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Investing.com -- Shares of Kone Corp (HEL:KNEBV) climbed 3% today after the company reported fourth-quarter earnings that surpassed analyst expectations. The elevator and escalator manufacturer’s orders totaled €2,119 million, sales reached €2,976 million, and adjusted EBIT stood at €387 million, each exceeding consensus forecasts by 4%, 2%, and 2%, respectively.
Despite reported EBIT falling 12% below expectations due to higher-than-anticipated adjustment items, the company’s performance was buoyed by strong order intake and sales growth.
Kone’s order intake experienced a 2.6% increase on a comparable currency basis year-over-year (YoY), with notable growth in the Americas and the Asia-Pacific, Middle East, and Africa (APMEA) regions. While new equipment business (NBS) orders slightly declined, modernization (Mod) orders saw significant expansion across all regions. The company’s order book grew by 1.4% YoY, indicating sustained demand for Kone’s products.
The company’s sales outside of China surged by more than 10%, although Chinese sales saw an approximate 15% decline. Kone’s adjusted EBIT margin improved by 20 basis points YoY to 13.0%, meeting consensus estimates. The margin improvement was attributed to a favorable mix and robust Mod margins, which helped counterbalance margin pressures in China and inflation across the board.
Adjustment items totaling €54 million included €36 million for restructuring in China, primarily within the NBS segment, and €18 million in expensed development costs related to the realignment of development activities with Kone’s new strategic direction.
Operating cash flow was a bright spot, increasing by 40% YoY to €534 million, indicative of the company’s strong operational efficiency and cash generation capabilities.
Looking ahead, Kone’s 2025 outlook anticipates slight growth in comparable sales, aligning with a consensus estimate of 3.7%, and continued improvement in the adjusted EBIT margin, which is projected to surpass the consensus estimate of 12.3% by 50 basis points YoY.
RBC analysts commented on the results, stating, "Neutral overall. Order and sales development is healthy, particularly outside China. However, China remains a substantial burden. Guidance has been left vague, which given the China uncertainties seems sensible enough. Also, we would like to have a better understanding of the sizeable adjustment items in operating profit."
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