Elevator maker Kone sees parts shortages and rising costs

Logo is displayed in an elevator at the KONE Academy of Finish manufacturer KONE in Hanover
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

October 28, 2021

By Essi Lehto

HELSINKI (Reuters) – Elevator maker Kone on Thursday reported below-forecast operating profit and mounting supply chain difficulties, offsetting its forecast of higher sales this year and driving its shares down more than 5%.

It still expects annual sales to be between 4% and 6% higher but also warned of a squeeze on profitability in the third quarter, and said it expected this to continue through year end as logistics deteriorate, component costs rise and demand in China decreases.

Chief Executive Henrik Ehrnrooth told Reuters semiconductor shortage had got worse after the first half year and said there are now supply difficulties at all points of the logistics chain.

“Seems like there is not enough harbor capacity in many countries, nor truck drivers to drive away the containers,” he said.

Ehrnrooth said Kone had been able to rise prices in the European and North American market, but not in highly competitive China, where prices have remained stable.

Investors have been on the lookout for any signs of fallout in China’s property development sector after the world’s most indebted developer China Evergrande Group’s difficulties in repaying debts spread to other companies there.

Chief Financial Officer Ilkka Hara told analysts on a webcast that currently companies breaking the Chinese government’s debt regulation rules account for between 4% and 4.5% of Kone’s sales in China.

Kone’s operating profit in July-September fell to 326.5 million euros ($378 million) from 333 million a year earlier, missing the 348 million estimate of 13 analysts polled by Refinitiv.

Its operating income margin in the quarter fell to 12.5% from 12.9% and Kone trimmed its adjusted margin outlook for the year as a whole to between 12.4% and 12.8%, from 12.4%-13%.

Year-on-year sales remained stable at 2.6 billion, while order intake, an indication of future revenue, grew 14.5% to 2.21 billion euros.

Kone shares down were 3% at 57 euros in afternoon trade, having fallen as low as 55.48 euros.

($1 = 0.8633 euros)

(Reporting by Essi Lehto; Editing by Jason Neely and David Holmes)