Elevator manufacturer Kone’s profits rise, but so do costs

Elevators are seen at the KONE Academy of Finish, manufacturer of KONE elevators and escalators in Hanover, Germany on February 6, 2020. Photo taken on February 6, 2020. REUTERS / Fabian Bimmer

  • Kone exceeds second quarter operating profit guidance
  • Sees higher costs mainly due to chip shortage
  • Reduces the operating margin outlook at the end of the year

HELSINKI, July 20 (Reuters) – Elevator and escalator maker Kone (KNEBV.HE) beat its quarterly operating profit forecast on Wednesday, helped by strong growth in North America and China, but warned of higher costs over the year as a whole mainly due to the semiconductor shortage.

The Finnish company said it would likely need to increase prices to offset rising costs, and lowered the top of its adjusted operating profit margin forecast for 2021 to 12.4-13.0% of sales, from 12.4-13.2% previously.

Second-quarter operating profit reached 367.1 million euros ($ 433.1 million) from 315.5 million a year ago, beating the average estimate of 345.8 million euros of 14 analysts surveyed by Refinitiv.

Managing Director Henrik Ehrnrooth spoke at a press conference about the growth in maintenance activities at Kone, as well as in North America and China.

The company predicted that materials and logistics costs would be 175 million euros higher this year than in 2020, and identified the semiconductor shortage as its main problem.

“About 40 million of them have already arrived,” Ehrnrooth told Reuters.

“We’ve compensated for the impact quite well, but now the focus will be on rising prices,” he said, adding that Kone had also redesigned the products to be able to take semiconductors from new suppliers.

Regarding the change in margin forecast, OP Markets analyst Anssi Raussi said: “We were expecting a slight adjustment which may have come a little earlier than expected. If commodity costs continue increase, there is a risk [Kone] still has to reduce the range. “

Kone shares rose 1% in afternoon trading.

The company’s order intake, an indication of future revenue, increased 16.2% year-on-year to 2.41 billion euros and quarterly sales increased 11% to 2.81 billion euros, exceeding analysts’ average estimate of 2.64 billion.

($ 1 = 0.8476 euros)

Reporting by Essi Lehto Editing by Louise Heavens and Mark Potter

Our Standards: Thomson Reuters Trust Principles.

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