Good afternoon, and welcome to KONE's results review for Q3 2012. As usual, we'll start with a short presentation by our President and CEO, Matti Allahouta and continue with your questions. Without any further introductions, let's start. Thank you. Please, Walt, please.
Thank you, Carla. Yes, welcome to KONE's quarter 3 conference call. We have again positive news to tell. And I have to say that this time, I am most pleased with our very good progress in cash flow. The in quarter 3, cash flow had a growth of more than 40% from an already good level in Q3 last year.
I will now first start again with the review of our financial performance in Q3 and in January, September, followed by a brief market view of market development in quarter 3 and a few comments of how we are developing our competitiveness. And then finally, of course, I will give our market outlook and our business outlook. So let's start with the quarter 3 numbers. The orders received had a growth of 18.3% and in comparable currencies, 10.5%. So this the conclusion here is that the impact of the favorable changes in excess rates was quite significant.
The order book went up by 27.5% to very close to a record level. I think that we were end of September about €20,000,000 €30,000,000 below the all time record level. In comparable currencies, the growth was 21.7%. Sales growth was strong at 26%, exceeding 1 point 6,000,000,000 And in comparable rates, the growth was 18.8%. The operating income growth was strong, 18.8 percent and reached EUR 224,500,000.
The relative operating income was in this quarter 13.7%. That means that it had a 0.9 percent point negative difference from the comparable number 1 year earlier. And later when I will review and focus on operating income more, I will naturally come back to the reasons behind this deviation. The EBITDA was in EBITDA, the gap was clearly was smaller. It was 0.6% points because the impact of GiantConnect amortizations in this quarter was again 0.3% points.
Cash flow, as said, went up from NOK 240,000,000 to more than NOK 350,000,000 And I am particularly delighted that this was a result of a positive development in all key factors of cash flow. The operating income improved. Secondly, the inventory rotation improved rather significantly, thanks to the actions we have been development actions we have been taking, especially in our delivery chain development program. And thirdly, our teams did a very good job in this weak environment with receivables. And in addition to all of these, also the accounts payable we are at let's say at a favorable level.
Naturally accounts payables payable, we see variations from month to month and quarter to quarter. But overall, very, very strong progress here. But of course, 9 months is much more informative in our kind of business, a less focused now to January, September development. As you see, the development over this year has been quite solid and the numbers are rather similar compared to the 3rd quarter numbers. In orders received, the growth has been 24%.
In comparable currencies, 17.6%. Of course, the Giant Kone consolidation in December last year has contributed to orders received and sales rather much. But even with that comment, this SEK 17,600,000 is at a good level. And the sales was sales growth was has been 21.5 percent and in comparable currencies 15.9%. The operating income growth excluding the onetime cost that we booked in quarter 2 has been 15%.
And the relative operating income in this over this period has been 12.8% as compared to the 13.5% last year. In EBITDA here in January, September, we have a difference of 0.4% points. And cash flow, it is not only a 1 quarter, let's say, great performance. As you remember, over the last years, we have had good solid improvement development in cash flow from operations. And now during the 1st 9 months of this year, the cash flow had a growth of more than 30% from €607,000,000 to €792,000,000 Overall, I have to say that I am pleased with this development we have had in January, September in our performance.
And I would like also here to use this opportunity to thank say thanks to our people who have done a great job. And let's then focus again on orders, sales and operating income and also see how the development has been compared to the same quarter during the previous years. And first, starting from orders. The growth in orders was fastest in Asia Pacific. And in Asia Pacific, it was best in China and in Southeast Asia.
Also, we had a slight growth in Europe, Middle East and Africa. However, Europe is more increasingly different in Southern Europe and Central and Northern Europe. So that in Central and Northern Europe, we had actually good growth in orders received, while the orders received declined in Southern Europe. In Americas, the orders received declined because of decline in the United States. As we have commonly navigated all the time, we have been increasing prices actively and especially so in the United States from the middle of last year.
And that development has been necessary and it has been positive. In Q3, the orders received margins improved. But naturally in this kind of competence development and targeting all the time higher orders is margins, we may have lost some opportunities and naturally another party's quarterly variations or another reason. So that about orders then sales. In sales, we again were in help us in such a situation that in quarter 3, we had good growth in both businesses and in all geographical areas.
In regarding businesses, the growth in new equipment business in quarter 3 was in sales was 45%, so very fast growth and even in comparable currencies 35%. In the service business, the growth was more than 9%, and in comparable currencies, close to 5%. When it comes to different geographical areas, the growth was fastest in Asia Pacific, but also at good levels in Europe, Middle East and Africa and in Americas. And then operating income. The growth in operating income that was more than 18%, 18% was driven by good growth in sales in Asia Pacific and good development globally in the maintenance business.
We as I have now mentioned a couple of times, the changes in the interest rates have had a positive impact in our business in Q3 and this year. And in the Q3, the impact coming from positive currency positive changes in exchange rates was 1 third of the growth in operating income. So these changes represented onethree of the operating growth. So these were the key factors driving operating income growth. And then the factors limiting the growth or being burdens for the growth were the following.
First of all, I already mentioned the amortization of the intangible assets of Zayant Kone. Then the second reason is the following. You remember that in 2011, we communicated all the times that all the time that the orders margins have we are going a little bit down. And therefore, we started an active pricing excellence program globally in the spring of last year that did not as I believe many of you remember that did not where we did not get benefits set last year, but have started to get benefits from beginning of this year. And now this year and up to roughly middle of next year, we are delivering these orders with a little bit lower margins.
Then thirdly, the third reason is, of course, that we have had such a high growth in Nuvikun business that the business mix has changed quite clearly. And in a minute, I will come back to that. And of course, it also has had an impact. So and here we have the business mix. You'll see that the new vehicle business and service business both represented 50% of our sales in January, September.
And in quarter 3, the share of our new equipment business was even slightly more. Geographically, we have added the fastest growth in Asia Pacific. And now the share of that region went up to 35% from the level of 27% last year. The sales in China represented 25% of our total sales in January, September. So this is about numbers.
And now I will move to give a brief update about how markets have developed. And I will start with Europe, Middle East and Africa and the new equipment markets. In Central and North Europe, the market declined somewhat, but remained at a relatively good level. The best development we saw in the markets in Germany, Switzerland and Austria. And the worst decline happened in the Netherlands where actually the market decline started later than in many other European countries in most other European countries and in Ireland.
In South Europe, the markets declined further from an already weak level. This was particularly so in Spain, where the market is at a very low level at the moment after continuous decline since 2,008. And this was also the case in Italy where the decline started first quite a few years or at least a couple of years just slightly, but then has a bit weakness has accelerated. In France, during the 1st 3 months of this year, the market developed positively. But then during quarter 3 quarter 4 last 6 months, the market has somewhat declined also there.
In the Middle East, on the other hand, we have seen more positive development. The market in Saudi Arabia has been strong. And we have continued to see as already in the spring positive signs also from some other countries like Qatar and from Luba in Arab Emirates. In Russia and Turkey, the markets have continued to grow. Regarding modernization markets, we see that the continued weakness in the economy has had an impact also.
Here the markets grew slightly in Central and North Europe, but continue to decline also decline in South Europe. Regarding maintenance markets, the market continued to develop well, also with clear variation between countries. Price competition has intensified in many countries in maintenance, especially so in Southern Europe. The Southern European market is really rather weak overall at the moment as we see. In the Americas and in the new vehicle markets in the United States, the revenue and recovery continued, driven by small and medium sized projects in the residential and office segments.
In Canada, the market has been actually all the time during the last years quite rather good and had a slight growth also now. In Mexico, the markets dropped to a very low level in 2,009 2010, then have largely recovered and now the market was rather stable. In modernization, the development in Americas was slightly better than in Europe. The markets grew slightly. And in maintenance markets, price competition intensified particularly in the nonresidential segments.
And now let's move to review how the Asian Pacific markets developed. The development also here is was rather much as we had expected. The markets here continue to grow, but the growth was slower than in the first half. And now a few comments country specific comments about the new equipment markets. In China regarding China, as you remember in July, we estimated that the growth in market growth in quarter 3 would be between 0% 5%.
Now it looks like the growth was somewhat higher than 5%. We said in July about quarter 4 that we made that the market will grow in quarter 4 by 0 to minus 5 percent. Now our estimate is that in quarter 4, the market in China will grow by 0 to plus 5%. So the trend is very clear. The market is market growth is slowing down, but this process is happening more slowly than a little bit more slowly than what we expected.
On the other hand, which is positive news, there is also an underlying important trend when we take a look at the statistics of the real estate development in China. The sale of new sales area or net sale practically pretty much the sale of new apartments was 3 quarters 9 months a period of decline. So after 9 months of declining trend, in quarter 3, this trend turned to positive. So that in July, September, the growth in new sales area in China was plus 6%. And this is naturally very, very important news.
And also the new construction development still in quarter 3 was negative. It is not unexpected at all because as I as we communicated also in July, the time for new construction start to pick up is typically 1.5 to 2 quarters after the new sales area starts to pick up on sales in new sales area. So this would mean 4.5 to 6 months from beginning of July. I already said that how we see the development in estimated development in the Chinese market in quarter 4. After that, we estimate that our market because our market typically starts to pick up then after some delay from the time of picking up of the new construction activity.
So from the beginning of next year, there will most likely be a period of flat or slightly negative growth in our industry before it also starts to pick up. In China, all segments grew, but the growth was driven by the affordable housing segment. Also, the other residence or the rest of the 2 residential activity had a was growing outside the 40 biggest cities area. In the 40 biggest cities area cities, the restrictions of the government are still in place. And there the developers invested more and in the commercial segments like hotels and offices and so on.
But also it's very important that when we take whole China, the vacancy rate or vacancy level had a negative and in this way positive. So declining trend in end of quarter 3 also very positive sign. In India, the economic growth has been going down quite a lot during the last few months. And in our markets, the situation is such that in quarter 3, the market was stable or had a very limited growth. There actually is quite a lot of demand for new apartments, but the tightness of financing is constraining growth.
In Australia, the market declined significantly because of weak economy and uncertainty in economy. And in Southeast Asia, the markets continue to grow, but the growth was more moderate than in the first half. Regarding modernization, the Australian market is the biggest big part of the Asia Pacific market still. And there the market modernization market declined slightly. In regarding maintenance, the markets maintenance markets really continue to grow throughout the regions well.
I would like now to take up 3 highlights of quarter 3. First of all, the sales of the new global Elevator range that we launched in late in late May early June have started in September in and they have started in Europe, Middle East and Africa and in Asia Pacific. As we said in July, we launched the new product range in a situation when the competitiveness of our current product was and continues to be very good. And therefore, after the very successful launch, we have seen our customers being really, let's say, impressed about what we are bringing to the markets. We are focusing on high quality ramp up.
And therefore, we are not creating any urgency as we have said here in the ramp up speed as we have said. And this means that the volumes in terms of deliveries, the volumes of the new product range will still be rather limited next year. And therefore, this new global product range will not have yet naturally will not have yet any essential margin impact next year. That will come then in 2014. And as you remember, by the end of 20 14, we will have been in the full volume phase.
And we estimate that in that phase, these new product range will represent about 40% of our 60% of our deliveries. And but naturally, next year, already, the new product trends will have a big impact in our orders, of course. The second highlight that I have here is the move to our new factory in China in Kulshan. And what has happened is that the production was moved in very smoothly to the new factory by the end of September. The third highlight is that because of our strong cash position and very good development in the and continuing very good development in cash flow.
Kone Port decided during quarter 3 that they will that the Board will propose an extra dividend that would be €1.50 per for every PP share. And actually, tomorrow, we will have the extra general meeting where this decision will be taken or where the decision about this will be done. Regarding our development programs, we have had in all of them very good progress. And I will just take give a couple of comments in 2 of these 5. First of all, employee engagement.
In this development program, we have been starting and are starting new development and training programs all the time. Just a couple of examples, we are starting a Managed KONE business program that is targeted for branch managers and people in similar roles and the service manager program and new sales training programs. We just emphasize these, therefore, so strongly in this kind of phase because the continued weakness in the global economy in the continued weakness of the global economy, it is so important to continuously develop the leadership skills of our leaders and do everything possible in order to keep up the good spirit we have. Another point is this delivery is an excellence. I wanted to really underline the development in cash flow and the work that we have been doing in this development program has contributed a lot to the improving significant improvements in the inventory rotation and hence to the cash flow.
Among other things, there are other initiatives as well, of course, in this delivery chain excellence program. And now then I would like to complete the presentation by telling our market outlook and our business outlook. Starting from a market outlook in the Nuviket markets, we estimate that the markets in Asia Pacific is expected to grow slightly in the last quarter of the year. In the markets of Central and Northern Europe, we expect the markets to decline somewhat. And in the markets of South Europe, we expect that we will see decline from the already weak levels.
On the other hand, we estimate that market in North America will gradually continue to gradually recover from a low level. In modernization, the markets are expected to be stable or declined slightly in the last quarter of the year. In maintenance, we expect that the markets will continue to develop rather well in most countries. Finally, the business outlook and we have specified post sales and operating income very, very slightly, slightly here. So it has to be a bit more accurate in our guidance with all of the experience and learnings from quarter 3.
Konecnet sales is now estimated to grow by 13% to 17% at comparable exchange rates as compared to last year. The previous outlook was from 12% to 17%. And the operating income excluding the onetime cost in quarter 2 is expected to be in the range of SEK 780,000,000 to SEK 820,000,000. The previous estimate window was from NOK 760,000,000 to NOK 820,000,000. So this was what I wanted to say to start with.
And now we have time for your questions. So please.
Thank you, Matti. And we will start with the questions from the people present here at the Konark Building. Erkki, go ahead.
Yes. Hi, it's Erkki Vasson from Swedbank. Coming to your order intake in Q3, if we exclude Giant KONE and if we have constant currencies there, your order intake growth decelerated to only just about 1% year on year in Q3. What should we read into this? What's about European weakness?
What's about this temporary slowdown in China? Or how would you comment that?
A few factors. So first of all, the markets have become weaker, as I mentioned. Then secondly, we see here quarterly variation. And then thirdly, the factories that we have been increasing prices all the time in most markets. And of course, in this kind of process, we always may have been losing some opportunities.
But even with that comment, I am pleased very pleased with our pricing excellence program and activity we have been doing there.
Tomi Ralloy, SEB, NSCIELTA. On the pricing, do you see any changes you would need to do in order to sort of regain orders or the momentum? Are you adjusting your prices in terms of the levels perhaps lower? Or how would you comment that? Well, first
of all, it is clear that now during the autumn, the it has started to become more and more difficult to increase prices. And this kind of situation, of course, but it is very much country by country issue. So in some countries, we will we continue to work in order to try to increase prices. In some other ones, we have to test where exactly the let's say the right level is. But what is equally important or even more important that this competence development will continue, and that is clear that development work will pay back.
If I can continue. On the 4th quarter guidance, if we take sort of revenue ranges, earnings ranges, it seems a little bit cautious. Is it is there a purpose you are signaling some sort of uncertainty in terms of Q4. We know that it's always dependent on the deliveries and mixes and so on. But any particular you are trying to signal there?
[SPEAKER STEPHEN ROBERT BINNIE:] Well, our guidance as you're aware it is typically clearly more accurate than the guidance of many other companies. And our guidance is our, let's say, transparent most correct guidance that what we can give.
If I can continue, for example, you could be saying calculating that revenue growth is close to 0 or up somewhat 6%, 7%. If I would assume that Asia Pacific continues to grow, do you think or confirm that revenues in Americas and Europe, Middle East and Africa could be coming down?
Well, I think that always when interpreting the guidance, there is a window. Typically quite typically, at least in our case, it is so that the most likely level is the middle of the guidance. And then always there is certain upside and certain downside. And as you said, depending on whether there are delays in projects and some projects completions are moving from December to January. Actually, we have had very little delays, but just to give you an example.
Finally perhaps, how big was the China in terms of orders
this in the
Q3? And if you can comment Q4 last year Asia Pacific in total? Henrik, maybe you remember these numbers even better? Yes. So as Martin said, the sales in China was
a little bit over 25% of our sales in China in Q3. In orders received, it was roughly 35%.
That's probably something we would need to check out. I think
it was around because you
have to remember that now
we have Giant Kone in here as well. We didn't have Giant Kone. So it was a bit over 25%. I can't remember the exact number, but it was a bit over 25%.
If my recollection is correct, China alone was roughly 20%, but we would need to check.
In order to see if I think it was higher, but okay. Let's check. Okay.
Yes. It's Krogsberg Bank again. Talking about China. As there is a bit temporary or a little bit more persistent slowdown in growth, Do you see any that pricing environment would be tightening? We have seen OTs boasting about their market share increasing again in China.
How would you depict the pricing in China?
So far this year, we have had a positive development in pricing. So China is one of the markets where we have been able to do that in positively. And Expensive market share. In China, we were growing our growth in China was very strong in Q3. And even excluding China, KONE, it was at good double digit level.
And you remember that I said that the market growth was in quarter 3 somewhat more than 5%.
Berke Stornner from Polivar Bank. Could you comment the development of cost side, especially the raw material costs and the labor costs and what was the effect in Q3? How do you see the coming months or quarters?
Okay. So first of all, in raw materials, the development has been very much as we have communicated all the time. We suffered still in Q1 of this year, a little bit less in Q2 of this year. And now in Q3, the development has been quite neutral. And we don't believe big deviations from this neutral in quarter 4 either.
The background here is that while the spot prices have come down a bit, the regarding the comparison point of 2011, we made as we have also communicated earlier, we made a good let's say good longer fixed price contracts already in the early autumn of 2010. And therefore, to that favorable comparison point, the development is rather flat. Then what comes to the inflation in the wages and salaries, when I mentioned about what factors were burdening, yes, in that area, we had a we suffered a bit, but that was not anything major, so I did not mention it.
Tomi, coming back to your earlier question about Asia Pacific share in the last quarter of last year, so I don't have the Asia Pacific figure here. But China share out of our so financial orders you see it for the full year last year. So in 2011, it was roughly 25% and in Q4, it was roughly 20%.
Hello. Elena Juppett from Equity Bank. Still getting back to China and the question is on Otis, well, wanting to take back some market share. What do you see happening with the local players in Asia and in China? And the kind of competitive dynamics between, say, you and Otis and the local players?
Are the local players losing market share as a trend? Or what's happening with them?
Yes. Maybe you remember that in July, we said that there seems to be such dynamics in China that demand is moving from the smaller players to bigger players. And that trend has continued.
Thank
you.
I think we are ready for the questions from the line. So operator, please let us have the first question. Thank you.
And the first question is from the line of Lars Brauson from DNB. Please ask your question.
Yeah. Thank you very much. Good afternoon, everybody. Matti, can I just return to an earlier question about your flat organic order growth in the quarter? And can I ask you to elaborate a little bit on what you've seen regionally here in terms of organic growth I?
E. In China, Europe and in the U. S?
Erik, maybe you answer this. Okay.
So if I start from Asia Pacific, as Matti mentioned that in China, we had strong orders received growth. Also if we exclude Giant Kone, our growth was clearly in the double digits, so clearly higher than the market. Southeast Asia also continued to grow quite well. But then as we said in the report as well in Australia, particularly, which is a reasonably large market, That market we've clearly seen more weakness and delay in decision making. So there orders received then declined.
Just to highlight a few in Asia Pacific. If we then look at Central and North Europe, as Matti also mentioned, we had growth in Central and North Europe, but then a clear decline in the southern parts of Europe And in North American income, the reason for our decline in orders received was a decline in orders received in the United States. So hopefully this gives you a little bit of a picture. And these were all organic growth rates I was referring to.
And if Europe I presume that that implies Europe is declining double digit solid double digit year over year. I'm trying to square that with quite robust commentary this morning from both Schindler and Otis order growth in Europe. Do you believe you're taking market share in Europe specifically on the new equipment and modernization side?
I continue to say the same message that we always give in the middle of the year that we always want to see the full year before we comment what really is happening in the market shares.
Right. Okay. Secondly, if I can ask to the commentary on maintenance. The pricing trends that you've seen and the greater pricing pressure, would you say that these trends are more like we've seen in the second half of twenty eleven where we talked about greater pricing pressures particularly on larger projects in Europe? Or would you say that what you've seen in Q3 perhaps is somewhat more pervasive across your markets in Europe and perhaps more structural in nature as you see it today?
Yes. There is some kind of difference. And the difference is in Southern Europe where in some countries we have seen also, let's say, higher pressure on prices not only in big contracts, but overall especially in big contracts, but somewhat also overall in non residential segments.
That's useful. One final question perhaps you Henrik. Just on Giant Corner, it looks like the order intake and absolute numbers are coming down from about €150,000,000 in Q2 to somewhere between €110,000,000 and €120,000,000 in Q3. Perhaps a slightly surprising sequential slight development and I know there are quarterly variations and perhaps there was a slight spillover from the Chinese New Year in Q1 into Q2. But can you comment a little bit on what you're seeing organically within Giant Kone?
That will be useful.
Well, firstly, I think that it's good to remember that in China, the Q2 is always seasonally clearly the highest orders received quarter during the year. I think that what we have said is that we have commented overall on our China growth figures. What we have said is that Giant Kona is now part of our operations in China. So we have not commented that much more on Giant Kone separately. I think that what we can overall say about the integration of Giant Kone and the development of Giant Kone as a business since we took control in December last year is that the overall development has been positive and we are quite pleased with the overall performance
with Giant Kone.
Is there a meaningful difference in terms of organic trends between the legacy Kone business and Giant Kone?
As I would say that Giant Kone has overall developed in a good way.
Thank you.
Your next question is from the line of Ben Masson from Bank of America. Please ask your question.
Yeah. Good afternoon, everyone. It's Ben Mazlin from Bank of America. A couple of questions, please. First one, just on the negative margin mix that you seem to have had from more new equipment and less service.
I think you gave the RIN ratio at fifty-fifty for the 1st 9 months. Given the very strong pickup this year you've seen in equipment orders, how would you expect that ratio to develop heading through Q4? Is obviously a big delivery quarter and then also into 2013? That's the first question. Thank you.
Okay. And the answer to this first question is that we expect the full year mix to be such that that Nooten business will be slightly more than 50% for the full year. And then what comes to next year, our policy is to give all of the information, all of the guidance then in January after we have done our homework very carefully.
Okay. Thank you. And then the second question,
just so I understand
it right, it sounds like you say that the orders received margins in Q3 are developing well, but at the same time the pricing environment is getting worse. I think Otis and Shindo have said the same thing today. Just does that mean that you're walking away from business that is just badly priced basically being more selective?
Overall, our objective in this kind of market environment is to learn to understand the markets all the time with a better granularity in order to be able to focus on the most attractive growth opportunities. And what comes specifically to your question walking away, yes, in some cases of big projects, we have come to the conclusion that we don't participate, but there are not many such cases, not at all.
Okay. Thank you very much.
Next question from the line of Austin Ayer from Marshall Weiss. Please ask your question.
Hi. Good afternoon. I have 3 questions, if I could take them 1 by 1. The first is maybe just an understanding question. When you talk about the fact that the slowdown in new equipment is having an effect on the maintenance business?
I don't quite understand. I mean, if new equipment has been slower, doesn't that mean that there are more old lifts to maintain?
Well
what we mean is that in some selected countries in Southern Europe, particularly. When the economy in those countries has continued to be very weak now for a period of several years, The and the new liquid markets have hence continued also to be weak. This has started to have some, I would say, not surprising pressures also in the pricing of the maintenance.
But I mean I don't understand. I mean are there people the staff who were involved in new equipment being moved to maintenance and so it's becoming more competitive? I don't quite sort of understand the dynamic. Am I these sort of 2 different parts of the business?
[SPEAKER JEAN LOUIS SERVRANCKX:] Well, first of all, naturally we have to understand the dynamics. When the new equipment market has been low, the number of convolutions is lower. And hence, the competition of the maintenance growth quite naturally is tighter. Then again, when looking at from the customer's point of view, when the economic weakness has continued, it is not so surprising that customers have started to put more pressures on the maintenance prices in some segments.
Okay. Got you. I think I've understood. Thank you. Second question was just when you talk about the effect on EBIT, one of the things that you said was negative was that there were lower margins in the 2010 2011 backlog.
Have those not been worked through yet? I mean when do those all sort of drop out?
[SPEAKER STEPHEN
ROBERT BINNIE:] Well, as Sandrik already roughly mentioned earlier, the average time globally from order to delivery completion is something like in new equipment like 1 year, but it varies a lot by geographical area. So that in Europe, it is typically from 9 to 12 months. In Asia, it is bit from 6 to 18 months depending on the market. And in the Americas, it is, let's say, typically from 12 months or 15 months to 18 months. Then, of course, in major projects, in big projects, the times are still clearly longer.
And so this means that, for example, this year, a major part of the deliveries we have delivered so far naturally comes from 2,000 and from the order book of 2011. And again, up to the middle of next year, we still have quite a lot of orders that come from 2011 as well.
Okay. Got you. And thank you. The last question
I had was just
regarding pricing in China. When you say that it was positive, I mean inflation is quite high in the country. And I just wondered, I mean, is do you think pricing is above inflation? Or if you don't know what inflation is, is it above wage growth?
[SPEAKER SEBASTIEN DE MONTESSUS:] Our orders I will answer in such a way that our orders received margins have been improving in China this year in every quarter.
Got you. Thank you very much.
Your next question from Rob Verdi from Espiriti Santa. Please ask your question.
Good afternoon, everybody. It's Rob Verdi from Espiriti Santo. I was just wondering if you could give me a little bit more color on how you're faring in the United States. You say that order intake has decreased clearly in the quarter and yet one of your competitors this morning said that it was clearly taking market share there through new product launches. Is the fact that you've not launched your new rollout in the United States having that impact?
So first of all, when we take the period of January to September, our situation in orders to see growth in the United States is positive. And then secondly, with the new product new global product trends launch in the United States will be in the first half of next year, and we will start to sell that in the second half. And then the third factor I would like to mention is that, as I said in my presentation in the U. S, we have been successfully doing good development in the prices of orders and orders margins. And that naturally, as I said, may have had some negative impact in losing some opportunities, but still this exercise has been very much worth it.
And then finally, we have always to remember that the quarter is a very short time, and we definitely also have an impact towards quarterly deviations here.
Okay. Thank you. It's very clear.
Thank you.
There are no further questions. Do we have further questions here in ESCO? In case not, let's just check
That is fine.
Okay. Sorry.
Still, Tomeraj, Sibienski, there was a large financial net income in the Q3. What was explaining that?
So the two explanations for that, of course, our strong cash position, interest income from that and also then we had from some of our holdings, particularly for Toshiba, their annual dividend was included in that.
Okay.
Do we have any further questions on the slides please? We have
a question from Tom Skogman of Handelsbank. Please ask your question.
Yes. This is Tom from Handelsbanken. I was wondering about the EBIT margin outlook for next year. We have discussed a lot of topics. But how much will, for instance, technical things like amortizations go down?
And what kind of raw material pricing trend you see for next year? And how significant is this price improvement in terms of the margin next year? Could you give some kind of a flavor
for that?
[SPEAKER KARL
HENRIK SUNDSTROM:] We will give our guidance for next year in January, So after very good preparation. This is our policy and it has worked well. We have been able to give rather good guidance when working like this.
But could you just mention the raw material cost trend how it looks like? You have commented that many times a couple of quarters ahead. What will happen after Q4?
Maybe Henrik, could you want to say something or I'll
Well, we can say, of course, as you can follow, there are raw material prices have overall, I would say, lately been on a reasonably good trend. Reason, of course, clear variations, the deviations between different raw materials. So let's see where they go to. We have selectively started to pick some prices for next year in order to secure some of these prices, but there's still a lot to be done. So I would say
the general trend has been in
a positive direction. I would say, Tom, perhaps the only thing we can say about this year is that, as we have said, that the impact of the amortization of the intangible assets in Giant Kone has impacted about 0.3 percentage points in our margin and this amortization will stop now in December. Thank
you.
Good. Thank you very much for your questions and active participation. I think we are ready to