Tuesday, July 22, 2008

Kone Quarterly Profit Rises on Asian, European Gains

Kone Oyj, the Finnish company that supplies elevators to the London underground and the Grand Mosque in Mecca, said second-quarter profit rose 19 percent on sales of new equipment sales in Asia and Europe.
Net income increased to 98.7 million euros ($157 million), from 82.9 million euros a year earlier, Helsinki-based Kone said today in a statement. Sales advanced 14 percent to 1.14 billion euros.
Revenue gained 25 percent in Asia and 15 percent in Europe, Middle East and Africa, more than compensating for a falling dollar and a North American housing slowdown that has spread to other construction markets. Kone is building lifts for the Marina Bay Sands resort in Singapore, the Shanghai International Finance Center, and the Delhi Metro.
``The results, especially in Europe, Middle East and Africa are encouraging, given all the comments on weak construction markets,'' said Maria Ivek, a Zurich-based Credit Suisse analyst with an ``outperform'' rating on Kone.
Kone closed down 7.2 percent at 22.04 euros in the Finnish capital, mirroring declines at construction companies and building-material suppliers. The company has lost 8 percent this year, giving it a market value of 5.6 billion euros.
Analysts surveyed by Bloomberg predicted a profit of 101 million euros on sales of 1.09 billion euros. Earnings per share rose to 39 cents from 33 cents last year.
Modernization, Maintenance
Kone has approximately 12 percent of the world elevator and escalator market, competing with ThyssenKrupp AG, United Technologies' Otis Elevator Co. unit, Switzerland's Schindler AG and Mitsubishi Elevator Europe BV.
Chief Executive Officer Matti Alahuhta has purchased small maintenance companies, most recently in France and Spain, to expand in maintenance and modernization, which are less cyclical than new equipment sales. Service and revamps accounted for 52 percent of sales in the quarter.
``In the U.S., the commercial segment no longer compensated for the slowdown in the residential segment,'' the company said in the statement. ``In the United Kingdom, the residential market continued to weaken, while the major project market was active.''
New contracts increased 16 percent, boosting the order book to 3.8 billion euros, as the North American real estate slowdown spread from housing to other building. Alahuhta said the company will grow more than 10 percent this year, compared with previous guidance of ``about'' 10 percent.
``It's quite exceptional that they were able to increase new equipment so much, and yet their operating profit is also increasing, said Credit Suisse's Ivek. ``Given that it's generally assumed new equipment has lower margins than service.''
Kone is controlled by Chairman Antti Herlin, who has more than 60 percent of votes according to the company's Web site. Herlin is the fourth generation of owners of Kone.

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