Profits going up at elevator maker Kone, but costs too

By Essi Lehto

HELSINKI (Reuters) - Elevator and escalator maker Kone beat quarterly operating profit forecasts on Wednesday, helped by strong growth in North America and China, but warned of higher costs over the full year due mainly to the global semiconductor shortage.

The Finnish company said it would likely have to rise prices to offset the higher costs, and lowered the top end of its adjusted operating profit margin guidance for 2021 to 12.4-13.0% of sales from 12.4-13.2% previously.

Second-quarter operating profit climbed to 367.1 million euros ($433.1 million) from 315.5 million a year ago, beating the 345.8 million euro mean estimate of 14 analysts polled by Refinitiv.

Chief Executive Henrik Ehrnrooth highlighted in a press conference growth in Kone's maintenance business, as well as in North America and China.

The company forecast material and logistics costs would be 175 million euros higher this year than in 2020 and identified the semiconductor shortage as its main issue.

"Around 40 million of that has already come through," Ehrnrooth told Reuters.

"We have been able to compensate the impact pretty well but now the focus will be in rising prices," he said, adding Kone had also redesigned products to be able to take semiconductors from new suppliers.

On the change in margin guidance, OP Markets analyst Anssi Raussi said: "We expected a slight tweak which now maybe came a bit sooner than we expected. If the raw material costs keep rising, there is a risk that [Kone] has to bring the range down some more."

Kone's shares were up 1% in afternoon trade.

The company's order intake, an indication of future revenue, grew 16.2% year-on-year to 2.41 billion euros and quarterly sales rose 11% to 2.81 billion euros, beating analysts' mean estimate of 2.64 billion.

($1 = 0.8476 euros)

(Reporting by Essi Lehto Editing by Louise Heavens and Mark Potter)