Kone Oyj shares slip as Q2 orders miss, China sales decline despite inline profit

Kone Oyj (HE:KNEBV) shares dropped over 2% following Q2 results that largely met consensus but featured light order growth and an 8.5% sales decline in China. While sales of €2.85 billion and adjusted EBIT of €347 million were in line, orders of €2.32 billion fell 2% below expectations, and comparable order intake growth of 3% missed forecasts. Despite a stable 12.2% adjusted EBIT margin, the company narrowed its 2025 sales outlook to 2-5% growth, maintaining EBIT margin guidance, which analysts viewed as neutral with limited implications for consensus revisions.

Analysis

Kone Oyj's (KNEBV) second-quarter results presented a mixed operational picture, triggering a more than 2% decline in its share price. While reported sales of €2.85 billion and adjusted EBIT of €347 million met consensus expectations, softness in forward-looking indicators is a key concern. Order intake of €2.32 billion came in 2% below forecasts, with comparable order growth of 3% also missing the 3.5% estimate, leading to a 0.9% contraction in the total order book. This weakness is primarily concentrated in the New Building Solutions segment, which saw sales fall 5.2%, driven by a significant 8.5% sales decline in the crucial China market. In contrast, the company demonstrated resilience in its other business lines and regions, with robust sales growth in Modernization (+19.9%) and Services (+8.6%), alongside strong performance in the Americas (+10.3%) and Europe (+6.5%). Profitability remained stable, with the adjusted EBIT margin expanding 30 basis points to 12.2%, supported by the favorable business mix towards higher-margin services, though this was partly offset by the weakness in China and rising R&D costs. Management narrowed its 2025 sales growth guidance to 2-5% (from 1-6%) while maintaining its EBIT margin forecast, a move that brackets current consensus and suggests limited near-term revisions from analysts.

Key Decisions for Investors

• Investors should closely monitor leading indicators from China's construction sector, as the 8.5% sales decline in this region is the primary headwind for Kone's new equipment business and overall growth.
• The bifurcation in performance, with strong growth in high-margin Services and Modernization offsetting weakness in New Building Solutions, warrants a balanced view; the defensive nature of the aftermarket business provides a cushion against new order softness.
• Given that the updated 2025 guidance is largely in line with market expectations, the current valuation may already reflect the known challenges, suggesting a neutral stance until there is a clear inflection in order growth or the Chinese market.