The shares of Otis fell 5.6 % in premarket trade on Monday after the business issued a poor forecast for the coming year, which was highlighted by deterioration in China's crucial real estate market.
Because of the recession in the world's second-largest economy, where an ongoing debt crisis is holding back new investment by developers of high-rise commercial and residential space, the elevator manufacturer expects organic sales to climb only 2.5 % to 4.5 % this year.
China accounted for a fifth of the company's net sales in 2021. Otis said it is taking steps to mitigate any negative consequences from its exposure to struggling developers, including requesting cash prepayments. It said just ten consumers had crossed "two or three red lines," accounting for less than 0.5 % of total purchases.
At the midpoint of its guidance range, net sales for the year are expected to be $14.55, up barely 2%. They increased by 12% in the year to December. The company expects profit per share to be slightly higher this year, at $3.25 in the middle of its guidance range, compared to $3.01 in 2021.
Otis' fourth-quarter sales increased by only 2% to $1.6 billion, while organic sales increased by only 1.2 %. As business recovered from the impact of Covid-19 in the same period a year before, the company ascribed this to harder comparisons in the Americas and Europe, Middle East, and Africa markets.
New equipment orders increased by 7.3 % in the fourth quarter, while order backlogs increased by 1%.