Earnings call transcript: Schindler Q1 2025 shows strong order growth

Schindler Holding AG reported a robust performance for the first quarter of 2025, with a notable acceleration in order growth and improvements in several key financial metrics. Despite challenges in the global market, the company achieved a 6% increase in orders, the highest since the second quarter of 2023. Revenue grew by 2.5%, while the EBIT margin improved by 110 basis points to reach 12%. The stock currently trades at $230.58, down 15.4% year-to-date, with InvestingPro data showing a moderate beta of 0.98, indicating relatively stable price movements compared to the broader market.

Key Takeaways

• Order growth accelerated to 6%, marking the highest increase since Q2 2023.
• Revenue increased by 2.5%, with EBIT margin reaching 12%.
• Operating cash flow was CHF 540 million, reflecting strong cash generation.
• Modernization revenue grew by double digits, contributing to a 9% increase in backlog.
• Stock price dropped significantly, impacting market sentiment.

Company Performance

Schindler’s Q1 2025 performance was characterized by broad-based growth across regions and segments. The company continued to benefit from its focus on service and modernization, which drove a double-digit increase in modernization revenue. Despite challenges in the global market, including a contracting residential market in China and softness in North America, Schindler’s strategic initiatives and product innovations supported its growth trajectory.

Financial Highlights

• Revenue: Increased by 2.5% year-over-year.
• EBIT Margin: Improved by 110 basis points to 12%.
• Operating Cash Flow: CHF 540 million.
• Net Profit Margin: Improved to 9.4%.

Outlook & Guidance

Schindler maintains its guidance for 2025, targeting low single-digit revenue growth and a 12% EBIT reported margin. The company expects continued double-digit growth in its modernization revenue, although it remains cautious about the North American market due to ongoing softness. Schindler is also monitoring the impact of tariffs, which are estimated to affect the U.S. business by CHF 23 million in 2025.

Executive Commentary

Carla de Geisler, CFO, highlighted the challenging market environment, stating, "We are facing a very uncertain and volatile market environment." CEO Paolo Campagna emphasized the enduring importance of the modernization business, noting, "Modernization business is here to stay." He also expressed optimism about the global service markets, saying, "We continue to expect the service markets globally to grow at a healthy pace."

Risks and Challenges

• Supply Chain Issues: Continued improvements are necessary to support margin growth.
• Market Saturation: Potential slowdown in new installations, particularly in China.
• Macroeconomic Pressures: Global economic uncertainties could impact growth projections.
• Tariff Impacts: Estimated CHF 23 million impact on the U.S. business in 2025.
• North American Market Softness: Ongoing challenges could affect revenue growth.

Schindler’s strategic focus on innovation and modernization, combined with its robust service portfolio, positions it well to navigate current market uncertainties. The company maintains steady growth with a 6.27% revenue increase over the last twelve months. For deeper insights into Schindler’s valuation and growth prospects, InvestingPro offers comprehensive research reports with expert analysis and Fair Value estimates, part of its coverage of over 1,400 top stocks.

Full transcript - Schindler Holding AG (SCHN) Q1 2025:

Sandra, Chorus Call Operator, Chorus Call: Ladies and gentlemen, welcome to the Schindler Q1 Results twenty twenty five Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. Would like to remind you that all participants are in listen only mode, and the conference is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast.

At this time, it’s my pleasure to hand over to Lars Broersson, Head of Investor Relations. Please go ahead, sir.

Lars Broersson, Head of Investor Relations, Schindler: Thank you, Sandra, and good morning, everybody, and welcome to our first quarter twenty twenty five results conference call. My name is Lars Borsen. I’m Head of Investor Relations at Schindler. I’m here together with Paolo Campagna, our CEO and Carla de Geisler, our CFO. Paolo will discuss our highlights of the Q1 results and our 2025 market outlook, and Karl will then take us through the financials.

After the presentation, we’re happy to take your questions. We plan to close the call at 11:00. And with that, I hand over to Paolo. Paolo, please go ahead.

Paolo Campagna, CEO, Schindler: Good morning, everyone. I am pleased to be back to report on our performance in Q1, which I think is another quarter we can be proud of. Let me start by giving you some highlights on slide number three, as well as touch on some of the external challenges we are facing currently. First, our top line development this quarter was encouraging. Our order growth accelerated to 6%, which is a growth level we haven’t seen for almost two years, actually since Q2 twenty twenty three.

Carla will give you more detail shortly, but I’m pleased that as a service company, we continue to deliver solid growth in our service and modernization business. In particularly, Mod had a strong quarter with close to 20% growth. But it is also worth noting that our new installations orders grew this quarter in value terms by 1% despite the headwinds in China. I’m particularly pleased that we grew our NA order intake by high single digit in EMEA in the quarter as we now start to see evidence of the impact the rollout of the new modular platform is having. Revenue growth returned to positive this quarter with growth across all our regions with exception of China.

And I was particularly pleased to see Mod revenue growth for the group accelerated to double digit in the quarter as we executed well on the backlog. More generally, on modernization, I think we’re making some good progress in terms of our product portfolio, organization and strategy. And looking ahead, I expect Mod revenue growth to continue at this pace, growing double digit in 2025. On profitability, we had a strong start of the year with our EBIT reported margin hitting 12%, up 110 basis points year on year. Good to see that our SG and A efficiency initiatives are starting to deliver savings and that our procurement and supply chain operations continue to support margins.

Carla will provide you with the details. And it’s not just the operating earnings, but also the conversion to cash, which make us happy. We delivered operating cash flow of $540,000,000 in the quarter. We continue to do well on cash conversion as our team is working very hard to drive continued improvement in our net working capital. Now, let me touch on some of the challenges we are facing in our external environment.

Firstly, the NA market in Americas was off to a weaker start this year than expected and we see also softer leading indicators, which have led us to downgrade the respective end market outlook. Otherwise, our market outlook is unchanged, more about that shortly. On tariffs, and Carla will walk you through our estimates on the expected impact, but let me say that I think we are in a strong position to deal with the higher tariffs and to mitigate the impact in 2025. In my view, the bigger question is how tariffs will impact the economics of our customers’ construction projects and our NI market more broadly. But for now, it’s too early to have real visibility on that.

Regarding the organizational changes, since I took over the CEO role earlier this year, let me say that the leadership transition has been well completed. We managed very smooth and seamless transition with no operational disruption. And as we discussed together in February at our full year results, we are staying on our strategic course we set two years ago. Finally, before I move on, just a word on our innovation launch and the X8 product, which we presented at the Milan Design Week early in April. And you will notice, I’m using the phrase innovation launch, not product launch, as we believe this is truly a new concept, leveraging innovative digital technologies, providing far more freedom for architects and setting new standards for sustainability.

And the initial customer feedback has been very encouraging. Now moving to Slide four, Schindler orders intake in Q1 twenty twenty five. First on service, our portfolio units continue to expand at a healthy pace with the best growth in China and Asia Pacific, even as China conversions slow as a consequence of the NII market decline in the last years. On modernization, as mentioned before, we are really pleased with the strong start in the year. We saw double digit growth across all regions except China.

The weaker growth in China this quarter, up low single digit, is primarily due to a tough comparison from Q1 last year and fewer large projects booked in this quarter. But the pipeline remains robust and we expect a reacceleration in the coming quarters. Conversely, Southern Europe was a standout this quarter and we believe this region can continue to deliver strong mod growth during 2025. In the new installation, we saw growth across all regions except China, strongly supported by the new model platform where already introduced. Our performance in The Americas was the highlight of the quarter with both North And South America growing double digit and we recorded also strong growth in Asia Pacific and a pickup in orders in Northern Europe.

However, the weak market condition in China led to an overall low single digit decrease in NII order intake. Moving now to our market outlook for ’25 on Slide five. We continue to expect the service markets globally to grow at healthy pace across all regions. Modernization markets will continue to be very active with mid to high single growth across the world and double digit growth in China as the government continues to support newer of equipment including elevators. In new installations, we continue to expect the global market to decline high single digit, dragged down mainly by low teens contraction in China, where residential floor space started, declined more than 20 plus percent in Q1 twenty twenty five, marking the third consecutive year decline in housing starts, in spite of the government’s resolve to stabilize the property sector.

We have decided to make a single revision to our 2025 market outlook, as I mentioned, now expecting The Americas new installation market to come down slightly in volume terms. This reflects the weaker start to the year in North America, down close to 10% in Q1, as well as more visible cooling off in the Brazilian NA market after the exceptionally strong ’24. A word on The U. S. Market.

You will recall that we saw activity pick up in second half of last year and had expected that momentum to continue ’25. But after a steep drop in the first quarter and in light of the softer leading indicators and added uncertainty from trade policies, we have now lowered our expectations. Across EMEA, we see a good growth outlook in The Middle East and countries such as Spain as well as signs of bottoming out in important German market. Asia Pacific, excluding China, is expected to grow mid single digit driven by India and Southeast Asia. With that, let me turn over to Carla to walk us through our financial results in more detail.

Carla, please go ahead.

Carla de Geisler, CFO, Schindler: Thank you very much, Paolo, and good morning, everybody. So let me start with Slide seven and referring to the left hand side of the slide. And there you can see that all our headline KPIs continue to point in the right direction. But allow me to give four quick observations before we dive into the details on the following slides. Firstly, as Paolo noted, the order growth accelerated to 6% this quarter.

And yes, this is the highest quarterly order growth that we have seen since the second quarter twenty twenty three. And as importantly, it was broad based with the growth in all the regions and the segments outside of our Chinese new installation business. Secondly, we returned to revenue growth in the quarter after the dip into negative growth in the prior quarter, so now tracking in line with our full year guidance for 2025 of low single digit growth. I will elaborate on that later. Thirdly, we continue to make some really good progress on the journey towards our 13% EBIT reported midterm target.

This quarter, our reported EBIT margin came in at 12%. We had no restructuring charges in the quarter, so that helped, but I was nevertheless very pleased to see the pickup in efficiency savings this quarter. Lastly, I will highlight our operating cash flow again this quarter. Now it continues to stay at a very healthy level, driven by a good development in the operating earnings and a stable net working capital, which is really pleasing after the big improvement that we have seen in 2024. Now moving to Slide eight.

And there, let me say first that it’s nice to see some healthy organic growth return to the business with 6% order growth in local currency in quarter one. And as Paolo highlighted already, it’s very much service and modernization driving that order growth. Mat grew close to 20% with double digit growth in all regions outside China. It’s also worth noting that our new installation business actually grew overall in value terms this quarter, albeit very modestly despite the headwinds from China. This growth was driven by EMEA and The Americas, which grew high single digit and mid teens, respectively in value terms in the quarter.

China new installation orders were down high 20s. And Paolo referred already to it. We are very pleased to see the impact of the rollout of our new modular platform and the effect it is having on our order intake in EMEA. Now moving on to the right hand side of the slide, the revenue development. There you can see that our revenue grew 2.5% in the quarter.

And as I mentioned to highlight, this quarter was the growth in modernization, which picked up, driven by a good execution and a gradual normalization of the backlog rotation times. We expect the modernization revenue to stay at a very healthy level in 2025, clearly supported by our backlog, which was up 9% year on year at the end of the quarter. Now a brief word on FX, which was broadly neutral to our financial performance in the quarter, but a big but clearly, the recent strengthening of the Swiss franc will have a negative effect in 2025, and we expect it could shave off a mid, let’s say, to five percentage points of our top line in the three remaining quarters of the year, assuming the FX rates stay at the current level. And now let me also briefly touch on our backlog, because I realized there were already questions regarding the restatement of our backlog. Now it’s very simple.

This relates to our U. S. Business, which has historically recognized order intake on a letter of intent basis instead of a contract signed basis. And that has now changed and has been harmonized with the rest of the group. So Q1 twenty four has been restated accordingly and the impact on our Q1 order intake is immaterial, while the impact on our order backlog is approximately hundred million Secondly, I’m pleased to report that our backlog margin improved again in quarter one sequentially and that follows the improvement in quarter four.

So two quarters of sequentially positive development after the flattish development that we saw in early twenty twenty four, which is very encouraging. The legacy backlog, as many of you have followed closely in recent years, continues to be worked down. It stood now at 10% of the total backlog at quarter end, down from the 12% at year end twenty twenty four. And I should also mention for completeness that the rollout of our new modular platform is progressing according to plan. You will remember that we have completed the rollout in Europe.

And we are now ramping up in India and Brazil as focus areas and are finalizing the specs for the rest of the regions. Now moving on to Slide nine to give you some insight on the EBIT performance. And allow me to focus on the drivers of our operational improvement, 37,000,000 uptake that you see in the bridge. And you will remember that through ’24 that we shared that the majority of the operational improvement was driven by price and mix, while efficiency was rather a smaller contributor. And now this quarter, I’m super pleased to report that efficiency is the biggest contributor.

This comes as saving from last year’s headcount reduction program are starting to come through, so the SG and A cost savings are coming through in addition to the procurement savings, which are continuing to deliver. So price and mix were for sure contributors, but less than efficiency this quarter and less so than in prior quarters. And also, please note that we had no restructuring costs, which were burdening the Q1 results. Now moving on to Slide 10, and there you see our net profit and the fact that our net profit increased to million in quarter one. The net margin continued to improve and stands now at 9.4%.

As Paolo mentioned already, our operating cash flow was also strong coming in at million, driven by the uptick in the operating profit and the lower cash restructuring. Net working capital change was flat year on year, which I see as pleasing after the big improvements that we made last year. Now we will have, for sure, quarterly swings in our net working capital as we also saw last year. But overall, I expect us to deliver another solid operating cash flow in 2025, even if we might not hit the exceptional level of last year. Now moving on to Slide 11, a new topic in the presentation, and it’s about the tariffs.

I wanted to provide you with some details on how we see the likely impact from the tariffs on our business as per today. So based on the tariff levels as they stand today, we estimate an annual gross impact on our business of around CHF33 million. For 2025, we estimate the impact to be around CHF23 million. We have given you the breakdown in the table by tariff category on imports to our U. S.

Business. So if we look at it by country, about 80% of the impact comes from the import to The U. S. From China and 20% from the imports to The U. S.

From the rest of the world, and that is primarily Europe. And the estimates we have provided you include both our direct and indirect exposure. Now in terms of the net impact, of course, we have initiated actions, which we expect will over time fully offset the tariffs. So this include pricing actions, but for our both for our existing backlog as well as for new orders, but it also includes supply chain mitigating actions and management of our suppliers. But it’s clear that these actions, particularly the ones on the supply chain, will take some time to take effect, and we will likely have some burden from tariffs on our 2025 performance.

Now moving on to Slide 12, and that is the slide that brings me to our 25% guidance, which remain unchanged. So I reconfirm, we expect a low single digit revenue growth in local currency and an EBIT reported margin of 12%. Now I’m sure you will ask why not a more ambitious margin guidance after the strong start of the year. So let me address this upfront and point you to four reasons why we expect the margin expansion to be more muted over the remaining three quarters of the year compared to quarter one. Firstly, as I just discussed, tariffs are a headwind in 2025 and there is a risk that we are not able to fully offset the gross impact in 2025 with our mitigating actions.

Number two, remember that we guide on reported EBIT margin. We took no restructuring charges in the first quarter, so the up to EUR 50,000,000 of restructuring costs, which we have guided you to in 2025 are still to come. Thirdly, China will be a greater burden in the coming quarters than it was in quarter one, partly because China is a seasonally smaller contributor in Q1 and partly because of the lower margin orders taken in 2024. Obviously, this will have a greater impact on our P and L as the year progresses. And fourthly, we will have less margin tailwind from mix in the coming quarters versus Q1, which has less contribution from NI, our new installation business and also our modernization business growth in the revenue mix.

So let me conclude by thanking, together with my colleagues in the Executive Committee, our close to 70,000 employees across the globe for their efforts so far in 2025. We are facing a very uncertain and volatile market environment, but I trust with the dedicated efforts and commitments of our colleagues all around the world, we believe we are very well placed to continue to serve our customers and to the and win in the markets we play. And with that, I hand over to Lars.

Lars Broersson, Head of Investor Relations, Schindler: Thank you, Carla. Paolo and Carla are now happy to take your questions. Can I ask you kindly to limit yourself to two questions only given the time we have available and the relatively long queue that we have for the questions and answers? So with that, operator, please, can we take the first question?

Sandra, Chorus Call Operator, Chorus Call: We will now begin the question and answer session. Our first question comes from James Moore from Redburn Atlantic. Please go ahead.

James Moore, Analyst, Redburn Atlantic: Yes. Good morning, everyone. I’m Paolo, Carla, Lars. I wonder if we could start with the tariff environment in two dimensions really just to make sure I understand the exposures and how that drives the charge. And then secondly, whether you’re seeing any change to demand in The U.

S. In any category in orders at the April? So that’s really the second question. Going back to the first, my understanding was that you were maybe 95%, ninety six % of your business is kind of local U. S, so you’re very localized with a minimal amount coming in and maybe something in the magnitude of China being somewhere around 3% of the import.

Is that correct? And what’s your approach on price? Is your approach to pass it all through with a price hike or to try and reroute some of the exposure? And if you could share how much you might do that and what the timing of price looks like, that will be very helpful.

Paolo Campagna, CEO, Schindler: James, good morning, first of all. Very good question. Let me start and then Carla can complete the picture. First of all, without going to the details of the assumptions, but what we can confirm is, yes, we are a very localized entity with our factories in The U. S.

For elevators and escalators. So that’s right. The impact, Carla was showing in details, you see the biggest is indeed coming from what we call indirect, which is our local American supplier base. There is an impact for sure. We have suppliers who import steel, aluminum, all this stuff.

So and this is the impact we expect to come. And you see in the assumptions we are taking into our numbers. So the import from China even is relatively contained, but however is for our suppliers the bigger part. So I think Carla was mentioning it that 80% is imported from China while 20% is coming from Europe. So the China tariffs do play a big role to our suppliers to our supplier base.

So on this one, we must include it in our assumptions and we have done it. Now to the second part, how we treat it. This may be two legs of the same story. One is working with our supplier base. We listen to the impact.

We are negotiating. We are trying to mitigate the most we can. And we must say there’s also an impact, and Carla was showing it on ’25, and we’ll come to this in a second, what would be later, is that for sure there are contracts which are still valid for this year. So and we enforce as much as we can these conditions on the suppliers. There’s a second leg which is the pricing leg.

You were mentioning this. And the pricing leg is very, how to say sensitive one. Without going to the details of our pricing policy, but for sure, we are working now on pricing in new installation and modernization. And this has a different lever, actually also depending from product, timing and all the conditions you can imagine to play a role into pricing. So Carla, something to complete?

Carla de Geisler, CFO, Schindler: No, I think you I mean, the only thing maybe, James, what I could complement is for the non China sourcing, I mean, is purely related to the microelectronics to that we actually source from Europe, just to give also a bit of color there what is outside China. But overall, I think we are very well placed when it comes to the tariff because of the simple reason what Paolo mentioned, we have our operations in The U. S.

James Moore, Analyst, Redburn Atlantic: Thank you very much. And if I just so I understand, if you say got CHF 20,000,000 of your CHF 23,000,000 through as price this year, would I assume that, that was all on your U. S. Business, which is a sort of CHF 2,000,000,000 business? So it’s only a point of price needed.

Carla de Geisler, CFO, Schindler: No. I mean the CHF 23,000,000 that just to be clear, I showed that the impact on the slide, that is really the impact on our U. S. Business coming from the import into The U. S.

We are working on different mitigating actions. As you can imagine, it’s all work in progress. But but we I mean, we don’t have now the clear breakdown on what is pricing and, you know, what is the supply chain. It’s all work in progress.

Paolo Campagna, CEO, Schindler: To clarify, James, very important okay. Yeah.

Lars Broersson, Head of Investor Relations, Schindler: Next question please, operator.

Sandra, Chorus Call Operator, Chorus Call: The next question comes from Martin Husler from ZKB. Please go ahead.

Martin Husler, Analyst, ZKB: Yes. First of all, maybe on the new products, Schindler X8, obviously, we probably went through the product descriptions, but can you maybe elaborate a bit more, how does it fit into your product range and about the geographical rollout in the future? Is it targeting only new construction or also modernization? That’s the first question. The second question is, you mentioned that order intake was down in unit, but actually overall for the group up in value.

And I was just wondering whether this is pure pricing or whether we should also take into considerations product mix such as large order contracts, which might have impacted here value over volume also a bit? You.

Paolo Campagna, CEO, Schindler: Martin, good morning. Let me take the second one first and then I come to X8, which is a very nice topic. The order intake is influencing units also very much by the market mix, right? So if you take the portion of China with the units there and the value outside of China, the answer is very clear. This evaluation units versus value comes from the market mix.

Coming to X8, and I was mentioning it before, we call it innovation launch. So let me clarify in a sentence what does it mean for us. Yes, it is a product. We have included all these new innovations, digital, physical, what we call phygital at the end in one product, which by now is launched in selected markets and will be applied in selected segments. So this is, therefore, it’s not a global product launch as we did in the past with modular platform.

Here, it’s much more about promoting the innovations, promoting the solutions, which then will find their way also in other products going forward. So it’s more of an innovation launch, introduction of innovations in the industry rather than a product launch globally by now.

Martin Husler, Analyst, ZKB: Okay. And it’s my understanding that it’s like high premium for residential, but rather small to mid rise buildings. Is that correct?

Paolo Campagna, CEO, Schindler: Yes. Thank you for the well summarized point. It’s very much a premium product for residential and to therefore also selected markets and in selected segments. Yes.

Martin Husler, Analyst, ZKB: Thank you. Thanks a lot.

Lars Broersson, Head of Investor Relations, Schindler: Thank you, Martin. Next question please.

Sandra, Chorus Call Operator, Chorus Call: The next question comes from Daniela Costa from Goldman Sachs. Please go ahead.

Daniela Costa, Analyst, Goldman Sachs: Hi, good morning. I have one question and a follow-up. First, just wanted to go back to the North America guidance and to understand was the downgrade on the market outlook there more prompted by like your macro expectations or actively on the ground? Have you started to see any project delays or cancellations? And then I’ll ask the second one after.

Paolo Campagna, CEO, Schindler: Daniela, good morning. Happy to answer this one. Our estimation is based on the Q1 knee eye as well the public available market numbers, which just came out these days end of last week. So we have numbers from Q1 new installation, which are public. This was taken into consideration.

To the second part of your question, do we see now cancellation coming in? Not now. The answer to the second part of your question is not now. So we cannot Understood.

Daniela Costa, Analyst, Goldman Sachs: Thank you. And as a kind of on a similar vein, your comment on Germany bottoming out, I was wondering if it’s more sort of just your expectation given the stimulus that we’ve seen there? Or are there any concrete signs that you can point to of things that are happening on the ground to call that bottom?

Paolo Campagna, CEO, Schindler: Yes. Well, here we have two sources. One is our own sales force, which in Germany is very close to the ground. And second, we expect now slowly but surely something which everyone is expecting that the pickup in infrastructure project would start showing some effects. Even we don’t assume this being a very fast pickup, as we know very well that this specific segment moves quite slowly.

However, we anticipate that we might have in the course of this year some first contribution, which then lead us to the overall assumption of bottoming out the situation or the market trend in Germany.

Daniela Costa, Analyst, Goldman Sachs: And Germany is a margin accretive country?

Paolo Campagna, CEO, Schindler: Excuse me, can you repeat, Tanjil?

Daniela Costa, Analyst, Goldman Sachs: Is Germany a margin accretive country?

Paolo Campagna, CEO, Schindler: Yes, yes, it is. Yes, is. Yes,

Daniela Costa, Analyst, Goldman Sachs: Got it. Thank you very much.

Paolo Campagna, CEO, Schindler: Thank you, Daniella.

Lars Broersson, Head of Investor Relations, Schindler: Thank you, Daniella. Next question please.

Sandra, Chorus Call Operator, Chorus Call: The next question comes from Benjamin Heilal from Bank of America. Please go ahead.

Benjamin Heilal, Analyst, Bank of America: Yes, thank you. Sorry, I wanted to kind of touch on that question around North America again. Sorry, can you go through in just a bit more detail like what has driven the change and what have you seen on the ground in Q1? I’m a bit confused in terms of comments you just made to Daniela versus what was said at the beginning of the presentation. Thank you.

Paolo Campagna, CEO, Schindler: Benjamin, Q1 in The U. S, talking market now, right? We just received last week the numbers collected by NII, so which are the public available numbers of the units sold in Q1 in The U. S. So this first was the first indication that market in Q1 was down around nine percent.

And it was not anticipated last year when we did our assumptions, we were looking at a flat market on a higher level. So we have a drop. This is a given fact from Q1, which we had to take into consideration. Now, why we have adjusted going forward is as we say this 9% drop in Q1 to be recovered in the coming three quarters would implicitly assume that the market would pick up. And this we say in the light of the tariffs, we assume be more unlikely.

So even if it stays up to level of now, we would have this drop of Q1, which influenced the full year outlook.

Benjamin Heilal, Analyst, Bank of America: That’s very clear. Thank you. As just a very quick follow-up, what have you seen in Q1? And have you seen any change in the last three to four weeks in terms of customer buying patterns since the tariffs were announced? Thank you very much.

Paolo Campagna, CEO, Schindler: Berrien, so far, no. We don’t have signals of a visible slowdown. It’s also maybe too early to draw, let’s say, assumptions now then we would look at single projects. So therefore, I think with this, we have to wait a couple of months to have a clear insight. But now coming back to your question, we don’t see it on the ground.

Benjamin Heilal, Analyst, Bank of America: With Thank you.

Lars Broersson, Head of Investor Relations, Schindler: You. Ben, next question please.

Sandra, Chorus Call Operator, Chorus Call: The next question comes from Miguel Borrega from BNP Paribas. Please go ahead.

Miguel Borrega, Analyst, BNP Paribas: Hi, good morning everyone. Thanks for taking my questions. So going back to tariffs and specifically wondering how you calculated these indirect CHF 7,000,000. So how much cost inflation are you effectively expecting from your suppliers? And in terms of mitigating actions, how much of that would be possible to offset in 2025?

I imagine pricing will be difficult given the lead times. And so is it more of an issue of changing suppliers? Wouldn’t that also come at a cost? That’s my first question.

Carla de Geisler, CFO, Schindler: Yes. Thank you for the question. I will take that one. Yes, when you your question related to the €7,000,000 as I said, is all pretty much work in progress. And we are now around the table with suppliers, but it’s early days.

And yes, it’s not only about negotiation. Of course, we are also looking at alternative sourcing, and it all depends on component by component. So yes, it’s too early to give more details than what we actually included in the slides. But happy to share more in Q2, and hopefully, we have a clearer view on the world.

Miguel Borrega, Analyst, BNP Paribas: Thank you. And then just in terms of China, we’ve seen some positive leading indicators coming through. Just wondering if you’re becoming, let’s say, less negative on the outlook for China? Or in other words, what would be the catalyst for you to become more constructive? Is it volumes or the pricing of orders that keeps going down?

Paolo Campagna, CEO, Schindler: Miguel, thank you for the question. And without saying what would need to make us more positive looking forward, but if we look at the situation today, we still see a healthy growth in service and modernization. So here, we have to keep in mind, it’s the largest market in units on this planet. So therefore, I think by all means, we remain positive in terms of markets when it comes to service and modernization in China. When we look at new installation, it’s very early time to assume, let’s say, a recovery of the market is our view on that.

And you were mentioning one argument, which has shown us in the last three years becoming always the negative point and it was the pricing on new installations especially, which we do not expect this year to recover yet.

Lars Broersson, Head of Investor Relations, Schindler: Thank you, Miguel. Next question please.

Sandra, Chorus Call Operator, Chorus Call: The next question comes from John Kim from Deutsche Bank. Please go ahead.

John Kim, Analyst, Deutsche Bank: Hi, good morning. Two if I may. Just a quick follow-up on that. Specific to China, can you talk about activity levels that you’re seeing in Tier one and Tier two markets, whether they’re meaningfully different on new construction or if there’s any positive lead indicators? And I’ll wait on the second.

Paolo Campagna, CEO, Schindler: John, good morning. Especially Q1, as you know, is in China a very special quarter, right? Mostly but this is traditionally mostly influenced by Chinese New Year. So to take this as a reference of activities in the market, one could say maybe it’s not Ready one. You are asking about Q2.

And by now in the new installation, we do not expect a recovery sorry, was Tier one and Tier two. By now, we don’t see a significant change in new installation. We don’t by now.

John Kim, Analyst, Deutsche Bank: Okay. Understood. And a completely unrelated question If we think about your cost efficiency initiatives and the effect of modular units being sold through, new installations, is there anything we should be paying attention to in the cadence through the quarters? Or is it fairly evenly spread in terms of impacts?

Carla de Geisler, CFO, Schindler: I will take this question. Well, it is actually the journey we are going through. And as I mentioned already last year, because of all the efficiencies that we are working on, you see that gradually picking up. And that is expected to continue going forward. So going forward, we will see an or we are working towards an incremental effect of the efficiencies coming through, and that is in the different areas that we are working on and that we shared before.

So it is both covering our new installation business, the modernization business, but obviously also the overhead, which is also a big item next to the continued work we are doing in the procurement and the supply chain.

John Kim, Analyst, Deutsche Bank: Okay. Thank you.

Lars Broersson, Head of Investor Relations, Schindler: Pleasure. Thank you, John. Next question please.

Sandra, Chorus Call Operator, Chorus Call: The next question comes from Vlad Sergievskiy from Barclays. Please go ahead.

Lars Broersson, Head of Investor Relations, Schindler0: Good morning. Thanks very much for taking my two questions. I’ll ask them one by one, if I may. First, on the pricing in China across your product spectrum? What would you say is happening in leading edge pricing on new orders for new equipment, service and modernization?

Paolo Campagna, CEO, Schindler: By now, we don’t expect any significant change on the pricing coming through this year. We were talking about new installation before, but now your question is also including the other product and businesses. So we don’t count now on a pickup on pricings in China this year. It’s not what we count on.

Lars Broersson, Head of Investor Relations, Schindler0: Understood. Thanks very much. And more conceptual question on modernization globally, if I may. Historically, this business has been cyclical. Where do you think we are in the modernization cycle right now?

And is there any impact or any risk of impact on this cycle from U. S. Related uncertainty, given of course that U. S. Is one of the biggest modernization markets out there?

Paolo Campagna, CEO, Schindler: Yes. I take the first and then Carlo you can complete. Cycle, let’s say, we were discussing this also in our full year result. Modernization business is here to stay in our opinion. The modernization volume worldwide, and I’ll come to The U.

S. In a second, is there to continue to increase. Yes, number wise, we have a big impact from China as the biggest installed base is there. But you make a right point, volume wise, The U. S.

And Americas play a big role. So therefore, we count on further growth in modernization business, as I mentioned before, in some regions double digit. So and therefore, this remains a key business in the future. Cycle, I would say, now we are in a cycle which is there to stay for a while.

Carla de Geisler, CFO, Schindler: Yes. Maybe also one point that is that the financing is really a small part of the modernization decision. So that’s a good point because when we look at our portfolio, yes, the majority comes from what we call the modernization replacement.

Lars Broersson, Head of Investor Relations, Schindler0: That’s great. Very clear. Thanks very much.

Lars Broersson, Head of Investor Relations, Schindler: Thank you, Vlad. Any final questions, operator?

Sandra, Chorus Call Operator, Chorus Call: So far, there are no final questions.

Lars Broersson, Head of Investor Relations, Schindler: Very good. Thank you very much. With that, I think we close out. Thank you very much for attending the call today. Please feel free to reach out to me, IR, for any follow ups you might have.

The next scheduled event we have is the presentation of our first half twenty twenty five results on July 18. With that, thank you and goodbye from us. I’ll hand it back to the operator.

Sandra, Chorus Call Operator, Chorus Call: Thank you. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

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