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Schindler Falls as China, India Growth Hampers Profit

Schindler Holding AG (SCHP) dropped the most in two years after the Swiss elevator maker cut its profit forecast, saying expansion in China and India is hampering profitability. The shares dropped as much as 7.1 percent.

Schindler sees net profit of around 550 million francs ($592 million) to 600 million francs this year, including a 155 million-franc charge on its investment in Hyundai Elevator Co. (017800) That compared with an earlier forecast of as much as 790 million francs. Profit fell 78 percent to 40 million euros in the second quarter.

“The expansion of Schindler’s market position in growth markets is advancing as planned but is having an impact on operating profit,” the Ebikon-based company said in a statement today.

Schindler earnings follow those of Helsinki-based rival Kone Oyj (KNEBV), which said July 19 that second-quarter sales grew 14 percent on strong China demand. Juergen Tinggren, Schindler’s chief executive officer, is ramping up investment in Asia to counter declining sales in Europe as governments cut public spending.

Profitability in the second quarter was below market estimates because of the cost of new products and factories, as well as pricing pressure, Kepler Cheuvreux analyst Oliver Girakhou wrote in a note to clients.

China Demand

“The main items to blame were related to the expansion of Schindler’s market position in growth markets,” he said.

Schindler said it expects 7 percent sales growth in local currencies for the full year, up from an April 19 forecast for 6 percent growth. The Swiss company will start production at the world’s largest escalator plant in Jiading, China at the end of this year, as well as expanding production in India, Slovakia and the U.S., it said.

Earnings before interest and taxes grew by 1.3 percent in the first half to 470 million francs. Sales in local currencies increased 7 percent to 4.3 billion francs.

Schindler shares fell 6.1 percent at 2:32 p.m. in Zurich. They have risen 2 percent this year, trailing the Swiss Market Index, which is up 18 percent.

To contact the reporter on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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