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Earnings

Elevator maker Kone says third-quarter profit rises, but flags pressure on pricing

HELSINKI (Reuters) - Finland's Kone KNEBV.HE reported an expected increase in third-quarter profit on Thursday as demand for elevators and escalators picked up in China, but said rising competition from other engineering groups had put pressure on pricing.

FILE PHOTO: Logo is displayed in an elevator at the KONE Academy of Finish elevators and escalators manufacturer KONE in Hanover, Germany, February 6, 2020. REUTERS/Fabian Bimmer

Kone’s quarterly operating profit grew 6% from a year ago to 333.1 million euros ($394 million) versus the 329.3 million expected by analysts, Refinitiv Eikon data showed.

Chief Executive Henrik Ehrnrooth said while China had developed well both in terms of sales and orders, “other parts of the world saw improved momentum but continued to be impacted by the COVID-19 pandemic, with increasing uncertainty again towards the end of the quarter”.

He added competition had heated up, especially in declining markets, resulting in pricing pressures. “China has been the strongest market, but it’s also a market where everyone wants to focus,” he said.

Shares in the company were down nearly 4% by 1300 GMT, with losses seen “potentially on the price commentary which the bears will highlight,” JPMorgan said in a note.

A month ago Kone raised its 2020 outlook, citing better-than-expected development in third-quarter sales and adjusted earnings before interest and tax (EBIT). [L5N2GJ19R]

Kone’s sales grew largely in line with analysts’ average expectations, by a little more than 1% to 2.59 billion euros from the year-ago quarter, while orders declined 3.8%.

“At comparable exchange rates, orders grew by 0.4%,” Kone added.

Ehrnrooth said in terms of new construction, the most resilient market to the COVID-19 crisis had been residential in most countries.

“The value of a good home has just increased in this type of environment,” he told reporters.

At the same time, non-residential construction such as shopping centres, hotels and offices, has been hardest hit.

“Many projects have been put on hold as people want to figure out what the new normal is going to be like,” he said.

($1 = 0.8447 euros)

Reporting by Anne Kauranen; Editing by Jason Neely and Jan Harvey

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