Lift maker Kone shifts focus as China property slump persists
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 per cent,” 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 per cent growth on our service sales. We are growing our orders on modernisation by 20 per cent. And the combination of the two for Kone represents 60 per cent of our business,” Delorme said.
Kone has been more exposed to China than rival Schindler which generated about 15 per cent of its revenue from the country last year, versus 30 per cent for Kone, according to estimates from Jefferies analysts.
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Delorme said three 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 per cent and 11.9 per cent, from a previous upper limit of 12.2 per cent.
It also narrowed its sales growth outlook to 0 to 3 per cent from 0 to 4 per cent at comparable exchange rates.
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Last month, Kone set a new mid-term target aiming for an adjusted operating profit margin of between 13 per cent and 14 per cent by the end of 2027, while keeping its long-term target at 16 per cent.
Kone reported third-quarter adjusted operating profit of 319 million euros (S$454.5 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. REUTERS
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