I am Katri Saarenheimo, I'm from the investor relations. As usual, we will start with a brief introduction to our quarterly figures and the trends in the market that we saw during Q1. After this, we will have plenty of time for Q&A and discussion. Henrik, please.
Thank you, Katri, welcome on my behalf. It's my pleasure to share with you the good, quarterly performance we had then in the first quarter, also share with you some exciting news of how our market share developed last year, something we particularly in connection with our first quarter results. For the future, we have started to go through our key figures, to go a little deeper into orders received sales and EBIT. I will talk about how we have developed in KONE, how markets are developing, our commercial market share, finally, our outlook. Let me first into how our year started. We had a strong operating performance in the first quarter, although orders received declined slightly. We were at a good level of EUR 1.9 billion. The orders received declined to 5.4% or 4.3% in comparable currencies.
Our outlook remained strong, just at more than EUR 8.5 billion. In fact, exactly the same level it was last year, in comparable currency, it has grown by 7.6% from last year. Our sales have continued to grow and is now EUR 1.7 billion, growth of 3.4% or 4.3% in comparable currencies. This is an important point with our sales growth, because it continues to be profitable. As you can see from the sizes, our EBIT continued to grow. It was EUR 221 million, the EBIT margin improved from 12.5%-12.7%. Our cash flow was strong, at about EUR 360 million. That shows that also in a more changing environment that we have had, a potentially challenging and competitive environment, we have maintained good and healthy business practices, therefore, maintained a very good cash conversion. Also, our earnings per share grew very well, from EUR 0.29-EUR 0.37.
With strong growth came natural from the improvement in EBIT, also in our financial items, we now had a positive impact from reevaluation from options related to acquisitions, whereas that same line had a negative impact last year. It was a negative impact on this one as well. I would like to say that a good performance such as this in a challenging environment is not possible without a motivated, dedicated team with a clear direction how to grow the business. Again, a very big thanks to all of KONE employees for their great work you have done during the first quarter of the year. As a few figures, let's dive a little deeper into orders received we started. Orders received declined to 5.4% or 4.3% in comparable currencies. The decline in China, the market in China declined just about 8%.
Our orders received declined in units, a little bit over 10%, and in market value, a bit more than that. This is good. We were able to compensate quite a lot of this with good development again in both North America, as well as in Europe, Middle East and Africa, and few other markets. We had broad-based good development, strong growth in the Middle East, and continued good development in Central and North Europe. This was very broad-based, this good development. In North America, we continued to grow. We grew from a high and strong level, that was positive. If you look at Asia Pacific outside of China, good development, in particular in the important Indian market, where we had good growth.
If you look at our various businesses, the best performance was in our major projects business as well as in modernization. We had a decline in our volume new equipment business. In a competing environment that we are living in, of course, pricing is very important. In this environment, we have been very focused on pricing and finding good opportunities, you can see it in our competitive metrics. We have been able to maintain healthy margins at a relatively stable level even in this environment. Again, the performance shows our competitiveness is strong, we have a nice position going forward from here. Entering next to sales, we continue to grow 3.4% or 4.3% in comparable currency.
If you look geographically, the strongest growth was in North America at 11.3%, we also grew somewhat in Europe, Middle East and Africa in basic percentage, where Europe, Middle East and Africa was more stable. This quarter, we now had the fastest growth in our services business, driven by very strong growth in modernization. Our majors business also continued in healthy growth, although it was slightly lower than we had last year. We had continuous very strong growth in Asia Pacific. We got inaudible in China over 25%. Slightly lower growth, what we think, a slightly slower start in Europe. We have to remember that the end of last year was very strong and that had slightly impacted the beginning of this year. inaudible was now more stable. Again, here we have to remember that follows a very strong growth in Q4.
Overall, I would say good progress in sales as well. inaudible income. Our profitable growth continued, earnings of EUR 221 million, we improved our margins from 12.5% to 12.7%. Here perhaps the most important factor was that improvement was very broad-based, across geographies and across businesses. The best improvement was in North America and in Asia-Pacific. We have continued to increase our investments in areas that support our competitiveness in future, such as R&D, IT, business development, and also expanding our footprint in some of the key growth markets around the world. Last year, if you remember, we had a good tailwind from currencies, now we have a slight headwind from currencies this year. There was a slightly negative impact from that overall on our EBIT. inaudible profitable growth continues.
Our businesses, as we have seen for many years, is the share of new equipment is increasing. However, now despite the strong growth in modernization, the share of modernization increased to about 13%. Was stable, share of new equipment slightly lower than last year. Geographically, also what we saw then during the second half of last year, the share of North America growing and Africa was now 18%. 18% gives a little bit more balance to overall sales for various geographic areas. Let us see financial development for the first quarter. Next to how we help our business and how markets overall develop. Let's start with some highlights from our development programs. As you know, we started our current development programs in 2014, so three years into development programs.
We are in the final year, very much pushing the accelerator to have a strong finish. We have achieved a lot in these development programs, but there's still a lot to be done. Some highlights. Our Leading Team of Professionals Development Program continues to have high activity and strong coaches. Our objective is that our people be a key differentiator for KONE when our customers look at us. We are continuing to give people opportunities for development through job rotation. Also, we have over the past years now and going out more broadly, mobile training tools to be able to bring better training to our people, in particular people who work out in the field. More than half of our employees are out in the field every day. What we have done is supporting every KONE employee to perform at their best.
Of course, we have many other areas we have taken action to help every KONE employee to perform at their best, and this is, again, a feature in how we're bringing better training solutions for them. Maintenance partner here an important milestone was the agreement that we signed with IBM to start a cooperation with them and using their Watson IoT Platform. We would collect data from our equipment to be able to improve the quality, reliability of our equipment, improve the performance for our customers, but also keep providing new services and ways of working with our customers. This has started very well, and it will truly transform how we do service and what happens in our industry over the coming years. It's important and good milestone and development for us.
This last year, we have achieved high finish in all these programs. We are looking forward already to the next phase. Let me turn to what's happening in our markets. Let's start with the new equipment markets and what's happening in those in the first quarter. Let's start with Asia-Pacific. That's naturally very important new equipment. Here the markets deepened following the market decline in China. I mentioned already the markets in China decline, however, in a while and going through as we did before in Asia. The markets in India and Australia continue to grow. Other markets here in the region remain more varied. In China, competition continues to be tough. In Europe and East Africa, good growth in Central and North Europe. As we saw also during the second half of last year, that has continued.
South Europe, we're starting to see the markets are now stabilizing. They're no longer declining as they have been, are more stabilizing. In Italy, there are still good opportunities in that market. North America, the markets, they grew slightly, driven by United States. Let's remember that really U.S. markets are at a strong high level, and they grew a bit further from there. We can see a good momentum in that market opportunity, and also because of strong market price increase improved somewhat in the U.S. market. Let me go through the calendar and look more into China. As I mentioned already, the market in China declined, measured in units, by about 8% in the first quarter, and it was very much in line with our expectations. The market remains challenging, and the competition for market share is high.
It is important to remember that China is not one homogeneous market. We are a very divided market with a strong situation in tier 1 and many tier 2 cities, whereas the situation in many tier 3 and 4 and lower tier cities is very challenging. The overall market situation remains challenging in China. However, if you look at the property market, you can also see some positive news. Real estate investments have increased by more than 6% in the first quarter. New construction starts after a clear decline last year now has started to grow for 19% in the first quarter, and property transactions have increased by 33% in the first quarter. The increase in transactions has reduced inventories in most tier cities. The inventory situation in tier 1 and many tier 2 cities is at a healthy, good level.
Also in tier 3, 4, and lower tier cities, inventory levels continue to be high. Let me say this, KONE, our orders received declined by a bit over 10%, we declined more than the market. Why is this? After a very long and consistent outperformance of the market. First of all, as the largest player in the market, we clearly took the approach at the beginning of this year that the priority for us was to maintain a commercially healthy business. We are by far the market leader, and we felt that this made a lot of sense in the first quarter. I would say the first quarter went very much in line with how we had expected.
When we look at the situations going forward, what the priorities for us are to have a very deep understanding of the market so that we can find the good opportunities and we can continue to find good pricing. If you look at our ambition, that hasn't changed at all. Our ambition continues to be to grow faster in our markets and to grow profitably. Those are important parts of our ambition. I must say that I have no doubt that this will be possible. We can definitely do it because we have a strong competitiveness, we have a strong brand, we have very broad distribution, and we have a good team in China. Overall, we have a good situation in a market that at the moment is quite challenging. A lot about the new equipment markets and China in the current year.
Let me now turn to the service market. We start with maintenance. Here, the trends in the maintenance markets have remained pretty much the same in both Europe, Middle East and Africa and North America. Markets are growing, although clear variation from market to market and price competition continues to be intense. Our Asia-Pacific markets continue to grow at a good rate, following the strong growth of the market over the past years there. Interesting is that we are really capitalizing on this good growth in the market in Asia-Pacific. In modernization, we are communicated in connection with our first quarter results that we're starting to see a bit better market development from a global perspective, and this has continued. Here we particularly see Central and North Europe how the markets are improving, particularly growing markets such as U.K., Germany, and a few other markets.
Also, if you look at South Europe, you're seeing more stabilization now following a decline over the past few years. In North America, modernization markets grew slightly from a high level and continue to grow in Asia-Pacific. Overall, modernization is going in a slightly different direction. As I promised in the beginning, happy to share some exciting good news about our market share in 2015 overall. If you look at the global new equipment market in 2015, the total market was about 846,000 units, compared to about 850,000 units in 2014. For the ones of you who are reading carefully now, remember that last year we said that the global new equipment market was 815,000 units. Now it is 816,000.
We have slightly reassessed the market based on a better understanding of a number of markets, including Iran, that we got a little bigger than we expected a year ago. The most important one is the development of the market. If we look at our development market declined by about 1%, whereas we improved, we grew at about 5%. We continue to take market share by over one percentage point. Our market share increased from about 18% based on previous figures to a little bit over 19%. The most important thing here is that our market share grew on a very broad basis. We grew our market share strongly in China. We grew our market share by two percentage points in the U.S., and also grew our market share clearly in Europe, Middle East and Africa, as well as in Asia outside of China.
A very important feature of last year was that we were able to grow and increase our market share on a very broad basis. I think this says a lot about the competitiveness we have in the market. If you look at the installed base in the world, at about the end of last year, there were about 13.5 million units in service overall. Growth coming, of course, mainly from Asia. Continued good growth in the total service base in the world. You can see that Europe, Middle East and Africa continue to be the largest market in the world by 43% of all installations, and China is now 28%. I think it's very exciting to look at this picture and see what growth opportunity we continue to have in our industry.
If you think about where the majority of the world's urban population are and where they're growing, it's in Asia, where big development is happening. We have more people living in urban environments in Asia than in Europe, for example, where more and more people, of course, live in buildings, higher buildings that need elevators. We can see the penetration improvement that can happen over long term in overall Asia-Pacific and in China. As we also see, we also have growing markets in the rest of the world. We can continue to see a good continued growth opportunity in the services business in this industry. If you look at our market positions, we are strong. If you look at our market positions in new equipment business, Europe, Middle East and Africa, we are number 2 player.
In North America, we have clearly strengthened our positions, now we have caught up with the competition, we already have the share number 3 place. A very strong improvement over the last years. In China, we strengthened our market leader position. Also we grew in Rest of Asia-Pacific, also the market leader. We can see new equipment, we have very strong positions. In maintenance, we continue to be a challenger company, because of that, our ambition is to continue to grow faster in the market. We can see that we are number 3 in Europe and East Africa, number 4 in North America. Although in Asia, we have strong positions in both China and Rest of Asia-Pacific. What is so important from this picture is knowing we have very strong position new equipment in this position overall.
That, of course, gives us a great opportunity to continue to capitalize on the growth in the maintenance base in the years going forward. Again, this picture shows our good positions we have when we look at the situation going forward. Good news on market share. I think then finally touch on our outlook, which is unchanged. Let's start with market outlook, which is unchanged from what we said in connection with the full year results. Here we expect the new equipment market in Asia-Pacific to decline, driven by decline in China of 5 percentage points, we expect price competition to continue in that market. Rest of Asia-Pacific, we expect to see some growth, particularly in India, Australia. Europe, Middle East and Africa, market is expected to grow slightly due to a good growth in Central North Europe.
We start to see more stable markets in Western South Europe and quite stable also Middle East. In North America, we expect the market to grow somewhat from a strong and high level. Maintenance is very much the same trends as we have seen before. Some growth, although varied in both North America, Europe, Middle East and Africa, continued good development of the market in Asia-Pacific. In modernization, we expect the market to grow slightly in Europe, particularly in Central North Europe, more stable in South, continued growth in North America and Asia-Pacific. Very much the same as we said at the beginning of the year. Our business outlook is also unchanged. We expect our sales to grow between 2%-6% in comparable currencies.
We expect our EBIT to be in the range of EUR 2,220 million-EUR 2,320 million. The only slight change here is we say that we assume translation exchange rates remain approximately at the average level of January to March, when we previously said, of course, the average level of January. Euro has slightly strengthened since the beginning of the year, which means our currency headwinds are a bit more than we predicted at the beginning of the year, so maybe EUR 30 million at these rates. We're still maintaining our outlook intact. With that, we can see continued good operating performance, strong development of market share last year, and a good development. We have many parts of the world we're able to, in a very good way, compensate the decline in China.
Again, very good confidence on looking forward. Our competitiveness is strong. Good brands, good distribution, and a strong team across the world. With that, happy to turn to questions.
Henrik. We'll start with the questions from those who have joined us from Finland.
Hello. Tina. The comment about not wanting to maximize the growth in China in the first quarter, and that against your ambition still to grow faster than the market. Is it safe to assume that during this year you would have the same attitude as in Q1, that you wouldn't be looking to maximize growth in this market situation or before the market gets stronger? How should one see that?
We don't make comments on the commercial approach we're going to take going forward. I think what I said, what is continued to be our initial levels, and then we have to see how we develop.
Thank you.
Thank you.
Thank you. Let's turn to the questions from those that are on the line. Operator, please.
Thank you. We will now take our first question from Lars Brorson of Barclays. Please go ahead.
Hi, good morning and afternoon, Henrik and Katri. A couple of things, if I could, on pricing, Henrik, I take the point, you're being more disciplined on pricing. Obviously, there are lots of market share implies others aren't. Can you talk a little about where in the market you're seeing pricing pressure and also where we are on pricing? I think earlier we talked about down to the mid-single digits year-over-year on average travel changes. Have you seen that sort of deteriorating in Q1? What's different, again, in your approach from what you're doing in previous years? Thanks.
We talked about market share. Let's remember, as we have always said, that we don't measure market share on a quarterly basis. That is too short of a period. Our development was pretty much in line with what we ourselves had expected beginning of the year. The trend overall has remained pretty similar to last year. We're talking about probably very rough and depends on segment and geography and so forth, but others are roughly 5-ish % on average.
Can you comment a little bit on the competitive situation? I appreciate your point that the quarters will swing around, Q1 breaks a trend of five years of outperformance in China. If you report it only from a factor, you're underperforming the market versus five years of outperformance. What are you seeing competitively and specifically as relative to your western competitors in terms of pricing approach?
Right. We don't comment on specific competitors. It's clear that what we're saying a bit, competition for market share is high in the market. Again, just remember, we're talking about one quarter of orders. Overall orders received were at a good level of EUR 1.9 billion. Last year, we increased our market share strongly in China. I think our development has been very good. We see this approach now in Q1. I think it makes sense, the approach we took as the largest player in the market. Yeah. Clearly, what we are saying is that high competition is tough in the market, but strong competition for market share. A lot of players with high ambitions there and in a declining market, this is usually what happens.
Just on secondly on your sales guide for the year, sorry, the 2%-6% growth. Can you talk about whether that is predicated on an improvement in your order in Q2? Obviously, China down 11.5% value terms in Q1, that's a third of your 2016 sales. It should be, of course, lead times here are shorter, so it should impact your invoicing this year. Talking about what is included in your guidance for the year, your China development in Q2 in turn.
Again, as I said earlier, we don't guide our orders received. We are very positive to our service content. We have a strong order book. We are growing our service business, and we have good confidence to get to our guidance for this year, not obvious maintaining it. I think that's what I can say on that. As you know, we don't guide or comment on how we expect our orders received to develop. I think it's strong and good order. That's important.
I just wondered whether it was predicated on the turn in China. I understand. Just finally from my side, in EMEA new equipment, I was a bit surprised to see new equipment sales decline significantly. You've obviously grown orders in EMEA in the last couple of years, obviously with some more driven by modernization. Can you talk a bit about what the sales there is in EMEA and what's driving that new equipment significant decline in the quarter, please? Thanks.
Remember that when we look at our new equipment overall, that we had a very strong growth in Q4, partly seasonal. We have a good order book in EMEA as well. Seasonally lower sales now both in EMEA and other parts of the world. I don't think there was anything dramatic related to this.
Thanks.
Thanks.
Thank you. Our next question comes from Andre Kukhnin of Credit Suisse. Please go ahead.
Yes. Good afternoon. Thanks so much for taking my questions. I'll go one at a time, please. Firstly, on China, obviously, could you let us know how did the KONE brand do versus GiantKONE in Q1?
As you know, we have two brands because sometimes one brand is doing better than the other. Throughout last year was a slight development for the KONE brand, and now it's perhaps slightly in reverse. That's why we have two brands, that they are going to go off in a different way in each kind of the market. That's not a big deal which one is developing better. We have two strong brands, and that is how we approach the market in China.
Sure. I completely sort of sense, given that the tier 1, tier 2 cities are doing much better, my understanding was that you sort of skewed the other way to try and understand. Was that just a composite of KONE having done particularly well in Q1 2016?
Well, you always have various effects and others. That was, of course, you have to remember that Q1 last year, for KONE overall, and for the KONE brand, was very, very strong.
Great. Thank you. Could you just help us to calibrate where you are right now across the whole portfolio in China in terms of the mix of tier 1 and tier cities versus tier 3, 4s?
Market is probably split about half and half, or even a little bit more in the higher tier cities overall, have been in the past as well.
Got it. Thank you. The second to the various question was just on cash side. The orders declined, and that normally, I would say, should lead to slightly less cash with payments. The opposite seems to happen when you're working capital. Could you help us to understand the movement there a little bit better?
Elisa, do you want to answer that?
Sure. First of all, our net working capital, looking at it, is minus EUR 1.1 billion, so very strong level. We saw a strong level of advance payments and also a good collection of receivables. I think what is important to note, that we saw this improvement from all parts of the world. From China, I can say that we saw a good progress from there as well.
Right. My sense is that what's been happening in China sort of late is that there's acceleration in the national construction activity trying to catch the higher property prices. That is resulting in kind of faster or a step up in the stage payments and milestone payments to actually get the production going for elevators. Is that something that you've seen in Q1 in your operations?
If I continue, on the payment terms, I could say that it's inaudible. Competition has been intense, we have only attracted in some cases, the payment terms for our important customers. Nothing dramatic there.
I think, Andre, what she's saying is that we could see that we had good deliveries in China. Customers are taking deliveries and healthy cash flow are very competitive because we have maintained good commercial discipline in our business.
Right. Would you think this is sort of the trend that will continue? We have had extension in the backlog to sales conversion for 3 years, I think. Now it looks like we may be accelerating the other way, i.e., the orders to sales should be shrinking. Is that something that you think is a sustainable trend?
It depends a little bit which part of the world you look at. If you look outside of China, the share of mid-size and larger projects has increased over the past years, particularly, well, partly in each market, also because of the strong growth in U.S. In China, the rotation continues to be good. We can see that our deliveries are at a good level. Overall, if we look at slightly compared to some historical trends, slightly longer order book rotation because of the mix on the order book. Again, no dramatic changes here.
Great. Very final question is, I think you launched a kind of low-end product in China recently, a Z Mini, for the sort of more price-sensitive customers. How would you expect margins to evolve on these sort of products that I think sounds like completely different involving resource?
I can tell you that the Z Mini is for the residential segment. It's actually a very good product. It's more standardized, that's why we can make sure it's very price competitive. It's actually, when you see it, when you use it's a great elevator. We can deliver very good value to our customers at good pricing despite very much standardization that you can become competitive in that. I wouldn't call it a strict product. It's a very good product with a great ride comfort and good value to the customer.
Got it. Thank you. With second-hand knowledge, I didn't have a chance to test it myself and hence the question. It sounds like profitability on that should not be too different to kind of your average of the portfolio for the results.
We have a good product competitiveness overall.
Got it. Thank you very much.
Thank you. We will now take our next question from Phil Wilson of Redburn. Please go ahead.
Good afternoon, everyone. Thank you for your questions. I'll do one at a time.
Of course.
Thank you. Thanks for your help on Chinese pricing for markets. Comment where your pricing was for first quarter and how that compared to the fourth quarter. Thank you.
If we look at, as I commented earlier, on our pricing trends. If you look over second half of last year, beginning of this year, I believe we have outperformed the market in terms of pricing, slightly. We can't say by exactly how much, clearly there are price pressures and price design for everyone. At the same time, we've been able to work quite well on our cost competitiveness, and therefore get a good profitability in the business.
That has the outperformance fallen a little bit into the first quarter as markets become more intense?
I think overall, we had a pretty good performance in the first quarter. As I say, Our understanding is that when we look over this period, that we have outperformed the market.
Thank you. Lastly, sorry to stay in China seems to be undertaking some recent cooling actions in property, given the very high price rises that we should be expecting. I know tier 1 cities demand to you is quite strong currently, are you seeing the impact of this cooling when you look at your forward indicators like tenders or customer dialogues, that maybe some of that strong tier 1, tier 2 demand may not be sustainable?
The cooling measures have just recently taken. At the same time, there are two approaches the government is taking at the moment, which I think is very sensible. Cooling measures in some of the cities where prices have been rising very fast, such as Shanghai and Shenzhen and Beijing. At the same time, they are working very actively on reducing inventory in weaker cities. This is something we see as a fundamental driver in the tier 1, and maybe tier 2 cities, this one of empty levels of inventories and a lot of people want to move into these cities. That's not changing overnight. What they're doing on cooling some of the markets, I think is quite sensible.
Sure. Have you seen an impact in your tender activity, yes or not?
We continue to see pretty good development in those markets. I think we don't comment on our tender activities, but there is good activity in those markets, too.
Thank you. Just a final question. Maintenance growth to the group level slowed in the quarter, from 7.5% to 5%, and I would expect it to carry on decelerating because the Chinese maintenance business is becoming a larger part of the mix and growing faster. Can you give some detail where maintenance slowed recently? What growth rate are you seeing in Chinese maintenance? Why are we seeing this slowdown in your maintenance growth rate? Thank you.
Our maintenance growth in China continued to be very strong. As I mentioned already, it was over 25% in the quarter. Continued to compound up at a very good level. We had a very strong finish to last year, 7.5%, and a very strong finish to last year in the maintenance growth. Probably a little bit impacted at the beginning of this year, so I wouldn't read too much into it. The main impact was in Europe where growth was now a bit slower than last year.
Maybe just one final question on maintenance and also one related to residential construction. We know the starts, investments, completions are making progress. Why don't we see the elevator market see any real improvement? Is there a structural trend here going on that perhaps we need to think about?
I just remember that we've seen one quarter of solid improvement in new construction area, which started a little bit last year but now very clearly the first, following a decline in both 2014 and 2015. When the markets were declining, our market wasn't declining as much, and therefore, we don't see immediately the upturn either. Of course, it's a good positive indicator of improving the fundamentals of the market. We don't expect that to impact, the same way that when it came down, it didn't impact the small town market either, the other way. It's still good that the market is developing. I think some core good indicators with growth in terms of real estate investments. It shows that more money is going into the sector. Developers are driving their projects forward. Also customers are buying apartments, and therefore, total transactions are going up.
You can't read a direct link between the two in the short term, between our market and new construction starts.
Thank you very much.
Our next question, ladies and gentlemen, comes from Antti Suttelin from Danske Bank. Please go ahead.
Yeah, thanks. This is on. Even if you play down the importance of the Chinese stimulants actions, I would like to ask your view, what do the Chinese really want? Do you think this stimulus, which we now clearly see impacting the construction numbers and statistics, is this something which is short-term only? Or is this beginning of a new big construction boom in China? What way are you looking at this?
We have seen stimulus in China that is the biggest stimulus apparently in infrastructure, that's of course needed to drive urbanization going forward. We also see stimulus to help the real estate sector and help people buy apartments. If we understand right what the Chinese government is trying to do, very sensible target is to continuously improve the urbanization and get more and more people to live in cities and work in cities, therefore they have this target of 100 million hukous over the next five years, which is a very fundamental change. The way I understand it is to make sure that the economy continues to develop by improving the urbanization, having people move into cities. Now they further help things by starting to relax the hukou rules. That is what we're seeing. Stimulus, of course, can have more shorter-term impact.
These, where I talked about, are more longer-term drivers. What we continue to see are cities, good demand. Lots of people want to move there for more than is even possible, then actions to reduce inventories in lower tier cities. The inventories are quite high. That is what we still need to see some type of improvement before that inventory situation improves. I think that's perhaps more of a broad answer to your question, Antti.
Yeah, thanks. May I ask differently? Do you expect the trends that we have seen in first quarter in statistics, I mean, parts up 19%, for example. Would you expect that trend to continue over the next several quarters, or would you expect that trend to eventually fade during the remainder of this year?
I think we have to see. We are not the best forecasters of macro statistics for that market. I think where we give an estimate, where we have a good view, where we understand development is it going to elevate or escalate the market, then we have given our clear outlook of what we expect of the market. That's what we feel we have good understanding on and good confidence with. I would like to comment on where we expect some of these other indicators to move over the coming months.
Yeah. You didn't raise this guidance even if the Chinese construction market has clearly picked up. Does this mean that you don't expect this pickup to last, or does this mean that you don't think the pickup will yet influence significantly KONE's elevator demand?
Let's put it this way, that the way the market has been developing in the first quarter has not been a great surprise to us. What we expected in the beginning of the year, we've seen a trend that we expect that our outlook is quite accurate for the full year between 5% and 10%. The fourth can be within that range. It's of course positive that things are going the right direction. Inventory levels are reducing in some of these lower tier cities, I don't think we're going to quite see it yet in our industry.
Yeah. All right. Thank you.
Thank you.
Our next question comes from Martin Flueckiger of Kepler Cheuvreux. Please go ahead.
Yes, sir. Good afternoon, ladies and gentlemen. Many thanks for taking my questions. Again, I'll take one at a time. First one, going back to the question in China regarding the market performance of tier 1, 2 and tier 3, tier 4 cities. Could you provide your best estimate of new equipment market growth in these two categories, please?
Perhaps if you look at segments in China, where we see growth is infrastructure, more stable and commercial, and then decline in residential. Would you, Katri or Erika, have a comment on what we say about impact growth rate by higher tier versus lower tier?
I believe it varies quite a lot. You have differences depending on the province, depending on the city in question. Like Henrik described already, I think the general picture is that the higher tier cities are somewhat stronger.
In the lower tier cities, when we look at the map of the various provinces and areas, there are very significant differences. Some that are quite stable, some declining a lot. We have markets really far in the west and around the east coast, but actually pretty different growth rates. You can't really generalize. It's really big differences between the development of different markets and provinces.
Okay, many thanks. Just to complete on the issue of the maintenance business or maintenance market in China, could you talk a little bit about the competitive environment and the situation regarding pricing in the Chinese maintenance business? Also, if you could update us on your current share with respect to maintenance in Chinese market.
The competition in China maintenance market is quite different from the new equipment market, because most of the competition there comes from small independent players. Most of KONE compete for their own brands in service and against small independent companies. That's where there's strong competition. That continues, of course, a lot of people see the growth opportunity there and therefore want to grow in that business. Not a big change in that market overall, in the dynamics. We have to, of course, constantly improve, obviously, which we have been doing to remain competitive and drive our business in a profitable way going forward, as we have done.
Okay.
That's what I can say. Sorry, your second question was related to?
Your share of the maintenance business in China. It used to be below 10%. Is it now 10% or above 10%?
It hasn't quite reached 10% yet, although the share has increased. It hasn't quite reached 10% yet, because we do the maintenance. If it's a service overall, we are probably at that level or more.
Okay, thanks. Finally, my last question on Europe. If I look at building permits and housing starts in important European markets, I believe this would suggest a healthy recovery for the new equipment market going forward. Do you share this view? Do you see any signs of this? What's your view, let's say 12 to 18 months, on the European new equipment market?
For this year, as I said in our outlook, we continue to expect a good development in Central and North Europe. Spain continued recovery, and a more stable market in France and Italy. As I said, in France, we have now building permits have improved a bit. A little bit too early to say how that impacts their market. I agree with you. Many Central North European markets, actually, the trends are positive. You can see that there are many cities with the same issue, that there is lack of apartments in the city. Residential activities is where we see this activity.
Thanks. Just a final one, if I may. What do you think is a good proxy for the timeline between building permits being granted and new orders received by you guys, for instance?
It depends very much on the segment. If it's quite residential, I don't know. There's clearly a timeline, because you have to get your permit first, and then you start planning it, and then you plan it quite far, then you order your elevator. Usually, it is a very standard building when you are starting. There can be a clear lag between the timing for those two. I can't say exactly how long that will be.
Thank you very much.
Our next question comes from Rizk Maidi of Berenberg. Please go ahead.
Yes. Hi, thank you for taking my question. Just a follow-up on the China maintenance and on the conversion rate there. If my memory is correct, I think the combined conversion rate for KONE and China's KONE brand is roughly 60%, and that number has remained stable for the past two, three years. Correct me if I'm wrong, I think this number should be going up as time goes. Secondly, just a question for you, Henrik. Do you think we'll see a further consolidation in the Chinese elevator market now that the new equipment sub-market has matured? If so, is KONE keen to play a role in this consolidation game?
If you look at our conversion rates, they have remained quite stable. Of course, we're working hard at improving them. It depends on what segments are growing and so forth. The KONE brand, 60%, no significant changes over the years. The consolidation, we may probably see a consolidation in the market. I would say that we are very focused on organic growth with very strong market positions in China, very strong brand or two brands, in fact, that are both very strong. We are, in that sense, in a good situation. On the maintenance side, we have strong organic growth, and that is what we focus on how we drive our growth going forward.
Thank you.
Our next question comes from Manu Rimpelä of Nordea. Please go ahead.
Good afternoon. Just one question from me. Can you comment about the maintenance pricing? I think you mentioned the price there going up. Was it also for the maintenance or mainly for new equipment? What's happening in China and Europe on that front?
The pricing and maintenance in the U.S., what it used to be. It can be tough price competition, not quite severe as in Europe, particularly South Europe. South Europe continues to be challenging. There's a lot of small companies that are fighting for business. No big changes to the trends in China overall.
Can I just follow up on the U.S. pricing? Why are we not seeing maintenance prices starting to recover if we are starting to see a pretty meaningful uptake in the market in terms of the new equipment?
You have to see that the new equipment deliveries have only now started to pick up in the past six to nine months. They are now still in the first service. I think you would hope we would start to see some of that impact going forward. You have to remember that they have had strong order to ship the past years, and the rotation in the U.S., it started to only come through now. Let's see. It's better not to give any forward-looking comments on where pricing may go. We have pricing is an individual agreement between us and customers always.
Okay. Thank you.
As a reminder, ladies and gentlemen, please press star one on your telephone keypad to ask a question. Our next question comes from Ben Maslen of Morgan Stanley. Please go ahead.
Thank you. Good afternoon, Henrik. A question, please, on China revenues and what the growth was. Did they indeed grow in the quarter? I think you gave an Asia Pacific growth of 4.3. I just wondered how China revenues fit within that first statement.
China's share of revenues was about 30%, and I would say they were stable-ish in China overall revenues.
Got it. Thanks. If orders stay down 5% for the next few quarters or for the year, as is your guidance, at what point would you expect revenues in China on the new book side to go into negative territory? Thanks.
Well, the outlook we have there for the market overall, we haven't guided our orders received. Much like you have orders in China. Of course, if the orders received go down, it will be reflected in your revenues for, let's say, six to nine months lag.
Okay. Six to nine months.
Even shorter.
Thank you. Just coming back to cash flow. Can you give us what is the typical cash flow profile of an order in China, if there is such a thing? How much you get up front, and what are the stage payments? I guess, just the phasing of the cash, if you can, generally. Thanks.
For KONE, we don't book an order unless we have a down payment. They're usually down payment that's not the largest part. You would have throughout when you start manufacturing the equipment, you have a down payment, then by the time of delivery, you have quite a significant further payment. That means that you want to keep covering your risk as you go forward. Down payment is still from the order, let's say, on average. We look at minimum 5% down payment to book an order. You have milestone payments after that throughout the process of delivering a new equipment.
Got it. Thanks. Finally, in EMEA, you mentioned a significant pickup in modernization demands during the quarter. I just wondered what was driving that. Is there any kind of legislative component to that, or is that pure demand? Is it sustainable? Thank you.
There hasn't been any regulatory change. It is market demand. We know that the modernization markets have been challenging for many years. While there is a lot of need for modernization, we can see in the economies, they are doing somewhat better. This demand, you can see that demand is coming through. U.K. is a good example of that. Germany is another, we can even see in the weaker South European markets, that the markets are now stabilizing. We know there's a lot of opportunities out there, a good thing is that we have started to cut through in the markets now.
Got it. Thanks, Henrik.
Thank you.
Thank you. Our next question comes from Austin Earl of Marshall Wace. Please go ahead.
Hi, good afternoon, everyone. I just wanted to confirm and to understand this issue that you talked about after the full year results about easing the incentives in China for the salespeople, so you wouldn't be so first half weighted in terms of growth. I just wanted to understand how much of an effect you thought that that might have had on your orders, and whether that will continue for the year, and therefore, whether you would expect your market share maybe to improve as the year progresses.
As I said earlier, we don't make any predictions or any indications about how we expect our market share to develop or our orders received to develop. Only thing I would say that the development in the quarter was in line with what we had expected.
Okay. Thank you very much.
Thank you.
We will now take our next question from Daniel Gleim of MainFir st Bank.
Yes, hello. Thank you for taking my question. There are actually two of them. Could you give us a little bit of guidance how sustainable the China maintenance growth of about 25% is? Now that orders are coming down for new equipment, new installations probably at one point slowing, and you are not actively acquiring maintenance business in China. Are we going to see zero growth in maintenance probably in 2017? What is your thinking on that? That would be my first question.
Well, I would first say, even if you think we have had a slower growth in many markets outside of China over many years across South Europe, we have been able to grow our maintenance business in order markets. Remember that we have a maintenance base. As the market grows, to maintain your growth rate, you of course need to have more and more growth each year. Over time, the growth percentage will come down, but there is a lot of potential to continue to grow that business in a good way. There's lots of equipment that is being installed or has been installed that is coming into the so-called commercial maintenance phase over the coming years. We continue to see good growth. As you can see, we have been able to continue to compound it at a good rate.
Again, the underlying base comes. The challenge in all the time is to have the same growth rate, but there's a lot of growth opportunities in there.
Okay, thank you. With regards to the order book rotation, you mentioned it is getting longer at the moment. If you look at your overall group order book, at the end of the first quarter, which still has some types of contracts, can you give us some guidance on an adjusted number? Do you have any feeling how the longer order book rotation has impacted your order book?
Not only has it impacted the order book per se, but it means that when we book an order, it goes in the order book, and it takes a little longer before it's recognized as sales. In that sense, I don't understand how we would adjust our order book. It's just it takes a little bit longer for orders that we have booked to be finally recognized as final sales because of some of the larger projects.
Okay. Thank you very much.
Thank you.
We now have a follow-up question from Andre Kukhnin of Credit Suisse. Please go ahead.
Yeah, sure. Thanks so much for taking it. Just two quick ones. Firstly, cash and balance sheets. Could you just share with us how you're thinking about this for the rest of the year and sort of what the opportunities are?
Yeah. I wouldn't say there's any change here. We have a strong balance sheet. We are okay with that. If there were to be any good acquisition opportunities, we are ready for them. We're ready to find growth opportunities. Overall, we're quite comfortable with the balance sheet we have. It's strong and very good.
I think historically, at this level, you've released cash back to shareholders. What's helpful impact at the moment, if anything?
That's, of course, always a question to our board, how they deliberate these. Those are often one-off decisions and nothing more I can say on that. We have recently paid out our dividend, we have just paid out about EUR 730 million to our shareholders. That was a good dividend payout. Again, it's only a week ago.
Yes. I have a quick question on modernization in China. I understand you've given the numbers so that we're looking makes references on what size of it is that services about 10% altogether and the majority of that is maintenance. What do you think the market share is in the modernization market in China?
It's not very high. I don't think anyone has a very high market share. It's very fragmented, mainly focused on component replacement and modernization. As the equipment base changes, we see a good opportunity there. We don't see anyone that really would have a strong market share in modernization today.
Got it. Thank you very much.
Thank you.
As there are no further questions, I'd like to hand the call back over to the speakers for any additional closing remarks.
Thank you very much, everybody, for the active discussion today. Let's conclude the call. Thank you, and have a great rest of the day.
Thank you