Weakness of Hyundai Elevator share price forces Schindler to make a third impairment to its participation


The price of the shares of Hyundai Elevator Co. Ltd., South Korea (Hyundai Elevator) suffered further declines in June and has reached new lows in the past few days, despite the positive trends the company reported in its elevator business for the first quarter of 2014.

The underlying reason for the weakness in Hyundai Elevator’s share price is to be found in its controlling shareholders, and their use of the company’s funds to maintain control over the loss-making Hyundai Merchant Marine Ltd.

The minority shareholders of Hyundai Elevator are deprived of any right of consultation and thus have no possibility of influencing the decisions to increase the company’s share capital and enter into derivative contractual agreements (see also the press release of 19 December 2013). This state of affairs has prompted Schindler to take legal action against both Hyundai Elevator and members of its board of directors. The actions concerned remain pending with the relevant legal authorities.

In view of the current weakness of the Hyundai Elevator share price, Schindler is forced to make a further CHF 40 million impairment to the book value of its Hyundai Elevator participation. This latest charge comes in addition to the two impairments totaling CHF 219 million made in 2013.

The impairment of CHF 40 million will therefore adversely affect Schindler’s second-quarter financial results, and will reduce the annual consolidated net profit for 2014 by the same amount. Following this latest impairment, Schindler’s Hyundai Elevator participation now has a book value of CHF 95 million on the consolidated balance sheet. Should the Hyundai Elevator share price suffer further material declines, additional impairments will be required.

However, on the balance sheet of Schindler Holding the participation in Hyundai Elevator was fully written off as of 31 December 2013.

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