FILE PHOTO: Logo is displayed in an elevator at the KONE Academy of Finish elevators and escalators manufacturer KONE in Hanover, Germany, February 6, 2020. Picture taken February 6, 2020. REUTERS/Fabian Bimmer
April 22, 2020
By Tarmo Virki
HELSINKI (Reuters) – Finland’s Kone <KNEBV.HE> reported a smaller than expected 10% fall in first-quarter profit on Wednesday, with demand for its elevators and services strong in many countries despite the coronavirus outbreak.
The elevator maker’s shares were 5% higher at 54.60 euros in afternoon trading.
Kone’s adjusted operating profit of 205 million euros ($223 million) topped the 184 million expected by analysts, Refinitiv Eikon data showed.
“Our performance in Central and North Europe and the Americas was very strong on all fronts in Q1,” Chief Executive Henrik Ehrnrooth said in a statement, though the impact of the coronavirus had hurt Kone in China, India and South Europe.
“Looking ahead, it is clear that in terms of results development, the worst is still ahead of us in most parts of the world,” Ehrnrooth said. “The pricing environment remained relatively stable in January-March. However, there were signs of some pricing pressure towards the end of the quarter.”
Last month, Kone downgraded its business outlook for this year because of the coronavirus outbreak, saying its 2020 sales and adjusted operating profit margin would at best be flat from 2019.
The company reiterated that outlook on Wednesday.
“Despite the COVID-19 outbreak, demand in the new equipment market was still fairly resilient in many parts of the world,” Ehrnrooth said, despite what he said were signs of increasing uncertainty towards the end of the quarter.
Kone said it won orders worth 2.1 billion euros in the quarter, up 0.7% from a year earlier, and comfortably beating 16 analysts consensus forecast of 1.9 billion published by Kone.
While sales of new equipment dropped 5% from a year ago, sales of services rose 5%, with maintenance sales growing 6.4% to 817.5 million euros.
“Maintenance revenues held up better than we thought – this is perceived as a ‘system critical service’ by countries,” Jefferies analysts said in a research note, noting that Swiss rival Schindler <SCHP.S> sees even service and repairs revenues rising in 2020.
Kone’s numbers and outlook echoed Schindler, which reported falling first-quarter profit and sales on Wednesday as the coronavirus epidemic led to the shutting down of production plants and construction sites.
The quarter was marked by Thyssenkrupp’s <TKAG.DE> sale of its elevator business in a bidding process won by a consortium of Advent, Cinven [CINV.UL] and Germany’s RAG foundation with a 17.2 billion euros offer.
(Reporting by Tarmo Virki and Anne Kauranen; editing by Jason Neely, Jane Merriman and Timothy Heritage)
