February 14, 2020 / 5:55 AM / 9 days ago

Schindler sees coronavirus hit of 'several hundreds of millions'

ZURICH (Reuters) - Schindler (SCHP.S) may see “several hundreds of millions” of Swiss francs stripped from this year’s sales as a result of coronavirus-related disruptions, CEO Thomas Oetterli said on Friday after the company reported a fall in 2019 profits.

CEO Thomas Oetterli of Swiss elevator maker Schindler addresses the annual news conference on the results for 2019 in Zurich, Switzerland February 14, 2020. REUTERS/Arnd Wiegmann

China accounts for more than half of the world’s new lift installations and for Schindler the Asia-Pacific region makes up 27% of sales. In China, Schindler has supplied Beijing and Chengdu metro lines and Shanghai’s 66-floor, 28-elevator Sinar Mas Plaza.

Schindler has expanded production and offices in China and Oetterli said the company now faced challenges protecting employees’ health while ensuring business continuity with customers as the coronavirus spreads.

“It is too early to quantify all the impact on our financial results, since it depends on the timing of when China gets back to normal,” he told reporters at a news conference in Zurich. “A loss of several hundreds of millions on the top line is possible, directly impacting absolute EBIT and profitability.”

Shares in Schindler, 71% controlled by Schindler’s founding family, were down 2.4% at 1220 GMT.

With these headwinds, Schindler, the second-biggest elevator maker behind United Technology’s (UTX.N) Otis, forecast 2020 revenue growth of 0%-5%.

For 2019, Schindler reported a 3.6% increase in sales to 11.27 billion Swiss francs. Net profit fell to 929 million francs but beat the 890 million forecast by analysts, Refinitiv Eikon data showed.

Operating profit fell about 1% to 1.26 billion francs as higher wages, material costs and project spending squeezed margins to 11.2% from 11.7%.

“The uncertainties are adding up,” Zuercher Kantonalbank analyst Martin Huesler said. “China accounts for ‘only’ 13% of Schindler’s sales, but the country accounts for a significant share of its production.”

SECTOR CHANGES

Schindler also faces challenges from the planned spin-offs by Otis and Thyssenkrupp’s (TKAG.DE) lifts division.

Board member Alfred Schindler, part of the Schindler family, told Reuters this week the company would launch antitrust legal action should Kone Ojy KNEB.HE and Thyssenkrupp pursue a combination that would leapfrog Otis and Schindler in size.

Oetterli said such a merger would plunge the elevator and escalator industry into years of chaos, job redundancies, price wars and court fights in Europe, the United States, Canada, China and Australia.

“Such a merger would result in severely increased competition leading to enormous price pressure that could go on for years,” Oetterli said. “We at Schindler do not want to trigger nor participate in such a scenario.”

Reporting by John Miller; editing by Michelle Martin/Jason Neely/Jane Merriman

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