Good afternoon, welcome to KONE's Q4 earnings call. My name's Natalia Valtasaari, I'm Head of KONE's Investor Relations. As usual, I'm joined here today by our President and CEO, Henrik Ehrnrooth, and our CSO, Ilkka Hara. As in previous presentations, Henrik will start by running through the key highlights of the quarter and the full year, both in terms of our business performance, financial performance, and also what we're seeing in the markets. Ilkka will follow up with a bit of in-depth review about the financials. Henrik will end the presentation speaking about our outlook for this year. We'll go into Q&A then, and I would ask you all to limit yourselves to one question, one follow-up, so that as many people as possible have the opportunity to ask their questions. With that, Henrik, please. Thank you, Natalia, and warm welcome to our Q4 presentation. Today, we have, again, a lot of interesting and exciting news to share with you. Going straight into the highlights of Q4. Q4, we had a solid sales development now, particularly if we look at the market conditions. Clearly, sales was a better level than it was in Q2 and Q3. Our service business continued to perform very strongly. That is something we put a lot of focus on during the past year, and we have continued to drive very nice growth in both maintenance and modernization. The Chinese market was clearly very challenging in Q4, and that had an impact on both orders and cash flow. It's clear that a lot has happened in China since end of Q4. I would say that signs are much more encouraging now than they were just going back to November, for example. We continued to successfully increase our prices in all of our businesses, which have been driving continued margin recovery both quarter-year-quarter and sequentially. Our board of directors have today announced that they will propose to annual general meeting a dividend of EUR 0.75 per B share. It's the same level as the prior year. What about Q4? I would say Q4 performance was very much in line with our expectations. We did see an improvement in profitability. Orders received at EUR 1.9 billion, down about 11% in comparable currencies. It's clear that Chinese market weakness had a big impact in this. Order book remains at the very solid level of more than EUR 9 billion. If you look quarter-year-quarter, up 5%. As I mentioned, sales returned to growth. Now in this quarter, just over EUR 2.9 billion and 2.9% growth here. Clearly, services business was the key driver here, and regionally was Americas. What I'm also happy about is that now our operating income increased 4.3% quarter-year-quarter to EUR 367 million, and our adjusted EBIT improved from EUR 359 million to EUR 365 million. A slight improvement here, even though margin was still down 0.5 percentage point from 13% to 12.5%. Cash flow was EUR 33 million in the quarter, clearly not something we are happy with. That is, perhaps what was a disappointment in this quarter. Earnings per share the same as previous year. As we always say, one quarter is a very short period of time, and now we have a full year to look back to on our performance. It's clear that 2022 had many different phases. Q1 started reasonably normally. In Q2, we clearly faced the COVID lockdowns in China, which meant that our sales suffered a lot because we almost lost a month of sales because of closure of our factory. Q3 continued to be challenging. Now, somewhat better Q4, if you look at profitability-wise. Orders received in that year, EUR 9.1 billion, down 2.5% in comparable currencies, which I would say is actually an okay result in an environment like this. Sales, EUR 10.9 billion, down 1.8%, of course, varied a lot quarter by quarter, and now return to growth. Operating income down 20% to EUR 1,000,000,031, and adjusted EBIT down from EUR 1.3 billion to EUR 1,077,000,000. This is clearly something we're not happy about, that's why we have such a strong focus on profitability improvement, which we, of course, could see partly already in Q4. Cash flow, EUR 754 million, down from an exceptionally strong EUR 1.8 billion before. EPS EUR 0.50. What I will talk about a lot today is where we put our focus last year. We can see that we made great progress in the focus areas we set for us. That again shows that, you know, KONE's team, when we set our mind to something, we can drive good improvement. That was again a sign of that last year. I think the team, from that perspective, did a great job again. As I mentioned, board of directors made a proposal of dividend of EUR 0.75, same level as last year, which means, of course, we're paying out now a bit over our EPS and provides a good dividend yield of 3.6%. Continued strong dividends, business, a bit over EUR 900 million that we will pay out again for last year's result. We know that markets have changed a lot over the last years. It's been about capturing opportunities where they have emerged, and therefore, you know, in a very changing environment, we set our focus on three specific thing during 2022. It was clearly about improving pricing. We've been talking about that a lot. Of course, about driving productivity, absolutely critical in an inflationary environment, an environment where costs are going up. Service business growth, because service markets have provided good growth opportunities, and that's why we have really pushed for growth in that business. How did we do? Price increases did go well last year. It meant that our margins of our orders received improved compared to sequentially and end of 2021. When we look at outside of China, you know, we had set ourselves a target of getting our margins of our new orders to a similar level where we were towards the end of 2020. That is what we achieved. Great progress there. China, clearly more challenging. Also, in our offering development and in our operations development, we focused a lot on productivity and product cost, both we had clearly better improvement than in prior years. Again, great results there. I think, which is very clear, that we continued throughout last year to have market-leading services growth, both in maintenance and modernization. In maintenance, for example, we can see that our service base grew by 5.4%, whereas our revenue grew by 8%. Clearly, KONE 24/7 Connected Services, all of them contributed to having a sales growth that was 1.5 times higher than unit growth. Overall, that was our focus during last year and clearly we're setting a very tight focus for this year to continue our positive development in these areas. Also, what I think is familiar to everyone that the way we measure our longer term success is through our strategic targets. That's a balanced way of looking at how we are developing all the areas that are important to us. In a great place to work, our employee engagement continued to be clearly above global norms. In a changing environment, absolutely critical to have motivated, driven workforce. Most loyal customers, we could see that our customer loyalty, based on our customer loyalty survey, continued the upward trend in both of our businesses, both services and new equipment, and very broadly geographically. What we're doing clearly is delivering positive results from our customers' perspective. Our third target is to grow faster than our markets. We continued throughout last year to have market-leading growth in services, and that is, of course, where we really put our focus. In new equipment, we really said that the first and most important thing for us is improving our margins, so pricing increases. That we did. In terms of market share, we were about in line with markets varied, a little bit, region to region, but more or less in line with the markets for last year. Our fourth target is to have the best financial performance. It's clear that this we are not happy with. Our current profitability is not something that is okay for us, something we want to improve, and we are driving improvement there. In sustainability, we continued our strong performance in environmental sustainability, in our diversity metrics and safety. In environment, you know, we continued to get a lot of external recognitions for the work we are doing there. Continued good progress for us and of course, a lot to do going forward. I would say many good developments, but still on profitability, a fair bit to be done. The other thing that we announced today is that we are planning to renew our operating model. This is, of course, to improve our competitiveness and be able to react even faster to market changes. What are we doing? We are simplifying our operating model. As you know, KONE has always had a culture of a strong local accountability. Now we're driving even further accountability to our area organizations and our front lines. At the same time, we want to continue benefiting from the global scale we have through our global product platforms, services platforms, as well as our supply chain. Why did we decide we want to do this? Well, when we look at the past years, we can clearly see that the market environment has changed very rapidly and situations have changed in a different way in different regions. Going forward, we believe that that will continue to be the situation, that markets will change and the development in North America will differ from Europe or from Asia. Therefore, we want to drive even more accountability to our area organizations to be able to quicker make decisions to capture the opportunities as they emerge in order to drive better growth. Also, as part of this, we are going from five geographic areas to four geographic areas. Two Areas in Europe will be combined to one, called Europe, and that's part of this change. Now, as I mentioned already, what we're really targeting with this is to better capture regional growth opportunities. It's of course about improving our competitiveness and our profitability. With better growth, we can drive also better profitable growth. In an environment that we also want to reduce our costs, the target of this program is to reduce costs by EUR 100 million, also to support our profitability development. Those are some highlights of our financial performance and how we performed and worked last year, and also the change in operating model. Let's next talk about our markets, how they developed in Q4. The equipment markets in Q4 globally declined. We can see that markets declined in each geographic area, it's clear that we could start to see impact of increasing interest rates and lower consumer confidence that had an impact on, for example, market for apartments and housing. North America, which has been perhaps the best performing market, now declined clearly in Q4. Same with Europe. There perhaps a bright spot continues to the Middle East. China declined by around 20% in Q4 and rest of Asia-Pacific slightly, although their bright spot has clearly been India. On the other hand, services market, we can see a much more positive development. That is why we've been putting so much effort in our services business. We can see that the maintenance markets continue to grow as we've seen before, and with best growth in Asia-Pacific and China. Modernization market now slightly lower growth than prior quarters, but still positive growth, which created, again, opportunities which we captured quite nicely. Let's dive a little bit deeper into the China market in Q4. It is clear that Q4 was one of the tougher environments in China and pricing competition was very tough. We did see a lot of changes towards the end of Q4 with the abolishment of all COVID-19 restrictions, which had a lot of impact during the quarter. If we look at all the statistics for Q4, we can see that most of them actually were worse in Q4 than rest of 2022, except for completions. We could start to see the focus on completing semi-finished buildings, how important that is. You know, if we look at China and how I see it at the moment, it's clear that Q4 was a challenging quarter. At the same time, towards the end of the quarter, first we saw an abolishment of all COVID restrictions and opening of the market, which we believe will have a positive impact now as the country goes through that current infection wave, which very far has done so already. At the same time, we have seen a lot of policy announcements to improve the situation for developers, to enable them to refinance themselves, to get financing, to be able to drive the whole property sector forward. Those have clearly created much more optimism and therefore there are encouraging signs for the market. Before the market really starts to now recover, we still need to see an improvement in consumer sentiment, which would then be a result of markets opening up and starting going better now that COVID-19 restrictions have been abolished. That's what we will say also you will see in our outlook. We're saying that we expect Chinese markets, yes, to decline for the full year 2023, but to start recovering towards the end of the H1 as a result of all of these measures that already have been taken. I will come back to that. Clearly, if I compare the situation now compared to, for example, November, outlook is has clearly improved. That is about our markets, a little bit more our China, and with that I'll hand it over to Ilkka. Thank you, Henrik, also warm welcome on my behalf to this Q4 result announcement webcast. I'll go through our financials as normal and start with orders received development for the quarter. For the quarter, orders received was EUR 1.944 billion, down on a reported basis 9.8% and on a constant currency basis 11.2%. This development was driven by China and the property sector continuing to see difficult environment as Henrik already described, and as a result, Asia-Pacific declined significantly in orders received. Americas declined as well as we saw a slight decline in Europe, Middle East, Africa as well, contributing to this development. At the same time, as we've talked about earlier, pricing has been at the center of our focus in this inflationary environment. Also in Q4, we continued to see our orders margins improving compared to last quarter, but as well as compared to last year. In China, pricing continued to be challenging, but lower commodity costs contributed to this development. At the same time, in other areas, we continued to see good momentum with pricing. As Henrik already highlighted, now with the pricing actions we've taken, we have been able to see our orders margin recovering back to the level where it was at the end of 2020. Very good development there. We've already highlighted the strength in modernization pricing earlier, and we've continued to now see good development also in new equipment outside of China. Very pleased to see this continuing in a positive manner. To sales. Sales for the quarter were EUR 2.9 billion. On a reported basis, 5.2% growth, and on a comparable basis, 2.9%. From geographical perspective, strong development in Americas, over 14% growth. Europe, Middle East, Africa growing at 4.8%. Asia Pacific down 3.9%, mainly driven by the development in China there. Also China impacting new equipment, which declined 2.4%. As highlighted already earlier, our services business continued its very strong performance. As a result, maintenance grew 7.6%, and modernization 11.4%. Very good performance on our services business. Our adjusted EBIT for the quarter was EUR 365 million, and the margin for adjusted EBIT was 12.5%. We continued to see positive development here. It's been a focus to be able to recover our margins now towards the end of the year. Absolute basis we're slightly up and margin-wise, we continue to narrow the gap compared to last year. The initial results of the pricing actions that we've taken on orders are now visible in the orders we deliver in this quarter. That contributes positively. We continue to see the widespread inflation creating cost headwinds, having a negative impact in our profits and profitability. Also, the mix impact from declining China sales is impacting negatively our profitability. Cash flow, which for the quarter, was EUR 33 million. Clearly we saw our working capital having a negative impact to our cash flow, down from last year's exceptionally high level of EUR 525 million. As I highlighted earlier, both at the end of last year, but also in conjunction with Q3 results, our timing of the accounts payable had a negative impact to our cash flow and working capital. Overall the liquidity situation in China is impacting our customers and accounts receivable were up in the quarter. Also, I would say that the orders received development in China, which was negative, naturally, contributes to our advances and therefore negatively on working capital development. Clearly, this cash flow is not something we're happy about and are expecting that in the coming quarters we would then start to return to a more normalized development in our cash generation for the business. With that, I'll stop and hand over to Henrik to continue with the market and business outlook. Thanks, Ilkka. How are we seeing 2023? First of all, let's start with the important China market. We expect that the Chinese market will decline by somewhat over 10%, in 2023. As I mentioned already, we expect that recovery will start towards the end of the H1 of the year as a result of the stimulus measures that have already been announced. We're not expecting anything new. We expect just that these will start taking effect and also when the economy improves, see better, consumer confidence. Rest of the world markets grow clearly in Asia Pacific, ex-China, of course driven by India. More stable in, Europe, Middle East and Africa. Of course there, Middle East, better than Europe. Decline slightly in North America, of course from a good level in North America. Modernization markets, we expect to continue to see growth in all regions. Maintenance markets, the good development that we've seen so far, trend to continue with slight growth in mature markets and of course good growth than in Asia Pacific. KONE's business outlook for 2023, we expect our sales in comparable currencies to be at a similar level to the previous year, and we expect our adjusted EBIT margin to start to recover due to the better margins of orders received that Ilkka talked about in our orders, and also the continued solid development in our maintenance business. This whole outlook does assume that construction activity in China starts to recover towards the end of the H1 of the year as a result of the measures that have already been introduced in the property sector. There are a number of things that are supporting our performance. There's of course the positive outlook for our services, the good development we have there. We have a strong order book and we're having gradually better margins that we deliver from that order book. Of course the easing commodity headwinds in Asia, well particularly China, I would say. What is burdening the result? The rotation in the order book continues to be slower throughout the world, because of more uncertain outlook and many developers slowing down their projects or in some markets still some material shortages. Of course the anticipated decline in China's new equipment market. We know that China is by far our biggest market and a very good market for KONE. Also, wage inflation will be higher this year than in prior years, and component costs are still going up. You know, we always have for the components that we buy, there's the raw material part and the value-added part. The value-added part, because of labor costs and other inflationary trends are driving up those costs still. I think many good things and, of course, overall expectation is that we will start recovering our EBIT margins. Now, to summarize, there continues to be good opportunities in services that we are focused on to continue to drive the good performance we have had. We are seeing positive results from profitability actions, particularly when it comes to pricing and productivity. We have a competitive offering, and our focus is to continue to drive long-term growth. We're also taking action to further improve our competitiveness with our planned operating model renewal. With that, we are ready for your questions and comments. Operator, please. Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. If you change your mind and want to withdraw your question, please press star two. Please ensure your lines are unmuted locally as you'll be advised when to ask your question. Please limit yourself to one question and one follow-up question only. The first question comes from the line of Lars Zorn from Barclays. Please go ahead. Thank you. Hi, Henrik, it's Elliot. If I can start maybe on the full year guidance. We have four years history of giving early insights. Now you don't. I appreciate there are some key variables within the China. If I can hone in, please, maybe one for Gustav, on component costs. Trying to understand how to think about raw material and component cost position. Is the next year that European 5G is in spaceship, and that continues to be free? Is it your price business in China that starts to pick there? Just to frame it, as we talked about EUR 400 million headwind over the last two years, that should start to reverse this year. I wonder from a sort of total raw mats and logistics and components cost standpoint, can you help us a little bit on what that number might look like in the 2023 bridge? Thank you. Thanks. Thank, Lars. I don't know if it was elsewhere, but the line on our end was a bit a little bad, so slightly, yeah, difficult to hear your question. First was guidance, then I'll take the raw materials. Yeah. Our guidance, I think we are being quite specific on our sales guidance and also that we will start to see a recovery in our EBIT margin. Clearly, there is some uncertainty still in the market as how will the China market, which we all know is very important to us. It's a good and profitable market for KONE, how that will start taking off. I still believe that we have a quite a specific outlook there. I hope that's helpful to everyone, the guidance we've given. Maybe I'll then continue on the cost or raw material/component cost question. As you said, we are seeing raw materials, especially in China, having a positive impact. That is something that we expect for year 2023. At the same time, as Henrik was highlighting, that even though the raw material part of the component cost is coming down, we're seeing the inflation in general, having a negative impact to this value-added part, so the processing cost to the components. As a result, raw mats are a tailwind, but due to this overall inflation, the component costs are a slight headwind. It's not a huge headwind, so some EUR tens of millions, but clearly a headwind still on an overall level. Thank you, Ilkka. That's helpful. Would it be fair to assume that the EUR 400 million headwind over the last couple of years would reverse, say, over the next three years, of which you could get, say, EUR 100 million this year just to help us a bit for our EBIT bridge for 2023? First, I guess if I would know where the raw material prices for the next three years would go, I think there's other opportunities than just elevate the business. Just assuming current thought. Yeah, yeah. That's sort of more of a joke. All in all, in your bridge, for 2023, as a result, the component purchases that we're making are a slight headwind. Even though the raw material comes down, then still the cost is a slight headwind for us as a result. That's the situation in 2023. Now, if it continues to go down the raw material part, then you need to take a view on the inflation. Obviously, if it continues to go down and inflation starts to come down as well, then it will start to be a tailwind as a result. Of course, we're taking a lot of action to reduce our own product cost through the offering, and that's of course something that is also supporting. A lot of moving parts here. We look at component cost and then of course, offering, where we are driving some quite positive change. Maybe add, to add to that, as we talked about earlier, in conjunction of the earlier results. Clearly in this cost environment also, the focus on scrutiny on product cost, for example, has been on a different level, and we've been able to see quite a good development there. It is something that will contribute positively, going forward, being able to then, counter some of the inflation that we see overall. Briefly, secondly, if I can, and finally, just on the market outlook, Henrik. I was quite encouraged to see new equipment in EMEA flat this year and modernization clear growth. I think we were all bracing ourselves, maybe something that was a bit worse. Maybe help us understand a bit better what you see in that part of your business. Secondly, within market outlook, negative 10% for China feels a bit conservative if we get a completion backlog, pickup in that part of your business. Could you help us understand or frame how much of, should we say, completion backlog is already on the books today versus an order opportunity, in 2023, potentially? Thank you. This order backlog, I would say magnitude-wise, and that's always gonna be a backlog, but, you know, let's say that's probably close to a year of volumes in deliveries and half a year of volumes in orders. How quickly does that come through? That's uncertain. It's always gonna be a backlog, but if we get a better financing situation, that could be a little tailwind. It's clear it's gonna take some time before that starts improving, therefore, the H1 of the year is likely to be more challenging. When it comes to Europe, it's clear it varies quite a lot. There are quite strong markets in the Middle East, in particular. Of course, with high commodity costs, they have a good situation there. Within Europe, it varies between segments, quite a lot of infra, building. It varies a lot market to market, but the good thing is that it continues to be opportunities to be taken. Helpful. Thank you both. Thank you. The next question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead. Hi, good afternoon. Thank you so much for taking my questions. One is a follow-up actually on the margin question, and the second one is on the cash flow from operations. Maybe starting by the one that's follow-up, maybe I didn't fully grasp your answer there. You're guiding for your margins to be slightly up. Your volumes are flat. Raw mats minus components seem like it's not a big driver. What is it some of the EUR 100 million of savings already in that bridge? Is it mix? Is it sort of what do you assume for China margins? If you can re-explain, sorry to ask again about what drives that margin up, because originally, I guess, I thought at least it would be raw materials, but it doesn't seem to be the case. I'll ask the second one afterwards. Thank you for piecemealing the questions. It's much easier for us. Yes. As you said, volume-wise, we're quite flat with this guidance. Mix-wise, it's neutral in a sense that we continue to see good opportunities in services. At the same time, with the orders development that we've seen, particularly in China, that has a other side of the coin. It's good to note that we've seen increasing orders margins in the last quarters since Q3 of last year. That's obviously something that we will now deliver and as we go through the order book to new and newer orders. It will have a positive impact to our results this year and some of that will carry over to 2024 as well, where the order book rotation is slower. Negative side on that bridge is overall cost inflation. For example, salary costs are continuing to be on a higher than normal level, a headwind. Yes, there will be some cost benefits from the new operating model. The EUR 100 million we set as a target, the full impact of that is only expected in 2024, but there are some tens of millions that will help also in 2023 as we go through the program and implement the new structure. Okay, that's very clear. Thank you very much. My second question is regarding the cash flow from operations, and you talked about the key makeup. Looking at the amount of advances as a group, it doesn't look like a huge difference. I guess it's really the receivables. Can you talk about what's going on in China? Was it a one-off in Q4? Do you expect to receive a big inflow from these receivables into the beginning of the year? If you could give us some clarity, I guess, sort of what visibility you have of getting paid in China. Thank you. Well, first, if I think about item by item, the Net Working Capital development. Clearly, our payables are coming down quite a bit compared to end of last year, sorry, end of 21, as well as in the quarter. That's then normalizing as I talked about the timing difference of the payables. On advances, normally, if we have a growing business in, they're actually contributing positively to Net Working Capital, meaning that it is further negative. Now we don't see that, and orders growth in China is the key driver there. Elsewhere, we've seen a better development there. I think on a quarterly basis, as we always say, cash flow will fluctuate. If you look at the situation, so overall, we've seen a more difficult quarters in China starting from lockdowns in Q2, and the tightness in liquidity, overall that is impacting and also having an impact on receivables, being the key driver there. Very quickly, no bad debt increases or is just a timing? Well, we've reserved bad debts as we see risks, but that's not the driver for Net Working Capital development. Understood. Thank you very much. Thank you. The next question comes from the line of Aurelio Calderon from Morgan Stanley. Please go ahead. Hi. Good afternoon, Henri, Ilkka, thanks for taking my questions. I'll take them one at a time. First of all is, around the China market and, apologies because I already asked this in the Q3. If I look at that slide, you show that you have slightly underperformed the market. I just want to understand if that's driven by you, not going after every single project or what's been the driver. Do you think you're losing market share or do you just think it's a conscious decision not to take orders at bad margins? If I look at for the full year in China last year, we're in line with the market or even perhaps slightly above. It varied quarter to quarter as it usually does. In H2 of the year, we had quite a lot of focus on pricing, and that contributed positively in Q3. In Q4, we continued to be very focused on making sure that we take orders that are high quality, i.e. payment terms are in place and also margins make sense. That's perhaps the biggest reason. As it's quarter to quarter fluctuation, we continue to have very strong position there. you know, in end of the last year, particularly H2, the liquidity situation of many of the developers was challenged. Yeah, one is to be very focused on, making sure you take orders where you're gonna get paid, and that's one of the things we kept high focus on. That's helpful. Thank you. It's probably a little bit of a follow-up on some of the previous questions around raw materials. If you could confirm what the raw material headwind was in 4Q, is that EUR 200 million sort of guidance for the full year that you provided and sort of the number where you ended up? I'm just trying to understand how much of the run rate in 4Q for margin should we assume heading into 2023? The actual number for the full year is quite close to the EUR 200 million that I've quoted already earlier. As a result, it was a slight, I guess, headwind in Q4, but not big enough to be called out individually. Your question on the run rate on Q4, I think it's also good to note if you look at the seasonality, that we tend to have a quite a good margin always in the Q4. Then, given the timing of, for example, Chinese New Year and market development in China, Q1 is a bit different. You need to also take into account the seasonality in margins. That's clear. Thank you very much. Thank you. Next question. Sorry. The next question comes from Klas Bergelind from Citi. Please go ahead. Thank you. Hi, Henri and Ilkka. Klas at Citi. My first one is coming back on the cost side and looking at the China impact from lower raw mats. You don't have much head chase here versus rest of the world, you see the impact already now. Let's ignore the component inflation for a moment and just zoom in on the raw mats. If you look at the current spot levels, they are, I guess, is around EUR 80 million annual potential tailwind. I guess that component cost electronics would like to stay elevated. The raw mats impact in China, I think is 60% of a total headwind, which is now reversing. You already saw it in the quarter. Is that a number you would agree with, around EUR 80 million, and then you add the EUR 10 million headwind from component costs on top? I'll start there. Thanks. I guess your net-net impact is different than mine. Meaning that raw materials plus the inflation is a headwind rather than tailwind. If I understood correctly, you are proposing it to be a tailwind for us. Particular in China, the raw materials are developing more favorably. Maybe also the inflation in overall is a lower impact there. In China, we've seen also pricing being more challenging. I'm not gonna comment area by area this, but dynamic-wise, it's a bit different dynamic in rest of the world versus China. Yeah. No, I was commenting on gross impact rather than net of pricing, but you might have a little bit of net of pricing then in there. Yeah. In rest of the world, yes, clearly pricing contributes positively. Fine. I, yeah, I might circle back on that. My second one is on the orders margin, where you say that's now back to levels we saw end of 2020, that's around 14%. When you look at the total backlog conversion now with China-Typically quicker versus India, maybe 12 months, America maybe 18 months or more. That 14%, how quickly do you think you can convert that, Henrik, is that end of 2023, start of 2024? I'm just trying to think about the total conversion. We haven't quoted any specific numbers on what that margin was. I think Ilko was pretty clear in his presentation that when we talk about recovering margin, we talk about outside of China. In China, pricing has been more challenging, but at the same time costs, the cost picture is clearly better in China than rest of the world. From a margin perspective, it doesn't differ that much, but clearly recovery has been better in other parts of the world. We also have to remember mix that China is continuously a very profitable new equipment market. When that share comes down, that's from mix perspective a little bit, is negative for us. With this current rotation, you know, we're gonna start gradually more and more this year, get the good pricing coming through, but that's gonna flow into 2024 as well, particularly, you know, larger projects in Europe and particularly North America. It's good to remember that North America has been one of the markets where we've seen pricing developing most positively. That gives us a good tailwind then, into 2024 and, from that respect. Thank you. Thank you. Next question comes from the line of Miguel Borrega. Miguel Borrega, please go ahead. Hi. Good afternoon, everyone. Two questions from me. The first one, just on your market environment guidance for North America and Europe. Just wanted to dig a little bit deeper on that and your expectations. You said North America slightly down, flat in Europe. Can you just comment on your exposure in each market? I guess in the U.S. it's mostly non-resi, which is typically more resilient, so I was just wondering why you expect the market to be down? In Europe, obviously the resi market is quite weak, so also a bit surprised you think it's gonna be flat. Just wondering what you're seeing on the ground for each of the Western markets? Okay. North America, clearly there is a lower share of residential, but residential is an important part of the market. Also, we're seeing a slowdown in the office market there as well. It's clear that many companies are now thinking about their situation. Also, developers with higher financing costs, there's clearly less speculative build construction right now. That is what is impacting. I would say it continues to be at a good level, the market there. In Europe, it varies a lot. You know, if you look at housing, yes, we can see that housing starts and approvals are coming down in most places. There's still a apartment shortage in most of Europe, but what are the sectors that are improving? When we look at Europe, we say Europe, Middle East, and Africa. It's clear that Middle East, there are some very strong markets, that are actually growing very nicely with a lot of opportunities. Middle East is clearly, the bright spot. You can see quite a lot of continued, infrastructure construction, and, actually some of, office continues to be pretty okay in many parts of Europe. It varies a lot. I would say really the strength comes from Middle East is the big strong part. Hey, maybe to add, just to make clear that we're talking about the same thing. When we talk about market outlook, we look at the total market for elevators and escalators there with a comment. And mainly it means elevators given the volumes. We don't guide ourselves our orders received. We only comment on sales. That's also good to note. Yeah. Thank you. Then in services, can you give us a bit more color on pricing for 2023? I appreciate the color on slide six, where, you know, you grew your maintenance base by 5% volumes, which leaves pricing roughly at 3% in 2022. I suppose if you update pricing by, let's say, last year's inflation, how much are we talking about for 2023? How easy is it to enforce these price increases? Lastly, where do you stand on the connected units? Thank you very much. Thank you. First of all, you know, it's not that 3% is how much we increased prices, because if you think about our portfolio, where we're growing the fastest, it's in Asia, particularly China and India, where average monetary value per unit is clearly lower what it's in Europe or North America. That's of course, making the value lower per unit. Through successful pricing, 24/7 Connected Services and so forth, is actually making it higher. I think the gap is actually quite positive there. You know, if you look at prior to 2018, it was always the almost the opposite, the average value per unit. We are not gonna comment so much on pricing yet because pricing for maintenance is happening right now for the year, so we can talk about in the Q1 more results. Only thing I can say it's higher than prior year because of the trends. Let's see, you know, we're always very cautious that we don't comment on pricing going forward, what we are just negotiating with customers. Let's see what the outcome is when it comes. I would say, I'm quite encouraged there. On connected units, we are now over 20% of all KONE units connected and roughly 15% of our total base is connected. Continuous good growth, and that also contributed more than a percentage point to our growth last year. In the markets where we have maintenance contracts which are tied to some kind of inflation index, naturally, that index last year did not fully reflect yet the inflation we've seen, 'cause inflation was just picking up. In those markets, the inflation now has been a bigger part, and then gives a good environment for escalations. As said, we'll come back on pricing when we look at post-fact what we've been able to accomplish. The next question comes from the line of Jingyi Zhang from Credit Suisse. Please go ahead. Hi, good afternoon, thanks for taking my question. I have 2 questions, the first one is on pricing. Firstly, for China, in the presentation you mentioned like for like, new equipment prices declined slightly and pricing environment continues to be intense. I'm wondering if you have observed any sequential signs of improvement or at least stabilization on China pricing. Now with China's commodity prices now roughly reversed all the inflation we saw over 2021 and 2022, I wonder what's your expectation on pricing environment in China going forward? On the same topic, more broadly for other regions, would you say that low teens is a sensible estimate of the price increase in North America and Europe on new equipment? Now with raw material almost turning into a tailwind. On the other hand, we observe E&E industry has been lagging its larger peers in building space in terms of pricing action. Net-net, I'm curious how you see the pricing environment develop in 2023 in North America and Europe as well. I would say, first of all, we're not going to comment on pricing environment going forward. That we don't do, because that is something between us and our customers, and then in hindsight, we're gonna look at what commercial strategies we deployed. In China, what we can say that, yes, pricing environment was challenging. Perhaps we're starting to see some signs of stabilization because it's clear that with the environment for everyone has been very challenging, even though, as you said, that steel prices have declined clearly there. That is a helpful thing for China market, but pricing has been very tough there. We expect. We have seen some stabilization now. What we're gonna see going forward, let's see. Well, I think it was very helpful. my second question is on maintenance conversion rate in China. if I remember correctly, you previously mentioned it's about 60% for KONE own brands. I'm wondering what is the roadmap for conversion rates to develop and to catch up with other regions going forward in the midterm? Thank you. Pretty much the same level last year as previously. It's clear that we're taking a lot of action to improve conversions and retentions. We know that the market there is very competitive, and a lot of independent players. You know, through value-added services, through Connected Services, those are, for example, ways how we can improve our both conversion and retention. Also we're seeing that where they're starting to deploy condition-based maintenance, where you can use more connectivity and you can therefore reduce your visits, that there is a better situation. It's still only a few cities that have this and, you know, we're gonna start to see a gradual increase in that, but that's gonna take some time. Those are the actions that are on the table to be able to improve conversion. I think regulatory environment also is an important factor there. Got it. Thank you very much. Thank you. The next question comes from the line of Lars Brorson from Deutsche Bank. Please go ahead. Hi, good afternoon. Thanks for the opportunity. I was wondering if we could pivot back to China for a second. Some color or context on the following ideas or topics. When you think about broad-based stimulus, are there specific programs or initiatives perhaps we should focus on? I'd also be interested to hear about kind of an adoption of the newer, lower ASP product that I think you had mentioned in the Q3 call. Do you find that the market's evolving to a lower ASP? And how should we think about that when we think about the market on perhaps a 2 or 3-year view? Thanks so much. Thank you. When you think about the China market, that what has been important? If you look at last year, the biggest challenge in the market was clearly the liquidity for developers. Three Red Lines policy was a very strict rule. Therefore, developers that had a weaker situation just didn't get financing, and they were unable to refinance or even restructure themselves. That has changed. That is perhaps the most important thing, that developers, both private and the ones with state backing, are able to refinance themselves and get financing. They will of course first need to get their bonds refinanced and all that, and then we think market will start to flow better. That is perhaps the most important thing. It was really in November, the 16-point plan that was announced by the government that had many of these elements in there. We can also see the importance of Three Red Lines policy has been declining. It's clear that the developers, many of them need to strengthen their balance sheet. As I said, the most important thing is now they are able to do it. They weren't able to do it during last year. Before we start to see an upturn, the other thing we will need is consumer confidence. For consumers again to have confidence to buy apartments. That probably is gonna take some time when the economy starts to pick up now, when COVID policies have been loosened. There seems to be some encouraging signs now or during Chinese New Year of consumers, you know, propensity to spend and be out there. I think those are the important things we need to see. Great. Could you touch a little bit about the lower ASP product or the newer products you're introducing? Also that has been a feature in China over the past years, is that perhaps the market that has done better has been the more affordable end of the sector. There are some opportunities also in more valuable products, but that's the speed perhaps with highest volumes have been. Yes, we have renewed our offering for lower end and made sure that cost is at the right level. We start to see good demand for that, of course, in the market context that we have right now. Okay. Thanks so much. Thank you. The next question comes from a line of Tomi Railo from DNB. Please go ahead. Hi, Henrik, Ilkka and Natalia. It's Tommy here from DNB. two follow-ups, actually. Did I hear correctly that, Ilkka, you said that price increases will be higher this year compared to last year? I said very clearly that we are not commenting on price increases for this year. I'm saying. What I did say a little bit forward is that on maintenance side, when it comes to annual price escalations. Mm. that there are encouraging signs. Got it. Thank you. It was, actually you who commented that. Secondly, in China, do you see any risk that the customers are starting to ask for lower prices, because steel prices are moving down? I know that the market has always been particularly challenging, but any risks that the prices are going down? Well, I can say first of all that, of course, it's a very competitive market and it's where market price, pricing will set. Of course, everyone needs to look after their profitability. Again, I would say what has been encouraging is how costs have improved, and that has helped margins sequentially in China. Now what the price is gonna be going forward, I think let's see. To be successful there, one needs to continue to have a very competitive offering, great field operations and service. I believe we are very strong in those points, so those are the things you need to have in place to capture the opportunities. Again, I'm not gonna comment on pricing, how we think that's gonna go this year. That's. That we have to see it in hindsight. All right. Thank you. Thank you. The next question comes from a line of Panu Laitinmäki from Danske Bank. Please go ahead. Thanks for taking my question. I just wanted to ask about EBIT margins in China and rest of the world. Are you able to kind of directionally comment on where China profitability was compared to the rest of the group in Q4 and in the full year of 2022? Yes. China for Q4 as well as the full year was accretive to earnings. Its margin was above group level slightly. Both Q4 and full year. Okay, thanks. Can I just ask, what about the sales mix? Is it still like 85 new equipment, 15 services as you've commented in the past? Yes. it hasn't changed from that, Right. Yeah. Directionally, it's like that. Yes. Okay. That's very clear. Thanks. Thank you. Next question comes from a line of Martin Flueckiger from Kepler Cheuvreux. Please go ahead. Yeah. Thanks, gentlemen, for taking my question. I'd like to come back on the raw material price issue. Now, if we could talk a little bit about steel prices in the various regions in 2022, so backward-looking. You know, I understand what you said about the China's development for the steel prices. What did you see in Europe and in the States? What is it that makes you hesitant, you know, to fully answer the, I think the first question of this call, which was, you know, at current spot prices, what would this imply in terms of head or tailwind for you in terms of raw material costs? I guess. That's my first question. I guess if you're asking about 2023, as I said already earlier, yes, overall, raw materials and obviously steel in different formats is by far the biggest one. It is coming down and it's contributing positively. At the same time, the processing cost, because we don't really buy that much pure raw materials, but rather components made out of those. The inflation has driven the processing cost, the value-added part up. As a result, the component cost is a slight headwind. It's not a huge one, but a slight headwind in 2023. Okay, I got it. Thanks. The other one is also a clarification question. Regarding 24/7 Connected Services, if I understood you correctly because the line wasn't always clear, the contract penetration rate is above 20% now. Is that correct? I also heard another number, like 15%. If you could clarify that, please. Sorry. Sure. Sure, Marty. We're saying over 20% for KONE equipment. If you take the whole portfolio, we are roughly 15%. Okay, thanks. The next question comes from a line of Delphine Brault from Oddo. Please go ahead. Yes, good afternoon all. Thank you for taking my question. I have two if I may. First, a follow-up question on the working capital. When do you believe you will come back to a more normalized level in working capital? Is it in the course of 2023? The second question I have is on your reorganization plan. You mentioned 1,000 job reduction. Can we have some granularity, maybe by region and by segment? Maybe I'll start with the working capital and maybe Henrik, you wanna talk a bit more broadly on the operative model changes. Working capital, well, depends how you look at normality. We're now roundabout in working capital on 2019 level. It is quite negative. It just was a lot more negative and now came down. And naturally, we don't guide working capital as such. What I do expect is that, as we said, there's measures that we expect to be impacting China market. They will also have a positive impact to liquidity available to property developers. I expect those to continue to then help to recover the China market from liquidity perspective, and then having a positive impact also to our working capital. After the beginner year, I expect more normalized development thereafter in working capital. When we look at our renewal of our operating model, as you said at the, it impacts about roughly 1,000 jobs globally. We haven't given a breakdown of that regionally, but it will impact all parts of the world when we are simplifying the organization. Therefore, yeah, it will be a global program for us. Okay, thank you. Thank you. Maybe good to note that due to the legislation, we just gave a number for Finland, which we have to give out. That's why there's one specific data point but not the others. Yeah. Finland's about 150 people, 850 rest of the world. The next question comes from a line of Andre Kukhnin from Jefferies. Please go ahead. Hi, Henrik, Ilkka. Thanks for the time. Just the first one is a clarification really. If you just talk on a, on a gross impact. You said you're helpful, you said component cost is tens of millions EUR of headwinds. Are you able to quantify the ease in cost headwinds in China? Please, and also the wage inflation, is that still 1 percentage point faster than normal wage inflation please? I'll start there. I guess, on, the cost headwind part, Henrik, now you're flipping slides- Oh, sorry. as you speak. Sorry. The cost headwind, we haven't broken down that to more granular level. Obviously, China is big part of the overall manufacturing and also as well as deliveries. We haven't commented that on more detail. Remind me about your second question, sorry. Wage inflation. Of course. That's good. Yes, we are expecting wage inflation to continue to be higher than normal level, and also over EUR 100 million in wage inflation as an extra cost as a result. Instead of 1, maybe 2+%. The second one is, historically, you know, the growth in your order book at the beginning of the year has historically correlated quite well with the organic revenue or organic, so the growth in local currencies that you're able to achieve. In this case, you're entering 2023 with 5% growth in your order book. Yet you're guiding for flat revenue development. Understand that there's some delays in construction sites, you know, on both sides of the Atlantic. There's some, you know, there's some sort of component issues that refrains you from that. How can we sort of explain this discrepancy between the way you guide revenues versus your order book growth? I guess the main main contributor there, if you just look at the headline number, I agree with you. As Henrik described, both the tailwinds and headwinds. On the tailwind side, we are seeing order book rotation somewhat slower in 23. It is resulted, so if you think about the mix where we're seeing the growth, fastest rotation in the order book has and is in China, and there we've actually seen decline in orders received. The growth has been especially in North America, where we have the slowest order book rotation. That's impacting overall then the order book conversion to sales, especially in the new equipment and in larger major projects. Thank you. Our last question comes from the line of James Moore from Redburn. Please go ahead. Hello, Henrik, Ilkka, everyone. There are lots of moving parts behind the EBIT margin this year, I'm afraid I'm coming back to some of them because I had a bad line, maybe just me, but I couldn't hear a lot. Currency, have you mentioned that it was EUR 60+ million or so positive last year, I'd expect a EUR 50-60 million negative impact to EBIT in FY 23. Could you comment on that number, firstly? It's not that big of a driver, in 23, the currency. That's why we're not calling it out. Okay. Sort of small, a small negative. Also remember that now this time we've normally given maybe more specific guidance. Now what we're saying is that related to first revenue, that it's on last year's level, and as well as then on profitability, that it improves, expected to improve in 2023. The currencies are not having a big impact to profitability, so that's why we're not guiding also currencies as such. It's clear with weaker dollar and RMB compared to euro, that's a bit of a headwind from a translational perspective. That's clear. Yeah. Okay. The second one is on savings. Could you help me with the timing? I get the message a bit this year, more next year, but is it EUR 30 this year, EUR 70? Is it EUR 10 this year, then EUR 60, then a spill of EUR 30 into FY 2025? I'm just thinking from a bridge perspective, if you could help us with the EUR 100 million. Some EUR tens of millions, for this year. The idea is that. Anything in 25? The idea is that this renewal will be completed during this year, which means it should be fully in place from 2024 onwards. Yeah. You would or you would not expect any impact in the FY 2025 bridge? There's a difference between a running rate at the end of 2024 and all achieved in the bridge in 2025. Run rate should be full at the end of this year. Yes. Okay. nothing in the bridge in 25. No. That's great. Thanks. Just lastly, I get the message on raw material and component together. When you've talked about raw material in the past, have you always talked about raw material and component together? Are you able to say what the pure raw material gross positive would be this year? In the past, we spoke, really focused on raw materials, and it was because the value-added part was more stable and it didn't really have a meaningful impact. Right now, it actually has a very meaningful impact. Therefore, we're now guiding a bit differently, because purely just looking at the raw material doesn't really tell what the impact is to our profits and profitability. That's why we are now commenting it slightly differently. Going back to Klas and others, and I had EUR 80 million, that sort of number, if one was to look at the raw material on a standalone pure raw material basis with a sort of high double-digit number being an appropriate positive, but that is mitigated by a slightly bigger negative on the componentry side. I guess what I was saying was that we have some EUR tens of millions of positive from raw materials and then a opposite inflation item. As a result, net-net, it's a slight negative, but not big enough to be called out. Thanks. Then lastly, if I could, I think it was mentioned about the adjective slight when it came to margin expansion for FY 2023. Is that an adjective you used or was that something that somebody injected into their question? I just wondered if there's any way you can quantify. The consensus is 110 basis points. Is that broadly in line with your thinking? We're saying very clearly that we're saying EBIT margins are put in front of us here, that the EBIT margin is expected to start to recover as a result of the margins and orders received and the good performance of our maintenance business. That's what we are saying right now. Okay. Thank you very much. Thank you. Thank you. There There are no further questions, so I'll hand you back to Natalia now so she can close today's call. Thank you. Thanks everyone for dialing in. Thank you for the questions. I hope you found the call informative, useful. I hope you got the answers that you were looking for. If you do have any follow-ups, please feel free to reach out to the team or to me. We're here to answer them. Otherwise, I would like to wish you a great rest of the day. Thank you, everyone.