Further Extraordinary Impairment of Schindler’s Participation in Hyundai Elevator

19.12.2013

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On November 27, 2013, Hyundai Elevator Co. Ltd. (Hyundai Elevator), South Korea announced the third capital increase within a year in the amount of KRW 217.5 billion (approx. CHF 184 million). The capital increase is planned to take place in the first quarter of 2014. Schindler is the second-largest shareholder of Hyundai Elevator, holding 30.9% of shares, but had no possibility to influence this decision. To recap: Schindler’s participation in Hyundai Elevator was already diluted by the previous capital increase (which excluded the preemptive rights of existing shareholders) on June 4, 2013 from 35% to 30.9%.

Hyundai Elevator’s business has seen positive developments in the past few months. Schindler is of the view that the intended capital increase is unnecessary for the elevator core business and expects that funds will be used by Hyundai Elevator to further finance the control of the loss-making Hyundai Merchant Marine Ltd. (HMM). Schindler has therefore decided to challenge the capital increase in court.

Hyundai Elevator’s share price reacted on the planned capital increase with a further decline. Due to the negative share price development, Schindler, in accordance with IFRS rules, has to take, in addition to the impairment in the second quarter of 2013 (CHF 155 million), a further impairment of CHF 64 million. This additional impairment impacts the result from financing activities of the fourth quarter and reduces the annual consolidated net profit in 2013 respectively. The value of the participation now amounts to CHF 135 million. Should the share price of Hyundai Elevator further deteriorate, additional impairments will be necessary, possibly before the end of the year.

Schindler’s operating performance in the fourth quarter is in line with expectations. The dividend proposal of the Board of Directors of Schindler Holding AG to the Annual General Meeting in 2014 will not be influenced by the impairments of the Hyundai Elevator participation.