Good afternoon, and welcome to KONE's first 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 President and CEO, Henrik Ehrnrooth, and our CFO, Ilkka Hara. As usual, Henrik will start by going through the key developments in the quarter. Ilkka will then continue with a bit of a more kind of in-depth dive into the financials, and then Henrik will finalize the presentation with our market and business outlook. Then we'll move to your questions, and I'd like to remind you all that during the Q&A session, please limit yourselves to one question and one follow-up. With that, we can ensure that as many people as possible have the opportunity to ask their questions. With that, I will hand over to Henrik. Thank you, Natalia, and welcome, and very happy to have you with us today. In particular, as we are happy to share good development that we had in the first quarter and good progress in priorities we have as a company. In the quarter, given the market backdrop, we had a good momentum in our orders received, both when we look at total orders received and in particular how pricing developed around the world. That was positive. Sales actually grew now nicely, really fueled by our services business. I would actually say that the development in our service business in the first quarter was actually excellent if we look at the growth in both maintenance and in modernization. Now, the Chinese market continues to be weak. At the same time, we can see that the policy measures that have been implemented since November last year are starting to have an impact that we can see. Therefore, we are slightly more positive about the Chinese market development now than we were beginning of the year. We can also see that the actions we have taken to improve our profitability is clearly bearing fruit. We are on the right track from that perspective. I'll start with some of the highlights, some focus areas for KONE and our markets, and then Ilkka will dive more deeper into numbers, and I'll then finish with our outlook. First quarter was a good start for us. Orders received at EUR 2,263 million. There was a decline in comparable currencies of 5.1%. Given the market backdrop, there was good momentum. We grew in all of our geographic areas except for in China. A particular highlight was the strong growth we had in our modernization business. Perhaps what I'm most pleased with is that our prices during the quarter improved in all businesses in all regions, really good broad-based development there. We continue to have a strong order book at over EUR 9 billion, giving us a good situation to go forward. As I mentioned, sales up 5.9% to EUR 2.55 billion, really fueled by our services business that grew in total at 13%. A really nice growth there. Operating income at EUR 238 million improved significantly from last year. adjusted EBIT decreased by 23% from EUR 196 million to EUR 242 million, and the adjusted EBIT margin from 8% to 9.5%. Of course, we all have to remember that for KONE, Q1 is always seasonally a clearly slower quarter and lower margin quarter than the rest of the quarters. Another clear highlight was the strong cash flow we had in the quarter, really good cash conversion. cash flow operations at EUR 456 million, and also 42% increase in EPS to EUR 0.36. Good broad-based development. We can see that while market environment continues to be challenging, you know, our teams at KONE have done an excellent job in driving a good performance really everywhere. Great job by the entire KONE team, I would say. Today, we are also publishing our sustainability report for last year. This is something that we are clearly seeing as a competitive advantage for KONE, somewhere we continue to have high ambitions. We set our science-based targets back in 2020 as the first one in our industry. What I think is positive is that now more and more companies also in our industry are implementing these. We can see in Scope 1 and 2 emissions, we are down 17% for the base year of 2018, so we are clearly making good progress here to reach our 50% by 2030. The next big step is clearly has to be the electrification of our vehicle fleet, and that will happen in the coming years. Scope three emissions, which are emissions related to our product materials and life cycle energy consumption of the products we have installed. Here we saw now a decline from base year of 4.3%. This is an area that clearly requires more fundamental R&D and product development in order to reduce it. What I can see in our activity we have in our research and development and offering development, clearly, we have a good development here, and I'm confident that we can get to 40% with coming generations of elevators and escalators. This is clearly the biggest part, something that takes a bit longer, but I can also see that the momentum there is clearly good. For us, sustainability is also more than environment. It is also about diversity, equity, and inclusion. One of the targets we have there is, how many, the share of women at what we call director level position. We started in 2020 at 18%. We are now at 23.5%, and our target by 2030 is to get to 35%. We are on track towards that, and clearly we need to still improve here. Also, safety, a really fundamentally important aspect in our industry, where we have also seen a continued improvement in our safety statistics. Last year, our industrial injury frequency rate was 1.4, and we have a target to get to 0.6 by 2030 here. 1.4 is a clear improvement again that we have had year-over-year. We can see that healthy and good safety culture at KONE. That you can read more about in our sustainability report that will be out today. About the markets. I think as which is familiar now to, I think all of you is in Q1, we always do a deep dive into the markets for last year. There's no direct industry data for our, for our industry, and therefore we do our own bottom-up analysis always in the first quarter. We now have the results to share from that. If you start with the total development of markets last year, the global new equipment markets declined by more than 10% last year. We're about 1 million units in total. Of course, biggest decline was in China, over 15% in total the units, so between 15% and 20% last year. That was of course the biggest impact. At the same time, markets for services, so both maintenance and modernization grew. Maintenance market in units grew at close to 5% and was over 20 million units last year. The modernization market grew at between 5%-10%. If you look at total businesses, our market share in new equipment last year overall was flat. In maintenance and modernization, we continued to have industry-leading growth if you compare to our peers. We're growing faster than our peers there. There we have a good development. If you then look at by market to market, in North America, we had a good development. We increased our market share and improved our market position in new equipment. We're now number three last year, so improved by a point, or one spot there. In maintenance, also we had the fastest growth in the industry. Clearly, we are a challenger in North America. That we know. In China, our market position was stable. We were number two in new equipment. A stable market share. In maintenance, we improved slightly, also number two there. Europe, Middle East, and Africa, in new equipment here, we lost a bit of share. We were number two still. In maintenance, we were stable. In Asia-Pacific, improved in both new equipment and maintenance and kept our market-leading position in rest of Asia-Pacific in the markets we operate. We can see that our focus last year was clearly in new equipment. It was principally on pricing ahead of growth. We see that that is what we achieved. In services, it was clearly about gaining market share, and that we also achieved. Very much in line with our focus that we had last year. Let's turn to this year's markets. How have 2023 started? If you look at new equipment markets, they declined globally in the first quarter, although there were significant differences between different regions. From that perspective, there continued to be opportunities. North America markets declined significantly. Europe, Middle East, and Africa, stable, but huge differences. The further north we go, the more decline, Nordics, Germany, and others. The further south we go to Middle East, their markets actually developed very positively. The Chinese market declined by about 20% in the first quarter, very much in line with the thesis we had beginning of the year. Then strong growth in rest of Asia-Pacific, driven by India and recovery in Southeast Asia. Big differences there. At the same time, services markets continued to be positive. Maintenance growing at its normal trends, so slight growth in the developed markets and good growth in China, rest of Asia-Pacific. Modernization also good growth opportunities almost every market. Strongest in rest of Asia-Pacific. China had a slight dip now. I would say that's mainly due to financing environment coming out of COVID. I'm convinced that the Chinese modernization market will grow this year. That case for the strong growth in that market hasn't gone anywhere. It's very much there. This is a quarterly dip that we've seen. What about the China markets? I think as you probably remember, beginning of the year, our thesis was that during the first half of the year, we see decline, and towards the end of the first half, we start to see a recovery in the markets. That thesis is very much intact. Decline of about 20% in the first quarter. We know financing environment continues to be very tough for developers and also very competitive markets, no question about that. We are seeing that these actions that we've taken started to impact the market. First signs of improvement in construction industry. If you look at the statistics, if we compare them Q1 where we're in Q4, we can see that we see an improvement everywhere. Real estate investment that was significantly down in Q4 is now down 5.8%. Perhaps the most positive signs of improvement is that residential sales volumes are improving. We can also see that in the biggest cities, prices actually have started to increase. Perhaps the most encouraging number are completions, which were up. This is really in line with the priorities in China of the government, is to finish semi-finished buildings, which there's plenty of. There's probably around a year of additional backlog that needs to be finished, that should provide some good opportunities going forward when those buildings get finished. That's about highlights, what we've been doing in markets, and now I'll let Ilkka dive a little bit deeper into our financial performance. Thank you, Henrik, also warm welcome on my behalf to this first quarter result webcast. As normally, I'll go through numbers in a bit more detail, and I have some good news to share. As Henrik already said, we had a good start for the year. Let's start with orders received, which for the quarter were EUR 2,263 million, which is a 6.6% decline on a reported basis and a 5.1% decline on a comparable basis. If you look at in more detail, we saw a strong growth in Europe, Middle East, Africa in orders received, as well as growth in Americas. Also as Asia Pacific grew outside of China. In China, as Henrik already said, in the market environment, our orders received declined around about 25% in the quarter. We've been very focused on orders received margin, and as you see, we've continued to see improvement both sequentially as well as year to year. If I look at the pricing, we have increased prices sequentially in all businesses in all geographies, as Henrik already said. That's very good. On top of that, we see positive impact from decreasing costs in China also contributing to our orders margin continuing to improve in this quarter. Very good performance against the market backdrop, which is clearly challenged. To sales. Sales for the quarter were EUR 559 million. Growth on a reported basis, 4.7%, and on a comparable basis, 5.9%. Despite the slight decline in new equipment, 2.2% decline, we saw very strong performance in the services business. Maintenance growing 9.2%, clearly driven by units, but also the contribution of increasing prices as well as 24/7 continued to have positive impact with other value-added solutions. In services, I would say that the highlight for the quarter was the very strong performance in modernization. 22.8% growth in the quarter is clearly very good number. Very happy about that. To adjusted EBIT. Our adjusted EBIT for quarter was EUR 242 million. Adjusted EBIT margin was 9.5%, up 1.5 percentage points from last year, so from 8% to 9.5%. Despite the persistent inflation, we saw a positive impact from lower material cost in China contributing positive to the results, as well as the pricing and pricing also for the orders that have been from last year with increasing prices having a positive impact to our profitability. Business mix was positive, so we saw strong growth in our services business despite China sales being down. The business mix was still positive as a result. Given a good revenue quarter, we saw better than expected fixed cost absorption as a result, contributing positively to the results as well, as well as good control in our costs to start the year with. At least from my perspective, the highlight for the quarter is the cash flow. Four hundred and fifty-six million is a good start for the year from a cash flow perspective. Despite accounts payable actually being negative to our net working capital, or cash flow, we saw accounts receivable contributing positively as well as maintenance invoicing cycle that helps always at the beginning of the year, contributing our net working capital further developing positively from the end of the last year. Clearly a good start from a cash flow perspective for the business. With that, I'll hand back over to Henrik to talk about market and business outlook for the rest of the year. Thank you. We have slightly updated our market outlook. We now expect that the China new equipment market will decline by close to 10% during 2023. Beginning of the year, we said more than 10%. A slightly more positive outlook on China than we had in January. As I mentioned, our thesis continues to be that activity is expected to start to recover towards the end of the first half of the year as a result of stimulus measures that have been taken. Good growth continuing in Asia Pacific outside of China, slight decline in EMEA and North America. Modernization continued growth in all regions and maintenance, same good old trends that we've seen before. Our business outlook, we have slightly specified. We now expect our sales, as comparable exchange rates to be somewhat above previous year. In January, we still expect it to be at a similar level to 2022. The good start meant that we have been able to specify this a bit. We continue to see that our adjusted EBIT margin is expected to start to recover as a result of the better margins of orders received last year and the continued good performance of our services business. We can see that Q1 was clearly a step in this direction. What is driving our performance is clearly the positive outlook for services and our good performance there. The fact that we have a good order book with improving margins from last year's orders, and also that commodity headwinds have eased in Asia. What is then challenging, clearly, is the decline in the Chinese market. We know it's an important and good market for KONE. We continue to see increasing component costs outside of China and also salary increases. Those costs are increasing. That markets are softening in Europe and North America. Overall, because of the order book, because our service business, we still have a more positive outlook, I would say right now than beginning of the year. In summary, it was a very good start on a broad basis to this year. We are focusing on strengthening our customer focus and competitiveness. The new organizational model that we announced in January that is proceeding well, and we are planning to have that new organization in place as of 1st of July. That will help us also move forward, and we are well on track with the objectives we set there. We have a very good position to capture the growth opportunities in our industry. While economy may be challenged in many parts of the world, we have a lot of good growth opportunities in this industry. Services business continues to be good throughout the world, and we've all seen our position there, which is strong. Also Middle East, Asia Pacific outside of China with our strong positions, we are well set to capture opportunities there as well. Those are positives for the markets going forward. With that, we are now ready and happy to turn over to your questions. Thank you. As a reminder, to ask a question, press star one. star one. Please signal the person star one. We will pause for just a moment to allow you to signal. Our first question comes from Guillermo Peigneux-Lojo from UBS. Please go ahead. Your line is open. Good afternoon, everyone. Guillermo Peigneux-Lojo from UBS. I guess I wanted to tackle first on the market outlook for China. I guess you said before, over 10% decline. Now it's close to 10% decline. I was wondering how do we implement that into what could be seen as your order intake sequential progress as we go forward? Obviously, Q1 is also a seasonal low in terms of activity. Are you at the moment witnessing a recovery in the sequential activity from an order intake perspective? That would be my first question. As you know, we usually don't, we don't guide for our orders received. What I would in general comment is that when you talk to customers in China and talk to, of course, our team there, it's clear that there is more optimism right now than just beginning of the year. Can start to see that this stimulus measures that the government have implemented, that they're starting to have an impact. It's really on, you know, making, getting good progress in completing semi-finished buildings, but also with the stronger developers, continue to drive forward with new projects. I would say the overall sentiment has improved somewhat during the year. Maybe to add to that, you're also asking sequentially. We are expecting the recovery to be more towards the latter part of this year than in the first part. gradually improving towards the second half. Yeah, thank you. Because, you know, Q1 typically is very soft, during the Chinese New Year, is it fair to assume that Q2 will be just by purely seasonal effects, better than Q1? If you look at China specifically, you have to remember Q1, there's always Chinese New Year, which is a couple-week holiday and, you know, things slow down in the market. You don't have as much of those in Q2. That's why Q2 is a higher activity, quarter in general. Yes. All right. Thank you very much. Then, you know, obviously my second question is what happened to the modernization market in China? Because in the previous outlook, you were slightly more positive than you are now, which seems to be rather negative. Could you elaborate a little bit of what. I know it's a small portion of what they do, but nevertheless I think it's interesting from a sentiment perspective. Yeah. Of course. It is clearly an overall growing market in China with a lot of potential. Now, in the quarter, you know, I think it was very much the same. It was about financing environment. Certain segments in modernization continued, others, they were more challenging. I think it's really we know that there's been overall challenges with the whole construction sector, financing, all that. This was just an aspect of it. I still feel comfortable that the market will grow nicely during this year. Full year basically. Thank you. Thank you, Henrik. My last one, I promise. You say second half activity recovery in China. Could you elaborate a little bit as to how do you feel basically that recovery will be in terms of especially timing? How long can last, if I may ask? Well, that's good to see. I would say that the way I would think about it is that the first thing we're seeing now in terms of recovery is that the semi-finished buildings get more and more completed. That you could see in completions already in Q1. That will continue, and there's plenty of that to be done. Then you start to see, we expect to start to see more activity on, you know, new starts, of course, first land sales, new starts, all that to pick up. That would then be something that can continue into next year. Thank you so much. Thank you. We will now move to our next question from Andre Kukhnin from Credit Suisse. Please go ahead. Good afternoon. Thank you very much for taking my questions. I wanted to start with the margin. You've obviously de-delivered 150 basis points improvement year-over-year in Q1, and we've seen the bridge. When I look at Q2, I don't really see many of these bridge components changing apart from maybe that China revenue headwind starting to mount following the orders. Looking back at Q2 2022, that was the very tough period for the whole industry or anyone Shanghai-based when you were locked down for nearly two months. I think you quantified that at the time at about a EUR 100 million impact, which is I think around 350 basis points in its own right. I know you won't guide for Q2 margin, but I just wanted to check. Will I be crazy to just stack these two things up, and make an adjustment for the top line for China decline, in terms of kind of constructing the margin bridge for Q2? Is there anything else in there that I should be aware of not to get overexcited? Well, I think a few things to note and not necessarily on a quarter by quarter basis, but directionally. First, yes, we did say last year that there's a about EUR 100 million headwind from the closures. Not all of that was part of the ongoing business. Some of that was also one-offs related to closing down and related to the overall closure costs. That's number one, so you can't add back that, the EUR 100 million fully. I would say that in the first quarter we did get quite a good benefit from fixed cost absorption and good control of fixed costs. Of course, we're gonna continue to control them. I do expect that inflation, labor cost inflation continuing to be on a high level so that there's more of that impact in coming quarters than on a negative side. Maybe those two would be the two items outside of what you called out. Of course, throughout the quarters, we will continue to see more positive impact coming from the better margin margin orders from last year. That's then the other side of the coin. Thank you. Okay. My follow-up, may I just ask on your China business now, if we look back to 2022, could you just help us calibrate the models in terms of the business mix? Where is it now in terms of new installations versus maintenance versus modernization? I recall you gave 80%, 15%, 5%, but I think this piece has moved in opposite directions actually in 2022. That'll be great. Just on the 15% or whatever has become service component and linking back to what you said it in terms of increasing prices in every business and every geography, have you managed to raise prices for China's service contracts as well? First question, the business mix. That, that's, probably is, more correct to have, 75 and 25 and, then closer to 20 from, maintenance and 5%, then on, modernization. Slightly more, services than, that, what you quoted and had been previously. Then in, China, your question, have we been able to increase maintenance prices in China? No, we have not. That's a correct, clarification. But in overall prices in, China, new equipment, were up in the quarter sequentially. As a result, the prices overall are up. Great. Very helpful. Thank you very much. Our next question comes from Daniela Costa from Goldman Sachs. Please go ahead. Hi, good morning. Yes, two questions from my end as well if possible. The first one just wanted to come back, I think, to uncompleted buildings in China. I think at some point last quarter you mentioned that maybe half of them didn't have elevators. Can you update us on how much that uncompleted yet to be ordered portfolio in the market might be still in terms of like having visibility on further China orders beyond start? The second question is more of a clarification question, but I think you have your slide when you have the market share developments. Sounds like you list yourself as number two in China, and I think at the CMD last year, you had yourself as number one in both new equipment and OE. Maybe you can explain sort of if it's just a methodology or if it was an intended, being careful in terms of like in a tough market, with pricing or exactly why the from one to two, and maybe you can talk to the EMEA market share arrow down as well. I think you alluded briefly to it, any extra color on sort of what drove the trend. Thank you. The China, very simple, one of our large competitors, did an acquisition that they integrated, and we're now looking at them as a consolidated group. That's the big difference there. EMEA, you know, our focus last year was very much on improving our margins, and in that we then lost a bit of market share during last year. Our focus was really more on prices and value that we could get. We see that that happened, that went well. Clearly, we can do better in the market share area. Sorry, the second question was about... The first question. The incomplete buildings in China. Sorry, yes. There, and this is there's not an exact number, take this as a very rough number what I say now. That the extra backlog of uncompleted buildings, say it's roughly a year of volume. It's gonna take some time for that to play out. It's not gonna happen quickly. It's gonna take time to play out, for that to play out. Perhaps about half of those have elevators order, half don't have them ordered yet. Got it. Thank you very much. Our next question comes from Klas Bergelind from Citi. Please go ahead. Thank you. Hi, Henrik and Ilkka, Klas at Citi. My first question I had was on the maintenance growth over 9%. I think 5%-6% is from the installed base, and the rest is from price mix. If that's the case, it looks like the impact from 24/7 of your pricing is now accelerating. Henrik, you alluded to this before potentially being the case for 2023 versus 2022. Can we talk about the pure price element here in maintenance? How much more pricing are you getting year-over-year? Is it one, perhaps two, and the rest is 24/7? I'll start there. First, in total, you have to remember that the fastest growing service base is in China, rest of Asia, particularly India. Their average contract value is of course much lower than they are on a global basis. That of course dilutes all the time. Then we're growing the base and we're improving our pricing. Prices are up actually quite nicely, particularly in Europe, where and, rest of Asia. Pricing, you know, therefore if you look at just five percentage point or little bit more of unit growth and then, the rest is pricing at 24/7, pricing would be more than, you know, for example, in Europe and North America than that percentage would indicate. actually, price increases beginning of the year have gone very well, and that is a clearly important driver for the top line growth, you know, going up to 9.2%, which, I think is a very strong number for that business. The generation of the growth is driven by pricing. 24/7 contributes more linearly, similarly to last year, on value basis. That's great to hear. My second one is on the bridge. Last quarter, Ilkka, you talked about the neutral effect from lower raw mats, but higher component costs. Wonder if that has changed at all for the year. Also you have logistics costs as you start to help you, and then you have the benefit of the cost savings gradually in the second half. Obviously it's not only raw mats and component costs. If you could help us with the bridge items. You talk about pricing on deliveries ex-China is now improving. If you could help us with the magnitude. Are we talking about mid-single digit price increases out of the backlog in EMEA, Americas gradually through the second half? Sorry, that was two in one. Sorry. Well, I'll take the bridge first. First, we talked about last time, our manufacturing costs, I guess is the best way to say it. Yes, there have been some changes during the first quarter. If I look at raw materials in China, they are slightly more a tailwind to us than they were at the beginning of the year. That's contributing positively. In Europe and in the rest of the world, raw materials still are a slight More of a headwind than anything else. Also semiconductor supply continues to be quite tight. We actually managed quite well in first quarter, but we do expect that there is a headwind from semiconductor component costs during the year, as well as inflation overall putting pressure. There, as you said, for example, logistics are a tailwind. Putting everything together net-net, from that perspective, we expect some tens of millions of tailwind. A bit better than we-what we expected in the beginning of the year. Other bridge items I would highlight. Yes, we will get some benefit from the restructuring when it comes to reducing our costs, more towards the latter part of the year. At the same time, of course, inflation, labor costs, for example, labor cost inflation continues to be on a high level, but we will be able to mitigate some of that with the restructuring measures that we're taking. As the full impact of those measures is only visible in 2024, we will get only partially the impact in 2023. Lastly, business mix wise, we will get some positive if we're able to continue to grow our services business, as we got a good start in the year and see good opportunities for the rest of the year. Of course, from new equipment perspective, especially we will see increasing the improved margin orders then rotating throughout the year and also partially to next year, as the order books rotate, especially in, for example, North America, slower than one year. That is the mix. I don't see that much of a difference. For example, in modernization, where we saw a recovery of the margins already earlier that would be a difference between the years in bridge. It's just if we continue to grow that, then it has a positive impact to the operating profit. That's great. Just on the pricing there in new equipment moving through EMEA first and then Americas have a longer backlog. Just curious on rough magnitude? Well, I think in general, I would say that we've continued to see maintenance we already discussed. In modernization, prices recovered already last year have continued to be on a good level. In new equipment, we continue to see good development in prices in Europe and in North America, as well as in Asia Pacific. Within the quarter, also in China, prices sequentially improved slightly. Thank you. Now, next question comes from Andrew Wilson from JP Morgan. Please go ahead. Hi. Good afternoon. Thanks for taking my questions. Firstly, just on the maintenance, on the maintenance growth, which you've helpfully broken down there. I guess my question is, it's quite broad, so I guess you can approach it as you like. Why wouldn't I think that that kind of 9% growth number would be sustainable as we go through the year on the maintenance side? Kind of to the breakdown you've given, 24/7 is a tailwind. The unit growth, I guess, is the question mark you need to continue. I guess pricing, I know lots of these contracts can be annual and therefore feel locked in. I guess is there any reason why I shouldn't be as positive? if it's not 9%, then say high single digits as an example when I think about the maintenance business in 2023. There are of course many things that are, you know, the fact that pricing is better will of course provide more growth during this year. That's right. 24/7 is of course a continuation. You have dependent market, let's say a quarter to a third of the revenues in maintenance are repairs. There also pricing has been an important driver. You know, on the margin where you get on your growth depends on how much activity you have in repairs in the maintenance business. That's of course an important driver and how successful we are in that. That is the part that can fluctuate. Of course, underlying, just the contract base that we look at, there's built in a little bit more growth than in past years because of good pricing in the service contracts. Of course, we need to continue to grow our base, so we need to continue to have good retention rates, which we have, and you know, even improved on those and conversion rates. Of course, all of those have an impact on the growth. Definitely a good start to drive good growth in the business this year. Yeah. That, that's very helpful. Just as my follow-up, it's really just to check a comment on the last question, actually. Just on the labor cost, Ilkka, I think from memory you said something around EUR 100 million or so or just over EUR 100 million headwind for 2023 in the bridge on labor. Is that still a sensible number? Or did I get that number right to start with, I guess? You have a very good memory. That is a good number to be used. Thank you on both. Thank you. We'll now move to our next question from Aurelio Calderon from Morgan Stanley. Hi. Good afternoon, Henrik, Ilkka. Thanks for taking my questions. The first one is really around the margins that you're seeing in order intake. And I guess you're talking again about sequential improvement and also year-on-year improvement. Is it possible to give us a hint of where you think margins are? I think you've talked about being close to 4 Q 2020 in the past. Just trying to frame where those margins are relative to history would be helpful. That'd be the first question. I guess we haven't been very explicit on the absolute number where they are. What I would say that, from orders margin perspective, we've been able to recover closer to level where we were, in end of 2020. To give you some perspective, so before the cost increases started. That's in terms of P&L margins or margin in order intake back in 2020? Yes, comparing apples to apples. Orders- Right. that we were booking then, versus the orders we're booking now to give you a rough perspective on it. Okay. Perfect. That's helpful. My second question is on the cash development, the working capital development. Obviously you had a very good 1Q development printing more than half of the cash you printed last year. How should we think about that going forward? Is there any reason to believe that that's going to completely reverse? I'm asking this because obviously the order intake or I'm assuming you've not been held by down payments in your order intake in that good cash number. How should we think about that going forward? It is a very good start for the year from a cash flow perspective. From a net working capital perspective, what were the key contributors to this positive cash generation? Collection, so receivables came down and they're one of the main areas were actually China that contributed positively. Positive development there, but more normal development in other places. Also North America developed well from that perspective. Advances, yes, they're not helping given the orders development. More neutral item at the end. At the same time, it's to note that we didn't get any help from payables, so that continued to be a quite low level on a balance sheet. Of course, we continue to drive positive cash generation in the coming quarters as well. Let's see how well we develop there, but clearly a good start. That's helpful. Thank you. Our next question comes from Rizk Maidi from Jefferies. Please go ahead. Yes. Hi. Thank you for taking my questions. Essentially focused on the bridge again. Ilkka, you talked about a better or a higher impact from wage inflation in Q2 versus Q1. How should we think about that EUR 100 million for the full year and the phasing of it sort of throughout the quarter, the different quarters please? Let's say it this way, that overall we had a very good control of the costs in the first quarter and a bit better absorption 'cause the revenue was actually quite good in the to start the year with. Normally when you go throughout the year, you start to see more and more the salary increases towards the second quarter and there onwards as the negotiations are concluded. I expect that gradually then to increase towards the EUR 100 million level that I have quoted already earlier. That's one side. Then I guess implicitly also, it's good to note that it's not only the labor costs. We also use subcontractors. Of course the inflation is happening with them as well, but, this labor cost is, something that we have a pretty good idea what will happen this year already. Okay. Understood. Just, I know you don't guide for margins on a quarterly basis, but it feels like you're guiding now for a price to input cost of tens of millions, I mean, EUR 10 million tailwinds. You're seeing better margins coming through the backlog. Is there any reason why we should not expect a faster margin progression on year-over-year basis as the year progresses? Well, as I said, I think good word in the guidance is to start to recover. We had a clearly a good start and better than expected start in the first quarter. There are positives, so the pricing of the orders that are coming from the backlogs, but they're negatives like I said, the labor cost in inflation, which will be a increasingly a headwind in the coming quarters. Of course from a sales perspective, if you look at the orders development in China in the past quarters, it has been negative, that's influencing the sales growth and therefore, slightly hampering also the business mix from a profit perspective. Interesting. Then lastly, just historically, I mean, given your experience into this business, how quickly do you feel the changes in orders in China when the completions turn? I know there's not a direct correlation there, but just roughly. I think the reality of the market today is quite different from where it was some years ago. You know, some years ago, usually when the government opened the stimulus tap, you know, market usually shot off almost, you know, very strongly and very quickly. Given the challenge in the market, that's why it's taking more time, and I think we're gonna see more gradual recovery. And I think one of the big impacts is just the balance sheet structure of many of the private developers that still need to be restored. That process has started. It's gonna take some time. That's why it's difficult to compare it to situations we've seen in the past years. Mm-hmm. Interesting. Thank you very much. Our next question comes from Miguel Borrega from BNP Paribas. Please go ahead. Hello, good afternoon, everyone. Thanks for taking the questions. The first one, just coming back to slide six, where you showed your market position in China going to number two. How far are you from the number one, and what is your approach now? Are you willing to go back to number one? Does that mean that you have to become more competitive? That's my first question. Yeah, China, our competitiveness is strong there. you know, our objective is overall to grow faster in the market. that is our objective in general. At the same time, we want to ensure that we do that with good margins. So we have a lot of focus on margin and therefore grow in a smart way. We are not far away. When it comes to service base, you know, we are really neck or neck. and, you know, we're growing at a good rate there. So I think I feel comfortable with our China position. We have a strong team there. We have a very good distribution across the market. we know that markets have been challenging, and we focus a lot on our margin there. that's what I would say. Overall, our objective in general is to, is to grow faster than markets overall. Great. Thank you. On modernization, clearly this has been a major driver of growth in the last two quarters. Can you expand a little bit here? What is the backlog like? What is supporting the double-digit growth in orders? Lastly, if you can touch on the margin profile of modernization, how different is it from the group level? Thank you. All right. I'll start with the first, and then Ilkka can continue with the second. You know, it's always modernization is a business that we've been putting a lot of focus on the past years. You know, we've talked quite openly about that, we think what we said for a few years, that long term, the biggest growth opportunity in the industry continues to be in services because of China being a not as big of a market as it was and just general economic trends. Therefore, we put a lot of emphasis in developing that business, you know, from a competitiveness perspective, capabilities perspective, sales dimension perspective, you know, from many different perspectives, not one silver bullet. Therefore, I believe that we have a good market position today. We have a good competitiveness, and that's what's been driving it. Yeah. I think we are in a good spot there, right now. It is a good business as a result. From a margin perspective, it's also we've been growing and also growing profitability in that business continuously. It is a good contributor to our bottom line. That was not necessarily the case some years ago. You know, as Ilkka said that we have improved that very nicely in that business. I must say that I think our teams globally have done a really nice job in modernization and continue to do really well there. Thank you very much. We'll now take our next question from Lars Brorson from Barclays. Please go ahead. Hi. Thank you. Henrik, I wanted to follow up on the China question just now. I, first of all, thank you very much for all the data and color you gave on that market and the competitive element. That's obviously very helpful. You're flagging your pricing and margin focus in China. I think you've always been focused on that. Even in 2015, 2016, in that downturn, you still gained share through that period. In fact, we've had a decade of market share gains up until last year. Not so in 2022 and not so in Q1 this year. I again appreciate that. Again, there are some mitigating factors. Mix is not helpful for you. You've got less exposure to large projects and infrastructure that obviously is stronger. As I said, you've obviously pursued a more price disciplined focus in China. I guess the big question to me is, are these headwinds in China you see competitively transitory, or are there some bigger structural questions to your operations in China? I appreciate it's going through quite a big transition with Bill leaving last year and Joe taking over. I was keen for a bit of color around how you see that dynamic. Sorry for the long question, but keen to understand a bit better what you're seeing there, versus your competitors. Sure. I would say that it's clear that the Chinese market is very competitive. It's been very competitive for a long time, and perhaps competition has even a little bit increased over the past years. I feel comfortable with our competitive position in China. You know, I think we had some headwinds last year with the lockdowns that had quite a big impact on everyone. You can see everyone who was Shanghai-based had probably a little bit more of an impact from that than that it continued a little bit of momentum during end of the year, and then focusing quite a lot on margin. You know, these are commercial decisions that one does and then, you know, follow through on what they mean. When I look at our footprint there, our distribution channels, our competitiveness and team, I think we have a very good position. You know, there are always gonna be changes in market positions. Now Q4 and Q1, yes, we did not develop quite in line with the market. I think fundamentally, I still think we have a good spot. We need to little bit just do better and catch up. Helpful. Thank you, Henrik. Can I ask secondly, just to modernization and the outlook in developed markets. I'm trying to understand a bit better the sustainability of the growth we're seeing in mod markets in developed markets. I appreciate that your order in taking the quarter is obviously rather exceptional. I'm just trying to understand the market more generally. History tells us that modernization markets are still rather cyclical. It is discretionary spent geared to bigger projects and, of course, financial health of your customers. You flagged the softer mod market in China. Can you help us a little bit with how you assess the mod market outlook into H2 and 2024? Also, I'm keen to understand whether in China you see any sort of regulatory catalysts ahead of us. Recall 10, 15 years ago, when SNEL was implemented in Europe, we saw a very nice growth uptick on the back of that. Just keen to hear what you see in China in terms of any sort of, to say, catalyst for an uptick in that growth market other than just the broader health of your customers. Thank you. Of course, modernization market, you know, part of that can be discretionary. If times are tough, particularly, the residential segment can push out that to some. That you usually see in weaker economic times. At the same time, you have to remember that the age of equipment just continues to age, so there's more and more need for it. There are many segments that continue to be strong, particularly commercial segments. You can very clearly see, again, the same trend we saw post the financial crisis was that if you are a property owner with commercial properties and, if they are not, fit for purpose up to scratch, you are very unlikely gonna get tenants, you're probably gonna lose your tenants. You have to upgrade them in general. That has been a good driver for the modernization business. Also in some places we see actually quite a lot of repurposing of building. There are many different things. Then you actually see public money coming into it as well. Those are the drivers. I think we have to see. Our point is that the fundamental trends there are very strong. Yes, on the private residential side, if economy is weaker, that can weaken a bit. That's more of a Europe thing than not so much North America. Ari, Ilkka, what you could add, Ilkka, as everyone knows, is also an interim leading our South European business, so dealing with this every day. Yeah. At least, well, for KONE, but particularly for our South European business, it is actually a business where we start to see good opportunities in the coming years. Clearly one where we can also help to generate the demand. Yes, there has to be liquidity available, people want to invest. At the end of the day, it's also one where we can go with an increasing aging elevator base and generate the demand. That's an interesting opportunity. For the coming years, I think it's a quite an interesting opportunity for us in Europe and globally. Good opportunities there. Yeah. Let's see, you know, how economy develops. Of course, there are big differences between North America and Europe. In North America, the good thing is that we know employment rates are very high and that should definitely help. Of course, as you said, the economy will impact that business. On China, there really the driver, as we discussed, is an aging equipment base that we start to get more and more units that need to be modernized. There's no direct regulation right now that would, you know, fuel that business in a significant way. I think it's just the natural thing and safety regulations that are continuing to drive it. Helpful. Thank you both. Our next question comes from Martin Flueckiger from Kepler Cheuvreux. Please go ahead. Good afternoon, Joaquin and Natalia. Thanks for taking my question. I'd like to talk a little bit about pricing on the revenue side, not in terms of order intake in Q1, but rather the impact from price increases in order to see some last year. Can you give us some kind of indication for our bridges, EBIT bridges, of course, what kind of magnitude of pricing impact we should expect? We talked about, you know, low to mid-single or mid-single digit impact in terms of organic growth, I guess. If you could also clarify in this respect with regards to revenue growth structure, what kind of magnitude for acquisitions we should model in or we should take into our model for Q1 and the full year? That's my first question. Well, I guess, sorry. Many questions, so I'll try to piecemeal it a bit. First, the impact of pricing. I think we talked about quite a lot on the maintenance side, how we see the market. There's a pricing is one component on the sales growth, then there's the repair part of it, then the unit part. And clearly the pricing has been a good driver of sales in the beginning of the year, contributing to further growth. On modernization, from sales growth perspective, we've seen actually the pricing being one of the key drivers for our growth in modernization. Yes, units grow some, but also pricing has been one of the key drivers. That's actually been the case already last year. We talked about how pricing has been recovering from a margin perspective, but that's also contributing to then to sales. It is clearly much faster order book rotating part of the business. That has been already visible in last year's numbers. Then to new equipment, which is then the last part of the business. From a modeling perspective, I would try to look at it from different take China one and then the rest of the world. In the rest of the world, we start to see pricing contributing positively last year. I would say that more a high single to low double digit improvements in prices. Okay. That's the order level that's spread out over several quarters or in years, I presume, yeah. Just for this year, you know, what is a reasonable proxy for the pricing component in top line growth? It contributes positively, but, I don't have a good answer to give. I think you need to look at it, order book rotation. The slowest order book rotation is in North America and Europe is a bit more than one year and China clearly below one year. The pricing components come through the quarterly quotes that we were giving already last year. Increasing having impact. It's difficult because mix is there. Yeah. Modernization has a big pricing impact. Right. -in it. That's very clear. Maintenance also has some pricing impact. New equipment, it's mix differences are can be quite significant. That's how we think about it. Sorry, we don't have a very clear answer to you there. No worries. Thanks so much. A second one on currencies. In the past, you used to provide a guidance on the currency effect on EBIT or on the EBIT bridge, you know, assuming that foreign exchange rates remain stable. Could you do the same exercise this time around again, please? I think the reason why we're not giving it now because we're giving a percentage margin guidance instead of an absolute guidance. In absolute it would have a bigger impact, but on a margin it doesn't have, I mean, a big impact on annual basis. Okay, great. Quarter was very limited. It's EUR few million, that's actually in the presentation I have to cheat to look at it, but it's just EUR few million impact. Great. Thanks so much. We'll now take our next question from John Kim from Deutsche Bank. Please go ahead. Hi, everybody. quick question on the order book or backlog progression. A competitor of yours kind of presented a view that the problematic backlog, which I believe is mostly in China, would deliver over fiscal 23 or calendar year 23 into 24. Is that a similar timeline as to how you think about the issue? how is that tracking? Thanks. I guess we have a backlog of customer orders that we try to deliver, we don't differentiate the orders as such. What I would say is that our prices have increased. Since last third quarter, they increased year-on-year. Of course, as the prices increase throughout the last year, increase in the impact of those improved margins will be visible in our sales. Will continue to be also visible in improvements in 2024 for those areas where the order book quotation is clearly more than a year, such as North America. Of course, that means that the older orders without the price increases start to go through the order book mostly in this year. You know, we don't really think about it as having a, you know, good or bad order book. You know, when we took those orders that are older in our order book, the context of the market was different. Costs were lower and the visibility to the sharp increase in cost wasn't there yet. Of course, cost increased and took some time for us to adjust to that. That is just the nature of the game. It's clear that we're successfully getting more and more orders with a better pricing in them. You know, when we took many of those orders earlier on, we thought that the margins were okay, but then costs went up a lot. That is how it goes and, you know, how it's always going in this industry, that you have a long backlog and then sometimes costs come down, then you get a tailwind, then you go up, you have a little headwind. You know, usually that fluctuation is something that is manageable. Now it's just been much bigger. We work through it and we start to see that, every month we get a little bit more still some impact in this quarter, not huge yet, but every quarter a little bit more. Of course, in the meanwhile we talk about product and project basis, do everything we can to drive productivity, product cost reductions, improvement in product profitability. Yeah. Regardless of when we book the orders, we try to do the same thing for all of the orders we have on a continuous basis. Great. Thank you. Thank you. With this, I would like to hand the call back over to Natalia for any additional or closing remarks. Over to you, madam. Thank you. Thanks everyone for dialing in. Thanks also for a very active Q&A session. I hope that you got all the answers you were looking for. If you didn't, you can always reach out to me and the team. We're happy to take your calls later today and during the week. I guess with that, I'd like to wish you all a great rest of the day. Thank you all. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.