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Schindler reported fully expected FY21 figures including a steep slowdown in the EBIT margin in Q4 21, as cost inflation accelerated and price mix in revenue is taking time to materialise. FY22 perspectives remain under cost and Chinese pressures, while management accelerated the phasing of the Top Speed 23 operational improvement programme without impacting its total amount. New guidance is unlikely to result in a drastic consensus revision.
Companies: Schindler Holding AG Pref (SCHP:SWX)Schindler Holding (SCHP:VTX)
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.
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
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Today’s trading update for H1 22 highlights the difficult operating environment over the first six months of the year, particularly in Q1. Trading picked up in Q2 and is expected to continue to improve in H2 22, in part, due to the inherent seasonality of the business, but also due to some catch up in demand. Guidance is for FY22 post-tax profit to be in line with the consensus estimate of £32.2m, as a result Zeus reduces its estimate by 2.5% to £32.2m. Previous guidance of £3.0m potential impac
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Last week, the UK government published the consultation paper on its Review of Electricity Market Arrangements (REMA). Any change potentially represents uncertainty in a market that has been wary of changes with a number of shares falling after early details of possible reforms were flagged in the press. We review the possible changes and conclude that while there is some risk, from what we can see at present the likely outcomes could be either minimal or beneficial for investors in clean energy
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Invinity has begun trading shares on the OTCQX Best Market in the USA. We see this as adding liquidity for North American investors and more generally increasing visibility for the company in key markets in North America.
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The US Inflation Reduction Act of 2022 now has a chance of passing the Senate next week as it is being voted under the Reconciliation procedure which allows bills related to the budget to pass on a simple majority rather than the 60-vote majority required to overcome a filibuster. If the act does find its way onto the statue books it will bring US$369bn in clean energy tax credits, grants and other incentives. Much is directed to protecting clean energy manufacturing in the USA, but it is a wide
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Unigel Group, intends to join the Aquis Growth Market. Unigel Group is a pioneer in the field of thixotropic gels for the fibre optic cable industry. The Company is also a supplier of laminated steel tapes to the fibre optic cable industry in the US. Thixotropic gels and laminated steel tapes are essential components to the rapidly growing global fibre optic cable market. The Group export
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Rolls Royce published mixed figures. Profitability was particularly low, pushing the net result back into the red zone. However, FCF generation was a positive surprise despite the rise in inventory. It has finally found an agreement to sell ITP Aero and will use the resulting cash to repay its only floating interest rate debt.
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Oil posted the biggest weekly decline since early April on growing signs that a global economic slowdown is curbing demand. Prices are near the lowest level in six months.
West Texas Intermediate settled at $89 a barrel, ending the week nearly 10% lower. US gasoline consumption has dropped, stoking demand concerns, while low liquidity has added to volatility. Supplies from Libya also picked up, helping to shrink key oil futures time-spreads and ease the tightness in the market.
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