April 19, 2005
KONE Strengthens Its Position in Russia
KONE will significantly increase its participation in the rapidly growing Russian elevator and escalator market by establishing a joint venture with Russias premier elevator company, Karacharovo Mechanical Factory (KMZ). KONE will initially own 40 percent of the new company, KMZ-Kone, and KMZs current beneficial owner, Promsvyaz Capital B.V., will own 60 percent. The agreement includes an option for KONE to increase its shareholding to a majority stake at a later date.
KONE and KMZ have a combined share of more than 35 percent in the highly segmented Russian new elevator market, which has a total volume of about 15,000 elevators per year. KONE, which currently supplies more than 500 elevators and escalators annually to Russian customers and has delivered nearly 10,000 elevators and escalators to hotels, office buildings and other prestige sites in the Soviet Union and Russia over the past 60 years, is strongly positioned at the top end of the market. KMZ is Russias largest elevator company and the market leader in the low end of the market with over 5,000 units produced last year.
This is a key acquisition for us, states KONE Executive Vice President Klaus Cawén. Together KONE and KMZ cover all the elevator needs of the Russian market, which is expected to grow significantly in the coming years. The new company will benefit from combining KONEs technology leadership and operations expertise with KMZs solid position in the Russian marketplace.
The major part of KMZs elevator operations will be transferred to the new joint venture company, whose operation will be expanded to include a full range of services including installation, maintenance and modernization. Initially, KMZ-Kones annual sales are expected to exceed EUR 70 million.
There are more than 440,000 elevators in service in Russia. Code authorities state that at least half of them require some degree of modernization or replacement. KMZ General Director Pavel Petrov, who will become General Director of KMZ-Kone, expects the new joint venture to take advantage of this opportunity for maintenance and modernization growth. We believe that KONEs worldwide expertise in modernization will combine well with KMZs market knowledge and engineering strengths to provide Russian customers with innovative solutions to upgrade their installed elevators. In addition, immediate plans include identifying and implementing a new production site for a new elevator product line.
The KMZ-Kone joint venture will be administratively independent from KONEs existing Russia operations, which consist of wholly owned subsidiaries in Moscow and St. Petersburg with a total of 240 employees. Execution of the joint-venture agreement will follow approval by the appropriate authorities.
Klaus Cawén, Executive Vice President
phone: +358 (0)204 75 4492
Minna Mars, SVP
Corporate Communications & IR,
tel. +358 (0)50 384 9440
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