HELSINKI (Reuters) - Finland’s Kone Oyj, the world’s second-biggest elevator maker, on Thursday reported its first year-on-year decline in core operating profit in 48 quarters, knocking its shares.
Kone had until now managed to protect its profits from a downturn in China, the world’s biggest elevator market that generates third of the company’s sales.
First-quarter operating profit decreased 1.7 percent from a year ago to 218 million euros ($238 million). The last time Kone reported a year-on-year fall in adjusted operating profit was in the fourth quarter of 2004, the company calculated.
“It is clear that we are not satisfied when operating profit falls, and we will take action to address that,” Chief Executive Henrik Ehrnrooth told Reuters.
Kone’s shares were down 2.9 percent by 1324 GMT as both profit and quarterly order intake came in slightly below market expectations.
But Kone raised its full-year sales and profit forecasts slightly, saying the Chinese market was now showing early signs of stabilization after two years of declines.
Ehrnrooth said its new equipment order volumes in China stabilized in the first quarter, and that market prices had also started to stabilize.
But the company repeated its forecast that installations in China would likely decline 0–5 percent in units ordered and said competition would continue to be intense.
With growth now coming from North America, Europe and its service business, Kone expects its global sales to grow 0-3 percent this year, whereas it had previously forecast that sales could be down 1 percent or rise by up to 3 percent.
Operating profit for 2017 is forecast to be in the 1.20-1.29 billion euro range, compared to a previous estimate of 1.18–1.30 billion euros, Kone said.
Otis, owned by U.S. group United Technologies, is the market leader ahead of Kone, which is bigger than Switzerland’s Schindler and German rival ThyssenKrupp in the elevator industry.
Editing by Alexander Smith. Editing by Jane Merriman