Kone Earnings: Further New Order Declines Foreshadow a Decidedly Slower Finish to 2023

Sales growth further accelerated for wide-moat Kone in the second quarter of 2023, rising 16% year on year organically. Growth was spurred on by a combination of strong new equipment and modernization project deliveries—given a very healthy order book, which stood at a near-record high of about EUR 9.2 billion at the beginning of the quarter—and buoyant maintenance business revenue. We’ve bumped our full-year 2023 EBIT forecast by 4% to EUR 1.31 billion to account for organic growth of the maintenance business that has tracked year-to-date ahead of our prior expectations. Still, Kone’s 2023 is shaping up as a tale of two halves with challenging new equipment market conditions set to weigh appreciably on top-line growth in late 2023. New equipment demand remains significantly challenged, with new orders falling 8% organically in the second quarter, worsening from a 5% rate of decline in the prior quarter.