Good afternoon, and welcome to KONE's Q2 results presentation. My name is Sanna Kaje, and I'm the Head of KONE's Investor Relations. I have here with me today our President and CEO, Henrik Ehrnrooth, and CFO, Ilkka Hara. Henrik will first go through the Q2 highlights. Ilkka will discuss the numbers in more detail, and Henrik will then discuss the outlook. In the end, we have plenty of time for your questions. Henrik, please.
Thank you, Sanna. Welcome to our Q2 results announcement. I'm very happy to share some great news with you today. We had a very strong quarter in a very difficult environment, an environment that I don't think any one of us has experienced during their careers before. If we start with the highlights, we had a very strong recovery in China. That was clearly an important driver of our performance. That was not only all, it was actually broad-based good performance. We can see that orders received have been impacted by a higher level of uncertainty around the world. Despite this environment, we were able to improve our earnings and have an exceptionally strong cash flow. Perhaps the highlight to me in the quarter was the results of our employee engagement survey, which improved significantly from already high level.
That shows that from our employees' perspective, we have done something right over the past years and in this crisis. Well, Sanna mentioned, I'll start with the key figures. Ilkka, of course, as usual, dive more deeper into them, but then talk about how we have performed during the crisis. I'll talk about how we're developing KONE, a little bit more about our employee engagement survey and the markets. Ilkka will then talk about the numbers in more detail, and I'll wrap up with the outlook. As I mentioned, the highlight really in our Q2 figures were our EBIT. Our orders received, here we can see the more challenging business environment. Were EUR 2.075 billion, down 9.4% in comparable currencies. We continue to have a good and solid order book at EUR 8.3 billion, flat year-over-year.
Our sales were also flat in the quarter at EUR 2.5 billion. Our EBIT, our operating income, improved by 2.9% to EUR 315 million. Our adjusted EBIT, which is a key performance metric for us, improved from EUR 320 million to EUR 325 million, and our adjusted EBIT margin improved by 0.2 percentage points to 12.8%. Clearly, a performance that I'm very happy about. As I mentioned, exceptionally strong cash flow at EUR 592 million. Earnings per share improved to EUR 0.47 from EUR 0.46. As we always say, one quarter is a short period of time, and we have now six months behind us, so we can look at a little bit longer performance. That actually tells quite a lot how this crisis has impacted KONE. Clearly, in the first quarter, it was more China that was impacted.
We started to see some impact in rest of Asia and South Europe. Really broader-based impact in rest of the world outside of China really happened in Q2. Orders received for the first half declined by 4.8% to just shy of EUR 4.2 billion. Our sales, flat year-over-year at EUR 4.7 billion. Operating income declined by 1.8% to EUR 513 million. The Adjusted EBIT declined from EUR 548 million to EUR 530 million. This, of course, because of the weaker EBIT we had in Q1. Margin down to 11.2% from 11.6%. Clearly, a very strong cash flow in the first half at EUR 939 million, by quite some margin an all-time high for six months for us. Earnings per share at EUR 0.76 compared to EUR 0.78. It's really environments like this that the culture, the commitment, dedication of employees are measured.
Here I'm very happy to say that I think we've done quite well from that perspective. Really, the KONE culture, which is a very much down-to-earth culture where hard working is valued, really dedication to delivering upon our promises is very, very important, and we've seen that people have really gone out of their lengths to serve our customers, doing that in a safe way, and that's something I'm, of course, incredibly thankful for. I must say, I couldn't be more proud of the entire KONE team or how they performed in the first quarter, and genuinely thankful for everything they've done. Big, big thanks to all of our employees. Just a stellar performance. Let's start by talking a little bit how the COVID crisis is impacting KONE.
If we start from more the installation side of business of new equipment and modernization, it was clear China recovered very strongly, and we had significant growth across businesses in China. The fact that construction sites and buildings were closed did impact our ability to install and modernize in many parts of the world, particularly many Asian countries and in South Europe. Central and North Europe and Americas, business has continued in installation more normally than in South Europe and rest of Asia. We can also see that demand has been impacted significantly outside of China. In maintenance, our business has been very resilient because elevator and escalator maintenance is deemed as an essential service in most parts of the world, and therefore contractual sales has been resilient. We can see that sales has declined slightly in our maintenance business, decline of 1.7%.
I think the environment we've gone through, it shows a very strong resilience of that business. We can see that contractual sales has continued quite normally, but it's clear that there's been an impact on repair and other discretionary activity that is directly impacted by the lockdowns. A big difference, area to area, which I think is pretty clear to everyone already. If we then look at the situation of what restrictions we have in various markets in operating our business, as we all know, China has returned very much to business as usual and is operating normally. Also many countries in Central and North Europe, particularly the Nordic countries, Germany, I would say quite normalized operations when it comes to installation and when it comes to services. Also throughout Q2, North America, pretty actually good ability to install on construction sites there.
South Europe has been harder hit, but we are going into a better direction, where more of the markets are being opened up. The toughest market from a restriction point of view at the moment is Asia-Pacific outside of China, particularly India, Indonesia, Philippines, and so forth. There we continue to have clear restrictions in place. How the situation is going to develop, we of course don't know, and we of course know that the situation in North America looks concerning. How have we operated in this environment? This we already presented to everyone in Q1, that we established five task forces on how we're going to manage throughout the crisis. I feel that that has worked quite well. It's clear that we have learned a lot during this quarter, and we continue to improve the way we react to situations such as this.
As for most companies, the first and foremost priority has been safe working for our people and business continuity. This, I would claim, has worked quite well. We have been able to constantly help our employees to work safely and provided them with equipment to do so, and our business continuity has been good. We have been able to continue to deliver to our customers throughout this period. Very important to us has also been the well-being, engagement, and care for our people. We know that times like this can be concerning for a lot of people, and how can we help our employees to perform at their best, provide them with the resources, with the help, with the support for them to do a good job.
Some examples of this is that we have had a very strong increase in completed courses in our e-learning platform, which already has been in very active use compared to most other companies. We have also reached out to societies. We have provided support for children's schooling, for example, by providing laptops to kids who can't afford them, to enable them to do remote schooling, and other such efforts in over 40 countries. It has been something that our employees have felt have been very important, that not only are we working on helping our own company, but the societies around us. In a crisis, one, of course, always needs to take actions to contain costs. We have, for example, frozen recruitments. We have not traveled, which saves quite a lot of money, and of course, looked very carefully at financial risk management.
As I already talked in Q1, a success story for us has been our customer activity and sales, how we very quickly moved our sales organization to a virtual mode and got sales activity very high, and in most places doubled the number of customer meetings compared to before the crisis. Question, of course, is the quality of those meetings as high when they are only remotely? I would say that we have also learned a lot here, which part of sales we're going to keep in face-to-face mode, where we can be more virtual, and how we really utilize our digital channels and digital marketing much better. This has been an area where we have taken big steps forward and learned a lot.
We've also focused a lot on what are the mid and long-term opportunities, what are the big changes that are going to happen as a result of this crisis, and actually put some bets in that area. We have, in fact, increased our investments in R&D, IT platforms, compared to what we had planned earlier in the year. Given the situation we have, we can invest in the future. Of course, the objective of all of that is to come out as an even stronger company following the crisis. I feel that we are on the right path, but of course, the results will only be shown in some years' time, but that is clearly the objective that we have. Much of what we've done over the past years have been actually taking us in a good direction, considering what's happened over the past four or five months.
Our focus on our digital services, our 24/7 Connected Services, where we're really leading the market, is of course a service that is very well suited to this. Less physical interactions, more doing things remotely, digitally, and actually improving the service level. Because of the fact that we have that service everywhere in the world, we early on in the crisis decided that we're going to provide this as a free service to hospitals, other medical facilities, care homes during the pandemic, and this has been very appreciated. We have a large group of hospitals have taken up this service and very much appreciated having their most critical equipment, be able to move people more, better working and more transparency, more reliability and safety in this environment. That has clearly been appreciated.
We launched our KONE DX Class elevators in Q4 last year. We can see what these solutions can do is again very well suited to an environment like this. Not only do they come with antimicrobial surfaces, the fact that they come with connectivity built in and with our digital platform, the ability to provide new services through application program interfaces is really perfectly suited to an environment like this where our customers are looking for adaptability, where our customers are looking for new services that we can then provide to them remotely. That we can see is something that has really chimed with our customers.
In Europe where we started the rollout, we can see that actually rollout has been successful, very good reception for our customers, and we can see that we are getting a premium for the services and the fact that they are future proof, these products. Also during the quarter, we launched our health and wellbeing solutions that have to do with touch-free elevator calls, has to do with air purification, has to do with sanitization of handrails, of escalators and so forth, and many other things. That is, of course, something that I believe will be interesting to customers. We can already see a lot of interest there, but of course still early days. An important thing we focused a lot on is we have our people flow planning and consulting team.
We have actually trained a lot of people more in helping our customers plan their offices for safe return to office premises. We have used case studies and we have used best practices that we've shared that how do you set up your flow in your building to make sure that people can stay apart in a safe way but still work efficiently in an office? Of course, it has a lot to do also with algorithms, how you set up your elevators, how you move people in the building. This has also been something where we have had high activity and continue to focus on it. How can we help our customers also return to offices safely and navigate this type of an environment?
Those are some examples how we say we've been helping cities and buildings become smarter and safer in this environment and in general as well. Now, I mentioned already that the highlight really for me during the quarter was the results of our employee engagement survey. Perhaps the most important number is our participation rate. Out of our 60,000 employees, 92% answered the survey, which we did in late May, early June. This is a phenomenal result, and that really shows that KONE's employees wanted to be heard, and we have very relevant result. Already last time we did the survey where we above the so-called high-performing norm. We've been above the high-performing norm for a few rounds already, but now we improved significantly from that. Out of 13 categories that we measure, 11 improved, one was stable, and one was new.
Very broad-based improvement. We got particularly high scores for our strategy and the direction of our innovation. That is, I feel, very positive. It's also clear that in a crisis like this, the way we have responded to the crisis has had a positive impact on the results. That I think is clear. The magnitude of our increase shows that we have been going in the right direction, and we have been able to make KONE a better place to work. That is our strategic target, is for KONE to be a great place to work, and this shows that we're going in the right direction. Of course, we always have work to be done. There are areas for improvement, and we humbly going to look at those and continue to work on this.
Overall, I feel that these results were very good. Let's turn to market development. That was more about how we developed KONE and some developments within KONE. Markets. Let's start with new equipment markets. As we know, big difference in demand. Overall probably pretty stable given the strong performance in China. In North America, markets declined significantly, and we continue to see uncertainty there. Europe, Middle East and Africa, big difference between Central and North Europe and Southern parts of Europe. Central and North Europe, actually several good countries like Germany and Nordic countries, and of course, given the severity of lockdowns in many South European markets and in Middle East, we saw more clear declines. Asia-Pacific, again, very big differences. China, significant growth, double-digit growth in the market in the quarter, whereas rest of Asia-Pacific markets declined significantly.
I've talked already about the challenges in markets such as India, Indonesia, Philippines and so forth. There we saw some much bigger impact. Clearly, continue to see a challenging demand picture in many parts of the world. Services. We can see that maintenance markets have remained resilient, and in overall number of units in the maintenance markets continue to grow, where there's been more challenging part in the maintenance market has been a discretionary aspect like repairs. Overall, North American maintenance market is pretty stable. Europe, Middle East, and Africa, a number of units continue to grow, and continue to grow clearly in Asia Pacific. Modernization, both in North America and Europe, Middle East and Africa, has been impacted clearly, and therefore markets declined significantly. In Asia Pacific, again, big difference is China grew and more difficult elsewhere.
Talking about China, what about the Chinese property market in the second quarter? Clearly, that was an important market and of course, a very important market for KONE. In the second quarter, the markets grew significantly year-over-year. Remember in the first quarter decline, and now they recovered strongly. We are seeing an intensified competition and that is affecting the pricing environment. As you will hear from Ilkka, we've done quite well in pricing, but it's clear that the environment is getting tougher. The government is stimulating via the infrastructure market, we continue to see high activity there. While the activity in the residential market has been very strong, we have to remember that there are a lot of restrictions in place there still. Also liquidity has improved for developers.
Just looking at some of the numbers, real estate investments up 8.5% June now compared to June. Residential sales volume up 2.1% year to date, good recovery following Q1, and new starts also in June up 9%. We don't have the June numbers for price changes in the 70 biggest cities, but in May it was 5% up. As we talked about the consolidation of property developers, that continued. That is about the markets little bit more in detail. Let me next hand over to Ilkka to dive a little bit deeper into our financial performance. Ilkka, please.
Thank you, Henrik, and also warm welcome on my behalf to this second quarter results webcast. I'll go through our financials in a bit more detail, and as already said, I have good news in number of fronts to share. I'll start with orders received development first. Orders received for the quarter were EUR 2.075 billion, which is actually down, on a comparable basis, 9.4%. We clearly saw the COVID-19 impacting our customers, their decision-making, especially if we look at Europe, Middle East, Africa, Americas, and Asia Pacific, excluding China, where orders received declined significantly. However, in China, we did see the recovery, as Henrik talked about it, being quite swift in the second quarter. Our orders received, measured in units, grew significantly, and in monetary value, clearly.
Like for like prices continued to develop positively, had a positive impact, but mix was slightly negative in the quarter. If we look at our orders received margins, we continued to see margins improving slightly in the quarter. Pricing developed positively, there I would call out especially the introduction of our new products such as DX, as well as new services helping us to differentiate. At the same time, yes, there was some easing of the cost pressures that we've seen also impacting our orders received margin. If we move to sales. Our sales for the quarter were EUR 2.5 billion, effectively flat both on a report and comparable basis. We saw new equipment growing at 4.9%, there clearly the very strong recovery, especially in new equipment deliveries in China, impacted that.
In maintenance, our sales declined 1.7%. There our contract sales actually developed well and were quite resilient in this unprecedented environment. As Henrik already highlighted, our repairs business, the part of the maintenance business that's more discretionary, was impacted by the situation, especially as buildings were used less. We saw repairs being negatively impacted. As well as in modernization, where sales were down 15.3% in the quarter as customers were both their decision-making was impacted, but also wanted to postpone some of the projects to minimize the risk in their buildings. If we look at geographically the development, first, biggest impact was in EMEA, where we saw our sales declining 8.9%, as well as in Americas, where sales declined 6.1%. In Asia Pacific, driven by the strong performance over China, we saw growth of 11.7%.
It's important to understand that in China, our sales grew more than 20% in the quarter due to a very strong recovery, in the quarter. Whereas in rest of the Asia Pacific, as was highlighted already earlier, we saw much more impact from the environment in sales. To Adjusted EBIT. Our Adjusted EBIT for the quarter was EUR 325 million. Very good performance, solid execution with our order book in this tough environment. Very proud of this number. We grew 1.6% compared to last year, and also our EBIT margin grew from 12.6% to 12.8%. If we look at the drivers for this development, obviously we had the underlying positive margin outlook for the business.
The strong deliveries in China contributing positively. At the same time, we did have extra costs, negative costs related to COVID-19, which we were partly able to offset with the selective cost containment actions that we talked about already, as well as some items, such as in China, we had some of the social security payments where there was discounts in the quarter, so they were less. The impact of that was approximately EUR 7 million in the quarter positive. Restructuring costs for Accelerate program were about EUR 90 million, and the benefits were about EUR 15 in the quarter. To cash flow, which was exceptionally strong in the quarter, EUR 592 million. While there's always fluctuations on a quarterly basis on the working capital and cash flow, I would call out a few items that are specific to this quarter.
First, the working capital, we saw a positive impact coming from increased payables due to a very strong recovery in China of approximately EUR 70 million. In addition to that, in some countries, the governments decided to delay payments for government-related payments such as VAT, pensions in some countries, which also had approximately EUR 50 million positive impact to our cash flow. As such, cash flow always fluctuates on a quarterly basis, and I would have to say that in many cases in this quarter, we saw that being positive impact to our cash flow. With that, I'll stop and hand over back to Henrik to go through our market and business outlook for 2020.
Thank you, Ilkka. Let's wrap up with outlook for markets and business. Let's start with our overall market outlook. In new equipment market, we expect the Chinese market to be relatively stable. As we know, in first quarter decline, how it increased, and full year, we expect to be quite stable. Other regions, new equipment market is expected to decline because of the uncertainty, and that's, I think, pretty clear to everyone. Maintenance markets, we expect it to remain resilient. Of course, excluding the more discretionary parts that are directly impacted by the lockdowns, as Ilkka already explained for our maintenance business. Modernization markets, there we continue to see good fundamental drivers. However, that's the business where we have seen most hesitation in decision-making and going forward. Therefore, that's probably going to continue to be impacted, but still, the drivers are there and intact.
When it comes to our outlook, which we have specified, we have now six months behind us. As you remember, in March, we came out with our revised guidance when we could really start to see the magnitude of the crisis. We provided the three scenarios. We were quite early on out there providing them, so we had three different scenarios, as you remember, and they all ranged in sales from -10% to zero. Now that we have six months behind us, we can narrow that range, and we believe that it's now our sales is going to be anywhere between -4% and zero in comparable exchange rates compared to last year. The Adjusted EBIT margin is expected to decline slightly or be stable at best. Continuing with the performance that we have had would be very good.
We have a number of things that are supporting our performance. We have a solid order book, a maintenance base. Ilkka talked about the improved margins in our orders received that we have been able to deliver on. That's, of course, important behind our margins here and our Accelerate savings. Clearly, we have things burdening the result. Clearly, the cost of the COVID-19 outbreak, the fact that we have lower cost absorption than we had planned for. Safety and business continuity measures. There in a crisis, it just makes sense to do anything that's required to keep business going. Of course, that causes costs. Subcontracting costs, particularly in Europe, some parts of Asia, continue to be high.
Now it's more not the question of very high demand, it's a question of getting people to the right places and providing safe working environments that are increasing costs, but it's the right thing to do. Also, we have proactively decided to invest in our capabilities to sell and deliver digital solutions and in our R&D. That's something where we are spending more, but it's something I'm very happy about really strengthening our capabilities there. If exchange rates stay at this level, that's going to be about a EUR 20 million headwind for the full year. That about our business outlook. Then if I summarize, very happy about our strong performance in a very challenging environment. Again, a big thanks to all KONE employees for the fantastic work they have been doing.
We can see that the investments we have done in differentiating, bringing out new solutions, have really been well-suited to what's happening now and putting us in a good position. Also, we're facing this weaker economic environment from a position of strength. If we look at the skill and motivation of our employees, we look at our competitiveness overall, and we look at our super strong balance sheet. Those are really great ingredients to come out as an even stronger company as a result of this crisis. That is clearly our objective. As I said, results will be shown in some years' time, at least I feel that we are going in the right direction. With that, I'm happy to open up for your questions.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one to ask a question. Our first question comes from Jeff Sprague with Vertical Research.
Thank you very much. Good day, everyone. I was wondering if you could elaborate a little bit more on the interest level that you're seeing around DX and the wellbeing solutions. Not surprisingly, you'd noted some uptake there, but maybe a little bit of additional color on how you see that play out and is any particular vertical market or country taking the lead on considering these solutions?
Let me start with this health and wellbeing solutions, and it's interesting, you can see different preferences, priorities, different areas, and it's clear that in Asia, they seem to be more focused on touch-free solutions, whereas in Europe and North America, perhaps more on air purification, if you look at elevators. We can see that lot of active dialogue there, lot of interest, but we can see that still a lot of companies are still thinking about what is their approach going to be. How are we going to change the way we work and how we move our people? I believe that the interest is definitely there. A lot of leads and requests there, but we are still early days. I would still say that, let's see. I think it's promising, but I still think we have to see.
When it comes to DX, that's something we started to roll out in Europe beginning of the year. There we have very quickly ramped up sales of DX instead of our old products faster than we had expected, because customers say, "Hey, I don't exactly even know what the digital services are that I want to have in the future, but this platform gives me the ability to be flexible, to bring new services I need them." Also these antimicrobial services has, of course, been a big hit. I think overall, good momentum early on. We have to see. Now, of course, the overall demand situation is a little bit more challenging, but we can also see that in a difficult environment, our customers, they need to find ways of differentiating. How is my residential building different from someone else's, or my office building?
Then you look at all aspects, we can see that elevators have become more important, therefore we are more central to their discussions, how they think about offices for the future. That's perhaps what I would say at this point.
Thank you for that.
We'll take our next question from Lars Brorson with Barclays.
Thank you very much. Hi, Henrik, Ilkka, and I hope you're all well. Henrik, if I can try my luck with three questions, one on revenue guidance for the year, one on your maintenance business in the Americas, and one just on your China outlook and thoughts going forward there. If I can start with your revenue guidance, revised guidance down zero to four. Just very simply, can you help us with a bit of color around your three key segments, new equipment maintenance, modernization, and your expectations, or at least maybe try to rank them, and what your thoughts are at this point for the full year from a revenue standpoint across those three?
Well, I would say, of course, as you've seen in this quarter, big differences area to area. It's clear that the maintenance business is the most resilient one. No question about that. We have a very solid and healthy order book on new equipment side, and if the markets continue as they are, we should have a pretty resilient business there as well. Of course, that depends on how markets are open and our ability to install. As said, in most places, that is very possible at the moment, with the exception of some Asian markets outside of China. We have to see there. Clearly, as I mentioned already, the most impacted is modernization. I think that's kind of logical.
A lot of modernization happens, for example, residential buildings or maybe people have not wanted to have a lot of work being done in their buildings now while they have to spend more time there and maybe not want to have so many workers there and so forth. If that is more flavor on that. Ilkka, you have anything to add to that?
No, I think it's a good way to describe it.
Thank you, Henrik, maybe just following up on that and moving on to my questions with regards to maintenance in Americas down, what mid to high single-digit this quarter. I understand within that your spare parts business is down solid double-digits. That's about a quarter of your maintenance business. That's obviously a higher margin, shorter cycle business. I presume that's partly impacting your 2020 guidance. I was struck by your comment, I think, around North America outlook was "concerning," and I agree with that. Not the first time we've heard it in this earning season, that the outlook around that part of the world does look more challenged. I wonder whether you can give us a bit of flavor for the developments around, particularly your spare parts business in North America. I appreciate, again, it's a different type of business than your EMEA business.
It's much skewed to commercial buildings. The thoughts around whether you think that might pick up as we get into the second half of this year?
Maybe I'll start, and if, Henrik, you have more to add to that. If I start from putting things to context in terms of the maintenance business. We saw overall the maintenance business being down 1.7%. If I look at the components, really, as I said, the contract sales part of it is quite resilient. That's the ongoing maintenance. There's the discretionary part, spare parts business with a bit more than 25% on global level of that business. There we actually did see our sales being down about 10% in the quarter. If I look at the North America, clearly there, our exposure to office and retail is higher than on average at KONE. That was clearly impacting it more.
Only thing last I would say, you talk a lot about spare parts. Of course, it's repairs overall. Spare parts is only a part of that.
I'm sorry, Henrik, I did mean repairs, not spare parts indeed.
Yeah.
I wonder whether you can give a bit of flavor for what you're thinking for the second half of this year.
I think that business will be very much dependent on how people are returning to offices, how people are returning to shopping centers, all of that. Why is that business down? It's clear that there's been a lot of buildings that have not been used. If they're not used, the need for repairs, of course, more or less goes away. Clearly some customers are also working hard to contain costs in this environment. I think that would depend on much how well companies are able to return to offices. We start to use facilities more broadly and so forth.
If I can try my luck with a third and final question, just on your China market outlook. We've seen a V-shaped recovery this quarter versus first quarter, unsurprisingly. You're keeping the market outlook for 2020 stable. That surprised me a little bit. First half is flattish overall. You're exiting first half at a double-digit run rate. I appreciate your comment, Henrik, around government restrictions. I would have thought there would be enough to see growth overall in the market. Maybe the specific question around that would be, are you already starting to see a sort of a slowdown or a moderation visible in parts of your business after a very strong Q2?
I think the point really is that we saw a sharp decline in Q1, and now you saw recovery in Q2. You kind of recovered to a normalized level, actually a little bit even beyond. You start to have, of course, high comps to compare to. I think, compared to anywhere else in the world, if you have a stable market compared to what it was very strong market second half of last year, then I think it's not a bad situation. I think we have to see. Let's see how it develops. Clearly, second quarter recovery was better than what we had expected.
Thank you both.
Thank you.
Thank you.
Our next question comes from Lucie Carrier with Morgan Stanley.
Good afternoon, gentlemen. Good afternoon, Sanna. Three questions from my side. I would go one at a time. If I could have a follow-up on last question on China. I think you've mentioned a negative mix in the quarter and probably a bit more pricing pressure. The last time we had seen pricing pressure, the market was down sharply at the time. We could understand people being a bit more aggressive. What do you think is happening now with the mix and the pricing dynamic, which seem to be going slightly the wrong direction?
Ilkka, want to start with the mix?
I'll start with the mix. Actually for us, the mix comment was more between KONE and GiantKONE in Q2, being slightly towards more the GiantKONE than KONE. If you remember in Q1, it actually was the opposite. I wouldn't read too much into this mix. It fluctuates on a quarterly level somewhat.
Yeah. Sorry, second part of the question.
Pricing. Yeah
Yeah, pricing environment. Sorry. Of course. I think you have to look at it from a global perspective that you have a lot of global players or regional players, and when the markets are down in most other parts of the world, clearly people are focusing more on China. I think you have to put it in a global context rather than just China.
Okay. Thanks very much. My second question was maybe also to come back to what you see at the moment in office buildings or other commercial facilities. I was wondering if, thanks to all of you kind of digital tools now at various level of the maintenance, whether you had a good sense from your standpoint at where or how quickly the ending of the lockdown measure are allowing people to come back to offices and retail shop. I'm just curious to understand whether you are able to calibrate either your staff or your resources as you are seeing potentially people going back to this building kind of ramping up. Are you able to follow that? If you are you able to give us some indication on how quickly you are seeing all of the facilities reopening?
The answer is yes, of course, we can adjust our resources, and of course, we are in close contact with customers and how they are doing this. For the buildings where we have real-time connectivity and we can deploy analytics, we can see that. We know that it's still only part of our base where we have that ability. There we can see it, but I think what you can follow on general movement of people, traffic of people around, where there's a lot of data around there now that chimes quite well with what we see.
I guess maybe the last question, before I go back on the queue, would be on the capital allocation. At the end of your commentary, you've mentioned very strong balance sheets, which has been the case for many years. Obviously, at the moment it looks like the Thyssen opportunity is off the table. How do you think of using this very strong balance sheet in the next couple of quarters, couple of years?
I would say just where we are right now, of course, it's a huge strength to have a balance sheet like we have. That means that we can make choices, we can find opportunities, and of course, we are looking for them. In a crisis like this, I think it's a real strength to have a balance sheet like we have, and that's what I would say. Very happy about it.
Sorry. Are you suggesting that this is more still looking on M&A opportunities the way you want to be using this balance sheet?
Absolutely. If there are good M&A opportunities that have come up, of course, yes, we're going to look at them, and we have a lot of firepower to do such.
Thank you.
Thank you.
We'll take our next question from Guillermo Peigneux-Lojo with UBS.
Hi, good afternoon, everyone. It's Guillermo Peigneux-Lojo from UBS. I wanted to actually further elaborate on Lucie's questions. I guess, your comment in the press release today of a stable Q-on-Q pricing in China and the mix, also referring to China. I wanted to ask, first of all, when you say stable Q-on-Q, and then, again, you're commenting on the prices comment that you just did before, could you explain us a little bit what has happened in the trend on pricing? The market is going up, and it's strange to see that pricing is now flat Q-on-Q after many quarters of increases. Then on the mix, you mentioned, KONE, GiantKONE and KONE. Is this related to GiantKONE maybe more focused to residential markets versus KONE into non-residential or other markets? Thank you.
Maybe I'll start. First looking at the pricing. If I look at the pricing, year-on-year, we were actually slightly up. Yes, more stable quarter-on-quarter there as we've seen this improvement starting earlier. I don't think the environment, yes, it's getting tougher, but we've been able to actually perform quite well, I would say, there. I'm quite happy about that development from a pricing perspective. At the same time for this GiantKONE mix, as I already said, there's always fluctuations on the mix on a quarterly basis. This time we had a bit more weight on the GiantKONE side compared to KONE. In first quarter it was actually the opposite, I wouldn't say that really you can read too much into it in the market. It's just the way this quarter it happened to be.
Thank you so much.
Thank you.
Thank you so much.
We'll take our next question from Klas Bergelind with Citi.
Yes. Hi, Henrik and Ilkka. Sanna. It's Klas from Citi. The first one for you, Ilkka, on the bridge. Obviously solid execution and that's really good to see. There's also a mix element that I would like to understand. The orders to sales conversion is very quick in China, and China is still higher margin than other regions. The mix has been good. Could you comment, Ilkka, on what it did to the quarter in the bridge there and to what extent execution on the cost side is sustainable? Did you have savings that will drop out as activity increases? I will start there.
First of all, I think it's good to remember that the environment that we're working on in Q2, it's been quite unprecedented, so it's not as straightforward as would normally be. It is true that we had very strong recovery, strong deliveries in China. That clearly is a positive impact in the bridge. If you think about the bridge overall, we had Accelerate savings contributing positively. At the same time, there's also cost headwinds, which were against us there. Normal increases in costs. I would say then if I look at the COVID-19 related items, so we had extra costs related to operating in this environment.
Some of them are really related to PPE protection and as such, but I would still maybe call out even more so that the complexity of this environment, how it causes us to maybe lose a bit of productivity and extra planning and really reaction times to our customer situations. That's a bigger cost. In the COVID-19 related costs, so the extra costs were higher than what we were able to see as cost containment actions, including what I call out as a special reduction in social security payments in China. Overall this was a negative contributor.
Let me ask you like this instead. When you look at the regional margin between China and developed markets, were you really sort of positively surprised about China, but were you also positively surprised in developed markets? Are you feeling that I'm just trying to gauge whether the China component was really a bigger driver to the margin than maybe we can see out of the numbers?
Well, along the fact that our sales in China grew more than 20% obviously is a big number.
That definitely was a positive contributor. As we've been explicit, our new equipment business in China is a better than average profitability business, that clearly contributes positively. In elsewhere, the situation has been much more about than working in this environment where the restrictions have been more tighter and coping with that complexity.
I would probably build on that theory.
Yeah. Thank you
actually our performance in North America, particularly in central northern parts of Europe, has been strong in the environment.
Yeah.
Actually there we did better than we had even expected, and we've been able to deliver on the good pricing and on that good margin of our order book. It is not only there and perhaps from a margin perspective, clearly the fact that we have less repair sales is then a headwind on margins as well. There are always puts and takes.
No, it's very impressive. Well done. My second one is coming back to Lucie's on the balance sheet. Obviously very strong cash flow and the macro environment is improving, and this could see the debate in the market resurfacing on whether KONE is ready to pay extra dividends. Now at the same time, Thyssen is owned by private equity, and they might not be long-term holders. Who knows, Thyssenkrupp might come back as an asset for sale at some point. Okay, I'm not sure how I'm going to ask this. Would it make sense to sit out and wait for that opportunity to come back, even if it takes several years or to pay an extra dividend? Just want to hear a little bit more from you, Henrik.
Well, I would say that first of all, that opportunity is now gone. We closed our books on that project, and we are looking forward and developing KONE as it is. Of course, the benefits of that hasn't gone anywhere, but we are looking solely forward. I would just in general say that in an environment like this, I'm really happy that we have a strong balance sheet, and I think there's real value to it.
Okay. Quick final one is on the sharp ramp of sales of the new range. That's good to see. Could you also comment on the digital services, whether there has been any surprising change on the acceptance levels already now? Sort of maybe in light of COVID-19, it's interlinked with the new DX, and how KONE Care and 24/7 is being rolled out. Is that also increasing as part of the maintenance mix?
On our 24/7 Connected Services, of course, DX is very new. On our 24/7 Connected Services, yes, we have seen increase in month-to-month growth numbers there, particularly in many European countries and some Asian countries as well, and China. Yes, we have built momentum there. I think customers realize that those are services that are very good in an environment like this.
Maybe to add to that, you're also referring to new KONE Care. Just today, it's the way we sell our maintenance service. There is no old way. We sell our service with this offering, and that continues to roll out as we renegotiate contracts with customers, have new customers or add to our maintenance base.
Thank you.
Our next question comes from Andre Kukhnin with Credit Suisse.
Good afternoon. Thanks so much for taking my questions. I wanted to just talk a bit about coming back to normal in the countries that unlocked, and the experience you're having there compared to China, where they're obviously trying to stage a catch up as opposed to just coming back to normal. How would you assess that sort of degree of urgency in Europe or in North America in kind of coming back to normal or trying to catch up compared to how you saw China developing three months ago?
I think we have to recognize that the situation is quite different, that China had a very quick, very sharp, full lockdown, they were able to do it quicker and then come back. We can see that Chinese have remained very focused on wearing masks and tracing and all that, and testing. They've been very effective there and therefore being able to keep the situation under control. I don't think the situation is as well under control in most other parts of the world, therefore we see a more gradual recovery. It's clear that also that the countries where we have had the most severe lockdowns and longest lockdowns takes longer to come back. We are not really seeing this catching up, as you would say.
We can see a better performance in the countries where lockdowns have been more limited, and the virus is better under control, such as most Nordic countries, not of course except for one, and Germany and countries such as that. There we see that business is becoming more normalized, whereas I think it's going to take longer time for example, Southern Europe to become normalized. Whatever that normalized is of course then a totally different question.
Right. Thank you. One of the kind of arguments we've heard is that we won't be able to come back to prior level because with social distancing, labor productivity cannot be as high as it was. On construction sites, it takes longer to get people up, et cetera. Again, looking at China, it's proven to be otherwise. Is this just kind of plowing more hours into it? Do you think from your, again, experiences around the world, it is possible with the kind of new rules to get to those kind of speeds of production as prior to COVID?
In China also, there are measures in place to make sure you stay healthy and very active monitoring and testing and so forth. One very simple difference we see between China, many Asian countries, and Europe is that everyone is wearing a mask, and that has an impact. I'm not a scientist here, but anecdotal evidence and other evidence that we've been seeing seems to be, and that is just a cultural thing, and it does help.
Maybe also you're more maybe commenting on the construction site as a whole, but for us, obviously, we work quite a lot in the shaft alone.
Yeah.
It's a bit different situation for us, but obviously if the construction sites are not progressing, then it's impacting us as well.
Got it. Thank you. I also wanted to ask about sort of slightly longer look, not longer, it's like 12 months longer look forward. You've got obviously benefit of an order book that spreads to that length and beyond. Would you say there's a risk building up of a kind of air pockets in any geographies of this concern that we've restarted the sites that were already operating pre-COVID-19, but there's not enough of the new permitting and approvals and budgeting and planning going on and that sort of Do you see that kind of risk building up on maybe 9-12 months view?
Clearly in some countries, I think that's probably going to happen. How broad-based that's going to be, we have to see. The big difference is country to country. It's clear that the hardest hit countries, all of that planning and that has slowed down so you can get an air pocket. I think it's a little bit too early to say. Yes, that's going to happen in some countries. How broad-based it is, I think we still need to see. At the moment, we have a solid order book going forward, and of course, that's important to continue to build on that.
Great. Thank you. If I could just maybe try one more. In terms of that piece of maintenance work that didn't happen during the lockdowns, the more discretionary part, would you say all of that is kind of, okay, buildings were not used and hence the elevators didn't go up and down and didn't wear and tear and hence didn't need repairs and spare parts? Or is there an element of some work being delayed that is pushed into following quarters?
Well, it's obviously very hard to say. There probably is both. Some of the work is postponed, and maybe that's something we need to catch up. Fundamentally, some of the equipment was not used as much. That part, I don't see that is we're able to catch up. It's just you don't have the wear and tear that you normally would have.
Half-half, or is it skewed one way or the other in your view? Your guess is infinitely better than mine.
I'm not in a guessing game.
Fair enough. Actually, sorry, if I may try just one other question. I just wanted to clarify completely for everyone. In China, on new equipment pricing, you're up year-on-year and stable compared to Q1.
Yeah.
You talk about toughening environment because there is increasing kind of commercial activity amongst your competitors or in the market generally, or have you actually seen anyone moving the prices clearly, like we've seen in end of 2015, 2016?
I would say, when you have an environment like this, and the biggest opportunities and growth is in China, it's pretty normal and usually that most companies put more of their focus into China. That's where we're going to capture the growth, that just then fuels the competitiveness. Of course, it is the biggest market, and I don't think it's anything more really to that than the overall environment, and you want to find opportunities there.
Got it. Thank you. I think we're on the same page. Thank you very much for your time. I appreciate you taking all these questions.
Thank you.
Thank you.
Our next question comes from Antti Suttelin with Danske Bank.
Thank you. This is Antti. On the margin issue, it seems that looking at your order intake margin improvement year-over-year and your sales margin improvement year-over-year, the explaining factor was the strong rebound in the Chinese new equipment market. At the same time, you are saying that you are seeing underlying increase in competitive pressures in China, you also say that you are seeing the strong rebound in the market in Q2 as a one-off, basically compensating for the weaker Q1. What happens to your margins, order intake, and sales when those two impacts start to impact, meaning that the strong rebound no longer continues in China and the underlying competitive pressure starts to impact?
I think we have to see what the situation is. The only thing we know at the moment is we have a healthy order book with a good margin, and I think you're a little bit overplaying China. Yes, China was, of course, very important to our performance in the quarter. Actually, if you look at our performance in many parts of Europe and in North America, it was actually also very strong. It was not quite as one-sided as you suggested. I think we have to see what the situation is going forward. We don't know what prices will be going forward, and that's always a negotiation we have with our customers. The only thing that we know is that we have a healthy order book where year-over-year margins are up, and that's what we're going to deliver upon now going forward.
Yeah. On the order intake margin side, are you potentially a little bit nervous that the improvement that you have seen over the past quarters on a year-over-year comparison is potentially coming to an end? Just basing on your commentary about the Chinese competitive environment toughening.
I think our message is very clear that it's becoming tougher. Yes.
Yeah. All right. Let's keep following the situation. Thank you.
We follow it very closely. Thank you.
We'll take our next question from Joel Spungin with Berenberg.
Yeah. Hi, good afternoon. I was wondering if I could ask about the modernization market. Obviously, you said that that had been a certain degree of caution in that market. Is that true in China as well? Is the Chinese modernization market proving to be a little bit more dynamic?
Yeah. As we showed in this one picture, both in sales but also demand, Chinese market in modernization is clearly different from rest of the world, so continued strong demand there and good growth in that market.
It's fair to say that it wasn't as strong as we've seen in the past years as well.
The market wasn't quite as strong.
There's some impact, yeah.
Yeah. It's still growing. Yeah.
Okay.
Sure.
Okay, thank you. If you think about some potential sort of stimulus, maybe in European markets, do you think that modernization is likely to be a beneficiary if there is a push to encourage people to improve energy efficiency in buildings and things like that?
Well, let's see what happens with this European Union EUR 750 billion plan. Of course, negotiations are going as we speak, but of course, a big part of that has to do with green buildings, modernizing them, and that's big part of the European Green Deal. There could definitely be a big driver. I think overall, we know that buildings are the biggest consumers of energy on the planet, and tenants are asking much more for green buildings, healthy buildings, and I think that's a good driver for modernization going forward. Perhaps not just right today, but going forward. I think, if EU gets its stimulus programs through, that's going to be a big aspect of it.
Okay, maybe just to follow up on that quickly. Do you have a sense, very broadly, about how relevant elevator usage is in terms of building energy consumption and to what extent is there an energy efficiency benefit for a new elevator versus a 20-year-old unit?
Well, clearly it's a big difference, a 20-year-old unit and a modernized elevator. There's a big difference in energy consumption. Elevators are not the biggest users of energy in a building. Maybe could be 10% or so, depending on the building. When you take an old building and want to have it energy efficient, you need to look at all aspects. Therefore, I do believe, and I'm confident we will play a role. Clearly, heating, cooling, ventilation, insulation, all those are probably bigger things. Bringing intelligence into the building, bringing much more efficiency, efficient elevators and escalators will clearly be an aspect of it as well.
Okay, thank you very much.
Thank you.
Our next question comes from Martin Flueckiger with Kepler Cheuvreux.
Yeah, thanks. Good afternoon, gentlemen. Thanks for taking the questions. Actually, just one last, I was just wondering whether you could talk a little bit about your raw material prices and your intermediate prices and the impact they had on Adjusted EBITDA in Q2, and what kind of impact you're expecting for the overall year 2020, and based on current prices, would there be a tailwind or headwind for 2021? Thanks.
Maybe I'll take it. If you look at the raw material prices, and obviously it's important to remember that it's mostly components that we buy, and therefore raw materials impact their prices. It is a slight tailwind for us in Q2, but not too meaningful to call it out, actually. It's different than we've seen in the past years where the headwind was quite considerable. If I look at then the second half and how is that developing, obviously price has been quite volatile lately, and also there's question marks in how the deliveries will actually evolve on second half, and that plays a role on what the outcome is. It potentially could be a bit of a tailwind for second half for us.
Okay, thanks.
Our next question comes from Daniel Gleim with MainFirst.
Yes. Good afternoon, Henrik, Ilkka, and Sanna. Can you hear me well?
Yes.
Maybe let's start with Ilkka. I have a question on the cash flow drivers in the current quarter. Could you maybe quantitatively explain what the drivers are that you consider more one time for this quarter, which ones you think could reverse in the quarters to come, and which ones are more structural, i.e., will last into future quarters and lastingly support the net working capital as a portion of sales? That would be the first question.
What I already said was really related to the working capital development, what I consider to be maybe more exceptional for this quarter, and one which clearly was on the payable side, where the strong ramp-up in China during the quarter increased the payables, and that's about EUR 70 million positive impact to cash flow. The second one was really related to government-related payments, VATs and such, where many other countries have decided to postpone those during second quarter. If I look at the development going forward, obviously, it's hard to forecast cash flow. Especially on the government-related payments, if there's a decision then not to continue such measures, then that would probably reverse. Similar on the payables. It is likely that it could reverse going forward. If I look at overall the cash flow, it fluctuates on a quarterly basis quite a bit.
This time, if you look at all the items, they seem to be going on a positive side. Maybe that's why we also call it out as an exceptional quarter in terms of cash flow.
All stars were aligned.
Yes.
Very clear. Thank you very much. Maybe Henrik, on the commentary on the order intake, major project, more down compared to volume. Should we read that as an inter-segment mixed comment? Residential versus the other ones, or is the same pattern present within the different segments, i.e., major projects within residential more down than volume? Could you help us on that?
Well, as you know, major projects can fluctuate quite a lot quarter to quarter. There's of course, part of that. Then a part of it is that the recovery in China was really very much on the residential construction side, where we book sort of orders, so that also has an impact. Also in Europe, for example, residential construction has been more resilient than some other segments. All of those play into that. As I said, these major projects can fluctuate quite a lot quarter to quarter. There are kind of many things. In general, yes, as you mentioned, residential is more resilient. I think it's going to be more resilient going forward with low interest rates and people valuing even more, having a good home right now and so forth.
Very clear. Thank you very much. Maybe my last question is on the modernization sales growth rate in the current quarter. Could you maybe quantitatively give us an indication which direction the trend has been over the quarters of our modernization sales less negative at the exit of the second quarter? Is there a positive trend visible already, or has this been more or less unchanged or even turning more negative at the end of the quarter?
Perhaps, going to a bet. It's so linked to lockdowns and restrictions and ability to access sites and particularly ability to access residential buildings and, when that situation get better, of course, those restrictions are smaller. Probably the toughest part was, I would probably have now looked so detailed about April, May, probably toughest, but clearly that's going to be a market that continues to be impacted.
Very clear. Thank you very much.
Thank you.
We'll go to our next question from Andrew Wilson with JP Morgan.
Hi, good afternoon. I'll be very quick in the interest of time. I just wanted to check a couple of points on the kind of the Q2 bridge, I think following up on Klas a little bit. I think with the Q1 results, you gave us some help in terms of what to expect, and I think it was that you'd have more help from the Accelerate programs and perhaps more help from sort of short-term discretionary savings in the Q2, but then the sort of COVID related costs and sort of loss of productivity would be higher. I just wanted to check that that's kind of how the quarter played out, because I think, clearly you've come in with a very, very good margin, certainly a lot better than the analysts were expecting.
I was just trying to get a bit more detail on sort of the moving parts within that, and it'd be very helpful in terms of the balance of the year as well.
On Accelerate, it was about EUR 15 million for the quarter. It continues to build up as we move forward. On the COVID related costs and savings. As if you think about in Q1, most of the impact in COVID related topics was in China, starting to come to Europe and North America. In that sense, the negative costs related to it are clearly bigger part in Q2 than in Q1, but also our cost containment. For example, traveling effectively was stopped in Q2. That wasn't the case in Q1. Very little savings coming from there. In balance, both grew, but as said, so if you cost containment versus the extra cost, so it clearly is a negative contributor.
That's very helpful. Thank you.
Our next question comes from Wajid Rizvi with RBC Capital Markets.
Hi, thanks for taking my questions. Just a couple left for me. Firstly, you mentioned that resi has been obviously more resilient at the moment, and particularly on the service side and offices are more impacted. Thinking about your pipeline and going forward, are you seeing any change in customer and developer confidence in moving forward by segment? I'd just be interested to hear what you think is happening already, and the obvious ones, I guess, hotels and leisure, but equally by the infrastructure projects, whether you're seeing more or less enthusiasm, the same for office. The second question was, just to be clear on something that's come up a few times, but do you think in Q3 the pricing will already be negative year-on-year in China? Is that your current base case or do you think it's still up?
Maybe I'll start with this latter question first, is that I don't know, and we don't comment on pricing going forward. We just tell about what the environment is, and then we have to see what our success has been, and that's something we've been very clear on. In terms of the segments, where do we see the biggest confidence? Clearly infrastructure. That's something I think governments are focused on, and I know that there are some governments that are very focused now on how can they get infrastructure projects quickly to be construction-ready, because they're, of course, usually long lead times, but the ones that are happening, they're going forward and that's seen as an important stimulus measure in China, but also many other parts of the world. Residential seems to be good confidence to continue with that.
Anecdotal evidence from our customers is that people are looking for slightly bigger apartments, which of course something that kind of makes sense if you want to have more from home working as well. I think you called it out, hotel, leisure, and people, of course, holding off and shopping malls. Offices, actually depends on quite a lot, and there's some interesting trends how people are thinking now about how to redevelop offices to meet this need. I think there will be again, opportunities there. I would really say residential infrastructure the strongest, and then of course, at the other end of the bookend are retail and hotel and leisure.
Thank you. Just are there any kind of standout anomalies by region where one region is doing something different to the rest of the world that you've picked up on?
Not really.
No. Very similar, more driven by the restrictions that if you think about how people are able to work and take things forward.
Great. Thank you.
We'll take our next question from Andre Kukhnin with Credit Suisse.
Thanks very much for taking my call. I'll be quick. I wanted to double-check on China and that kind of recovery there. We follow some data on contract awards, and that seems to show even sharper bounce back. When we compare that to how you see it or how you report in the quarters, it does look like there's a bit of a lead in that contract awards data. The question I have is whether you feel that the kind of bounce back in China is fully played out in Q2, or is this something that kind of ramped up through Q2 and actually exited at a full rate?
Well, I think what we're saying is you have to always remember where you started from. If you bounce, if you go further down and bounce back, what level are you compared to a normalized level? We expect if the market is staying stable, we expect high level of activity going forward this year. I think one has to be very careful when you look at bounce back and what you're actually comparing to.
I was just thinking about April was kind of the first month, I think, in China when up until [cells] broader tiers called back to normal. I'm just wondering whether you had that kind of spike in May and June faded, or is it kind of spiked and continued? I appreciate this is more granular than we ever discussed, but I think it's unusual times.
I would just say that the activity continues to be good in China, it gave it a bounce back. We have to remember, where do you come from? Now we bounce back to a more normal level, actually, even beyond a normal level. Yeah, that's where we came from. That's a bounce back, we expect a solid activity going forward. That's our message.
Got it. Thank you. Just more broadly on kind of world post-COVID, or rather, I guess, with COVID, have you seen any kind of clear structural actions being taken by customers that respond to or talk to how they believe the world will operate post-COVID? I.e., have you seen major hotel project being pulled for good, or have you seen to what you mentioned, I think just now in terms of offices being reconfigured? If you would take a sum of that, where does that land you in terms of degree of demand in commercial, in your view in, say, end of 2021 and beyond?
I would say the vast majority of customers are still thinking, "What does it mean?" That means that they probably have more things on hold. Maybe a few hotel projects and things like that have been pulled. What we see more on the office and commercial side is that people are rethinking what does it really mean, what does it mean? I don't think anyone has full clarity yet of what are the implications. I would more call it wait and see mode and trying to figure out what it's going to be. There are, of course, some hypotheses emerging, but I would say that's the stage where we are.
Thank you. What is emerging? Just very excited to know.
I think that healthy, safe indoor environments with better air circulation, with better ability to distance people, that also have to do with the people flow. I think where the question really will go is that it's pretty clear already that we will not have as many people in any one office as before. The trend, as you know, we've talked about over the past years, has been to have much higher density of people in every office building. Clearly, that had gone a little bit too far. We're probably going to reverse on that and have slightly different type of office spaces that needs more space. You're going to have more mixed working with more work from home. Where does that equilibrium go? That's what people are trying to figure out. I think we have to wait a little bit to see that.
Great. Thank you for your time, Henrik.
Thank you.
We'll take another question from Lucie Carrier with Morgan Stanley.
Thanks for the follow-up. Just one question, please, if I may. At the level of the company, roughly about half of the business is OE and about half of the business is, sorry, services, and same thing on resi, non-resi. Can you maybe help us to understand, if we look solely at the commercial exposure, how much would be OE and how much would be services?
Oh.
I don't have it in the top of.
I don't have that.
I think, yeah, you see the overall revenue split we've shared, but not on the business.
Yeah.
I'm not sure maintenance is that much different.
Yeah, probably not.
Intuitively, yeah.
Yeah. I think Sanna and the team can follow up with you on that.
You would think actually that there's as much maintenance done in a residential building than, let's say, an office space, in terms of value for your portfolio?
Sorry, I don't know if I understand your question now.
Well, I guess I'm trying to understand if we look at your residential business and if we look at your non-residential business or your commercial business, I'm wondering if in commercial, your share of revenue is equally split between OE and service, or whether service has a higher share in commercial than it has in residential.
Probably somewhat, but I always intuitive somewhat, but I don't think there's a massive difference, frankly.
I would have to agree.
Yeah. Okay.
Okay.
Thank you.
Thank you.
As a reminder, that is star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal. It appears we have no further questions. I'd like to turn the conference back to our speakers for any additional or closing remarks.
Thank you all. I think we hand over to Sanna the next.
Many thanks for your active participation again. I would like to still remind everyone that we will have our 2020 Capital Markets Day on September 29. Hopefully many of you will be able to join. At least there won't be any flying around. With that, thank you again, and have a nice weekend.