Schindler expects revenue rebound as workers return to offices
Many of us will be comfortable getting back into enclosed boxes with strangers sooner than we think, according to the head of the world’s second-largest maker of elevators and escalators.
For the past 12 months, the coronavirus pandemic has emptied city centres and upended the lives of office workers, a group that used lifts more than any other.
But, said Thomas Oetterli, chief executive of Switzerland’s Schindler Group, the pandemic will ultimately do little to change the long-term trends that drive his business and determine white collar working lives: urbanisation, construction and the ongoing importance of the office as a centre of commercial activity.
For Schindler, one of Europe’s largest industrial companies, resurgent earnings will translate into significant opportunities to make sizeable acquisitions, Oetterli told the Financial Times in an interview.
“We have already started to intensify M&A . . . [now] if we see bigger opportunities . . . we will definitely have a look at those as well,” Oetterli said. “We have a strong balance sheet, enough cash and a good equity ratio. Those are always good in a moment [like this] where you have a difficult environment because you can act out of strength . . . you can invest into new business models, into M&A.”
Schindler has historically focused on snapping up small, localised elevator servicing companies because of the reliable cash flows they offer.
But the company is now also looking for opportunities to acquire larger businesses involved in the engineering and manufacturing of elevators, said Oetterli.
Thomas Oetterli, Schindler chief, said: ‘Some day in the second half of 2021 we will see people back in the office’ © Arnd Wiegmann/Reuters
The onset of the pandemic for the sector was marked by Europe’s biggest private equity deal in more than a decade: Schindler’s smaller rival Thyssenkrupp Elevator was bought from its eponymous German parent conglomerate by private equity groups Advent and Cinven for €17.2bn.
The scale of the deal has led some to speculate that the company’s new owners may seek to sell parts of the business, such as its North American arm.
The elevator and escalator business model is driven by three components: installations, servicing, and upgrades.
With less economic activity, less usage and wear, and less certainty about the future, business has slowed — but not as much for Schindler as the company first anticipated when the coronavirus went global.
Last week, the Lucerne-based company reported revenue down 5 per cent year-on-year in 2020 to SFr10.6bn, with a 16.7 per cent hit to net profit at SFr774m.
Schindler has already seen its revenues spring back in China, according to Oetterli, where sales are now above pre-crisis levels. The chief executive added he does not expect a rebound to be as sharp in Europe and North America, but believes it is on the horizon this year.
“Some day in the second half of 2021 we will see people back in the office. [Most] people will go back to workplaces [this year] I am totally sure . . . Nobody wants to stay for the rest of their life in 12 square metres alone in front of a computer screen,” Oetterli said.
“We all know how boring [homeworking] is, how difficult it is: how difficult it is to communicate, how difficult to do certain work it is, and how difficult it is to manage private and professional life.”
Oetterli believes ongoing health concerns may, if anything, help to spur a growth in income from upgrades with existing clients.
In the middle of last year, Schindler launched a suite of eight “clean mobility” options for clients to make elevator use more sanitary. Intelligent controllers can be used to set specific limits on the number of passengers per car, Oetterli said. Air purification systems are now available as upgrades to lifts that can filter out viruses from aerosols. And calling elevators can be made hands-free using apps on users’ phones or buttons that do not need to be pressed to be activated.