughout the year. So if you think about what I said about the whole period all the way to the midterm targets, we are continuing to accelerate our margin improvement, but definitely we aim to improve margins quarter by quarter throughout the year. so if you think about what i said about the whole period all the way to the midterm targets we are continuing to accelerate our margin improvement but definitely we aim to improve margins quarter by quarter throughout the year

Speaker 11: Right. And is the service margin itself improving as well in 2025 as a stand alone? Right. right And is the service margin itself improving as well in 2025 as a stand alone? and is the service margin itself improving as well in 2025 as a stand alone

Speaker 2: I guess we have not guided that closely each of the dimensions more given the total number. As we said in the CMD, the measures we're taking on digitalizing the service business are actually something where we see good opportunities to drive margin improvement going forward. One, clearly, number one is that customers actually visibly it will differentiate us. Then secondly, we also are driving with digital productivity improvements. Actually, as we are now ramping up country by country the digital offering, we see that materializing, but it will take some time to see that in the P&L as it will. First, you need to implement, then you need to learn the new way of working, and then you start to be able to reap up the benefits from a profitability and productivity point of view. I guess we have not guided that closely each of the dimensions more given the total number. i guess we have not guided that closely each of the dimensions more given the total number As we said in the CMD, the measures we're taking on digitalizing the service business are actually something where we see good opportunities to drive margin improvement going forward. as we said in the cmd the measures we're taking on digitalizing the service business are actually something where we see good opportunities to drive margin improvement going forward One, clearly, number one is that customers actually visibly it will differentiate us. one clearly number one is that customers actually visibly it will differentiate us Then secondly, we also are driving with digital productivity improvements. then secondly we also are driving with digital productivity improvements Actually, as we are now ramping up country by country the digital offering, we see that materializing, but it will take some time to see that in the P&L as it will. actually as we are now ramping up country by country the digital offering we see that materializing but it will take some time to see that in the p&l as it will First, you need to implement, then you need to learn the new way of working, and then you start to be able to reap up the benefits from a profitability and productivity point of view. first you need to implement then you need to learn the new way of working and then you start to be able to reap up the benefits from a profitability and productivity point of view

Speaker 1: We are working on our pricing. Yeah. The bottom line is in service, and that's where we really have the highest attention. We work on one side to be smarter in our pricing, on the other side to get more productive with digital technology. Yeah. We are working on our pricing. we are working on our pricing Yeah. yeah The bottom line is in service, and that's where we really have the highest attention. the bottom line is in service and that's where we really have the highest attention We work on one side to be smarter in our pricing, on the other side to get more productive with digital technology. we work on one side to be smarter in our pricing on the other side to get more productive with digital technology Yeah. yeah

Speaker 11: Really helpful. Thank you very much for your time. Really helpful. really helpful Thank you very much for your time. thank you very much for your time

Speaker 2: Thank you. Thank you. thank you

Speaker 1: Thank you. Thank you. thank you

Speaker 13: Thank you. Ladies and gentlemen, kindly be reminded that to limit yourself to one question and one follow-up, thank you. We will now move on to our next question from John Kim of Deutsche Bank. Hilary Sørensen, please go ahead. Thank you. thank you Ladies and gentlemen, kindly be reminded that to limit yourself to one question and one follow-up, thank you. ladies and gentlemen kindly be reminded that to limit yourself to one question and one follow-up thank you We will now move on to our next question from John Kim of Deutsche Bank. we will now move on to our next question from john kim of deutsche bank Hilary Sørensen, please go ahead. hilary sørensen please go ahead

Speaker 6: Thank you. Good morning. Could we unpack the slight margin decline in the Q4 order intake? It'd be helpful to understand whether this is still the weight of Chinese NBS or whether you're seeing any sort of evolution on margins in the modernization, again, looking at China? Thank you. thank you Good morning. good morning Could we unpack the slight margin decline in the Q4 order intake? could we unpack the slight margin decline in the q4 order intake It'd be helpful to understand whether this is still the weight of Chinese NBS or whether you're seeing any sort of evolution on margins in the modernization, again, looking at China? it'd be helpful to understand whether this is still the weight of chinese nbs or whether you're seeing any sort of evolution on margins in the modernization again looking at china

Speaker 2: So in China, the modernization margins, as I've said earlier, that is the highest margin business for us. It's still a smaller part of the business and the fastest growing business. And we actually see good development, good opportunities going forward in the modernization, especially the partial modernization part of it is a very compelling part of it. But let's see, right now it looks quite good. So in China, the modernization margins, as I've said earlier, that is the highest margin business for us. so in china the modernization margins as i've said earlier that is the highest margin business for us It's still a smaller part of the business and the fastest growing business. it's still a smaller part of the business and the fastest growing business And we actually see good development, good opportunities going forward in the modernization, especially the partial modernization part of it is a very compelling part of it. and we actually see good development good opportunities going forward in the modernization especially the partial modernization part of it is a very compelling part of it But let's see, right now it looks quite good. but let's see right now it looks quite good

Speaker 6: Okay, helpful. And can you comment on service margins, price inflation versus underlying weight for this year? Okay, helpful. okay helpful And can you comment on service margins, price inflation versus underlying weight for this year? and can you comment on service margins price inflation versus underlying weight for this year

Speaker 2: So our service margins were more stable in 2024. And yes, labor inflation was there. And also, as normally, we escalate the prices based on that. But more stable development in the service margins. And really, to me, the key focus there is that we are able to grow it fast. And now with more than 10% growth in services, to me, it is a fantastic number to be able to get the double-digit growth in services. So our service margins were more stable in 2024. so our service margins were more stable in 2024 And yes, labor inflation was there. and yes labor inflation was there And also, as normally, we escalate the prices based on that. and also as normally we escalate the prices based on that But more stable development in the service margins. but more stable development in the service margins And really, to me, the key focus there is that we are able to grow it fast. and really to me the key focus there is that we are able to grow it fast And now with more than 10% growth in services, to me, it is a fantastic number to be able to get the double-digit growth in services. and now with more than 10% growth in services to me it is a fantastic number to be able to get the double-digit growth in services

Speaker 1: A number on which we've been extremely consistent in the past quarters. We had many questions in CMD, but when you look back in the past three, four quarters and what we've delivered again, I mean, 10.5% in Q4, very, very consistent gross delivery. A number on which we've been extremely consistent in the past quarters. a number on which we've been extremely consistent in the past quarters We had many questions in CMD, but when you look back in the past three, four quarters and what we've delivered again, I mean, 10.5% in Q4, very, very consistent gross delivery. we had many questions in cmd but when you look back in the past three four quarters and what we've delivered again i mean 10.5% in q4 very very consistent gross delivery

Speaker 6: Yeah. Well done. Thank you. Yeah. yeah Well done. well done Thank you. thank you

Speaker 1: Thank you. Thank you. thank you

Speaker 13: Thank you. And we will now take our next question from Vladimir Sergievski of Barclays. Hilary Sørensen, please go ahead. Thank you. thank you And we will now take our next question from Vladimir Sergievski of Barclays. and we will now take our next question from vladimir sergievski of barclays Hilary Sørensen, please go ahead. hilary sørensen please go ahead

Speaker 5: Yeah, good morning. Thanks very much for taking my two questions. I'll start on the adjustment to EBITDA and apologies for laboring the point. On my numbers, it looks like this was the highest quarterly adjustment KONE has ever had. In particular, I'm interested in this EUR 18 million development cost adjustment. Can you explain what those exactly are and how the accounting worked on those EUR 18 million? And have you done similar development cost adjustments before? Yeah, good morning. yeah good morning Thanks very much for taking my two questions. thanks very much for taking my two questions I'll start on the adjustment to EBITDA and apologies for laboring the point. i'll start on the adjustment to ebitda and apologies for laboring the point On my numbers, it looks like this was the highest quarterly adjustment KONE has ever had. on my numbers it looks like this was the highest quarterly adjustment kone has ever had In particular, I'm interested in this EUR 18 million development cost adjustment. in particular i'm interested in this eur 18 million development cost adjustment Can you explain what those exactly are and how the accounting worked on those EUR 18 million? can you explain what those exactly are and how the accounting worked on those eur 18 million And have you done similar development cost adjustments before? and have you done similar development cost adjustments before

Speaker 2: Can you just summarize again? The line is bad. So on your actual question, I was losing one out of the three words on this end. Can you just summarize again? can you just summarize again The line is bad. the line is bad So on your actual question, I was losing one out of the three words on this end. so on your actual question i was losing one out of the three words on this end

Speaker 5: Absolutely. And apologies. So EUR 18 million cost adjustment, what exactly that was related to? How the accounting worked? And have you done similar EUR 18 million development cost adjustments before? Absolutely. absolutely And apologies. and apologies So EUR 18 million cost adjustment, what exactly that was related to? so eur 18 million cost adjustment what exactly that was related to How the accounting worked? how the accounting worked And have you done similar EUR 18 million development cost adjustments before? and have you done similar eur 18 million development cost adjustments before

Speaker 2: All of the costs, the EUR 54 million, are related to restructuring. Both China was the biggest part, the EUR 30-plus million, and the rest were related to global teams, including our development teams, to align the actions towards the strategy and how we want to deliver. On the development part, these are costs related to fourth quarter, which we then discontinued the activities, and they were part of restructuring costs. All of the costs, the EUR 54 million, are related to restructuring. all of the costs the eur 54 million are related to restructuring Both China was the biggest part, the EUR 30-plus million, and the rest were related to global teams, including our development teams, to align the actions towards the strategy and how we want to deliver. both china was the biggest part the eur 30-plus million and the rest were related to global teams including our development teams to align the actions towards the strategy and how we want to deliver On the development part, these are costs related to fourth quarter, which we then discontinued the activities, and they were part of restructuring costs. on the development part these are costs related to fourth quarter which we then discontinued the activities and they were part of restructuring costs

Speaker 1: If we take maybe a broader perspective, I mean, we've talked a lot about innovation, but I think reflecting back on 2024, there is one thing on which I'm very proud, which is we've very strongly realigned our innovation engines to what are the clear priorities of the company, and we've pushed speed. Like this example of the Mono 100, six months to develop a new innovation to market that, frankly, the market was expecting for many years. So yes, we made choices, and we decided to stop some things. I feel very strong with it. I think KONE, with this, is a more agile company, a more nimble company, and a more focused company. I feel very good with that. If we take maybe a broader perspective, I mean, we've talked a lot about innovation, but I think reflecting back on 2024, there is one thing on which I'm very proud, which is we've very strongly realigned our innovation engines to what are the clear priorities of the company, and we've pushed speed. if we take maybe a broader perspective i mean we've talked a lot about innovation but i think reflecting back on 2024 there is one thing on which i'm very proud which is we've very strongly realigned our innovation engines to what are the clear priorities of the company and we've pushed speed Like this example of the Mono 100, six months to develop a new innovation to market that, frankly, the market was expecting for many years. like this example of the mono 100 six months to develop a new innovation to market that frankly the market was expecting for many years So yes, we made choices, and we decided to stop some things. so yes we made choices and we decided to stop some things I feel very strong with it. i feel very strong with it I think KONE, with this, is a more agile company, a more nimble company, and a more focused company. i think kone with this is a more agile company a more nimble company and a more focused company I feel very good with that. i feel very good with that

Speaker 5: Thank you very much. That's very clear. Last question. Would you expect any additional adjustment for 2025 or restructuring cost at this point or not? Thank you very much. thank you very much That's very clear. that's very clear Last question. last question Would you expect any additional adjustment for 2025 or restructuring cost at this point or not? would you expect any additional adjustment for 2025 or restructuring cost at this point or not

Speaker 2: Of course, we continue to evaluate both the market as well as how we deliver our strategy, but I do not expect right now any restructuring costs that are meaningful in 2025. Of course, we continue to evaluate both the market as well as how we deliver our strategy, but I do not expect right now any restructuring costs that are meaningful in 2025. of course we continue to evaluate both the market as well as how we deliver our strategy but i do not expect right now any restructuring costs that are meaningful in 2025

Speaker 5: Super. Thank you. Super. super Thank you. thank you

Speaker 1: Thank you. Thank you. thank you

Speaker 13: Thank you. And we will now move on to our next Klas Bergelind of citi. Hilary Sørensen, please go ahead. Thank you. thank you And we will now move on to our next Klas Bergelind of citi. and we will now move on to our next klas bergelind of citi Hilary Sørensen, please go ahead. hilary sørensen please go ahead

Speaker 3: Thank you. Hi, Philippe and Ilkka, Klas at Citi. First, on the composition of service growth, it seems like organic units grew mid-single digit still, and then the ISPs again added another one and a half, and that leaves 4% price mix, which is higher than I thought, especially as you probably have a negative geographical mix there out of China still. Can we try and break that down a little bit? What I'm trying to gauge really is if digital and 24/7 contributed more this time to the organic growth in services. Thank you. Thank you. thank you Hi, Philippe and Ilkka, Klas at Citi. hi philippe and ilkka klas at citi First, on the composition of service growth, it seems like organic units grew mid-single digit still, and then the ISPs again added another one and a half, and that leaves 4% price mix, which is higher than I thought, especially as you probably have a negative geographical mix there out of China still. first on the composition of service growth it seems like organic units grew mid-single digit still and then the isps again added another one and a half and that leaves 4% price mix which is higher than i thought especially as you probably have a negative geographical mix there out of china still Can we try and break that down a little bit? can we try and break that down a little bit What I'm trying to gauge really is if digital and 24/7 contributed more this time to the organic growth in services. what i'm trying to gauge really is if digital and 24/7 contributed more this time to the organic growth in services Thank you. thank you

Speaker 2: I see you've seen on the penetration, so we continue to penetrate quite nicely with our connectivity. But I think this time I would call out more the overall services contributing to the value. So yes, 24/7 and the added value is there, but I think we saw broad-based services positive development, and especially the Western market standing out, both Europe as well as more broadly. And those have been standing out in terms of growth in the fourth quarter. It doesn't mean that 24/7 didn't, but I wouldn't call that out as a main driver for that. I see you've seen on the penetration, so we continue to penetrate quite nicely with our connectivity. i see you've seen on the penetration so we continue to penetrate quite nicely with our connectivity But I think this time I would call out more the overall services contributing to the value. but i think this time i would call out more the overall services contributing to the value So yes, 24/7 and the added value is there, but I think we saw broad-based services positive development, and especially the Western market standing out, both Europe as well as more broadly. so yes 24/7 and the added value is there but i think we saw broad-based services positive development and especially the western market standing out both europe as well as more broadly And those have been standing out in terms of growth in the fourth quarter. and those have been standing out in terms of growth in the fourth quarter It doesn't mean that 24/7 didn't, but I wouldn't call that out as a main driver for that. it doesn't mean that 24/7 didn't but i wouldn't call that out as a main driver for that

Speaker 1: But if I would single one point that explains our growth in service, I would say our people. And the fact that on the ground every day, we try to differentiate by being committed with our customers, and the word of mouth actually helps us a lot. Example in Madrid, why did we take that contract? Because of our reputation, because of our people, and then technology. But it's hard to copy a culture. I think we have a culture of commitment with our customers, and they see it. And it's about experience. When you take an elevator, you want to be safe. And our people take it very seriously. And I think that's a big part of the explanation of why we are growing faster than others. But if I would single one point that explains our growth in service, I would say our people. but if i would single one point that explains our growth in service i would say our people And the fact that on the ground every day, we try to differentiate by being committed with our customers, and the word of mouth actually helps us a lot. and the fact that on the ground every day we try to differentiate by being committed with our customers and the word of mouth actually helps us a lot Example in Madrid, why did we take that contract? example in madrid why did we take that contract Because of our reputation, because of our people, and then technology. because of our reputation because of our people and then technology But it's hard to copy a culture. but it's hard to copy a culture I think we have a culture of commitment with our customers, and they see it. i think we have a culture of commitment with our customers and they see it And it's about experience. and it's about experience When you take an elevator, you want to be safe. when you take an elevator you want to be safe And our people take it very seriously. and our people take it very seriously And I think that's a big part of the explanation of why we are growing faster than others. and i think that's a big part of the explanation of why we are growing faster than others

Speaker 3: Thank you. My second one is on the margin development. First, on modernization, Filippo, you improved this margin from COVID levels by four percentage points. That was the message at the capital markets day. What about the quarter? Let's see if you're going to answer this, but roughly year over year in the quarter, just to get a feeling for the magnitude. And also, if I can just confirm that you said that you intend to improve the mod margin further in 2025, but with the service margin likely to be stable and for that to come further out. And I'm obviously talking beyond the restructuring in China. I'm talking about the sort of ex-China business, if you like. Thank you. thank you My second one is on the margin development. my second one is on the margin development First, on modernization, Filippo, you improved this margin from COVID levels by four percentage points. first on modernization filippo you improved this margin from covid levels by four percentage points That was the message at the capital markets day. that was the message at the capital markets day What about the quarter? what about the quarter Let's see if you're going to answer this, but roughly year over year in the quarter, just to get a feeling for the magnitude. let's see if you're going to answer this but roughly year over year in the quarter just to get a feeling for the magnitude And also, if I can just confirm that you said that you intend to improve the mod margin further in 2025, but with the service margin likely to be stable and for that to come further out. and also if i can just confirm that you said that you intend to improve the mod margin further in 2025 but with the service margin likely to be stable and for that to come further out And I'm obviously talking beyond the restructuring in China. and i'm obviously talking beyond the restructuring in china I'm talking about the sort of ex-China business, if you like. i'm talking about the sort of ex-china business if you like

Speaker 2: Maybe I clarify first on what I've said. So far, I have not said on service margins going forward anything. I commented 24. But then looking forward with digitalization and so forth, of course, we expect the margins to improve in the longer term. And on the service performance, I was more highlighting the fact that as long as we continue to grow service and modernization as fast as we are doing, of course, that provides us a mix positive contribution to profitability. And in modernization, all I would say that I continue to be very happy with the steady growth of the profitability of the business as we're scaling it up. Maybe I clarify first on what I've said. maybe i clarify first on what i've said So far, I have not said on service margins going forward anything. so far i have not said on service margins going forward anything I commented 24. i commented 24 But then looking forward with digitalization and so forth, of course, we expect the margins to improve in the longer term. but then looking forward with digitalization and so forth of course we expect the margins to improve in the longer term And on the service performance, I was more highlighting the fact that as long as we continue to grow service and modernization as fast as we are doing, of course, that provides us a mix positive contribution to profitability. and on the service performance i was more highlighting the fact that as long as we continue to grow service and modernization as fast as we are doing of course that provides us a mix positive contribution to profitability And in modernization, all I would say that I continue to be very happy with the steady growth of the profitability of the business as we're scaling it up. and in modernization all i would say that i continue to be very happy with the steady growth of the profitability of the business as we're scaling it up Let's see, it is a function, of course, the speed we can scale up, but also it is one where how we deliver to our customers is critical in terms of how we can differentiate and command a pricing premium and impacting then the margins. But I have to say that the modernization team has done a good job. Let's see, it is a function, of course, the speed we can scale up, but also it is one where how we deliver to our customers is critical in terms of how we can differentiate and command a pricing premium and impacting then the margins. let's see it is a function of course the speed we can scale up but also it is one where how we deliver to our customers is critical in terms of how we can differentiate and command a pricing premium and impacting then the margins But I have to say that the modernization team has done a good job. but i have to say that the modernization team has done a good job

Speaker 1: On that slide that I'm showing here, there is one word which is very important, which is industrialize our approach. Largely speaking, this industry is taking modernization as an artisan business because every case is different, and where I think there is a lot of opportunities on making it modular and simple so that actually it's simple and fast for our customers, and it's simple and fast for our people, and by doing this, which takes actually a lot of innovation, we should increase our margin. On that slide that I'm showing here, there is one word which is very important, which is industrialize our approach. on that slide that i'm showing here there is one word which is very important which is industrialize our approach Largely speaking, this industry is taking modernization as an artisan business because every case is different, and where I think there is a lot of opportunities on making it modular and simple so that actually it's simple and fast for our customers, and it's simple and fast for our people, and by doing this, which takes actually a lot of innovation, we should increase our margin. largely speaking this industry is taking modernization as an artisan business because every case is different and where i think there is a lot of opportunities on making it modular and simple so that actually it's simple and fast for our customers and it's simple and fast for our people and by doing this which takes actually a lot of innovation we should increase our margin

Speaker 3: Just final thing. The reason why I'm asking is I get the mixed shift, Ilkka. The reason why I'm asking is that you improved the modernization margin this quarter again. And I think for some people, there was this feeling that all of the self-help would be quite back-loaded. And that is why I'm asking whether there is a chance to improve the mod margin in absolute terms. I get the mixed shift also in 25. Just final thing. just final thing The reason why I'm asking is I get the mixed shift, Ilkka. the reason why i'm asking is i get the mixed shift ilkka The reason why I'm asking is that you improved the modernization margin this quarter again. the reason why i'm asking is that you improved the modernization margin this quarter again And I think for some people, there was this feeling that all of the self-help would be quite back-loaded. and i think for some people there was this feeling that all of the self-help would be quite back-loaded And that is why I'm asking whether there is a chance to improve the mod margin in absolute terms. and that is why i'm asking whether there is a chance to improve the mod margin in absolute terms I get the mixed shift also in 25. i get the mixed shift also in 25

Speaker 2: Is there a possibility? Definitely, there's a possibility. Is there a possibility? is there a possibility Definitely, there's a possibility. definitely there's a possibility

Speaker 3: Okay. Okay. okay

Speaker 2: You've gone very far. You've gone very far. you've gone very far

Speaker 3: Thank you. Thank you. thank you

Speaker 13: Thank you. And we'll now take our next question from Miguel Borrega of BNP Paribas. Hilary Sørensen, please go ahead. Thank you. thank you And we'll now take our next question from Miguel Borrega of BNP Paribas. and we'll now take our next question from miguel borrega of bnp paribas Hilary Sørensen, please go ahead. hilary sørensen please go ahead

Speaker 14: Hi, good morning, everyone. I've got two questions. The first one on maintenance grew 9.5% in 2024. I believe you said previously that you would expect a similar development in 2025, so I'm wondering if you could shed some light on the moving parts regarding portfolio growth, scope, pricing, and mix. Correct me if I'm wrong, but I think in 2024, you said 5% portfolio growth, 2% scope, 3% price offset by 1% mix, so with inflation coming down, you think you can maintain that level of pricing? Hi, good morning, everyone. hi good morning everyone I've got two questions. i've got two questions The first one on maintenance grew 9.5% in 2024. the first one on maintenance grew 9.5% in 2024 I believe you said previously that you would expect a similar development in 2025, so I'm wondering if you could shed some light on the moving parts regarding portfolio growth, scope, pricing, and mix. i believe you said previously that you would expect a similar development in 2025 so i'm wondering if you could shed some light on the moving parts regarding portfolio growth scope pricing and mix Correct me if I'm wrong, but I think in 2024, you said 5% portfolio growth, 2% scope, 3% price offset by 1% mix, so with inflation coming down, you think you can maintain that level of pricing? correct me if i'm wrong but i think in 2024 you said 5% portfolio growth 2% scope 3% price offset by 1% mix so with inflation coming down you think you can maintain that level of pricing

Speaker 2: Well, I guess what we've said about services is that we aim to grow that over cycle towards our midterm targets closer to 10%. And I'll stick to that target, and hopefully, that is consistently then also our target and ambition for every year. And we continue to see good opportunities in growing units. Of course, with NBS market now being more difficult in the last years, we've been seeing modernization contributing positively to the units. And so far, we've been growing quite nicely the units as well. And then market for acquisitions, these small maintenance companies, continues to be very active. We have a good pipeline. So the aim is to be able to continue to add also from there. But of course, it's a smaller part of the growth. Well, I guess what we've said about services is that we aim to grow that over cycle towards our midterm targets closer to 10%. well i guess what we've said about services is that we aim to grow that over cycle towards our midterm targets closer to 10% And I'll stick to that target, and hopefully, that is consistently then also our target and ambition for every year. and i'll stick to that target and hopefully that is consistently then also our target and ambition for every year And we continue to see good opportunities in growing units. and we continue to see good opportunities in growing units Of course, with NBS market now being more difficult in the last years, we've been seeing modernization contributing positively to the units. of course with nbs market now being more difficult in the last years we've been seeing modernization contributing positively to the units And so far, we've been growing quite nicely the units as well. and so far we've been growing quite nicely the units as well And then market for acquisitions, these small maintenance companies, continues to be very active. and then market for acquisitions these small maintenance companies continues to be very active We have a good pipeline. we have a good pipeline So the aim is to be able to continue to add also from there. so the aim is to be able to continue to add also from there But of course, it's a smaller part of the growth. but of course it's a smaller part of the growth

Speaker 1: It's a disciplined approach. It's a disciplined approach. it's a disciplined approach

Speaker 2: Yes, with a smaller part of the growth formula as such. And then, yes, we do aim to also increase the value both from pricing, but also continuing to drive, for example, spare parts and so forth positively. So we don't guide that in detail individual businesses, but I think the recipe from 2024 is not that different for 2025 or 2026 going forward. And yes, we do see opportunities to improve pricing even though the inflation is down. It's part of the sales and operational excellence work we're doing. Yes, with a smaller part of the growth formula as such. yes with a smaller part of the growth formula as such And then, yes, we do aim to also increase the value both from pricing, but also continuing to drive, for example, spare parts and so forth positively. and then yes we do aim to also increase the value both from pricing but also continuing to drive for example spare parts and so forth positively So we don't guide that in detail individual businesses, but I think the recipe from 2024 is not that different for 2025 or 2026 going forward. so we don't guide that in detail individual businesses but i think the recipe from 2024 is not that different for 2025 or 2026 going forward And yes, we do see opportunities to improve pricing even though the inflation is down. and yes we do see opportunities to improve pricing even though the inflation is down It's part of the sales and operational excellence work we're doing. it's part of the sales and operational excellence work we're doing

Speaker 14: Thank you. That's very clear and then just to follow up on the service margin, as you mentioned, in 2024 was stable despite the 10% growth. Usually, labor is offset by price, and you mentioned productivity and value-added services, so in other words, what prevented your margins from growing in 2024, and why should it be any different in 2025? Thank you very much. Thank you. thank you That's very clear and then just to follow up on the service margin, as you mentioned, in 2024 was stable despite the 10% growth. that's very clear and then just to follow up on the service margin as you mentioned in 2024 was stable despite the 10% growth Usually, labor is offset by price, and you mentioned productivity and value-added services, so in other words, what prevented your margins from growing in 2024, and why should it be any different in 2025? usually labor is offset by price and you mentioned productivity and value-added services so in other words what prevented your margins from growing in 2024 and why should it be any different in 2025 Thank you very much. thank you very much

Speaker 2: Many of the things we're aiming to deliver to our customers with digital will actually be the key way to improve the profitability. And of course, we do have right now a mixed negative shift with still fast growth in China contributing negatively to the profitability. So that's one negative on that side. But it is something where the scaling and getting the profitability up, not only growing, but improving profitability is at the heart of the strategy. So we expect that to be better going forward. Many of the things we're aiming to deliver to our customers with digital will actually be the key way to improve the profitability. many of the things we're aiming to deliver to our customers with digital will actually be the key way to improve the profitability And of course, we do have right now a mixed negative shift with still fast growth in China contributing negatively to the profitability. and of course we do have right now a mixed negative shift with still fast growth in china contributing negatively to the profitability So that's one negative on that side. so that's one negative on that side But it is something where the scaling and getting the profitability up, not only growing, but improving profitability is at the heart of the strategy. but it is something where the scaling and getting the profitability up not only growing but improving profitability is at the heart of the strategy So we expect that to be better going forward. so we expect that to be better going forward

Speaker 1: And on pricing, I think we are working in much more detail on understanding where there is a pricing, where there is more value and therefore more price. And we think we can do better. We've started to clarify a couple of stuff in 2024, and hopefully, this starts to impact our 2025 level of profit in service. And on pricing, I think we are working in much more detail on understanding where there is a pricing, where there is more value and therefore more price. and on pricing i think we are working in much more detail on understanding where there is a pricing where there is more value and therefore more price And we think we can do better. and we think we can do better We've started to clarify a couple of stuff in 2024, and hopefully, this starts to impact our 2025 level of profit in service. we've started to clarify a couple of stuff in 2024 and hopefully this starts to impact our 2025 level of profit in service

Speaker 2: Did we lose the line? Did we lose the line? did we lose the line

Speaker 13: No, Michael is still on. No, Michael is still on. no michael is still on

Speaker 2: Okay, good. Okay, good. okay good

Speaker 13: While you're mute. While you're mute. while you're mute

Speaker 1: We had 10 seconds of, "oh my God, we are by ourselves. We had 10 seconds of, "oh my God, we are by ourselves. we had 10 seconds of "oh my god we are by ourselves

Speaker 13: Right. Since there are no further response from Miguel, let me just move on to our next question from Benjamin Heelan of Bank of America. Hilary Sørensen, please go ahead. Right. right Since there are no further response from Miguel, let me just move on to our next question from Benjamin Heelan of Bank of America. since there are no further response from miguel let me just move on to our next question from benjamin heelan of bank of america Hilary Sørensen, please go ahead. hilary sørensen please go ahead

Speaker 9: Yeah, thank you. Morning, guys. I just wanted to have a quick follow-up on some of the margin commentary for 25. So you talked about the backlog margins being down slightly in 2024. Do you have a view on where that will end up in 2025? Are you going to be able to offset cost inflation, etc., in 2024? Just to kind of order margin, how can we think about that progressing over the next 12 months? And then just a quick one on the market outlook. You've talked about a more positive outlook in North America. I think one of your competitors last night said something similar. So can you talk a little bit about what you're actually seeing on the ground? Are you starting to see the orders improve? Is it more just kind of qualified leads? Yeah, thank you. yeah thank you Morning, guys. morning guys I just wanted to have a quick follow-up on some of the margin commentary for 25. i just wanted to have a quick follow-up on some of the margin commentary for 25 So you talked about the backlog margins being down slightly in 2024. so you talked about the backlog margins being down slightly in 2024 Do you have a view on where that will end up in 2025? do you have a view on where that will end up in 2025 Are you going to be able to offset cost inflation, etc., in 2024? are you going to be able to offset cost inflation etc in 2024 Just to kind of order margin, how can we think about that progressing over the next 12 months? just to kind of order margin how can we think about that progressing over the next 12 months And then just a quick one on the market outlook. and then just a quick one on the market outlook You've talked about a more positive outlook in North America. you've talked about a more positive outlook in north america I think one of your competitors last night said something similar. i think one of your competitors last night said something similar So can you talk a little bit about what you're actually seeing on the ground? so can you talk a little bit about what you're actually seeing on the ground Are you starting to see the orders improve? are you starting to see the orders improve Is it more just kind of qualified leads? is it more just kind of qualified leads Just help us understand a little bit what you're actually seeing on the kind of day-to-day in the North American business. Thank you. Just help us understand a little bit what you're actually seeing on the kind of day-to-day in the North American business. just help us understand a little bit what you're actually seeing on the kind of day-to-day in the north american business Thank you. thank you

Speaker 2: I'll start, and then maybe you comment on the market, but I would say that we still have double-digit growth in orders in the Americas, so it's quite a good market and has been for the full year, but on the order margins, trying to be clear and concise on your question, so commenting on orders booked in fourth quarter and the margins we expect those to have when we deliver them going forward, so in China, our margins are down for those orders, and the margins we're booking for China are below the ones we're delivering, so there is clearly a margin pressure in China, in the rest of the world, the margins are more stable, and there's a slight positive, so the orders we're booking are slightly positive towards the ones we're delivering, so a slight tailwind there, so that's on the orders margin. I'll start, and then maybe you comment on the market, but I would say that we still have double-digit growth in orders in the Americas, so it's quite a good market and has been for the full year, but on the order margins, trying to be clear and concise on your question, so commenting on orders booked in fourth quarter and the margins we expect those to have when we deliver them going forward, so in China, our margins are down for those orders, and the margins we're booking for China are below the ones we're delivering, so there is clearly a margin pressure in China, in the rest of the world, the margins are more stable, and there's a slight positive, so the orders we're booking are slightly positive towards the ones we're delivering, so a slight tailwind there, so that's on the orders margin. i'll start and then maybe you comment on the market but i would say that we still have double-digit growth in orders in the americas so it's quite a good market and has been for the full year but on the order margins trying to be clear and concise on your question so commenting on orders booked in fourth quarter and the margins we expect those to have when we deliver them going forward so in china our margins are down for those orders and the margins we're booking for china are below the ones we're delivering so there is clearly a margin pressure in china in the rest of the world the margins are more stable and there's a slight positive so the orders we're booking are slightly positive towards the ones we're delivering so a slight tailwind there so that's on the orders margin And we do expect with that comment to continue to drive actually very good product cost reductions. And in 2024, we had historically high product cost reductions, especially in China. But of course, the pricing environment has been quite tough there as well. And the goal for 2025, we continue to see good opportunities to drive overall the product cost down with the actions we're taking as such. But maybe on America, you want to comment? And we do expect with that comment to continue to drive actually very good product cost reductions. and we do expect with that comment to continue to drive actually very good product cost reductions And in 2024, we had historically high product cost reductions, especially in China. and in 2024 we had historically high product cost reductions especially in china But of course, the pricing environment has been quite tough there as well. but of course the pricing environment has been quite tough there as well And the goal for 2025, we continue to see good opportunities to drive overall the product cost down with the actions we're taking as such. and the goal for 2025 we continue to see good opportunities to drive overall the product cost down with the actions we're taking as such But maybe on America, you want to comment? but maybe on america you want to comment

Speaker 1: Yeah. I mean, the momentum in Americas is building. It's been always very dynamic in modernization, a bit less in service, but positive. We've seen and we're expecting H2 to be better from a new construction standpoint, and it was. And we see month after month, more optimism, more construction, even in new construction. So it's a great market to operate. We have a great team. We actually have a great business momentum on our three business lines. I'm very impressed by the work we're doing, especially in modernization, where our growth is really fantastic. So we're optimistic about Americas. Yeah. yeah I mean, the momentum in Americas is building. i mean the momentum in americas is building It's been always very dynamic in modernization, a bit less in service, but positive. it's been always very dynamic in modernization a bit less in service but positive We've seen and we're expecting H2 to be better from a new construction standpoint, and it was. we've seen and we're expecting h2 to be better from a new construction standpoint and it was And we see month after month, more optimism, more construction, even in new construction. and we see month after month more optimism more construction even in new construction So it's a great market to operate. so it's a great market to operate We have a great team. we have a great team We actually have a great business momentum on our three business lines. we actually have a great business momentum on our three business lines I'm very impressed by the work we're doing, especially in modernization, where our growth is really fantastic. i'm very impressed by the work we're doing especially in modernization where our growth is really fantastic So we're optimistic about Americas. so we're optimistic about americas

Speaker 9: Okay, very clear. Thank you. Okay, very clear. okay very clear Thank you. thank you

Speaker 13: Thank you. And we'll now take our next question from Panu Laitinmäki of Danske Bank. Your line is open. Please go ahead. Thank you. thank you And we'll now take our next question from Panu Laitinmäki of Danske Bank. and we'll now take our next question from panu laitinmäki of danske bank Your line is open. your line is open Please go ahead. please go ahead

Speaker 8: Hi, thanks. I have a question on the sales mix in China, so how much roughly was new equipment out of sales in 2024 and then modernization and services? Hi, thanks. hi thanks I have a question on the sales mix in China, so how much roughly was new equipment out of sales in 2024 and then modernization and services? i have a question on the sales mix in china so how much roughly was new equipment out of sales in 2024 and then modernization and services

Speaker 2: Two-thirds new equipment and one-third modernization and services. The same rule applies there, two-thirds services, one-third modernization. That's the mix. Like Philippe said, we expect that to continue to move in favor of modernization and services, where we see good growth opportunities going forward. Two-thirds new equipment and one-third modernization and services. two-thirds new equipment and one-third modernization and services The same rule applies there, two-thirds services, one-third modernization. the same rule applies there two-thirds services one-third modernization That's the mix. that's the mix Like Philippe said, we expect that to continue to move in favor of modernization and services, where we see good growth opportunities going forward. like philippe said we expect that to continue to move in favor of modernization and services where we see good growth opportunities going forward

Speaker 8: Okay, thanks. And then just to clarify, when you talk about margin decline and further pressure on margin in China, does that only apply to new equipment or also on service and modernization? Okay, thanks. okay thanks And then just to clarify, when you talk about margin decline and further pressure on margin in China, does that only apply to new equipment or also on service and modernization? and then just to clarify when you talk about margin decline and further pressure on margin in china does that only apply to new equipment or also on service and modernization

Speaker 2: That is mainly an NBS comment. That is mainly an NBS comment. that is mainly an nbs comment

Speaker 8: Okay, thank you. Okay, thank you. okay thank you

Speaker 13: Thank you. And we'll now take our next question from Tomi Railo of DNB. Your line is open. Please go ahead. Thank you. thank you And we'll now take our next question from Tomi Railo of DNB. and we'll now take our next question from tomi railo of dnb Your line is open. your line is open Please go ahead. please go ahead

Speaker 7: Hello, it's Tomi from DNB. Can you just comment a little bit on the lowered outlook for China's service from the third quarter, clear growth to fourth quarter, slight growth? Hello, it's Tomi from DNB. hello it's tomi from dnb Can you just comment a little bit on the lowered outlook for China's service from the third quarter, clear growth to fourth quarter, slight growth? can you just comment a little bit on the lowered outlook for china's service from the third quarter clear growth to fourth quarter slight growth

Speaker 2: We are seeing the impact of the slower NBS market in earlier quarters and years impacting the growth in services. So less units being added to the service base and therefore the growth we expect for the market to be now a slight growth rather than a clear growth. So no big drama there and as such. We are seeing the impact of the slower NBS market in earlier quarters and years impacting the growth in services. we are seeing the impact of the slower nbs market in earlier quarters and years impacting the growth in services So less units being added to the service base and therefore the growth we expect for the market to be now a slight growth rather than a clear growth. so less units being added to the service base and therefore the growth we expect for the market to be now a slight growth rather than a clear growth So no big drama there and as such. so no big drama there and as such

Speaker 7: Makes sense. Thank you, and just maybe on the continued comment that 90% of the profits come from services and modernization. Was that different in the fourth quarter alone or was there kind of a deviation compared to the full year and fourth quarter? Makes sense. makes sense Thank you, and just maybe on the continued comment that 90% of the profits come from services and modernization. thank you and just maybe on the continued comment that 90% of the profits come from services and modernization Was that different in the fourth quarter alone or was there kind of a deviation compared to the full year and fourth quarter? was that different in the fourth quarter alone or was there kind of a deviation compared to the full year and fourth quarter

Speaker 2: Not that different. I think the message is very clear that that's where we make our money. Not that different. not that different I think the message is very clear that that's where we make our money. i think the message is very clear that that's where we make our money

Speaker 7: Thank you. Thank you. thank you

Speaker 13: Thank you, and we will now take our last question from Mikael Doepel of Nordea. Your line is open. Please go ahead. Thank you, and we will now take our last question from Mikael Doepel of Nordea. thank you and we will now take our last question from mikael doepel of nordea Your line is open. your line is open Please go ahead. please go ahead

Speaker 4: Thank you. Thank you. And hello, everybody. Just a question on China, really. So if you look back at 2024, we saw quite significant volume pressure in the new equipment business there, and we also saw quite significant pricing pressure as well. If I remember correctly, being down double digits. I'm wondering what kind of a delta you expect on the pricing side for new equipment in 2025 in China. And also, if you expect to see any mix change in your business there, please. Thank you. thank you Thank you. thank you And hello, everybody. and hello everybody Just a question on China, really. just a question on china really So if you look back at 2024, we saw quite significant volume pressure in the new equipment business there, and we also saw quite significant pricing pressure as well. so if you look back at 2024 we saw quite significant volume pressure in the new equipment business there and we also saw quite significant pricing pressure as well If I remember correctly, being down double digits. if i remember correctly being down double digits I'm wondering what kind of a delta you expect on the pricing side for new equipment in 2025 in China. i'm wondering what kind of a delta you expect on the pricing side for new equipment in 2025 in china And also, if you expect to see any mix change in your business there, please. and also if you expect to see any mix change in your business there please

Speaker 2: First, our outlook for the market was significantly down in units. We seldom, or I don't see that you can comment forward-looking pricing, but let's put it, the competitive nature of the market is expected to continue in China, and we continue to see our business mix from this two-thirds, one-third to continue to be moving towards closer to the market, and the market value for China is 50-50, roughly, in terms of new equipment versus modernization and services, so the mix shift towards service and modernization continues in our business, also looking forward. First, our outlook for the market was significantly down in units. first our outlook for the market was significantly down in units We seldom, or I don't see that you can comment forward-looking pricing, but let's put it, the competitive nature of the market is expected to continue in China, and we continue to see our business mix from this two-thirds, one-third to continue to be moving towards closer to the market, and the market value for China is 50-50, roughly, in terms of new equipment versus modernization and services, so the mix shift towards service and modernization continues in our business, also looking forward. we seldom or i don't see that you can comment forward-looking pricing but let's put it the competitive nature of the market is expected to continue in china and we continue to see our business mix from this two-thirds one-third to continue to be moving towards closer to the market and the market value for china is 50-50 roughly in terms of new equipment versus modernization and services so the mix shift towards service and modernization continues in our business also looking forward

Speaker 1: I repeat our China priorities. Number one, cash. Number two, margin. Number three, pivot to, let's say, 50-50 directionally. That means that really in NBS and modernization, we are much more intentional and structured in the customers we want to go after to protect our cash and protect our margin. The market is a market. We've clearly decided in the course of 2024 to adapt the way we're dealing with our business in China. Actually, we see better output out of this. Now, it's still a tough market from the new construction standpoint, but I really see our teams being very focused on where there is the biggest or the best compromise volume margin cash opportunity. I repeat our China priorities. i repeat our china priorities Number one, cash. number one cash Number two, margin. number two margin Number three, pivot to, let's say, 50-50 directionally. number three pivot to let's say 50-50 directionally That means that really in NBS and modernization, we are much more intentional and structured in the customers we want to go after to protect our cash and protect our margin. that means that really in nbs and modernization we are much more intentional and structured in the customers we want to go after to protect our cash and protect our margin The market is a market. the market is a market We've clearly decided in the course of 2024 to adapt the way we're dealing with our business in China. we've clearly decided in the course of 2024 to adapt the way we're dealing with our business in china Actually, we see better output out of this. actually we see better output out of this Now, it's still a tough market from the new construction standpoint, but I really see our teams being very focused on where there is the biggest or the best compromise volume margin cash opportunity. now it's still a tough market from the new construction standpoint but i really see our teams being very focused on where there is the biggest or the best compromise volume margin cash opportunity

Speaker 4: Okay, that's very clear. If you just can squeeze in a final one on the margins, which you, I mean, you managed to improve your group margins by 30 basis points last year, and you expect to continue to improve this year. We talked a bit about the, well, let's puts and takes for the year and how things are going to develop. But would you say that this is a good ballpark in terms of what to expect in terms of the improvement for this year, given what you have previously said, that it's going to be a bit more back-end loaded to get to your targets? Okay, that's very clear. okay that's very clear If you just can squeeze in a final one on the margins, which you, I mean, you managed to improve your group margins by 30 basis points last year, and you expect to continue to improve this year. if you just can squeeze in a final one on the margins which you i mean you managed to improve your group margins by 30 basis points last year and you expect to continue to improve this year We talked a bit about the, well, let's puts and takes for the year and how things are going to develop. we talked a bit about the well let's puts and takes for the year and how things are going to develop But would you say that this is a good ballpark in terms of what to expect in terms of the improvement for this year, given what you have previously said, that it's going to be a bit more back-end loaded to get to your targets? but would you say that this is a good ballpark in terms of what to expect in terms of the improvement for this year given what you have previously said that it's going to be a bit more back-end loaded to get to your targets

Speaker 2: I will leave some work for you guys as well. We will definitely, as I said, we aim to continue the improvement of our margins going forward, and that's the goal. I will leave some work for you guys as well. i will leave some work for you guys as well We will definitely, as I said, we aim to continue the improvement of our margins going forward, and that's the goal. we will definitely as i said we aim to continue the improvement of our margins going forward and that's the goal

Speaker 4: Good. Thank you very much. Good. good Thank you very much. thank you very much

Speaker 13: Okay, thank you, Philippe. Thank you, Ilkka. And thanks to everyone who joined us, listening in and participating with the questions. Great to see active dialogue as usual. If you do have any follow-ups, please feel free to reach out to me or the team. We're happy to help. And I guess we've come to the end of our session then. So thanks and have a great day. Okay, thank you, Philippe. okay thank you philippe Thank you, Ilkka. thank you ilkka And thanks to everyone who joined us, listening in and participating with the questions. and thanks to everyone who joined us listening in and participating with the questions Great to see active dialogue as usual. great to see active dialogue as usual If you do have any follow-ups, please feel free to reach out to me or the team. if you do have any follow-ups please feel free to reach out to me or the team We're happy to help. we're happy to help And I guess we've come to the end of our session then. and i guess we've come to the end of our session then So thanks and have a great day. so thanks and have a great day

Speaker 2: Thank you so much. Thank you so much. thank you so much Bye. Bye. bye