Schindler's Q2 Order Intake Slips Amid China's Construction Slowdown but Exceeds Forecasts

When examining SIX: SCHP, one can't help but notice the slight drop in its second-quarter order intake, a trend largely influenced by the sluggish Chinese construction sector. The leading Swiss lift and escalator manufacturer reported its order intake at 2.98 billion Swiss francs ($3.35 billion) for the period, reflecting a 0.4% decrease in local currencies from the previous year. Interestingly, this figure slightly surpassed analysts' expectations, pegged at 2.95 billion francs in a Vara consensus.

China's slowdown in the construction market presents a significant challenge, with new installation volumes in the region plummeting between 5% and 10% compared to the previous year. This decline aligns with broader industry data indicating a roughly 24% drop in Chinese construction starts during the first half of 2024. These numbers highlight the tough environment facing companies like Schindler (SIX: SCHP) and its Finnish counterpart, Kone (HEL: KNEBV).

On a brighter note, Schindler's service and modernization segments, prioritizing maintenance and renovations, exhibited growth during Q2. However, the company cautioned that new installations in the Asia-Pacific region, excluding China, would likely fall short of expectations. This projection includes significant markets such as India, where rapid urbanization presents a substantial opportunity for lift manufacturers.

In contrast, Schindler expects new installations in the Americas and EMEA regions to outperform initial forecasts. This optimism provides a glimpse of stability amid the market turbulence induced by slowing activity in China.

Looking ahead, while Schindler has reaffirmed its annual outlook, it deviated from its usual practice by not offering a net profit forecast. This strategic decision suggests a cautious approach to navigating the complex and evolving global market dynamics.

In currency terms, converting the Swiss franc to US dollars, the exchange rate is $1 equaling approximately 0.8889 Swiss francs. For traders, this insight into Schindler's performance and market conditions, particularly in China and India, could prove pivotal in making informed decisions.