Finnish elevator and escalator manufacturer KONE Oyj (HEL: KNEBV) has reaffirmed its full-year financial targets, despite incurring significant one-off expenses related to its planned acquisition of German rival Teekay and costs from restructuring activities.

The company, which saw its shares decline by 1.87%, announced the acquisition plan in April, valuing the deal at approximately €20 billion (US$22.8 billion). Upon completion, the merger will create the world's largest elevator company by revenue. For the second quarter, expenses directly linked to the Teekay acquisition amounted to €24.3 million. When combined with restructuring and pension-related costs, total one-off charges for the period reached €47.7 million.

Key Financial Performance

The company reported that revenue growth in its maintenance and modernization services helped offset a slight decline in its new equipment business for buildings, which was impacted by lower delivery volumes in Greater China.

Total new orders for the quarter grew by 11% year-over-year to €2.56 billion, driven by new projects and modernization activities in the Americas, Europe, Asia-Pacific, and the Middle East and Africa. However, orders in Greater China showed a notable decrease. The order intake surpassed the €2.43 billion consensus estimate compiled by Vara Research.

KONE stated, "The global new equipment market softened slightly in the second quarter, primarily due to continued weakness in China. Competition in the new elevator segment in China remains intense, continuing to put pressure on pricing, while pricing conditions in other regions were stable."

Quarterly Earnings Snapshot

For the second quarter, adjusted earnings before interest and tax (EBIT) came in at €369.9 million, up from €347.2 million in the prior-year period. Total revenue increased by 3.1% to €2.94 billion. The adjusted EBIT margin improved to 12.6% from 12.2% a year earlier. Analysts surveyed by Vara Research had, on average, expected adjusted EBIT of €373.5 million and revenue of €2.97 billion.

Outlook for the Year

The company maintained its full-year outlook, targeting constant-currency revenue growth of 3% to 6% and an adjusted EBIT margin in the range of 12.3% to 13.0%.