The Schindler Group achieved a successful performance in the first half of 2008. Both orders received and operating revenue increased compared to the same period of the previous year despite negative foreign exchange impacts. Net profit grew by 23.7%, representing a significant improvement.
In the elevators and escalators business, orders received improved by 15.5% in the first half of 2008 and rose by as much as 21.5% in the second quarter (in local currencies). Schindler reported an EBIT margin of 10% for the first half of 2008 – confirming the margin it achieved in the first quarter – despite one-time exceptional costs.
Consolidated orders received grew by 8.6% to CHF 7,334 million compared to the first half of 2007. This corresponds to an increase of 13.3% in local currencies.
Consolidated operating revenue totaled CHF 6,744 million, representing an increase of 3.9% (+8.1% in local currencies) compared to the first half of 2007.
Net income from financing and investing
Net income from financing and investing improved by CHF 28 million from CHF -35 million to CHF -7 million compared to the first half of 2007. This improvement was partly driven by unrealized foreign exchange gains related to operational hedging transactions, while hedging losses were incurred in the corresponding period of the previous year.
Profit and cash flow
Net profit grew by 23.7% to CHF 313 million and cash flow rose by 32.5% to CHF 383 million compared to the first half of 2007 (figures for the previous year have been adjusted for the EU antitrust fine).
At 45,161 employees, personnel was virtually unchanged compared to end-2007.
Elevators and escalators business
Strong growth in orders received
Orders received grew by 8.7% to CHF 4,860 million. In local currencies the increase was as much as 15.5%, reflecting contributions from all regions. A particularly pleasing level of sales was reported in the high-rise segment, in which Schindler won notable major orders in all regions – underscoring the high performance of the Schindler 7000 elevator.
The new Schindler 3300 passenger elevator has achieved a very high level of acceptance in the market since it was released for sale in summer 2005.
The new products for the residential market were also rolled out in China and Latin America in the first half of 2008. The general start of sales, as well as the expansion of the offering to further Asian countries, is planned for the second half of 2008 and for 2009.
The order backlog rose by 6.8% to CHF 7,051 million compared to end-2007, which corresponds to an increase of 11.4% adjusted for foreign exchange impacts. This increase reflects the growth in orders received.
Operating revenue and operating profit
Operating revenue totaled CHF 4,251 million, representing a slight increase of +0.6% compared to the first half of 2007. Adjusted for foreign exchange impacts, operating revenue grew by 6.6%.
Operating profit (EBIT) rose by 11.6% to CHF 423 million. The EBIT margin was 10.0% (first half of 2007: 9.0%). Before exceptional costs of CHF 22 million relating to the discontinuation of the production in Vienna, the EBIT margin was 10.5%. It thus exceeded the EBIT margin in the first quarter of 2008 and confirmed the improvement in operating performance. All regions contributed to this enhanced performance.
To counter the soaring costs of raw materials and special metals, as well as continuously rising energy costs, Schindler increased elevator and escalator prices by around 6% in June and July 2008.
Significant improvement in half-year result compared to the previous year
The European PC markets that are of relevance for ALSO continued to experience a slowdown in the first half of 2008 and barely increased – or even declined – in value. Despite this trend, ALSO achieved a 9.9% rise in Group net sales to CHF 2,493 million in the first half of 2008 compared to the same period of the previous year (2007: CHF 2,268 million). Operating profit grew by 166.7% to CHF 24 million over the same period (2007: CHF9million). At CHF+2 million, consolidated net profit improved substantially compared to the first half of 2007 (CHF -8 million).
Outlook for 2008
Elevators & escalators
The large order backlog will contribute to a good level of capacity utilization and operating revenue in the second half of 2008. However, the weakening of the economy in several important markets will impact orders received in the second half of the year. Negative foreign exchange impacts and increased material costs should largely be offset by operational improvements and further measures.
The weakening demand for IT products that was evident in the second quarter is expected to continue in the second half of 2008. In addition, the price war between distributors in several European countries intensified during the second quarter. At present, ALSO therefore still anticipates that Group net sales to exceed CHF 5 billion for 2008 but expects a lower net profit of CHF 15 million to CHF 17 million.
As announced at the annual results media conference on February 28, 2008 – and excluding any unforeseeable events – Schindler expects to report a net profit of over CHF 630 million and an operating margin of at least 10% in its core business for the financial year 2008.