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China slowdown and higher costs to make 2022 challenging for Schindler

China slowdown and higher costs to make 2022 challenging for Schindler 1

By Aida Pelaez-Fernandez and Bartosz Dabrowski

(Reuters) – Elevator and escalator manufacturer Schindler expects 2022 to be challenging, particularly in the first half, citing a slowdown in China and rising costs.

The Swiss company said on Thursday it had not been materially impacted by Evergrande’s debt issues, but it expected 2022, especially the first half of it, to be challenging for business in China, which makes up 14% of Schindler sales.

“China’s real state investments slowdown will impact the market of our business in the first half of 2022, or a little bit longer,” CEO Thomas Oetterli said on a conference call.

Oetterli said he expected the Chinese market, which accounts for at least two thirds of the world’s new lift installations, to bounce back in the second half of 2022, helped by government actions.

Beijing has stepped up measures to rein in China’s property market this year, including upper limits on developers’ debt ratios and restrictions on purchases.

Baader Helvea said in a note it does not see a major impact for the company from the Evergrande crisis but said “multiples might remain below former peaks and a persisting pressure on margins”.

Oetterli said Schindler expected 2022 to be challenging as electronic shortage and high material costs will continue to have a negative impact.

For the January to September period, the company pointed to Europe as the main burden on its revenues, which came in at 8.28 billion Swiss francs, in line with the 2019 pre-pandemic level.

“Revenue slowdown in the first three quarters was not related to China, we were weaker in Europe because material shortage was stronger than in the rest of the world”, Oetterli said.

Schindler’s quarterly net profit came in at 234 million Swiss francs ($254.74 million), slightly below 235 million a year earlier, but beating the 220 million expected by analysts.

($1 = 0.9186 Swiss francs)

(Reporting by Aida Pelaez-Fernandez and Bartosz Dabrowski in Gdansk; Editing by Angus MacSwan)

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