Welcome, really, to KONE's Quarter One Conference Call. We have again some positive news to tell. They have started very well. The most important development that we see ourselves, in our case, has been the very strong growth in orders, meaning the 30% growth in orders received during the first three months. I would say that the most important point of all in that has been that we have been able to have good growth in orders in all key geographical areas. Very good development in Asia-Pacific and also very good development in Americas and also positive development in the Europe, Middle East, and Africa. I will, again, this time, first focus on our financial performance during the quarter one. I will review market development in different markets, followed by a few comments about how we are developing our competitiveness.
Finally, naturally, I will tell about what is our market outlook for this year and what is our slightly upgraded business outlook for 2012. Let's start with the financial performance in quarter one. I'm pleased to start with the orders received. Numbers. Orders received went up by 30.7%. In comparable currencies, 27.1%. Of course, the GiantKONE that we consolidated in the beginning of December last year contributed to this growth. Even without the positive impact of GiantKONE, the growth was 23.7%. Order book end of March was at record by far, a record level, more than EUR 4.8 billion, up close to 30% from a year ago. Even in comparable currencies, 24.5% up. I want again to remind all of you that we don't include in order book maintenance contracts.
Sales growth was, this naturally means that the order book is very strong and a very good starting point for the year. Sales growth was also good. It was 17.8%. In comparable currencies, 15.1%. You see from here that this means that we have sales were close to EUR 200 million higher than what was the sales level a year ago in quarter one. Operating income grew somewhat more than what we expected ourselves. It went up by 11.8% to EUR 132.7 million. I will later tell what were the reasons to this kind of good growth, what made it possible. The relative operating income was 10.7%, which, as you see, means that it was 0.6% points less than in quarter one a year ago. Now we have to remember and understand that 0.4% points of this difference is because of the amortization of the intangible assets at GiantKONE.
Without that, the negative deviation from the 11.3% of last year is 0.2%. Because of these amortizations that we will, let's say, to a greater majority of that we will do this year, we are now giving our report also the EBITDA development, because it better reflects how our operative performance has been developing. As you see, the EBITDA growth during the first quarter was 15.8%. That is very close to the same as sales growth. You see that the relative EBITDA difference to the previous year is exactly this, 0.2%. However, it is slightly negative. Most people would say flat. In every case, I will come back later and discuss more about what were the different factors impacting positively and negatively to the operating income growth.
Cash flow was also strong at close to EUR 250 million and a little bit higher than what it was last year in quarter one. Now let's again take a closer look at the development in orders received and sales and operating income and also as compared to the development in previous years. From this picture, you'll see all very clearly that the orders received level that we had in this quarter was clearly higher than in any other quarter we have had at KONE. As I said, the most important thing was that we had good progress in all key geographies. The growth was strongest in Asia-Pacific, and there it was best in Southeast Asia and China. Also, the development in India was very good.
In Americas, we had good growth in all of our key markets, in the United States, in Canada, and in Mexico, and in Europe and Middle East and Africa. There we had a positive development in orders received, and it was best in the Middle East, in Sweden, in Switzerland, Belgium, and France. This is about orders. Next, about sales. Regarding the sales development, I have two important points. First of all, the headline here says that growth in all businesses. In new business, the sales growth was very high this quarter. It was more than 27%. I am equally pleased with the development in the service business because we had a growth of more than 11% in our service business during quarter one.
The other important point is, or at least interesting point, but very natural as such, is that at the same time when we had good progress in all geographies in orders received growth during the quarter, we had major deviations in our sales growth in, let's say, geographically. First of all, in Asia-Pacific, the growth was very strong. It was more than 60%. Naturally, this was partly contributed by the consolidation of GiantKONE. Even without that, the growth was very strong. This is naturally the result of the good orders received in that geography that has continued in our case for a long time. In addition to that, naturally, some natural quarterly variations. I have to remind you that the sales growth in the first quarter of last year was not strong compared to the orders received flow that we have had.
These kind of changes are part of the very strong development in Asia-Pacific in deliveries now, early part of this year. In Europe, Middle East, and Africa, we also had good sales growth, more than 10%. In the Americas, on the other hand, we had a clearly negative growth in sales, which is because of the low market level in 2010 and hence the low level of orders in the Americas in 2010. As we have said, I mentioned several times, the time from orders to completion of deliveries in Americas is longer than in most other markets and typically between 12- 18 months. This is about sales. Next, about operating income. Here, the first point is that the three key reasons why we had better development in operating income compared to what we expected in January were, first of all, the strong deliveries in Asia-Pacific.
Secondly, good development in productivity, especially pleased I am with our development in the maintenance business. We had a very good start in the maintenance business to this year. The third reason that you never know beforehand is that, or can't know beforehand, is that the positive impact coming from the favorable changes in the translation exchange rates was 25% of our operating income growth. These were the key reasons why we did better in operating income than what we expected in January. On the other hand, exactly in line in what we said in January, our operating income continued to be burdened by high material costs and wage and salaries inflation in Asia and intensive price competition. What comes to material costs, I would like to repeat what I said in January.
The impact of these high material costs, they have been highest in Quarter Four last year and quarter one this year. Also, the development in material costs has been, as such, a little bit more favorable now. We still have some negative impact from material costs in quarter two. The situation, as it looks now, should be a bit better. This is about operating income. Now to the business mix. Here, the good organic growth combined with the GiantKONE impact has led to quite clear changes in both of these pie charts. In the geographical mix, the share of Asia-Pacific went up from 22% last year in quarter one to 30% now. However, I would like to point out that the share of sales in Europe, Middle East, and Africa continued to be more than 50% of our sales. This means that our geographical balance is good.
What is great is that a growing share of it is in the big growth markets. I would also like to add that, because I'm very sure that you are interested in that, the share of China of our sales in quarter one was about 20%. What comes to the business mix, the impact of these factors that I mentioned has been that the share of new equipment business was now 3% higher than what it was in quarter one last year. This is about business mix. This concludes the part of the presentation about the development in our financial performance. I have to say that when thinking about how we have what has been our progress in this quarter one, I have to say that the biggest asset that we have at KONE is our highly capable and committed personnel.
I want to thank them also in this context again. I would like to move to tell about how the different markets have developed. First, starting from Europe, Middle East, and Africa, and from the new equipment, how the new equipment markets developed. Many of you remember that last year in Central and Northern Europe, in many countries, the market grew nicely in the first half and then stabilized to a relatively good level during the second half. Now, during this quarter one, the market in Central and North Europe declined slightly but remained at a relatively good level. A few comments by country. In Germany, the good market development continued. In Sweden and Belgium, the market stabilized to a rather good level. Whereas, especially in the Netherlands, the market declined. Also in Finland, but very slightly. In the U.K., the whole market declined somewhat.
The activity level was good in the greater London area. In Southern Europe, the market remained weak. In France, the market grew a little bit, but we don't expect that the growth will last to the end of this year. In Italy and Spain, the markets continue to decline from the earlier already weak levels. In the Middle East, the market growth was strongest in Saudi Arabia. In Russia, the market growth that has lasted now already about 18 months continued to be good. In Modernization, the markets declined slightly. In maintenance, the markets developed well, but the price competition remained very intense. Next, I will take Americas and start with new equipment markets. The most important point here is that in the United States, the gradual recovery of the market continued. This good development expanded to a wider geographical area.
However, the development was and the growth was best in the East Coast, West Coast, and in Texas. In Canada, the market remained stable at a good level. In Mexico, the market continued to grow. In Modernization, the development was a little bit better than in Europe. We saw that the market grew slightly. In what comes to maintenance, the good development continued, but price competition remained very intense also here. Finally, Asia-Pacific. As we expected, the market growth continued in Asia-Pacific, but at a clearly lower rate already in the early part of the year than when compared to the growth last year. Now a few country-specific comments. First, China. We estimate that during the first quarter, the market growth in China was 10%+ , so somewhat more than 10%. For the second quarter, we expect the growth to be between 0%- 5%.
For the second half, we see that there is some uncertainty. However, we expect that the growth will continue outside the 45 biggest cities in China. In the 45 biggest cities, the situation currently is such that some of the restrictions set by government continue there, for example, for buying second or third apartment because government wants to get the prices to decline from the higher levels. This is what has started already to happen, and in some cities, even already quite clearly. Now what the buyers are doing, they are waiting for the price in these 45 cities. Many, not all, but many, many buyers are waiting for the prices to decline and then to make the decision at the right time. We expect that the situation will start to develop positively also in these 45 cities at the end of this year.
In China, the market growth was most strongly driven by the affordable housing segment, but also by the rest of the residential segment in the inner part and western parts of the country. Actually, all of the other segments, except the infrastructure segment, had a rather positive development direction. In India, as you remember, the financing constraints started to slow down growth towards the end of last year. Now this development continued, and the Indian market grew only slightly. The main driver for growth was the residential segment. In Australia, in a similar way, the economic outlook started to delay customer decisions during the second half. This development continued now in the first quarter. In Southeast Asia, markets continue to grow well, and that good development has again continued there already for quite long. In Modernization, the market declined in the biggest Modernization market in Asia-Pacific, which is Australia.
In maintenance, the good development everywhere in this geography continued. This means that overall, this market development is quite a mixed picture. It is very important to know the markets well and have better granularity in the market understanding. That is what we are working all the time, more and more, in order to identify the growth opportunities best. Next, about our development activities and how we are developing our competitiveness. I have to say that the development and work in all of these five development programs has continued to be very active during the first three months of this year. I do not now go in more in detail what we have achieved and what we are doing in each of these areas.
However, instead of that, I want, first of all, to remind you what is the philosophy here when we develop our competitiveness in a focused way, but in a broad scope all the time. Our objective is to develop KONE to become a stronger and stronger company every year, a better and better company every year, and develop a very strong company long term. In order to make that happen, we judge ourselves every year through five key measures where we want to make good progress in order to secure that we are really doing sustainable progress. These five are, first of all, to continuously develop employee satisfaction, continuously develop customer satisfaction, grow faster than the market, have better development in financial performance compared to our competition, and have good, strong development in sustainability.
If you think these five measures, if there is progress in all of these areas, then the company is becoming better and stronger all the time. The other point that I want to take up here is that we are starting a new initiative. As you know, we have been working and continue to work very actively with our major field activities, installation and maintenance. Now we are taking a closer focus also in our support functions. Our objective is now in this work to clarify the roles of our different support functions so that the work we are doing in our support functions maximally supports our business development. Related to that, our objective is also to improve the processes, simplify and improve the related processes.
In parallel, we will take a closer look at whether we have a need in some of the countries where the markets continue to be at a clearly lower level compared to the pre-financial time period. Also about that, we will know then more when we announce our results in quarter two. These plans, we expect that they will bring some cost savings, but this is not at all the primary objective here. The key priority is here to improve our operations also in these respects. I am coming to the market outlook and business outlook. The market outlook to 2012 is that, first of all, starting from the new equipment markets, we expect these markets to continue to grow in Asia-Pacific, but at a significantly lower rate than in 2011.
There also is uncertainty related to the development in the second half of the year that I already discussed when I told about China market development. The markets in Central and North Europe are expected to remain relatively stable or decline slightly. The markets in Southern Europe are expected to decline from the already weak level. The market in North America is expected to continue to gradually recover from a low level. What comes to Modernization, we expect that the Modernization market will be at about the same level as last year or grow slightly. The Maintenance markets we expect to continue to develop well. Finally, our business outlook, which we have slightly upgraded because of the positive start of the year. Now we say that KONE's net sales is estimated to grow by 10%- 15% at comparable exchange rates as compared to last year.
Our previous guidance was 8%- 13%. In operating income, we expect that we will be in the range of EUR 750 million- EUR 800 million, assuming that translation exchange rates don't materially deviate from the situation at the beginning of 2012. Our previous range was from EUR 730 million- EUR 790 million. Thank you. This was what I wanted to say to start this conference call. Now we have time for your questions, please.
Thank you, Matti. We will start with the questions of those present here in Espoo, Finland. Please go ahead, Iris.
Yes, Iiris Kemppainen from Carnegie. A couple of questions, firstly on your orders. Could you give us a number? How much did your orders grow in China? You have normally been commenting on that.
Henrik, you remember the numbers well.
We have not commented on our specific orders growth in China previously, but it's clear that China contributed significantly to orders growth. If we see that, if you take the orders growth, first of all, excluding GiantKONE, they were 23.7% compared to 30.7%. That shows that impact. We had a very strong growth in our orders received in China in the first quarter.
I would like to add that because we have typically said how big part of our total orders received came from China, and it was about 25%.
Secondly, as you mentioned, your outlook comments on China are a little bit more cautious for the second half, while some of your peers have been indicating that Q1 will be weak and then improving the rest of the year. I'm just wondering what is behind your cautiousness for the second half?
When we look at the development of the Chinese market over the last seven, eight years, it has always developed, grown in this kind of sinus wave. Always when the growth has been very strong, the government has taken actions to slow down growth. This time, they had to take quite a few actions before the market started to slow down. Market growth started to slow down. That started, as you remember, in about September last year. What follows typically is that when the growth is starting to slow down, they again take actions to take care of that the new growth will start. Now China has already taken twice actions to increase, let's say, money supply. The credit growth during quarter one has been actually quite a lot, especially in March.
What this means is that we think that it is quite clear that in the second quarter, the growth rate will be slower than in quarter one, especially remembering that in quarter two last year, the growth level was very high. It remains to be seen when these actions to accelerate growth again start to, let's say, lead to results, meaning that the growth will start again.
Thank you. Still, one question. On your backlog, what would you say about the current margins in your backlog?
If you remember, towards the end of last year, we said that we had a slight decline in the order book margin, although it remained at a good level. Now, in the first quarter, we had a stabilization of our margin order book. In the first quarter, we were better able to get our price increases through than earlier. Having said that, if you look at the market environment out there, particularly in Southern Europe, the United States, or North America overall, it's clear that the market environment is challenging. It's a challenging environment, but we were better now in the first quarter than last year in pricing. What is clear without saying is that our efforts in developing further our pricing capability will continue. It is nice to see that we are starting to get some results in that.
Thank you.
Hello, Elina Riutta from Evli Bank. Still on orders, United Technologies reported earlier today and Otis reported order intake down 9% in the first quarter. Could you comment a bit on the difference that we're seeing in your figures and their figures? Are you taking market share or is it the different business mix that is behind it?
As you very well know, we don't ever comment on our competitors and competitors' development. What is clear is that 30% growth in today's markets, as we saw that the market development is a mixed picture, is faster than the market growth. On the other hand, one quarter is a very short time. As I always said, and we have always said, there are quarterly variations. It's not, let's say, we don't speak about market share in three-month intervals.
Thank you. One more question about the adjustments to your operations in countries where the market has been down for quite a while: which markets are you looking at, and what kind of action? Can you talk about that now, or is it something that is going to come in Q2?
We have already done small structural changes in the United States where the markets, although they are gradually recovering, are still much below the levels of 2006 and 2007. Also, a small action in Spain. It is clear, to give you one example, that naturally we need to, we are looking at, we will now study the situations in those markets where the new equipment markets especially continue to be at a low level. This is naturally the case, for example, and especially in Southern Europe.
Does this reflect a view that you expect these markets to continue to be down for quite some time?
We naturally, always when we study these kind of questions, we have to be pragmatic and also take a view whether we believe that markets will continue to be down for a long time. You know that as we are very long-term oriented, one of our key approaches is that we always want to develop our company in, let's say, in a plus-plus way between our company and our people. Of course, we always take a little bit longer-term view and not months or quarters or even a year what actions we take.
Thank you.
All right. Thank you. We are ready for the first questions from the lines, please.
Thank you. Our first question comes from Mr. Andreas Dahl from Chevreux. Please go ahead, sir.
Hi, Dr. Andreas Dahl from Chevreux. Just a quick question on sort of the pricing. I realize Henrik mentioned that you'd seen a stabilization in the backlog margin in Q1. Could you shed some light perhaps on what kind of pricing environment you're seeing in China at the moment?
Hey, Henrik, maybe you continue starting the pricing.
I would say that the competition and pricing environment in China is clearly that it's tight. There is an area, of course, where we have to work on our pricing given the pressures we have both there from labor costs and from material costs that we have seen. I would say it's a challenging pricing environment, but I think we have worked a lot very actively on improving our capabilities in that area.
Great. Just to follow up, Jen, on that one, if you were to compare the pricing environment today versus a year ago, is it somewhat similar or better or has it deteriorated?
I would say that it is today about similar to what it was a year ago. It was tough also then. If there is a change, that is maybe a tougher direction because the growth in this phase has been slowing down. As Henrik said, our pricing capability has improved and that helps.
Our next quick question comes from Mr. Colin Gibson from HSBC. Please go ahead, sir.
Hi, good afternoon, everybody. Questions, please. They're both really simple, straightforward questions. Can we get back to the issue, please, of your market share in the first quarter? I think you indicated what I guess is pretty clear, that you outgrew the market in the first quarter. I appreciate that one quarter is a short time period, but could you give us some insight as to why you think you outgrew the market in the first quarter and whether you think the reasons that helped you grow faster than the market in Q1 will still be there in Q2?
Okay. Can we take question by question? You can then say the second question. The question is that why I think that your question was that why was our market, why was our orders with growth as fast as it was in today's market environment? I have to say that, as you know, from the spring of 2008, we have worked with the approach where we want to take, where we try to take also, let's say, difficult uncertain environments as an opportunity. The four key points here are, first of all, understanding the markets with better granularity, meaning that seeing better the growth opportunities also in the weaker markets. In connection with this, having very high sales activity level, and that also has been the case. Secondly, all the time developing our quality and productivity. Third, all the time actively developing our product competitiveness.
At this point, our product competitiveness simply is very strong in some very essential segments in today's markets. Maybe the most important case in point here is our competitiveness in the affordable housing segment in China and overall our product competitiveness in the big Chinese market. The fourth point is that before the financial crisis or the economic crisis started in 2008, we also decided to increase, further increase our already high investments in developing our people, developing leadership skills in a broad group of our people, and altogether taking some such developing actions that we keep a good spirit in our company. Naturally, we are developing, measuring also this development. I have to say that that development has been very good.
My comment in my speech when I said that during the first quarter, we again very clearly saw that our biggest asset, in addition to this product competitiveness and more granular market understanding of the others, is that our more and more capable and more and more committed personnel in different parts of the year.
Okay. Thank you for that. My other question, if I may, you commented early on in the call, although you didn't come back to it really, that on an underlying basis, margins were roughly flat year- on- year, only about 20 basis points different year- on- year. Yet, you know, we've become used to seeing your commentary that you have intense pricing pressure in the service market. Does intense, when you say it, mean something less than it would when I say it? I struggle to understand how price competition can always be intense, yet margins essentially can be maintained.
Maybe Henrik, you will answer this.
I would say that if you look at most of our markets, the pricing environment is intense. It is a very tough competition, particularly in the markets where we have had a prolonged weakness in the markets. It's clear that in those markets, you do get price pressures given the low volumes. I think we have done a few things to counteract this and to be able to improve our margins. First of all, the growth that we have had, of course, brings us fixed cost and other SG&A leverage. That is, of course, one way for us to improve our margin in an environment like this. We have continuously worked on our quality and productivity in order to, again, get efficiency in that area.
These are the ways, and then together with pricing, as we discussed earlier, how we can, even if the tough pricing environment, have a much more granular understanding of that area as well and therefore be better at pricing and counteract some of the very tough pricing pressures that we have. I think these are the most important areas that we have worked on and have resulted in us being able to maintain the margins even in this tough environment. Perhaps the most important one is the profitable growth that we continue to strive for.
Okay, thank you.
Good.
Our next question comes from Mr. Lars Brorson from DNB . Please go ahead, sir.
Thank you very much. Thanks for taking my questions. I had three if I could. First, if I could return to your commentary around your Services business. Congratulations on a great quarter. In that, the 9.5% sales growth you've seen there, you also at the same time talk about a Modernization market which has declined for you, which to me suggests that your maintenance market probably grew in the mid-teens year-over-year. Can you elaborate on what has been driving growth here? Are we talking about a broad-based cyclical tailwind in your mature markets, or have we perhaps seen some servicing defer in 2011? A second question to that, within your Services business, you've added about EUR 70 million year-over-year. Can you maybe talk about what has been added in mature markets versus emerging markets? That would be my first question. Thank you.
I will start that then, Henrik. If you will, then continue because I don't really hear the latter part of the question. The growth in sales in the Service business really was this more than 11%. We had a good growth in both maintenance and modernization in sales. Both had a, let's say, good start of the year in this respect. Maybe you, Henrik, continue.
I would first add to Matti's question when we talk about the modernization market that, of course, has more of an impact on our orders received. If you remember, during last year, our orders received performance in modernization was better than our sales from a growth perspective. Now it was reversed and we had better growth in sales, but in orders received. It's a flow-through of these orders to sales.
I must say also, Lars, your second question related to the maintenance growth was a bit unclear. Could you repeat that?
Of course. I was just interested to understand how your Services business breaks down, particularly on the maintenance side between developed markets and mature markets. That incremental EUR 70 million in Services sales you have added in Q1 this year versus last year, could you give us a sense for how much has been added in mature markets versus emerging markets?
We don't open up our sales by geography in our maintenance market. I would say that the growth has come from both mature markets and from developing markets. We have continued to have a good conversion rate in the mature markets, and that has brought additional service revenues. It is clear also that we are converting and growing our service business in developing markets. I think I would say it's quite balanced, the growth between the two overall.
That's useful. Thank you. I had a second question, if I could, on GiantKONE. It looks from your order growth numbers to me as though GiantKONE has added some 7% to group order intake year-over-year. That's about EUR 70 million, EUR 75 million in the quarter. That will be about EUR 300 million on an annualized basis. That, of course, compares to your about, sorry, EUR 340 million in 2011. Can you talk a little bit about the underlying order development in GiantKONE and to what extent there's a different seasonal pattern than what we have seen in KONE?
I think GiantKONE continued to develop in a positive way. As you know, our orders have seasonal patterns, and first quarter is not necessarily the highest one in China. I think that you can't really take first quarter and then multiply it by four. I would say overall, GiantKONE continued to have a positive development and grew both in orders and sales year-over-year.
That's useful, Henrik. Thanks. I had one final question, if I could, just a bookkeeping question really. The impact of that amortization on operating income you talk about was 40 basis points on operating margin in the quarter. There were obviously 70 basis points total amortization in the quarter. The remaining 30 basis points, what is that? We talked in the last quarter about part of it being on the order book and part of it being other intangible assets. Could you break down, if you could, that 70 basis points of amortization in the quarter, please? Thanks.
You can see that the total amortization for us was EUR 8.7 million in the quarter. That breaks down, part of that comes from the GiantKONE acquisition, and part of that comes from when we buy in smaller acquisitions, we also then amortize the service contracts that we purchase over a certain period of time. These are the main amortizations we're talking about here, acquisition-related amortization, something that we have constantly. The number was higher for this year than in previous year because of the GiantKONE order book amortization.
That's clear. Thank you very much.
Next question comes from Mr. Ben Maslen from Merrill Lynch . Please go ahead, sir.
Okay. Good afternoon, everybody. A couple of questions, please. The first one on China. You say that going forward, you expect to see slowing growth. Can you give us a sense of just what the book-to-bill you have in China at the moment is? I guess orders will slow, but how far does sales have to grow to catch up with the kind of level of demand you see at the moment? That's the first question.
Could you say the question again? The line was a little bit unclear.
You're saying that orders in China will flatten out from here or the growth will slow. I'm just wondering how far below the order rate are your sales currently. The book-to-bill in China.
It is clear that given that our China orders have continued to grow at quite a good pace, we have, if we look on a kind of rolling annual basis, a positive book-to-bill. The way you have to think about China is that the time lag from order to sales depends a little bit on the segment and type of project, but it's roughly six months. That perhaps gives you some picture of the impact of how orders develop to sales. Currently, we have had a positive book-to-bill in China.
Okay. You can't give us a figure roughly what that is?
No, we haven't opened up that in more detail, but I guess this six-month lead time gives you about a picture of it.
Okay, great. The second question is that this kind of sequential order development, I mean, the Q1 orders this year were a lot stronger than Q4 and the run rate of last year. You didn't announce any kind of real big orders. There's no seasonality. Can you maybe just explain why you think Q1 was so much stronger than the 2011 rate and what you expect going forward sequentially? Should we assume EUR 1.3 billion-EUR 1.4 billion is the kind of normal order run rate for you, or would you expect it to pull back from here?
Okay. The major drivers for the strong development in orders in quarter one were, first of all, that we were able to get good development in all key geographical areas. That is one key point. The second key point is that we had a good quarter in major projects. Naturally, major projects is something that varies a lot from quarter to quarter. As we have always underlined, three months is a short time. Therefore, we have had and we will have quarterly variations.
Okay. Fine. In terms of major projects, you don't always announce them. Is that fair?
We announce major projects if they are significant in size. Typically, it is that if the significance means that if the contracts are, let's say, EUR 5 million or bigger. Also, you know, some projects we also announce them so long as our customers are in agreement with that. That's another.
That's another.
We have still the majority of our orders are standard, what we call our volume business. That is really the most important driver for the orders growth. When you talked about sequential from Q4, particularly if you look at, for example, Asia, the end of the year in China tends to be slower when you come towards the Chinese New Year. That usually slows down before that. Chinese New Year was quite early this year. These are just some seasonal patterns. As Matti said and as you mentioned as well, one quarter is a short period of time to compare. Here you see how our orders receive level has been in different quarters over the years. The conclusion is that quarter three quite often is the lowest, but maybe first half is a little bit higher level than second half, but seasonality is not significant.
Okay. Q2 is normally strongest for orders. I guess it would be tough for this year to assume that that's the case, or can that still happen as far as you're concerned?
It is still early days. As I said, the activity level is high in our sales and product competition is good, but there is this, let's say, quarterly variation. Let's remember that always. Not only that, but always.
Yes, okay. Thanks a lot.
Thank you.
Thank you.
Our next question comes from Mr. Andre Kukhnin from Credit Suisse. Please go ahead, sir.
Good afternoon, everybody. Thank you for taking my questions. I have two questions, please. One is on the GiantKONE business. Before, you kindly provided the profitability of this business for 2011 and 2010. Would you provide it for the first quarter? If not, can you at least indicate if it's been up or down in the first quarter?
Now the situation is that from the beginning of December, GiantKONE is one of our activities, and we don't report our, let's say, profitabilities of our, for example, profitabilities or orders or sales of our different countries separately. This is why we have also decided that now GiantKONE is business as usual. Henrik already mentioned that the integration of GiantKONE has been developing well, and there is nothing special to add.
Okay. Thank you. Maybe just a bit broader on China, given that it looks like there's a bit of a mixed shift away from high-end coastal region towards mainland China and social housing. Is there any margin implications from that for the market broadly or for you specifically?
Our strength is that we have a very competitive situation also in the affordable housing segment. Therefore, we don't have any major margin implications regarding how the markets have been developing and are expected to be developing. All the time since during the last several years, our objective in general globally has been that in this, also in this kind of business, as in most businesses, it is important to have the cost competitiveness in all segments.
Right. Okay. Very clear. The second question, just very briefly on your backlog mix. Is it looking any different compared to what it was a year ago in terms of the proportion of large projects in it versus the other business, or in terms of sort of social housing versus other projects?
Henrik, maybe.
Yeah. If you remember, during 2011, one of our very fast-growing segments was our major projects business. Of course, the lead time is the longest there. It is clear that the share of major projects in our backlog is higher than it was a year ago. It is clear also, as affordable housing has been growing in China, that the share of affordable housing, if you look at it in China, would be higher. Particularly, if you look at this, as Matti said already, the impact of having more affordable housing does not have such a big impact for us given our good competitiveness there. The impact of more major projects, of course, means that the order book rotation is a bit slower.
That's very clear. Thank you very much.
There are no further questions at this time.
Do we have further questions from the people present here?
Okay.
Okay. In case there are no further questions on the lines, I would like to thank you for your very active participation and also remind you that we will be holding our Capital Markets Day on June 8 in Helsinki. If you would like to register for the event, please do so at www.kone.com on our website. You are most welcome to join us in Helsinki in early June.
Thank you.
Thank you very much.
Thank you.
Thank you.