Schindler released broadly positive figures for Q3 21 following the Evergrande debacle and the wave of downgrades. However, the 7% beat on EBIT was only the result of lower-than-expected non-operating costs. Order intake remained strong but likely to be inflated by higher ASPs to compensate for higher input costs. The CEO sees pressure in the Chinese property market over the next six months, at least. Uncertainties in China justify the mean-reverting trend on the P/E in our view.
Companies: Schindler Holding AG Pref (SCHP:SWX)Schindler Holding (SCHP:VTX)
Q2 21 results portrayed a better performance than the mixed Q1 21. Order intake beat consensus, while revenues were back to their 2019 level despite a strong adverse FX effect. Guidance was confirmed on the top-line front and set above consensus on the net income front. H2 21 should be lower than H1 21, with the acceleration of input cost headwinds, also putting at risk the FY22 margin.
Schindler’s 9M 20 revenue contracted by -6.6% yoy, driven by weaker new installations and modernization, while a strong Swiss franc exacerbated the decline. Despite this decline, Schindler experienced a recovery vs H1 20. Net profit fell by 19.4% yoy. Due to Schindler’s cost optimization programme, the company expects to incur up to CHF130m in restructuring costs (including the reduction of c.2k staff over the next two years). On the back of the more optimistic results, FY20 guidance was raised.
Companies: Schindler Holding AG Pref
Schindler’s H1 20 revenue contracted by 8.7% yoy, driven by lower demand and a strong Swiss franc. Net profit shrank by 28% yoy. Consequently, Schindler launched a cost optimisation programme, including the reduction of c. 2k staff over the next two years (part of an up to CHF150m restructuring programme). Schindler’s outlook sees revenue contracting between -6% and 0% (local currencies), net profit between CHF680m and CHF720m, and the market not returning to FY19’s level until 2022.
Schindler’s Q1 revenue fell by 5.2% yoy to CHF2.4bn. The resilient services division (deemed a “system critical service” by many governments) partly relieved the overall revenue contraction brought by new installations and modernisation units. Logically, APAC (especially China) suffered the most during Q1 20, while other regions followed a similar pattern starting in early/mid-March. Given Schindler’s revenue breakdown by region (c. 73% of sales coming from outside APAC), we expect Q2 to impact
Schindler maintained its guidance despite the long-term threat of labour cost inflation.
Hence, following this earnings release, we expect no change in either our forecasts or our target price and, hence, we will keep our Add recommendation.
With the potential merger of Kone and ThyssenKrupp, there is a high chance that in some countries Kone would have to divest some activities to obtain the competition authorities’ approval for the deal. Much as CRH did in buying assets from LafargeHolcim, Schindler could be selective in buying assets from Kone/ThyssenKrupp. Therefore we believe that Schindler would be the true winner of such a merger and we intend to keep a positive recommendation on the company.
Schindler posted lower growth than Kone and a sharper contraction of the EBIT margin.
Raw material and labour inflation will continue to have an impact on profitability. Schindler is expecting to increase EBIT on an absolute basis, but it will be challenging to maintain the margin reached in FY18.
We expect to lower our operating profit by some 3%, which should have an about 5% negative impact on our target price.
Schindler managed well to adapt to changing market conditions (flattening of demand in China, difficulties in Brazil, cost inflation, wage inflation, trade wars, and so on…) and successfully continued its growth path while at the same time improving its results. Concerning the outlook, China will remain a key factor for growth and profitability, but management also said that it sees the US at the top of the economic cycle and sees risk in tightening financing conditions.
The company continued to grow and posted the best reported sales growth in the lift industry. Management sees a FY18 revenue increase of 3-5% in local currencies. Moreover, the conversion rate in China is above 70%, the best figure in our opinion in the industry, and Schindler is willing to work on pricing, in the same way as market leader Kone did in 2017 in order partly to offset the raw material price increases.
• Orders received grew by 5.2% and by 5.6% in local currencies.
• Revenue rose by 2.7% and by 2.9% in local currencies.
• Operating profit increased by 10.7%.
• EBIT margin reached 11.7% vs 10.9% in H1 16.
• Net profit grew by 12.6%.
• Cash flow from operating activities increased by 3.3%.
• Orders received rose by 5.9% in local currencies.
• Order backlog grew by 4.5% in local currencies.
• Revenue grew by 3.8% in local currencies.
• Operating profit increased by 10.6%, and 9.4% in local currencies.
• EBIT margin at 11.5% up by 70bp.
• Net profit almost stable.
• Cash flow from operating activities increased by 6.9%.
• Orders received rose by 4.1% (4.6% in local currencies).
• Order backlog increased by 6.8% (6.5% in local currencies).
• Revenue grew by 3.1% (3.6% in local currencies).
• Operating profit (EBIT) increased by 13.1% (13.9% in local currencies).
• EBIT margin was 11.7% (previous year: 10.7%).
• Before exceptional items, the EBIT margin was 11.5% (previous year: 10.5%).
• Net profit improved by 10.2% to CHF823m.
• Before exceptional items, net profit was CHF766m (previous
Key information (9m figures):
• Orders received up by 4.3% (3.9% in local currencies).
• Order backlog exceeds CHF10bn and registered an 8.1% growth (9.7% in local currencies).
• Revenue up by 3.7% (3.6% in local currencies).
• Operating profit up by 7.7% (8.1% in local currencies).
• EBIT margin improved by 40bp to 11.1%.
• Net finance expense impacted negatively by FX effect.
• Net profit rose by 6.0% thanks to one-off.
• Cash flow from operating activities decreased by 5.7% to CHF659m
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AFC Energy has announced that its “S” Series hydrogen fuel cell system and ammonia cracker have been selected for the Norwegian ZeroCoaster bulk cargo ship design. The proposal has also been awarded “Approval in Principle” status by DNV, the international certification agency. The announcement is another significant endorsement of AFC Energy’s technology and the group’s biggest step forward in Maritime. This is further endorsement of our investment thesis, which was refreshed in September, which
Companies: AFC Energy plc
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Fulcrum has delivered a reassuring trading update, confirming it continues to trade in-line with FY22E forecasts, as evidenced by disclosed headline interim results. This comes despite recent turbulence in the UK's energy marketplace, which has not impacted Fulcrum's progress, including its recently established smart metering business. Given a 22% decline in the shares this month, opportunistic buyers should see value as forecasts remain unchanged and the stock now trades at book value and a his
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Companies: Spectra Systems Corporation
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Trinistar Liverpool S.a r.L announces its potential listing of a newly formed single asset company which will own the Capital Building in Liverpool on the IPSX. Upon admission the Company would become a real estate investment trust (REIT). The Capital Building occupies close to a 3.5 acre freehold site in the centre of Liverpool’s business district; the building comprises c425,000 square feet of predominantly of
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Companies: Brickability Group PLC
Spectra Systems is a leading provider of advanced technology solutions for banknote and product authentication markets. Spectra's newest customer (announced September 2021), using its optical materials in K-cups for Keurig brewers, has already placed three orders totalling $394,000 since inception (three months sales) and thus evidences the traction Spectra is making in this niche but important growth market. Based on the order pattern to-date, Spectra estimates that this business stream (all cu
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Companies: James Latham Plc
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While there remains considerable uncertainty over the planning and permitting of the Uskmouth power station conversion there have been a couple of recent pieces of good news for SIMEC Atlantis in our view. Inclusion of waste-to-energy in the carbon capture support model is potentially positive for Uskmouth and may increase its political attractiveness to the Welsh Government as they consider permitting. The ring fencing of CfD support for tidal steam in the next allocation round opens up the pos
Companies: SIMEC Atlantis Energy Ltd.
A sea change for the better?
The global science-based group that makes plastic and rubber products "smarter, safer and sustainable", has welcomed DEFRA’s decision to not list oxo-biodegradable plastic in its November 2021 public consultation as a “frequently littered and problematic plastic.” The Scottish Government has likewise issued draft Regulations in November which do not list oxo-biodegradable plastic. Symphony views this as a major step in the right direction.
DEFRA and the Scottish Gov
Companies: Symphony Environmental Technologies plc