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CEO's letterThe ways, tools and means for growthDear shareholders,Our main objective is to serve our customers and continueproviding excellent technologies that perfectly answer theirneeds. I am happy to say that during an extremely dynamic year,day-to-day operations have not been too much distracted by thehuge number of integration activities which have taken place.This is the third year in which the company has continued toperform very well under significant pressure. Still our supremeobjective has been well fulfilled.The year began with us closing the largest deal in our history,thus welcoming over 6,000 new colleagues into the Group. Theintegration procedure has included over 3,000 distinct activities, with hundreds of people participating. These have beenperformed with a rigorous agility, allowing us to successfullyrealize most of our plans for 2017. All in all, we can congratulate ourselves on a job well done.Each of the business areas within this new group achievedstrong performance. I am especially happy that Business AreaService has been able to perform the majority of their integration work, Industrial Equipment has undergone the first phaseof its turnaround, and Port Solutions showed a satisfying orderintake. These achievements are already ample demonstrationof our underlying task – preparing a solid base upon which todevelop our next phase, which will be one of growth.During the year, we have seen the two legacy organizationsmeld into a single united front. In terms of corporate culture,it has been easy to work together. In the beginning of theprocess, we set out to gather facts from across the organization, building a comprehensive view before making the critical decisions that would govern our collective future. From thecurrent vantage point, we can see that this was a wise strategy,and a well executed one in practice.But the process was not one without difficult decisions.Overlapping functions and operations naturally gave rise to acertain number of redundancies, and as part of the rightsizing,personnel has decreased by approximately 730 employees.These unfortunate necessities were carried out to ensure ourfuture competitiveness.Today, our company has the ways, tools and means tocommence growth.The renewed organization situates our support functions (procurement, marketing and communications, finance,HR, legal, and strategy) in service to our businesses, thussupporting profitability. The emphasis here is on providing clearresponsibilities, explicitly avoiding the tendency to create siloes.Renewal is also underway in terms of our internal policies,as we harmonize our actions globally, across all territories and6Konecranes Annual Report 2017markets. We believe that sustainable growth is only achievedby nurturing responsible business practices and acting withintegrity.It is no longer enough for companies to focus only on theirdirect footprint, they need to define what kind of value theyare creating, both for their stakeholders and for the widerworld. We want to support a more all-encompassing societyby creating a diverse and inclusive work environment and byfostering equality.In terms of financial performance, the year has seen aspecial focus on developing EBITA margin, and, as a consequence, we were even ready to give up certain underperforming businesses. This resulted in a final figure of 6.9 percentadjusted EBITA margin and an increase of 17 percent, with eachbusiness area playing their part admirably.After an acquisition costing EUR 1.5 billion, of which EUR 686million was financed with a share issue, we have net debt of onlyEUR 525 million and a solid balance sheet with a gearing of 41percent.As shares were used to bridge the valuation and finance theacquisition, Terex became our largest shareholder, achievingtheir target and completely exiting in September. The use ofshares as parcel payment was thus another successful aspectof a smooth, well-executed acquisition.In our interactions with customers, partners and stakeholders,we have heard only positive comments about joining forces inthis way. Two powerful brands have combined, becoming vastlymore than the sum of their parts, and we are very happy to havearrived at such an excellent market position. On the technologyside, we have been able to balance our road maps, and establisha strong direction built on our shared heritage.We see our advantages especially in circular-economy business models. Digitalization, demand for low-carbon productsand the opportunities of rental services are certainly having animpact on our stakeholders and our business.In our conjoined product offering, we are able to provide innovative power sources like hybrid technology and other energy-saving solutions such as regenerative braking. Our aim is toinspire and challenge the market and support our customers byoffering innovative, eco-efficient solutions.I would like to warmly thank all our stakeholders for theircontinued faith in our capabilities, and for the parts they themselves have played in our success. While there remains much tobe done, this represents an excellent start to the journey."We are preparing a solid base uponwhich to develop our next phase,which will be one of growth."Panu RoutilaPresident and CEOKonecranes Konecranes Annual Report 20177

company narrativeMISSION –WHAT WE DOWe are not just lifting things, but entire businesses.VISION –WHAT WE WANT TO ACHIEVEIN THE LONG TERMWe know in real time how millions of lifting devicesperform. We use this knowledge around the clock to makeour customers’ operations safer and more productive.VALUES –OUR GUIDE TO DAILYDECISION MAKINGcompany narrativeSTRATEGY –HOW WE GET THERETECHNOLOGYLEADERSHIPREAL TIME VISIBILITYTO CUSTOMERS’EQUIPMENTEND TO ENDPROFITABILITYSHARED &HARMONIZEDPROCESSESSERVICEEQUIPMENTLifecycle Care in Real TimeService for all types and makes of cranes and hoistsGlobal service networkImprove the safety and productivity of our customers'operationsCore of LiftingDirect and Indirect channels inIndustrial EquipmentMulti-brand strategyNeed based customer offeringTACTICAL FOCUS AREAS – WHAT WE WILLFOCUS ON DURING THE NEXT 2–3 YEARSTrust in PeopleWe want to be known for our great people.GROWTHCustomer experiencePROFITABILITYRealizing potentialTotal Service CommitmentWe want to be known for always keeping our promises.TECHNOLOGYEngineering capabilitiesPEOPLELifting peopleSustained ProfitabilityWe want to be known as a financially sound company.VALUE PROPOSITION – BRAND PROMISE: LIFTING BUSINESSES 8Konecranes Annual Report 2017Konecranes Annual Report 20179

Business environment onecranesKglobal marketpositions:A market leaderin industrial cranes and components,as well as crane serviceGlobal manufacturing industry andcontainer traffic growth acceleratedThe J.P. Morgan Global Manufacturing PurchasingManagers’ Index (PMI) signaled a solid and steadyimprovement in manufacturing operating conditions in 2017. At the end of the year, global manufacturing production expanded at the quickestpace since early 2011. There was also a bouncein international trade flows, as growth of newexport business hit a near seven-year high. Developed countries, on average, tended to outperformemerging markets.The euro area remained a bright spot within theglobal manufacturing sector. Its PMI rose to a nearrecord high level, with the growth improving acrossthe countries. Outside the Eurozone, the performance of the UK and particularly Swedish manufacturing sectors remained strong in 2017, aswell. Correspondingly, the European Union manufacturing capacity utilization rate continued toimprove and was near its ten-year high at the endof 2017.10Konecranes Annual Report 2017Similar to Europe, the economic activity inthe US manufacturing sector, measured by thePMI, expanded clearly in 2017. However, the UStotal industrial capacity utilization rate improvedonly marginally after having declined since theend of 2014 and it indicated that slack capacityremained in the industry.Compared to the previous year, PMIs alsorose in the BRIC countries, but the rate of expansion remained more modest than in Europe orthe US. Brazil saw a clear positive turnaround,and it emerged from its two-year long recessionin 2017. On the other hand, Chinese, Indian andRussian manufacturing sector operating conditions improved only at a marginal pace.The recovery of the world’s containerized tradein 2017 turned out to be much bigger than whatwas the expectation in the beginning of the year.The global container throughput increased byapproximately 6 percent on a year-on-year basisin 2017.Among top 3in container handling equipmentRegionally, volumes in Asia, which representmore than a half of the global container traffic,rebounded on most of the trade routes aftertwo weak years. Container volumes from Asiato East Coast North America grew particularlystrongly, as the widening of the Panama Canalhas supported traffic above expectations. In addition, the volumes in the Mediterranean portsincreased clearly thanks to the improved economicgrowth in Southern Europe. The container trafficin the Middle East suffered from low oil prices andtensions in the region.The average raw material prices, includingsteel, copper, and oil were above the previousyear’s level in 2017. The EUR/USD exchange ratewas volatile during the period as it depreciated inthe first half, but then appreciated in the secondhalf compared to the previous year.Approximately6% increase inglobal containerthroughput on ayear-on-year basis.Konecranes Annual Report 201711

Business area serviceBusiness area serviceThe Business Area’s mission to create acustomer experience that drives growth is fulfilledin large part by this systematic change. In practice, this means Lifecycle Care in Real Time,utilizing customer consultation in combination withmaintenance and usage data to deliver safety andproductivity improvements.This way of operating is underpinned by a disciplined sales model and dedicated roles for all salesresources and assignments. The importance ofanalytics to the entire model cannot be overstated,with its role as one of our daily management toolsbringing about increased transparency (with positive ramifications) in both customer operations andwithin the K onecranes sales organization.The BusinessArea’s mission tocreate a customerexperience thatdrives growth isfulfilled in largepart by digitaltransformation.Diverse marketsIntegration. Transformation. Growth.Business Area Service provides specialized maintenanceservices and spare parts for all types and makes of industrialcranes and hoists, from a single piece of equipment toentire operations. Our objective is to improve the safety andproductivity of our customers' operations.Business Area Service began 2017 with acontinued long-term focus on transformation ofthe business model – namely through a productized offering, systematic processes and digitalization – as well as the beginning of integration ofthe MHPS Service units. These endeavors rolledout generally as planned and the year ended witha pivot to a focus on growth heading into thenew year.Integration, of course, refers to the acquisitionof MHPS and the addition of its Demag brand tothe Business Area offering, promising the opportunity to strengthen the service business on a widescale. The front line service business was fullyintegrated in the US, Canada, Brazil, India, UK andDenmark. Integration of the remaining countrieswill continue in 2018 and 2019.12Konecranes Annual Report 2017The installed base of Demag products bringssignificant potential for the service agreementbase, with further synergies to be achieved byleveraging the Konecranes service model, systemsand infrastructure, integrating our e-commerceplatforms, incorporating a variety of our products,as well as sharing and spreading best practicesacross the newly combined talent pool.More broadly, the Business Area intends tocapture further market share by focusing on sixcore trends: safety, productivity, outsourcing, regulations and compliance, the aging industrial workforce, and digitalization.Digital transformation is a particularly vitalcomponent, representing both an ongoing, longterm project as well as one of the acquisitionsynergy benefits already being realized.The weakening dollar had negative translation effects on US orders and sales. The oil andgas sector and other commodity-based industries bottomed and some signs of recovery wereevident. Industrial production turned positiveduring the year. We continued to make good progress in segments such as automotive. However,severe weather did negatively affect orders andsales in the latter part of the year.Similarly, western Canada’s oil and gas andother commodity sectors stabilized. The centraland eastern parts of the country continued tobenefit from their industrial base.Mexico, Chile, Peru and Brazil declined whileour relative position in those markets remainsstrong, and our position in Brazil has significantlystrengthened due to the MHPS acquisition.In Europe, our strong performance in theUK and Spain continued and were furtherstrengthened by the acquisition. We attained solidbusiness volumes in France and Italy. In Germany,the K onecranes business is now clearly benefitingfrom the processes of business and digital trans-formation, and with the MHPS business we arenow in good shape to capture more of the sizeableexisting market for service; the same can be saidfor Austria and Switzerland.In Russia, the market situation was varied andoverall the business has slightly declined. EasternEuropean states have performed moderately. OurNordic home market has performed well, althoughScandinavia has been challenging.The Middle East and Africa remained troublingenvironments, geopolitically speaking, but onceagain Saudi Arabia performed well thanks to thelarge installed base we have built up over theyears. South Africa continued to show good growthand benefited from early integration actions.In China, we have done well in our legacy Konecranes business, and customers areincreasingly receptive of the improvements insafety and productivity we offer. We continuedto find stronger awareness and openness tooutsourcing and increased interest in and demandfor our consultation services. The MHPS businesswill add to these opportunities.Key figuresOrders received, MEUROrder book at end of period, MEURNet sales, MEURAdjusted EBITA, MEURAdjusted EBITA, %Operating profit (EBIT), MEUROperating margin (EBIT), %Personnel at the end of 8%7,2061–12/16 comparable981.4200.31,214.1153.412.6%Change, %-1.5-2.1-3.04.91–12/16 necranes Annual Report 201713

Business area industrial equipmentThe installed base ofDemag products bringssignificant potentialfor the serviceagreement base.Australia has seen some leveling in thecommodity-based industries, but our transformation here is yielding very tangible results. We nowhave a solid business in India, bolstered by indications of recovery in the process industries. Ourmodest business in Japan continues to grow, withother Asian countries remaining steady.Appetite for growthWith integration and transformation well underway(and to a large extent executed), Business AreaService will now pivot its energies toward growth.Capturing the synergies of the MHPS acquisition,increasing service agreement retention, improvingthe bundling of service products in service agreements, and expanding the customer maintenancespend to deliver safety and productivity enhancements will be the main growth drivers.Online sales of parts, light lifting equipmentand accessories will continue to increase, asstores are now active in the US, Canada, China,Singapore, Australia, Germany, the UK, Finland,and France.Leveraging the Demag installed base andagreement base is expected to be a significantsource of growth. This entails both expandingagreement base coverage, increasing agreementvalue and service sales per asset, and harmonizing the combined offering and pricing.Finally, leverage and assimilating Demag serviceproducts – such as light-lifting products, generaloverhaul packages, and below-the-hook productsand inspections – will be another crucial step.14Konecranes Annual Report 2017Systematic integrationBusiness Area Industrial Equipment offers industrial cranes, theircomponents and lifting equipment solutions for a wide rangeof customers, including industries like General Manufacturing,Waste-to-Energy and Biomass, Paper, Power, Automotive, Aviationand Metals Production. Products are marketed to crane endusers and through a multi-brand portfolio to independent cranemanufactures and distributors. The business area includes thebrands K onecranes, Demag, SWF Krantechnik, Verlinde, R&M,Morris Cranes Systems and Donati.The year 2017 was the first year of integrationof the acquired Demag operations into BusinessArea Industrial Equipment. Besides Demag, theintegration includes also Donati’s crane components business.In March, Konecranes divested the ChineseSanma Hoists & Cranes Co. Ltd. to JingjiangHongcheng Crane Components ManufacturingWork. With this divestment, the company streamlined its product and brand portfolio in theChinese market.The year was also one of profitability improvement for Business Area Industrial Equipment.This was the result of the cost-saving actionsinitiated in 2016, which are now paying dividends, in addition to general improvements toproject execution and the dismantling of thematrix to a product-line based organization withdirect P&L responsibilities.With the integration of the acquired MHPS business units ongoing throughout 2017, a workingprinciple was established to separate integrationproject work from customer-related operations asmuch as possible in order to secure full focus onall customer-serving operations, whether sales ororder execution issues.Konecranes Annual Report 201715

Business area industrial equipmentThis has allowed the business area to concentrate on upholding and improving customer excellence without any undue distractions, while, likewise, integration actions could be executed diligentlycompletely independent of external-facing work.Market overviewTo look to Europe first, the Nordic countriesdemonstrated growth both in orders and sales, asdid Germany, Spain and Austria, while the UK andFrance showed a slight decrease in orders.In Russia, orders received grew, but in theMiddle East a decline in orders and sales wasin evidence especially due to oil prices, and thismarket now awaits an oil price recovery and thereduction of various tensions in the area. SouthAfrica continued to be slow in order intake.In APAC, market orders and sales grew nicelyin India, while China’s orders grew in several keyindustry segments, and we expect sales growth tofollow in tandem. In Southeast Asia and Australiathere is optimism in the market and orders havebeen growing.In the Americas, larger project orders grew in theUSA towards the end of the year, while standardcrane and component orders grew across thewhole year. Markets in Ca

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