By Anne Kauranen
HELSINKI (Reuters) -Kone sees no end to China’s construction slump and so will focus on modernising and servicing existing lifts, the Finnish company said as it reported third-quarter profit below expectations.
China, Kone’s main market, is in a prolonged property downturn and there are few signs of a revival despite several rounds of policy support measures by Beijing over the past year.
“In 2024, the share of our profit related to China new construction will be less than 10%,” CEO Philippe Delorme told Reuters.
Kone, which also makes escalators, moving walkways and automatic building doors, last month announced a new global strategy refocusing on modernisation and services instead of selling equipment for new buildings.
“We have 10% growth on our service sales. We are growing our orders on modernisation by 20%. And the combination of the two for Kone represents 60% of our business,” Delorme said.
Kone has been more exposed to China than rival Schindler which generated about 15% of its revenue from the country last year, versus 30% for Kone, according to estimates from Jefferies analysts.
Delorme said 3 million of China’s total 10 million lifts will be more than 15 years old by 2030, requiring modernisation and maintenance.
Kone narrowed its 2024 margin outlook, expecting a full-year adjusted group operating profit margin of between 11.5% and 11.9%, from a previous upper limit of 12.2%.
It also narrowed its sales growth outlook to 0–3% from 0–4% at comparable exchange rates.
Last month, Kone set a new mid-term target aiming for an adjusted operating profit margin of between 13% and 14% by the end of 2027, while keeping its long-term target at 16%.
Kone reported third-quarter adjusted operating profit of 319 million euros ($344 million), up from 316 million euros a year earlier but below a mean forecast of 340 million euros in a poll of analysts compiled by Vara.
($1 = 0.9269 euros)
(Reporting by Anne Kauranen in Helsinki, editing by Louise Rasmussen, Kirsten Donovan)
