January 24, 2019 / 1:06 PM / in 5 months

UPDATE 2-Elevator maker Kone expects Chinese demand to stagnate

(Writes through with China comments)

By Anne Kauranen

HELSINKI, Jan 24 (Reuters) - Finnish elevator maker Kone warned its sees no growth or a decline in orders this year from China, its main market, adding to disappointment over a profit forecast which missed analyst estimates.

“The increased uncertainty in many major markets impacts the visibility of the overall market development for 2019 ... In China the market is expected to decline slightly or to be stable in units ordered,” Kone said in Thursday’s earnings report.

Kone shares were down 3.6 percent at 1440 GMT, compared with a 0.9 percent drop before the earnings report was released, and analysts at Jefferies said they were disappointed by the China outlook which they had expected to be flat.

The elevator sector has struggled in recent years with falling installations in China, but Kone’s U.S.-based rival Otis said on Wednesday it expected continued infrastructure spending by the Chinese government.

Kone’s Chief Executive Henrik Ehrnrooth declined to speculate about the Chinese government’s willingness to stimulate investments this year.

“We have seen good activity on the infrastructure side,” he told Reuters, but added that overall construction business in China had been hit by the restrictions imposed on the property markets by the Chinese government.

Ehrnrooth said China had set restrictions both for constructors and their clients, on maximum prices and loans as well as for investors on the required share of own capital and the number of houses one can own.

“This has clearly slowed down the property markets...It departs from what President Xi constantly says, that houses are for living and not for speculation,” Ehrnrooth said.

Kone reported higher fourth-quarter profit of 319.6 million euros, up from 302.6 million a year earlier and roughly in line with analysts’ expectations of 323 million.

The Finnish firm said it expected its adjusted operating profit to return to growth in 2019 and reach between 1.12 billion and 1.24 billion euros.

The mid-point of Kone’s forecast range is 1.18 billion euros, which compares with forecasts for 1.23 billion in a Reuters poll of analysts covering the company.

Jefferies said the adjusted EBIT guidance range meant the market consensus was now at the upper end of the range and would likely see earnings forecast adjusted lower.

“We believe our profit turns to growth, as it did now in the fourth quarter and we believe our full-year profit will turn to growth this year,” Kone’s Ehrnrooth said. ($1 = 0.8827 euros) (Reporting by Anne Kauranen Editing by Alexander Smith and Keith Weir)

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