Kone's shares drop more than 8pc after orders slip

HELSINKI: Kone's shares fell more than 8% on Wednesday after the Finnish elevator and escalator maker reported a decline in order intake and said cost inflation would erode its margins even as first-quarter sales and profit beat expectations.

Kone's order intake, an indication of future revenue, decreased by 1.6% year-on-year to 2.08 billion euros, and the new orders come with slightly weaker margins following an increase in the cost of raw materials, the company said.

The rise will pressure Kone to raise prices to offset a margin drag into 2022, Citi analysts said in a note.

"It is evident that in this kind of a situation, everyone aims to raise prices but it remains to be seen what we will do as we do not comment on future pricing," Chief Executive Henrik Ehrnrooth told Reuters.

Kone shares were down 8% at 67.3 euros at 13.49 GMT.

The company expects the increase in raw material and logistics costs to hit margins later in 2021 or early 2022 as the company's average delivery time is 9 months, Chief Financial Officer Ilkka Hara added in a conference call.

Kone reported a rise in operating profit to 249.8 million euros ($301.53 million) from 197.2 million a year ago on sales of 2.3 billion euros following continued growth in China.

This was above the mean estimate of 14 analysts polled by Refinitiv for operating profit of 240.3 euros and sales of 2.22 billion.

The growth in China, however, was offset by declines in the rest of Asia-Pacific, the EMEA region and North America, where the company said the market fell significantly.

"We can see signs of recovery but as the markets still are weaker, everyone competes for growth from a smaller pot," Ehrnrooth said.

The company said its full-year core result for 2021 remained on track to grow 2%-6% from 2020 and the adjusted earnings before interest and taxes (EBIT) margin would be 12.4%-13.2%, a slight decrease from 12.4%-13.4% announced in January.